HDFC Bank, the country’s largest private sector lender, reported an 11.5% year-on-year increase in net profit to Rs 18,654 crore for the quarter ended December, slightly above the Bloomberg estimate of 18,367 crore. Improved margins, loan growth and stable asset quality help the lender’s bottomline. On a sequential basis, the net profit was almost flat.
Margin Expansion
Net interest income (NII) – the difference between interest earned and interest expended – grew 6.4% YoY to Rs 32,620 crore. The bank’s core net interest margin (NIM), a key indication of banks’ profitability, improved to 3.35% from 3.27% in the previous quarter.
The bank’s interest income grew around 1% YoY to Rs 76,751 crore during the period. Total income stood at Rs 90,005 crore, up 3% on year. The bank has recognised an estimated incremental impact of Rs 800 crore due to new labour code. Total expenses of the bank Rs 62,907 crore, largely flat compared to the year-ago quarter.
The total provisions declined to Rs 2,838 crore in the December quarter from Rs 3,154 crore a year ago after release of contingent provisions of Rs 1,000 crore, primarily in respect of a large borrower group, fulfilling certain conditions, the bank said.
Post-Merger Glide Path
Total balance sheet size was Rs 40.89 lakh crore as of December 31 against Rs 37.59 lakh crore a year ago. The average deposits of the bank grew 12.2% YoY to Rs 27.52 lakh crore as on December 31, with current account, savings account (CASA) ratio stable at 34%. The gross advances rose 12% YoY to Rs 28.45 lakh crore. The retail advances posted a growth of around 7%, while corporate loan segment rose 10.3% during the reporting quarter. Credit-deposit ratio of the bank remain elevated at 98.7% as of December-end. The lender aims to reduce it back to pre-merger levels of 87-88%.
“Quarterly CD ratio fluctuations are normal due to seasonality, and liquidity. We are in an easing cycle with credit growth focus in the country that also needs our participation. We’re not constrained—we’re directionally lowering it, fine with quarter-to-quarter ups and downs. The objective is to keep moving it down as we go along. We are confident that it will be on a downward glide path,” Srinivasan Vaidyanathan, managing director and chief financial officer, said in the post-earnings media conference.
The asset of the bank was stable during October-December. Gross non-performing asset (GNPA) ratio was unchanged at 1.24% as on December-end compared to the previous quarter and net non-performing asset (NNPA) ratio at 0.42%.