Business News/ Companies / Company Results/  HDFC Bank reports 17.7% rise in Q4 profit, misses estimates on higher provisions

Private sector lender HDFC Bank on Saturday reported a 17.7% year-on-year (YoY) rise in its net profit to 6,927.6 crore for the quarter ended March led by a rise in net interest income (NII) and other income.

The bank’s profit, however, was lower than the 7,253.8 crore estimated by eight analysts polled by Bloomberg. Profit was hit because of doubling of provisions to 3,784.4 crore during the March quarter.

The bank said provisions for the quarter included credit reserves related to covid-19 in the form of contingent provisions of about 1,550 crore.

Srinivasan Vaidyanathan, chief financial officer, HDFC Bank told analysts on a call that as a result of lockdown and consequent slowdown in economic activity and its strict adherence to social distancing there has been an impact starting in the latter half of March in terms of loan origination, distribution of third-party products, payment products and activities, inability to deploy collection efforts to the optimum level and so on.

The bank’s NII – the difference between interest earned and interest expended – grew 16.15% YoY to 15,204.1 crore. Its net interest margin (NIM), a key measure of profitability, stood at 4.3%, down 10 basis points (bps) from the year-ago quarter.

HDFC Bank’s asset quality improved in the March quarter, with the gross bad loan ratio or the percentage of bad loans to total advances declining 10 bps to 1.26%. Its net NPA ratio was down 3 bps to 0.36% in Q4 FY20.

The bank, in a statement, said it will a grant a moratorium of three months on the payment of all installments and/or interest, falling due between 1 March and 31 May to all eligible borrowers classified as standard, even if overdue, as on 29 February.

“For all such accounts where the moratorium is granted, the asset classification shall remain standstill during the moratorium period," it said.

The bank’s advances grew 21.3% on year to 9.93 trillion during January-March. Domestic retail loans grew 14.6% and wholesale loans grew 29.3%, it said, adding that the domestic loan mix between retail and wholesale was 51:49.

Overseas advances constituted 3% of total advances, the bank said.

Total deposits stood at 11.47 trillion as 31 March, an increase of 24.3% on year. Its current and savings account (CASA) deposits grew 23.9%, with savings account deposits at 3.10 trillion and current account deposits at 1.74 trillion. The bank said its CASA deposits now comprise 42.2% of total deposits as of 31 March.

HDFC Bank’s total capital adequacy ratio (CAR) in accordance with Basel III guidelines was at 18.5% as on 31 March, up 140 bps on year and compared to the 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).

Shayan Ghosh
Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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Updated: 19 Apr 2020, 01:45 AM IST
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