HDFC Bank, India’s largest private sector lender, reported a net profit of 10.8% on year to Rs 18,641 crore for the quarter ended September, beating analyst estimates. As per Bloomberg estimates, analysts had expected the net profit at Rs 17,345 crore for the reporting quarter.
In the September quarter, the net interest income inched up by 5% on year to Rs 31,552 crore, higher than the analyst estimate of Rs 31,423 crore.
Other income also grew by 25% on year to Rs 14,350 crore. However, on a sequential basis, it fell sharply by 34%.
Net interest margins moderated to 3.27% in July-September from 3.35% a quarter ago. The bank’s management said there would be “some tailwinds” on account of deposit repricing over the next couple of quarters to a year.
The bank’s operating expenditure was up 6.4% on year to Rs 17,977 crore in the reporting quarter. “Investments are ongoing both branches, people and technology, but at a pace which is lower than what it was in the previous period,” the management said.
In terms of asset quality, the gross non-performing asset (NPA) ratio improved to 1.24% as on September 30 from 1.40% a quarter ago and the net NPA ratio improved to 0.42% from 0.47% a quarter ago. During the quarter, the bank reported slippages of Rs 7,400 crore, upgrades and recoveries worth Rs 6,800 crore and wrote off loans worth Rs 3,300 crore. The credit cost fell to 51 basis points from 56 bps a quarter ago.
The provisions and contingencies increased by nearly 30% on year to Rs 3,501 crore but fell by 76% on a sequential basis. The provision coverage ratio stood at 67% as on September end.
The balance sheet of the bank was steady with liquidity coverage ratio at 120% and the capital adequacy ratio at 20%, against a regulatory requirement of 11.9%. The tier-I capital adequacy ratio was at 17.9% and the CET-1 capital ratio was at 17.5% as on September 30.
The private sector bank saw gross advances up 9.9% on year while the deposits were up 12.1% on year as on September 30. Within advances, retail loans were up 7.4% on year, with the mortgage book up nearly 7% on year to Rs 8.02 lakh crore. Loans to the small and mid-market space increased by 17% on year.
“The triad of the tax benefits, the GST, and the interest rate cuts seems to be working as we see at the ground level, economic activity visibly improving across customer and product segments. In this background, we have an opportunity to accelerate loan growth, which is what we have started to do from this quarter,” Sashidhar Jagdishan, managing director and CEO of the bank, said in the post earnings media call.
In terms of deposits, current account deposits were up 7.6% on year while the savings account grew at 7.3%. CASA ratio of the bank was steady at 33.9%. The bank also added 46 branches in the quarter, taking the total count to 9,545.
With this, the credit-deposit ratio of the bank by the end of September stood at 98%. At the time of merger of HDFC with the bank, the credit-deposit ratio was as high as 110% due to which the bank had decided to slow down their lending and bring down the CD ratio to 96.5%. “We believe and we expect that we will grow faster than the system growth rate and gain market share in FY27,” Jagdishan said.
When asked about the draft guidelines on acquisition financing which are yet to be released, he said that it is too early to comment. “I think it’s a very good positive for India banks and for the corporate customers. Definitely, it was going to be a win-win one in terms of us providing another product offering to our bouquet of services to our customers. Even for customers, I believe that it should reduce the cost of the transaction itself. But let’s wait in terms of getting the final guidelines,” he added.