Mumbai: HDFC Bank Ltd’s net profit rose 33.7% to Rs 1,085 crore in the three months ended 30 June, compared with the same period a year ago, on robust loan demand and higher fee income.
The net profit figure at India’s second largest private bank beat a Reuters analysts poll estimate of Rs 1,070 crore, but net interest income at Rs 2,848 crore was below expectations at Rs 2,910 crore.
“Working capital loans are the mainstay of our business and we expect continuing demand from that part besides some term loans,” executive director Paresh Sukthankar said. “Retail loans will continue to grow.”
Loans grew 29.1% to Rs 1.76 trillion in the June quarter, the bank said. It expects its loan book to grow faster than the industry average. “If the system grows at 18-20%, we will grow at 20-22%,” Sukthankar said.
The lender’s fee income accrued from selling financial products, such as mutual funds and insurance, to individuals, and its cash management and trade services for companies.
However, the bank’s net interest margin (NIM), or the difference between interest earned and interest spent, dropped marginally to 4.2% from 4.3% year-on-year. Analysts attribute this to higher cost of funds for the banking sector as a whole. NIMs are considered a key measure of any bank’s profitability.
HDFC Bank total gross non-performing assets, or bad loans, at Rs 1,833 crore were just 1.04% of the loans, down from Rs 1,791.21 crore, or 1.21%, of loans in the June quarter last year.
Analysts expect gross bad debts to rise in the coming quarters.
“In the next three-four months, it is expected that industry NPAs will rise like its always seen when interest rates increase,” said Ajay Parmar, head, institutional research, at Emkay Global Financial Services Ltd.
Sukthankar said the bank is monitoring loans to small and medium enterprises (SMEs) carefully in view of the current interest rate scenario.
“SMEs are the largest part of our business banking, and we have seen a strong growth in that segment. There continues to be bankable opportunities, and as of now, we are not slowing (loans to this sector), but watching them closely,” he said.
The bank’s scrip fell 0.70% to close at Rs 511 even as the 30-share benchmark Sensex index on the Bombay Stock Exchange rose 0.79%, or 147 points, to 18,654 points on Tuesday.