HDFC Bank Q2 profit rises 18.4%, cautions slowdown could lead to higher defaults2 min read . Updated: 17 Oct 2020, 05:12 PM IST
- HDFC Bank's net interest income grew 16.7% y-o-y to ₹15,776.4 crore
- HDFC Bank’s asset quality improved in the September quarter with gross bad loan ratio or the percentage of bad loans to total advances declining 30 bps y-o-y to 1.08%
MUMBAI: Private sector lender HDFC Bank on Saturday reported a 18.4% year-on-year (y-o-y) rise in net profit to ₹7,513 crore for the three months to September owing to a rise in total income and lower tax outgo.
Its profit was higher than ₹6,409 crore estimated by a Bloomberg poll of 15 analysts.
The bank’s net interest income—difference between interest earned and interested expended—grew 16.7% y-o-y to ₹15,776.4 crore. Its net interest margin—a key measure of profitability—stood at 4.1%. HDFC Bank’s other income rose 9% y-o-y to ₹6,092 crore.
HDFC Bank’s asset quality improved in the September quarter with gross bad loan ratio or the percentage of bad loans to total advances declining 30 bps y-o-y to 1.08%. Its net NPA ratio was also down 25 bps to 0.17% in Q2 FY21. Even compared to the June quarter of FY21, HDFC Bank’s gross bad loan ratio was down 28 bps.
However, its provisions rose 37% to ₹3,703 crore and it said that total provisions for the current quarter includes contingent provisions of approximately ₹2,300 crore for proforma NPAs.
The bank said in a statement while there has been some improvement in economic activities during the current quarter, the continued slowdown has led to a decrease in loan originations, the sale of third-party products, the use of credit and debit cards by customers and the efficiency in collection efforts.
The bank cautioned that the slowdown may lead to a rise in the number of customer defaults and consequently increased its provisions.
The Supreme Court on 3 September ordered an interim stay on classifying bad loans if not declared so by 31 August and banks are expected to use this relaxation in the September quarter or till the final orders are passed. HDFC Bank said that if the bank had classified borrower accounts as non-performing after 31 August 2020, its proforma gross NPA ratio and proforma net NPA ratio would have been 1.37% and 0.35%, respectively.
“Pending disposal of the case, the bank, as a matter of prudence has, in respect of these accounts made a contingent provision, which is included in provisions (other than tax) and contingencies," it said.
The bank’s total advances were at ₹10.38 trillion in Q2 of FY21, an increase of 15.8% over the same period last year. The domestic retail loans grew 5.3% and domestic wholesale loans grew 26.5%, it said, adding that the domestic loan mix between retail and wholesale was 48:52. Overseas advances constituted 3% of total advances, the bank said.
Total deposits stood at ₹12.29 trillion, an increase of 20.3% over 30 September last year. Its current and savings account (CASA) deposits grew 27.5% with savings account deposits at ₹3.48 trillion and current account deposits at ₹1.63 trillion. The bank said its CASA deposits now comprise 41.6% of total deposits as of 30 September 2020.
HDFC Bank’s total capital adequacy ratio (CAR) as per Basel III guidelines was at 19.1% as on 30 September, as against a regulatory requirement of 11.075%, including the capital conservation buffer of 1.875%, and an additional requirement of 0.20% for being a Domestic Systemically Important Bank (D-SIB).