HDFC Bank Q1 Result, Profit-NII up

HDFC Bank Ltd on Thursday said its fiscal first quarter net profit rose 20.15% from a year ago as it earned higher interest on loans and made more money from fees and commissions.

Net profit rose to Rs.3,238.91 crore in the three months ended 30 June from Rs.2,695.72 crore a year ago.

According to a poll of 23 Bloomberg analysts, the bank had been expected to post a profit of Rs.3,275.40 crore.

Net interest income (NII), or the core income a bank earns by giving loans, increased 21.8% to Rs.7,781.44 crore from Rs.6,388.70 crore last year.

Non-interest income including fees and commissions increased 14% to Rs.2,806.61 crore from Rs.2,461.91 crore in the same period last year. Among the components of non-interest income, fees and commissions saw a 15.5% growth as compared with last year and rose to Rs.1,978 crore.

Net interest margin rose by 10 basis points from last year to 4.4%. “The NIM has mostly remained within the 3.9-4.3% range. This quarter’s increase is due to a change in the loan mix and also repricing of deposits,” said Paresh Sukthankar, deputy managing director, HDFC Bank.

One basis point is one-hundredth of a percentage point.

The bank’s total advances as on 30 June stood at Rs.4.7 lakh crore, up over 23% from last year. The bank’s domestic retail lending book grew by 25%, while its wholesale book rose 23.7% year-on-year (y-o-y).

Among retail loans, commercial vehicles, auto loans and unsecured loans grew during the quarter, Sukthankar said.

Total deposits rose 18.5% y-o-y to Rs.5.74 lakh crore.

Gross non-performing assets (NPAs) rose 12.02% to Rs.4,920.89 crore at the end of the June quarter from Rs.4,392.83 crore in the March quarter. On a y-o-y basis, gross NPAs jumped 34.7% from Rs.3,652.23 crore. As a percentage of total loans, gross NPAs stood at 1.04% at the end of the June quarter, compared with 0.94% in the previous quarter and 0.95% in the year-ago period.

“While this (gross NPA figure) appears to have gone up compared to other large private players, it remains much better and doesn’t seem to be a cause of concern. HDFC bank has been our top pick in the banking space, and we believe it will be able to deliver 20% CAGR (compound annual growth rate) earnings growth going ahead,” said Siddharth Purohit, senior equity research analyst at Angel Broking Pvt. Ltd.

The bank’s gross slippages during the April-June period were around Rs.1,700 crore, which was adjusted with Rs.1,230 crore worth of recoveries and upgrades.

“Of the net slippages, about 40% have come from the SME (small and medium enterprises) book. The fall in asset quality is not too sharp. We had seen a drop in asset quality in the October-December period, which we were able to pull back in the March quarter. We should be able to pull back this time too. We will continue with cautious growth in this segment,” said Sukthankar.

Apart from this, the bank is also seeing some fall in its unsecured loans portfolio, he added.

“Typically these loans carry a higher risk and the fall is largely within what we have expected. It is not a cause for concern yet,” he said.

Provisions and contingencies jumped 30.84% to Rs.866.73 crore in the quarter from Rs.662.45 crore a quarter ago. On a y-o-y basis, provisions jumped 19.06% from Rs.727.99 crore. Out of the total provisions, loan loss provision for the quarter was at Rs.557.5 crore, while the bank also created a floating provision of Rs.170.5 crore.

During the quarter, HDFC Bank provided nearly Rs.120 crore against loans it had given to the Punjab state government.

Net NPAs were at 0.32% in the June quarter compared to 0.28% in the previous quarter and 0.27% in the same quarter last year.