HDFC Bank on Monday reported a 20% year-on-year (y-o-y) growth in its net profit for the quarter ended June to Rs 3,893.84 crore on the back of a 20.4% increase in net interest income (NII) to Rs 9,370.74 crore, even as the announcement of farm loan waivers took a toll on the asset quality. NII is the difference between interest earned and interest paid by a bank. Provisions at the bank jumped 80% y-o-y to Rs 1,558.76 crore on account of higher general provisioning for loans to companies in certain stressed sectors — this figure stood at Rs 206 crore — and coverage for agricultural loans. On a sequential basis, provisions rose 23.5%. Gross non-performing assets (NPAs) at the end of June stood at Rs 7,242.93 crore, up 47% from the year-ago period. The gross NPA ratio rose 19 basis points (bps) from the end of March to 1.24% of the overall loan portfolio. Paresh Sukthankar, deputy managing director, said almost 60% of the increase in gross NPAs has come through from the agriculture portfolio. “We believe a fair portion of this impact does reflect changed customer behaviour in anticipation of loan waivers which were announced. Though it has been a fairly good monsoon and farmers have had some realisations, there has been some impact on repayments, which is clearly reflected in the 20 basis-point increase of our gross NPAs,” he added.
The net NPA ratio rose 11 bps sequentially to 0.44%. Total advances rose 23.4% y-o-y to RS 5.81 lakh crore as of June 30. Net interest margin (NIM) improved marginally to 4.4% from 4.3% in the March quarter. The bank typically reports a NIM of 4-4.3%. “Given the fact that we are growing our loan book somewhere in the low 20s right now, and deposit growth has been in the high teens, clearly I don’t expect that margins will continue to be outside that range,” Sukthankar said. Savings account deposits grew 26.5% y-o-y to Rs 1.93 lakh crore and current account deposits rose 34% to `1.02 lakh crore. Term deposits saw an increase of 9% over the previous year to Rs 3.76 lakh crore.