Mumbai: HDFC Bank Ltd, India’s most valuable private sector bank, said on Friday that net profit in the fiscal third quarter rose 30% as it lent more to consumers and companies, and earned higher interest and non-interest income.
Net profit rose to Rs.1,859 crore, or Rs.7.80 per share, in the quarter ended 31 December from Rs.1,430 crore, or Rs.6.10 per share, a year earlier, in line with a Bloomberg estimate of Rs.1,829 crore based on an analysts’ poll.
Net interest income, or the interest earned on loans minus that paid for deposits, rose 22% to Rs.3,799 crore on a 24% increase in loans. Non-interest income rose to Rs.1,799 crore from Rs.1,420 crore, driven by a 24% increase in fees and commissions to Rs.1,402 crore.
HDFC Bank attracted demand for loans from individuals in spite of slowing economic growth and high interest rates that have made consumers in Asia’s third biggest economy wary of borrowing money from banks.
Executive director Paresh Sukthankar said loan growth was led by the retail sector, which included auto loans, loans to small businesses, credit cards and personal loans.
“Retail loans grew 29% from last year, higher than the 18.5% growth seen in corporate loans. We disbursed Rs.29,000 crore of retail loans, of which Rs.5,700 crore were loans to small companies, Rs.4,000 crore were auto loans, and Rs.3,700 crore each for commercial vehicles and personal loans,” Sukthankar said.
HDFC Bank’s loan book mix now is tipped in favour of retail loans, which constitute 53% of the loans, up from 52% last year. Sukthankar said he expects retail loans to dominate the loan mix should the bank maintain its current pace of growth.
“Our wholesale loans are mostly made up of working capital loans, which are short- to medium-term, and capital expenditure, which is sluggish in the current context. With our range of products and the distribution network we have, we expect retail growth to be faster in the next couple of quarters,” he said.
The strong growth in retail loans has also increased the risk of non-performing loans for the bank. Total non-performing loans increased to Rs.2,432 crore in December from Rs.2,133 crore in September, up by Rs.299 crore, largely on account of loans to individuals.
“Eighty per cent of the new bad loans have come from retail products, especially loans for commercial vehicles and construction equipment. But it is still lower than what we have priced in,” Sukthankar said.
The increase in non-performing loans is nothing to be alarmed about, said Hatim Broachwala, an analyst at Karvy Stock Broking Ltd.
“It is still very low for a bank of HDFC’s size. The bank has done well because loan growth has been stronger than expectations of 19-20%,” he said.
The bank’s net interest income “has been lower than 30% for a few quarters now, but they have maintained a 30% growth in profit because of lower provi sions. If asset quality deteriorates further, then profits will come down from the 30% growth we have been seeing all this while”, Broachwala said.
Provisions dropped to Rs.307 crore in the quarter to December from Rs.329 crore a year ago. However, it was higher than the Rs.293 crore the bank set aside in the quarter ended September.
HDFC Bank’s net interest margin, or the difference between the rate charged for loans and that paid for deposits, fell marginally to 4.1% from 4.2% in the quarter ended September. Sukthankar said the bank will maintain margins between 3.9% and 4.2%.
HDFC Bank shares ended at Rs.659 apiece on BSE, down 1.18% on a day the benchmark Sensex rose 0.38% to close at 20,039.04 points. The BSE Bankex rose 0.14% to close at 14,551.19 points.
Government-owned IDBI Bank Ltd reported a lower-than-expected net profit for the quarter ended 31 December after setting aside more money to cover rising bad loans.
Net profit in the period rose just 2% year-on-year to Rs.417 crore from Rs.410 crore. Profit dropped 14% versus the Rs.484 crore reported in September 2012.
Earnings per share declined to Rs.3.26 from Rs.3.90 after the government’s stake in the lender increased to 70.52% in December from 65.13% in December 2011.
Total non-performing loans increased to Rs.6,401 crore from Rs.4,640 crore in the quarter ended December 2011. As a result, the bank had to set aside Rs.963 crore, two-and-a-half times higher than the Rs.407 crore it set aside in the year-ago period.
IDBI Bank shares ended at Rs.113.35 on BSE, down 0.92% from the previous close.