Mumbai: Buoyed by robust growth in fees, commissions and earnings from foreign exchange and derivatives transactions, HDFC Bank Ltd on Thursday beat market expectations to report a 33.91% rise in its net profit, to Rs630.88 crore for the fourth quarter of 2008-09 against Rs471.11 crore in the corresponding quarter of the previous year.
The earnings of India’s second largest private lender in the March quarter are, however, not strictly comparable with the corresponding quarter of fiscal 2008 as Centurion Bank of Punjab Ltd (CBoP) another private lender, was merged with HDFC Bank in May 2008. The financials of the fourth quarter of fiscal 2009 reflect the performance of the merged entity.
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The bank’s so-called other income that includes fees, commissions and earnings from foreign exchange and derivatives transactions, grew by 102.9% in the quarter, to Rs1,114.8 crore from Rs549.3 crore. The main contributor to other income were fees and commissions of Rs714.8 crore.
Despite an economic slowdown that has dented consumer confidence and has led to a sharp drop in banks’ loan growth in fiscal 2009, HDFC Bank’s retail loan portfolio grew by 55.5% during the year, to Rs61,154 crore. It now account for 61% of the bank’s gross advances.
This is significant as India’s largest private sector lender ICICI Bank Ltd is paring its retail loan portfolio. From 67% of its total advances a year ago, retail loans are now about 55% of ICICI’s overall loan book.
“We continue to grow our retail book that includes car loans, personal loan and mortgages,” said Paresh Sukthankar, executive director of HDFC Bank.
“HDFC Bank’s net profit exceeds market expectations. The bank is growing its advances portfolio including retail assets despite the current economic environment and this could lead to rise in stressed loans in the coming quarters,” cautioned an analyst with a Mumbai-based brokerage, who declined to be named as he is not authorized to speak to the media.
In a recent preview of earnings of banks and non-banking finance companies, another local brokerage Religare Capital Markets Ltd said, “The impact of deteriorating asset quality will not be felt in the fourth quarter as banks derive the benefits of new asset restructuring norms.”
The Reserve Bank of India (RBI) has allowed banks to restructure all loans whose repayment has not been met due to the economic downturn.
The gross non-performing assets (NPAs) of the bank rose to 1.98% of advances in the March quarter, up from 1.34% in the year ago quarter. NPAs, net of provisions, increased to 0.6% from 0.5%.
The increase is due to the merger of CBoP, a release said. The erstwhile CBoP loan portfolio accounted for about 42% of gross NPAs on 31 March.
The bank has restructured assets worth Rs120 crore in the March quarter, of which Rs69 crore has been classified as NPAs. It has received applications from borrowers for Rs305 crore worth of loan restructuring and has already classified Rs254 crore of this as NPAs. Banks are required to restructure these by 30 June.
For the fiscal, its deposit base grew 41.7% to Rs1,42,812 crore. Low-cost current account and savings account deposits are 44.4% of total deposits, the highest among private lenders. Yet, its net interest margin or the difference between the cost of funds and earnings on such funds marginally dropped to 4.2% from 4.3% in the year ago quarter.
The bank’s net profit for the fiscal rose 41.17% to Rs2,244.95 crore, against Rs1590.18 crore in the previous year. This includes a one-time Rs31.7 crore income due to a change in accounting practice for some fixed assets such as automated teller machines.
HDFC Bank declared 100% dividend, or Rs10 per share.
HDFC Bank’s scrip rose 0.3% to close at Rs1092.50 even as the bellwether Sensex of the Bombay Stock Exchange, rose 2.93% to 11,134.99 points and Bankex, the banking index, rose 3.16%. The earnings were announced after market hours.
Graphics by Sandeep Bhatnagar / Mint