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Bad loans mount at HDFC Bank, Axis

The growth in retail loans was driven by auto and personal loans: Paresh Sukthankar

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Two of the largest private sector banks reported a divergent set of numbers on Tuesday. The second largest private sector lender HDFC Bank continued to report a double-digit growth in its profitability with a 20.4% rise in its profits to Rs 3,455.3 crore with the asset quality remaining stable. While Axis Bank, the third largest private lender, reported an 84.3% drop in net profit at Rs 319 crore led by a sharp rise in its bad loans.

HDFC Bank reported gross non-performing assets (NPAs) at Rs 5,069.04 crore as on 30 September 2016 compared to Rs 4,920.89 crore as on 30 June 2016. The ratio of gross NPAs to gross advances stood at 1.02% as on 30 September 2016 as against 1.04% as on 30 June 2016.

For Axis Bank, the loan provisions for the quarter climbed to Rs 3,623 crore as against Rs 707 crore a year ago. The gross NPAs also climbed to 4.17% as against 2.54% a year ago. But the bank was able to bring down its watch list by 32% to Rs 13,789 crore compared to Rs 20,295 crore in the previous quarter. This helped the share price of the bank to rise by 1.49% to close at Rs 529.05 on the BSE.

The loan growth for HDFC Bank slowed with advances growing at 18% over the previous year as compared to 23% in the last quarter which led to the stock closing 1.19% lower at Rs 1,250.40 on the BSE.

Paresh Sukthankar, deputy managing director of HDFC Bank said in a media concall, "The growth in retail loans was driven by auto and personal loans. Unlike the last quarter the bank did witness that the credit card outstanding remained flat on a sequential basis. We have moderated the issuance of the new cards as we noticed that the number of active users were coming down. Therefore, we want to be a little conscious of the growth in the credit card segment."

Parag Jariwala of Religare securities said in a note, "Net interest margins (NIMs) declined by 0.20% over the preceeding quarter. Sequential drop in margins was due to reduction due to negative carry on excess money held in T-bills in order to pay off FCNR deposits and pricing pressure in few loan segments."

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