HDFC Bank net profit grows 20%

Gross bad loans as a percentage of total loans rose to 1.04% from 0.94% as of end-March, which the bank said was driven by small-and-medium corporate borrowers and individuals

HDFC Bank, country’s second largest private sector lender, reported a 20% growth in net profit to Rs 3,239 crore in the April-June quarter led by a higher net interest income and other income.

The net profit is in line with Bloomberg estimates at Rs 3,275.40 crore.

Net interest income, difference between interest earned and interest expended grew by 21.8% to Rs 7,781.4 crore. The rise in interest income was led by a strong growth in advances at around 20%. The management explained that the uptick in advances was recorded both in the retail and the wholesale segment. In the retail segment advances were higher in personal loans and credit card whereas on the corporate side growth was led by working capital and medium term loans. The domestic loan mix between retail and wholesale at the end of the June quarter was at 53:47.

 

Other income that includes fees treasury gains etc grew by 14% to Rs 2,806.6 crore mainly led by the growth in fees and commissions.

Though asset quality remained largely stable the bank saw a slight uptick in bad loans in retail, agri and the business banking segment. The Gross Non-Performing Assets increased to 1.04% of gross advances at the end of quarter ended June as compared to 0.95% a year ago. In the same period, net NPA increased to 0.32% as compared to 0.27%. At the end of June quarter, the restructured advances were at 0.1% of gross advances.

With the rise in bad loans provisions also increased by 30.84% to Rs 866.73 crore in the quarter ended June as compared to the corresponding quarter a year ago. 

“We may continue to pull back bad loans in the SME segment for one more quarter. We have also seen a slight increase in NPA in agri in this quarter and some increase in bad loans in retail segment, specifically personal loan,” said Paresh Sukthankar, Deputy Managing Director, HDFC Bank. However, he also added that the risk-reward is currently playing out well in the unsecured lending segment and therefore the lender is not looking at moderating its growth in this portfolio.

The bank’s net interest margin, a key indicator of profitability improved to 4.4%. Sukthankar said that the improvement in margins was due to a change in loan mix and the bank believes that the NIMs will continue to remain in the 4-4.4% levels in the coming quarters as well.

The bank remains well capitalised with a capital adequacy ratio of 15.5%.