Mumbai: HDFC Bank Ltd on Monday reported a 51% jump in profit in the September quarter, beating analysts’ estimates, on higher other income and lower provisions.
This is India’s largest private lender’s first quarterly earnings after its $40-billion mega-merger with parent Housing Development Finance Corp. Ltd came into effect on 1 July. Therefore, direct comparisons with the year-earlier figures may offer a misleading picture.
The bank saw net profit rise to ₹15,976 crore in the quarter ended 30 September from ₹10,605 crore in the year-ago period. That exceeded analysts’ estimates of ₹14,120 crore in a Bloomberg survey.
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As forecast by the management in a call with investors in September, the bank saw its net interest margin (NIM) narrow to 3.6% at the end of September from 4.1% in the preceding quarter. However, the management did not say when the bank expects to achieve 3.7-3.8% pro-forma merged NIM.
“We had indicated going into the merger, there was a build of liquidity to tide over the merger management, and 25-30 bps impact on margin is coming from there,” said Srinivasan Vaidyanathan, chief financial officer of HDFC Bank. “Our margin has been 4%. Now, when you have a debt-funded balance sheet with a mix of funding, the cost of borrowing is higher than the cost of deposit. Over a period of time, deposits will replace borrowing. Then margin will start to improve,” he added.
The bank’s core income grew by 30% to ₹27,385 crore in the quarter ended 30 September from ₹21,021 crore in the year earlier.
Advances grew by 58% to ₹23.54 trillion at the end of the September quarter. The growth in advances was largely on account of the merged book of HDFC. Deposits grew 30% to ₹21.72 trillion as of 30 September. Vaidyanathan said he is confident that the bank will continue its focus on adding ₹1 trillion in deposits every quarter. The current and savings account (Casa) ratio fell to 37.6% of total deposits as of 30 September, compared with 42.5% in the previous quarter.
Other income, or income from fees and commissions, stood at ₹10,708 crore at the end of September, compared with ₹7,596 crore in the corresponding period last year.
Its gross non-performing assets increased to ₹31.57 trillion as of September end, compared with ₹18.3 trillion during the same period last year. As a percentage of total assets, gross NPAs stood at 1.34% at the end of September compared with 1.17% as of 30 June. Net NPA as a percentage of total assets stood at 0.35% as of 30 September, compared with 0.3% in the June quarter.
The management said the increase in NPAs was due to the bank restructuring ₹5,000 crore of its wholesale loan book of HDFC Ltd in the second quarter.
“Almost 22 bps of the 1.34% gross NPA is (from) erstwhile HDFC non-individual book (which) is current and performing. But because it is restructured and (under) RBI’s guidelines, it is NPA,” Vaidyanathan said.
Total provisions stood at ₹2,903 crore at the end of the September quarter, compared with ₹3,240 crore during the corresponding period a year ago.
On Monday, shares of HDFC Bank fell 0.4% to ₹1,529.5.
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Updated: 17 Oct 2023, 12:26 AM IST