Mumbai: India’s second largest private sector bank, HDFC Bank Ltd, on Tuesday posted a 30.5% growth in net profit to Rs606.1 crore for the quarter ended 30 June, driven largely by interest income from loans and growth in the other income consisting of fees and commissions and gains from trading bonds.
Paresh Sukthankar, executive director of the bank, said: “Over 70% of our revenues have come from net interest income as the margins have remained stable at about 4.1%. The bond gains and fee and commissions and cost control have contributed to the net profit.”
The bank’s shares on the Bombay Stock Exchange ended on Tuesday down 1.03% at Rs1,360.40 apiece even as the bellwether equity index Sensex closed 3.38% higher from its Monday close at 13,853.70.
Capital performance: HDFC Bank managing director Aditya Puri. Ashesh Shah / Mint
HDFC Bank’s treasury income through sale of investments saw a profit of Rs256 crore in the quarter against a loss of Rs77.6 crore in the corresponding quarter last fiscal while income from foreign exchange and derivative business dipped to Rs137.8 crore from Rs157.4 crore.
Fees and commissions grew 27% to Rs649.3 crore.
Axis Bank Ltd, the country’s third largest private sector bank, saw a 70% growth in profit partly on account of growth in trading income, which surged 569% to Rs326.07 crore from Rs57.31 crore in the corresponding period the previous fiscal.
An earnings preview report on the June quarter by domestic brokerage Prabhudas Lilladher Pvt. Ltd said the Reserve Bank of India has been buying illiquid papers through its open market operations, and that this could help some banks generate treasury gains.
HDFC Bank’s advances portfolio for the first quarter grew by 7.2% to Rs1.03 trillion from Rs96,796.87 crore in the corresponding quarter last year.
“Year on year, the bank’s advances book has grown. On the retail side, we are seeing demand in auto and home loans. On the corporate side we are seeing demand for working capital requirement,” Sukthankar said.
The deposit base of the bank grew by 11.3% to Rs1.45 trillion as of 30 June, compared with Rs1.3 trillion in the corresponding period last fiscal.
HDFC Bank’s net interest income for the quarter rose 7.66% to Rs1,855.58 crore for the quarter against Rs1,723.47 crore in the corresponding quarter last fiscal. The bank’s net interest margin (NIM)—or the difference between cost of funds and interest earned on funds, and a key measure of a bank’s operational efficiency—for the first quarter stood at 4.1%.
“The performance has been guarded by higher other income and control in operating costs,” said a banking analyst at a Mumbai-based brokerage who asked not to be named because he is not authorized to speak to the media.
Provisions and contingencies for the quarter increased to Rs658.82 crore from Rs344.47 crore in the year-ago period. Non-performing assets increased marginally to 0.6% from 0.5% of the bank’s loans. Net non-performing loans in absolute terms increased to Rs656.46 crore in the quarter ended 30 June against Rs496.07 crore in the corresponding quarter last fiscal. An asset is termed as non-performing if interest or instalments of principal due remain unpaid for at least 90 days.
“The non-performing loans have increased largely on account of continued slippages in the Centurion Bank of Punjab (CBoP) portfolio. This trend is expected to continue for another two quarters,” said another banking analyst with a brokerage who too did not want to be identified. CBoP was merged with HDFC Bank in May 2008.
Restructured assets, including applications yet to be approved, were 0.55% of bank’s gross advances as of 30 June.