Misses street estimates due to low biz volumes amid pandemic
Amid disruptions due to Covid-19, the largest private lender HDFC Bank on Saturday posted lower than estimated net profit of Rs 7,730 crore during the June quarter as the asset quality of the bank worsened. Although the net profit of the bank registered a 16.1% year-on-year (y-o-y) growth, the bottomline missed the Rs 7,931-crore consensus estimate by Bloomberg. The net interest income (NII) of the lender, however, grew 9% y-o-y to Rs 17,009 crore, but remained flat sequentially.
The bank has acknowledged that business activities remained curtailed for almost two-thirds of the quarter due to Covid-19, which has led to a decrease in retail loan originations, sale of third-party products, card spends and efficiency in collection efforts. The lower business volumes, coupled with higher slippages, resulted in lower revenues, as well as an enhanced level of provisioning.
Provisions during the quarter increased 24% y-o-y to Rs 4,831 crore, compared with Rs 3,892 crore in the year-ago quarter. Provisions and contingencies for the quarter included specific loan loss provisions of Rs 4,219.7 crore and other provisions of Rs 611 crore. The core net interest margin (NIM) of the bank declined 10 basis points (bps) sequentially to 4.1%, compared to 4.2% in the March quarter.
The asset quality of the lender worsened during the June quarter. Gross non-performing assets (NPAs) ratio of the lender declined 8 bps to 0.48%, compared to gross NPAs of 0.4% in the previous quarter. However, net NPAs ratio improved 5 bps to 0.45% from 0.5% in the March quarter. The total credit cost ratio remained at 1.67%, compared to 1.64% in the March quarter and 1.54% in the quarter ending June 30, 2020.
The bank said it has restructured loans worth Rs 7,800 crore, under the Reserve Bank of India’s one-time restructuring scheme. This included Rs 5,457 crore worth retail loans, and Rs 1,735 crore worth of corporate loans. The bank has also restructured loans worth Rs 608 crore to other borrowers under the scheme.
Other income of the bank grew 54.3% y-o-y at Rs 6,288.5 crore. The four components of other income were fees and commissions of Rs 3,885.4 crore, foreign exchange and derivatives revenue of Rs 1,198.7 crore, gain on sale or revaluation of investments of Rs 601.0 crore.
Total advances rose 14.4% y-o-y to Rs 11.5 lakh crore, of which retail loans were up 9.3% y-o-y to Rs 4.58 lakh crore. Similarly, commercial and rural banking loans were up 25% from a year ago to Rs 3.86 lakh crore. The bank also said wholesale loans were up 10% y-o-y to Rs 3.14 lakh crore.
Total deposits of the bank grew 13.2% y-o-y to Rs 13.4 lakh crore. CASA deposits grew by 28.1% y-o-y with savings account deposits at Rs 4.2 lakh crore and current account deposits at Rs 1.85 lakh crore.
The bank’s total capital adequacy ratio (CAR) as per Basel III guidelines was at 19.1% as on June 30 against a regulatory requirement of 11.075%.