Bank identifies firm for selection of new CEO, shortlist by July.
HDFC Bank’s net profit jumped 32.8% year-on-year to Rs 7,416.5 crore in the December quarter, driven by robust growth in fee income and healthy loan growth. The bank also gained from the cut in corporate taxes announced in September, with its impact visible this quarter too. The bank’s results beat street estimates, with non-interest income growing 35% YoY to Rs 6,669.3 crore on a standalone basis. Fees and commissions accounted for two-third of the other income, growing 24.1% to Rs 4,526.8 crore. “We are surprised by certain runs that we have had in the third party distribution and payment products. We have seen decent growth in credit and debit cards, at around 20%… Yields on the (third-party) products that we have been distributing have been better,” CFO Sashi Jagdishan said in a conference call.
In a slow credit growth scenario, total advances of the bank grew 20% annually to Rs 9.36 lakh crore as on December 31, 2019.
Pre-provision operating profit (PPOP) grew 20.1% YoY to Rs 12,495.4 crore. The bank’s net interest income (NII), which is the difference between interest earned and interest expended, rose 12.7% YoY to `12,172.9 crore in the third quarter of FY20. Meanwhile, core net interest margin remained stable at 4.2%.
On the selection of a new CEO for India’s largest private sector bank, the management said a search firm has been identified and a shortlist for the central bank’s approval is likely to be ready by July. “We do have a roadmap or a glide path as to when the long and short list of candidates and the interviews will be slated. I think the final granular details have all been agreed upon in the board meeting today… July-August, that’s the time that we see we would have finalised the shortlist for RBI’s approval. I think we are on track,” Jagdishan said without divulging the name of the head hunting firm.
The bank saw pick-up in demand for credit since the last week of November, driven by its loan outreach programmes, management said. Wholesale loans, consisting 48% of the loan book, grew 29.3% YoY. Retail loans, which constitute 52% of the loan book, grew 14.1% YoY. On the bank’s retail loan book seeing incremental stress, the management said commercial vehicles and some commercial products are a growing cause for concern. “Commercial vehicles due to the various economic factors… is something that needs to be looked at and monitored very carefully,” the management said.
Total deposits of HDFC Bank grew 25.2% YoY to Rs 10.67 lakh crore as on December 31. Retail constituted 78% of total deposits. CASA deposits grew 21.5% YoY, with savings account deposits at `2.77 lakh crore and current account deposits at Rs 1.43 lakh crore. Time deposits grew 27.7% YoY to Rs 6.45 lakh crore.
Provisions of the bank were up 12.7% sequentially at Rs 3,043.6 crore, while current account savings account (CASA) ratio stood at 39.5%, compared with 39.3% in the previous quarter. Management said slippages in the third quarter included at least one large account. Core slippages for the quarter stood at Rs 3,839 crore.
Asset quality declined marginally, with gross NPA ratio increasing 4 bps sequentially to 1.42%. Net NPA ratio rose 6 bps to 0.48% in the December quarter. As on December 31, 2019, HDFC Bank’s total capital adequacy ratio (CAR) in accordance with Basel III norms, stood at 18.5%, up 120 bps from a year ago. Regulatory requirements stipulate CAR of 11.025%, including capital conservation buffer of 1.875%, and an additional requirement of 0.15% for domestic systemically important banks (D-SIB) like HDFC Bank. Common equity tier 1 (CET 1) ratio stood at 16.2%, compared with 14.9% a year ago. Risk weighted assets were up 4.7% YoY, at `9.50 lakh crore.