HDFC Bank’s net profit for the quarter ended June grew 5% on-year to Rs 19,060 crore, missing analyst expectations. The bottomline for the lender was pegged at Rs 19,720 crore as per Bloomberg estimates. Net profit was up on the back of falling provisions and steady growth in net interest income (NII).
NII was up 7% on-year to Rs 33,534 crore in the reporting quarter. However, it was lower than Bloomberg estimates of Rs 34,257 crore. Net interest margin (NIM) for April-June stood at 3.26% as against 3.40% a quarter ago.
Other income declined sharply by 41% on-year to Rs 12,822 crore, falling 3% on a sequential basis. The decline was due to fall in fees and commissions, forex and derivative income and net trading and MTM income.
Total balance sheet size was Rs 43.97 lakh crore as on June 30 as against Rs 39.54 lakh crore a year ago. Gross advances grew 15.4% on-year, and deposits were up 14.7% on-year. Within gross advances, the retail book grew by 7% on-year, small and mid-market book was up 18.7%, and corporate and other wholesale book was up 18.6% on-year. The retail AUM mix declined to 52% as on June 30, from 55% a year ago. Overseas advances constituted 1.6% of total advances.
Within the total deposits, current and savings account (CASA) deposits grew by 9.4% with savings account deposits at Rs 7 lakh crore and current account deposits at Rs 3.24 crore. Time deposits were at Rs 21.45 crore as of June 30, an increase of 17.4% on year, resulting in CASA deposits comprising 32.3% of total deposits as of June-end.
Strategic Capital Mobilization
HDFC Bank expects momentum in FCNR(B) deposit mobilisation to pick up over the coming months, with the lender pursuing multiple channels to attract overseas deposits and provide leverage to customers.
“There are three streams of FCNR that we are targeting,” MD & CEO Sashidhar Jagdishan said, pointing to attractive FCNR deposit rates, the bank’s own leverage for select customers, and financing through partner foreign banks. “The momentum will start to pick up now. It is just a matter of time… it should be a very healthy number vis-à-vis what the system is going to be mobilising over the next couple of months,” he said, declining to disclose the deposit mobilisation target.
On the leverage strategy, Jagdishan said the bank is considering offering around nine times leverage to eligible customers using its own funding lines, while leverage available through partner overseas banks could range from nine times to as high as 19 times depending on the jurisdiction. “We have plans to raise further borrowings to be able to provide own leverage to our best set of customers,” he said, adding that the bank would recalibrate the leverage if required.
Responding to questions on regulatory restrictions in the UAE, Jagdishan acknowledged that HDFC Bank faces limitations on new business in the Dubai International Financial Centre (DIFC) besides other regulatory constraints. “We do have a little bit of a handicap there… but we are not necessarily waiting for that. We have alternate strategies which we are deploying… within the realms of the regulations,” he said, adding that the bank has “plan A, plan B and plan C” to continue reaching customers in the region.
In terms of asset quality, the gross non-performing asset (NPA) ratio inched up to 1.17% from 1.15% a quarter ago. Net NPA ratio stood at 0.41% as against 0.38% a quarter ago. The provisions and contingencies fell 78.8% on-year to Rs 3,060 crore. Credit cost inched up to 40 bps in the reporting quarter as against 35 bps a quarter ago, which impacted the bank margins.
On the leadership transition, Jagdishan said the bank’s newly appointed chairman Rajiv Kumar’s first board meeting had been “very well received” by directors. “He’s done a lot of homework and we are very eager to see a great partnership between the board and the management over the next years,” he said.
On Jagdishan’s own reappointment, Deputy Managing Director Kaizad M Bharucha said the governance nomination and remuneration committee (GNRC) and the board were actively working on the matter. “The NRC and board is completely seized of the matter and this is work in process… we will certainly let all stakeholders know of the outcome,” Bharucha said, adding that the chairman’s endeavour was “to minimise uncertainties in a very short time period”.