HDFC Bank Ltd on Friday reported a higher-than-estimated fiscal fourth-quarter net profit and stable asset quality, prompting investors in India’s most valuable bank to drive its shares to a record high.
Net profit rose 18.25% to Rs3,990.09 crore in the three months ended 31 March from Rs3,374.22 crore a year ago.
Net interest income (NII), or the core income a bank earns by giving loans, rose 21.49% to Rs9,055.1 crore in the March quarter from Rs7,453.34 crore a year ago. Non-interest income including fees and commissions gained 20.25% to Rs3,446.26 crore.
The bank’s gross bad loans as a percentage of total loans, at 1.05%, were little changed from end-December, although higher than 0.94% a year earlier.
“In the last one year we have seen a 10 basis points increase in gross non-performing assets... which is not out of line… It is a challenging environment,” said Paresh Sukthankar, deputy managing director.
HDFC Bank has been a standout performer in a banking industry beset by Rs7 trillion of stressed assets—the legacy of an economic slowdown that stalled projects and squeezed corporate cash flows, making it difficult for borrowers to repay debt.
HDFC Bank’s “asset quality remains one of the best in the system”, said Alpesh Mehta, a sector analyst at Mumbai brokerage Motilal Oswal Securities, adding that the results “positively surprised”.
Provisions and contingencies jumped 76.28% to Rs1,261.80 crore in the fiscal fourth quarter from Rs715.78 crore in the preceding quarter.
Of the Rs550 crore increase in provisions sequentially, Rs270 crore came from higher general provisions, said Sukthankar. This reflected a Rs60,000 crore increase in advances in the quarter.
Loan-loss provisions nearly doubled from a year earlier to Rs978 crore in the March quarter. The bank said it also accounted for loan defaults that were not recognized as such in the December quarter after the central bank temporarily relaxed rules to help businesses weather the November ban on old high-value banknotes.
Net non-performing assets rose 0.33% in the fourth quarter from 0.32% in the previous quarter and 0.28% in the same quarter last year. HDFC Bank’s capital adequacy, a measure of financial strength expressed as the ratio of capital to risk-weighted assets, was 14.6% at the end of March, compared with 15.5% in December.
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