HDFC Bank on Friday reported a 20% year-on-year (y-o-y) growth in net profit for the quarter ended December to Rs 4,642.6 crore on the back of an 18% y-o-y rise in income, despite an 89% jump in provisions. The profits were just a tad below analysts’ expectations, according to Bloomberg data. The bank’s net interest income (NII), or the difference between interest earned and interest expended, rose 24% y-o-y to Rs 10,314.3 crore. The bank indicated that this was driven by a core net interest margin of 4.3%. Non-interest income grew 23% to Rs 3,869.17 crore.The bank’s provisions soared to Rs 1,351.44 crore as a result of the bank’s move to set aside additional provisions to bridge the gap between the Reserve Bank of India’s (RBI) and its own assessment of the provisioning for three corporate accounts. Paresh Sukthankar, deputy managing director of the bank, said that in the previous quarter, HDFC Bank had already made contingent provisions for one of the accounts, even in the absence of clarity on the account’s final status from the regulator. Soon after, the account was classified as a non-performing asset (NPA) on the RBI’s instructions.
“Of the balance amount, some had already been declared NPL (non-performing loan) in the June quarter and the September quarter. Since we now have finality we have given the divergence of the total NPLs,” Sukthankar said. The total divergence in provisioning for the bank, difference between its assessment and that of RBI’s for three corporate accounts, in FY17 stood at Rs 793.39 crore. The divergence with respect to gross NPAs stood at Rs 2,051.76 crore. However, following an upgrade in classification of one of these accounts to “standard” in December last year, the divergence has come down to Rs 294.18 crore on December 31, 2017. The bank’s gross NPA ratio on December 31 stood at 1.29%, 3 basis points (bps) higher than on September 30. The net NPA ratio rose 1 basis point sequentially to 0.44%. The core net interest margin in Q3 remained unchanged at 4.3% from the preceding quarter ended in September.
Total advances grew 27.5% y-o-y to Rs 6.31 lakh crore, helped in part by the effect of a low base as the December quarter in FY17 coincided with the demonetisation exercise. The bank’s CASA deposits rose 6.7% y-o-y to Rs 3.07 lakh crore, while total deposits rose 10% to Rs 6.99 lakh crore. CASA deposits accounted for 43.9% of total deposits as on December 31, 2017. On a segmental basis for the quarter, while retail, which is the largest segment accounting for about half the revenue, saw a year-on-year growth of 10.3%, wholesale revenues clocked a faster 30% growth. Treasury revenues dipped 2.7%, year-on-year in the December 2017 quarter. Within the retail book, strong growth was seen in personal loans, auto loans, credit cards and business banking. The bank’s distribution network expanded to 4,734 branches (4,555 branches on December 31, 2016) and 12,333 ATMs (12,087) across 2,672 cities. Of the total branches, 52% are in semi-urban and rural areas.