Mumbai: Riding on higher income on interests, private-sector lender HDFC Bank Ltd on Thursday reported a 37.1% increase in its fourth quarter net profit. The bank’s net profit for the quarter ended 31 March stood at Rs471.1 crore against Rs343.6 crore a year ago.
The bank, which is merging the privately-held Centurion Bank of Punjab Ltd with itself, posted a net profit of Rs1,590.2 crore for the year, a 39.3% rise.
Its interest income for the quarter rose 53.4% to Rs2,956.2 crore.
The bank’s non-interest income grew 39.3% in the quarter to Rs549.3 crore from Rs394.4 crore in the same quarter last year.
Fees and commissions, which rose 37.6% to Rs490.4 crore, were the main contributors to non-interest income.
However, the bank’s foreign exchange and derivatives revenues fell to Rs60.4 crore from Rs103.3 in the same period a year ago.
The result was in line with market expectations but its stock fell marginally by 0.19% to Rs1,442.60 on the Bombay Stock Exchange on Thursday even as the banking sector index Bankex on the bourse rose 0.35%.
Two other private-sector banks that announced their fourth quarter earnings ahead of HDFC Bank have posted higher net profits.
Axis Bank Ltd’s fourth quarter net profit grew by 71% and Yes Bank Ltd’s by 108%, although both on a much smaller base.
“While credit growth in the banking system slowed down to about 22% for the year..., the bank’s net advances grew by 35.1% with retail advances growing by 38.6% and wholesale advances growing by 30%, implying a higher market share in both segments,” HDFC Bank said in a statement.
Its net interest income for the March quarter increased by 55.7% to Rs.1,642.1 crore. Its net interest margin, or the spread between the average cost of funds and average income generated by funds, now stands at 4.4%.
While this is on the higher side by the industry standard, its non-performing assets as a percentage of net advances rose marginally to 0.5% compared with 0.4% in the same quarter last year.
The bank has kept aside Rs465.1 crore in the quarter against Rs267.1 crore in the year-ago quarter, primarily on account of provisions for non-performing assets and general provisions for standard assets of Rs293.0 crore, besides tax and other contingencies.
An analyst with a local brokerage said the results were in line with market expectations. “Fee income continues to be strong in the bank.
However, we are still awaiting the details regarding the bank’s high provisions,” said the analyst, whose company does not allow him to be named.
It is not known whether HDFC Bank has made any provision for the mark-to-market losses suffered by some of its corporate clients in derivatives deals.
Mark to market is an accounting practice of valuing the derivatives in line with the prevailing market price.
Since Indian banks are not allowed direct exposure toderivatives, they always enter into back-to-back deals with foreign banks for cross-currency options and swaps. So, if their corporate clients default in honouring such contracts, banks will need to settle the deals with their counter-parties.
Axis Bank has madeprovision worth Rs71.97 crore for six derivatives contracts of two of its corporate clients who have taken the bank to court for the mark-to-market losses in such deals.