Higher retail loans, other income boost HDFC Bank net 20.5%

Country's second largest private sector lender HDFC Bank today reported a 20.5 per cent jump in net profit to Rs 2,869.5 crore in the three months to September, helped by rise in other income and robust performance in retail loans segment.
The overall set of good numbers was also driven by net interest income and operating profit as also stable asset quality despite higher provisions and tax expenses.
However, the recent aggressive rate posturing has hurt the Aditya Puri-led bank's margins, which slipped its lowest range of 4.1 per cent.
It can be noted that this is the tenth consecutive quarter that the country's most-valuable lender with a market capitalisation of over USD 42 billion has been reporting sub-30 per cent growth in net profit, after clocking 30 per cent plus growth for 30 quarters in a row.

While the banking system led by public sector banks, which control four-fifths of the asset base has been reporting tepid credit growth that has been averaging in single-digits since the past many quarters, the lender has reported a more than expected asset growth which clipped at 27.9 per cent, in the reporting quarter, driven by retail loans as corporate loans are still a far cry.
Gross bad loans as a percentage of total loans fell to 0.91 per cent from 0.95 per cent in the June quarter.

The aggressive 65 basis points reduction in the base rate to 9.35 per cent since April, which no rival has matched so far, weighed on net interest margin that fell to 4.2 per cent in the reporting quarter from 4.3 per cent in the previous three months. The current NIM is closer to the lowest end of the bank's NIM target of 4.1-4.4 per cent.

Deputy MD Paresh Sukthankar attributed the slip in the margins to a slew of factors, including the 0.35 percentage points reduction in the base rate and a faster growth in fixed deposits which resulted in the share of the low-cost Casa deposits falling below 40 per cent in many years.
Reiterating their NIM target band, Sukthankar sought to drive the message that this does not mean that the margins will dip in the future as well.
The lower margins will help the bank as more deposits start getting repriced according to lower interest rates, he said, adding the bank will also be reviewing its base rate this quarter where it may opt for a cut given the declining interest environment.

But Angel Broking analyst Vaibhav Agrawal expects the bank to recoup some of the lost margins in the coming quarters. He also has buy call on the stock.