Riding on more loans to individuals and companies and higher fee income, HDFC Bank Ltd, India’s third largest bank by market value, announced Rs321 crore in net profit for the fiscal’s first quarter ended 30 June, a 34% rise from the year-ago period.
“The results of the private sector lender has been slightly better than expectations,” said a banking analyst with the broking arm of a large foreign financial services outfit who did not wish to be quoted. “We had expected net profit of the bank to be Rs316 crore. The bank has gained from its aggressive retail push as also from other income in foreign exchange market.”
The bank has earned a total income of Rs2,641.7 crore in the first quarter, up from Rs1,795. 2 crore. The net interest income, or the difference between the interest earned on its loans and the interest cost of its deposit liabilities, increased to Rs1,042.2 crore against Rs817.6 in the corresponding quarter a year ago.
However, net interest margin, or the difference between what HDFC Bank earned on loans and paid for deposits, widened to 4.2% from 4.1% from a year earlier. This is because of its focus on low-cost deposits.
For HDFC Bank, current account (on which bank pays no interest) and savings account (on which 3.5% interest is paid) accounts for 50% of its entire deposit base of Rs81,604 crore—one of the highest in Indian sector.
The bank’s other income— consisting of fees and commissions from selling mutual funds and home loans—and foreign exchange and derivatives revenue has registered a growth of 77.3% to Rs515.8 crore against Rs290.9 crore in the first quarter last year. HDFC Bank sells home loans of its promoter Housing Development Finance Corp Ltd and earns fees on distribution of such loans.
Vishal Goyal, a banking analyst with Edelweiss Securities Ltd, a domestic brokerage, said, “The profit growth has come in line with expectations on the growth in fee-based income that the bank has witnessed. We expect a 30% growth in profits going ahead.”
The bank added 69 branches during the first quarter, taking its branch network to 753 in 320 cities from 535 outlets in 228 cities in June 2006. As of June 2007, the number of debit cards issued by the bank were more than 4.3 million, while credit cards issued crossed the three million mark.
Shares of HDFC Bank closed at Rs1,147.85 on the Bombay Stock Exchange, down 1.73% and giving it a market capitalization of Rs36,686 crore. The benchmark index Sensex closed at 15,009 losing 35.25 points or 0.24%.