BackHDFC Bank profit rises 30% on loan demand
Profit for the quarter ended September rises to `1,560 crore on the back of strong credit growth
Premium(Abhijit Bhatlekar/Mint)
Mumbai: HDFC Bank Ltd, India’s second largest private bank, said on Friday profit for the quarter ended September rose 30% to ₹ 1,560 crore on the back of strong demand for loans from individuals, showing little effect of the economic slowdown.
Net interest income rose 27% to ₹ 3,731.7 crore driven by demand for loans, which rose 23%, exceeding the average 16-17% growth seen by the banking sector in the quarter.
The results were in line with analyst estimates polled by Bloomberg that pegged net profit at ₹ 1,553.2 crore.
Net interest margin, or the difference between interest earned and expended, was at 4.2%, up from 4.1% in the same period last year, but down from 4.3% in the June quarter.
HDFC Bank’s net profit has now grown at or more than 30% through 52 quarters in a row, said Rikesh Parikh, vice-president (markets strategy and equities) at Motilal Oswal Securities Ltd.
“We continue to maintain ‘neutral’ view largely due to rich valuation and suggest to hold on due to high quality of earnings and HDFC parentage," he said in a media note after the results.
HDFC Bank rose 0.94% to close at ₹ 630.40 a share on Friday on BSE, while the benchmark Sensex fell 0.69% to 18,675.18 points. The banking index, Bankex, declined 0.4% to 13,086.92 points.
Demand for loans from individuals grew at a rapid 32%, led by personal loans, loans to small companies and ₹ 2,500 crore in home loans bought back from parent Housing Development Finance Corp. Ltd (HDFC), said Paresh Sukthankar, executive director at HDFC Bank.
“Our loan growth this quarter has been driven by retail loans, which has changed the ratio of our book to 53% loans from retail versus 51% a year ago," Sukthankar told journalists in a conference call.
In contrast, the corporate loan book grew just 14% from last year as demand for new projects remained static. HDFC Bank disbursed ₹ 11,275 crore to individuals and small firms, against ₹ 7,000 crore to large companies, mainly for working capital requirements.
The bank surprised on other income and bad loan provisions, said Kajal Gandhi, an analyst at ICICIdirect.com, the retail broking arm of ICICI Securities Ltd.
Other income increased to ₹ 1,345 crore, up 11% from ₹ 1,212 crore in the quarter ended September 2011. Provisions dropped to ₹ 293 crore from ₹ 366 crore as net non-performing loans remained stable at 0.2% of advances.
“There are very few concerns for this bank going forward, but the fact that it is a predominantly retail-focused bank now probably increases risk of non-performing loans from that portfolio going forward, especially if this current economic slowdown continues and leads to more job losses," Gandhi said.
HDFC Bank’s Sukthankar said a drop in fixed deposit interest rates last month, stable current and savings account deposits at 45% of total deposits, and the cash reserve ratio (CRR) cut by the Reserve Bank of India (RBI) on 17 September helped maintain margins.
CRR, or the amount of deposits banks park with RBI at no interest, was cut to 4.5% from 4.75%, infusing ₹ 17,000 crore into the banking system.
Last month, HDFC Bank cut deposit rates in the six months, 17 days to five-year bucket by 25-50 basis points. A basis point is one-hundredth of a percentage point.
Sukthankar said retail and wholesale rates are now aligned. “We are a market leader in most of the retail products, if not all the retail products, and we will move in the same direction that our competition moves, which will mean we could roll out some (cuts) in the next few weeks," he said.
On Thursday, HDFC Bank rival ICICI Bank Ltd announced a special “festival" home loan scheme with interest rates lowered by up to 1 percentage point, till 31 December.
Sukthankar said the bank will continue to aim to grow faster than the industry average. “We have a diversified loan book, which is the combination of both retail and corporate. We expect to grow at least a couple of percentage points more than the rest of the system though we face the same challenges like other banks, namely slow growth and asset quality concerns," he said.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
