HDFC Bank reported Rs 2,233 crore profit against Rs 1,844 crore in the April-June quarter of 2013-14.
The bank attributed the fall in profit to a 20-basis point dip in net interest margin (NIM), which declined to 4.4 per cent in the reporting quarter.
However, total income jumped to Rs 13,070.7 crore from Rs 11,588.56 crore in the year-ago period.
"NIM in the first quarter was stable sequentially, but on a y-o-y basis it has dropped slightly. If you look at our range of NIM, it has been around 4.1-4.4 percent. It would be at the upper end of the range going forward," HDFC Bank Deputy Managing Director Paresh Sukthankar told reporters here.
Interest earned rose 16.1 percent to Rs 11,220.1 crore from Rs 9,663 crore last year same period.
"HDFCs NII grew 17% YoY (marginally ahead of expectations) on back of healthy NIM (4.4%; stable QoQ) and 20.7% loan growth. However, PAT was marginally lower on muted other income largely due to subdued forex as well as trading gains despite moderate rise in opex and lower provisions. Loan book was largely driven by strong growth in overseas as well as domestic wholesale portfolio. Moderate growth in retail portfolio (7% YoY), led to decline in share of retail book from 54% in Q4FY14 to 52% in Q1FY15. Nonetheless, slight disappoint came on rise in NPLs - gross and net NPAs rose 12.3% and 22.9% (QoQ), respectively, in absolute terms. However, it is still comfortable at 1.1% and 0.3%, respectively, in percentage terms," says Saday Sinha, banking analyst, Kotak Securities.
Net interest income, which is the interest earned minus interest paid, during the period grew 17 per cent to Rs 5,171.6 crore he said. It accounted for 74 per cent of net revenue.
The asset quality slightly deteriorated with gross non-performing assets (NPAs) at 1.07 per cent as against 1.04 per cent, while net NPA was stable at 0.3 per cent.
"The three-four basis points increase in NPAs has happened from agriculture, SME and a little bit on retail, including commercial vehicles and commercial equipment businesses. There is not a large particular segment which showed any material deterioration," Sukthankar said, adding the bank did not sell any NPAs during the quarter.
Provisions and contingencies, consisting of specific loan losses and general provisions stood at Rs 482.8 crore for the quarter, including Rs 40 crore provided for its exposure to corporates with unhedged forex loans following the recent RBI circular.
HDFC Bank had earned a reputation for delivering over 30 per cent profit growth for 37 straight quarters in the past 10 years (40 quarters).
In the previous quarter, it had reported 23 per cent growth in profit, the lowest in 10 years. For the October-December period, the bank's profit growth was 25 per cent. In the preceding quarter, the rise was 27 per cent.
Shares of HDFC Bank ended 0.71 per cent down at Rs 826.50 apiece on the BSE.
Total restructured loans, including applications under process for recast, were flat at 0.2 percent of gross advances compared to the same period last year.
The Mumbai-headquartered bank's advances rose 20.7 per cent to Rs 3,12,109 crore, while total deposits also increased 22.7 per cent to Rs 3,72,074 crore.
Sukthankar said if new measures announced by the government result into economic revival, then the bank would also see some uptick in its loans as well as deposits. Savings account deposits grew 18.1 percent over the previous year to Rs 1,05,639 crore.
Commenting on the results Motilal Oswal Securities vice-president Rahul Shah said: "The numbers are slightly below estimates. Still we believe its asset quality remains the best in class with lowest net stressed loans."
When asked about the plan to raise Rs 10,000 crore capital for which it already has board approval in place, Sukthankar said the bank is yet to take a decision.
"We haven't decided on what structure or which market we will access (for raising funds). Certainly, it will be function of various things including approval from FIPB. But there is no forgone conclusion about whether it will be domestic or international," he said.
To a query about status on the Foreign Investment Promotion Board approval for increasing foreign holdings in the bank, Sukthankar said there is no update on the issue.
HDFC Bank Q1 Net up 21%
(Reuters) HDFC Bank India's second-biggest private sector lender by assets, reported on Monday a 21 per cent rise in quarterly profit, lagging estimates, although asset quality remained stable.
The Mumbai-based bank said net profit rose to Rs 2,233 crore $371 million) for its fiscal first quarter to end-June from 18.44 billion rupees a year earlier.
Analysts had on average forecast a net profit of Rs 2,321 crore, according to Thomson Reuters data.
Weaker economic expansion has squeezed credit growth for Indian lenders, slowing their earnings growth in recent quarters. The sector is betting on a revival in economic activity after a new government led by Prime Minister Narendra Modi took power in May.
The central bank's recent move to allow long-term bonds raised by banks for infrastructure lending to be exempt from mandatory reserve requirements, in line with government policy, is also seen as a positive for the sector.
Indian banks are expected to report a net income growth of about 22.2 percent in the next 12 months, according to Thomson Reuters StarMine SmartEstimates, which would be the second-fastest earnings growth in the sector in Asia Pacific after South Korea.
HDFC Bank, which had outperformed rivals with consistently high profit growth of about 30 percent and stable asset quality, has seen profit growth weaken in the past quarters.
Provisions for the June quarter increased to 4.83 billion rupees from 2.86 billion rupees in the previous quarter.
Net non-performing loans as a percentage of net advances remained stable at 0.3 percent.
Net interest margin fell to 4.4 percent from 4.6 percent a year earlier.
Shares of HDFC Bank, valued at more than $33 billion, were up 0.7 percent by 0552 GMT. The stock is up almost 27 percent so far this year. The Indian banking sector index has gained more than 36 percent, the highest in Asia Pacific.