HDFC Bank, the country’s second-largest private lender, saw April-June net profit rise 33.9% on year to Rs 812 crore driven by a 40% rise in its loan book, lower requirement for provisions and contingencies, and a stable net interest margin. The profit was in line with street estimates of Rs 806 crore.
Net interest income grew 29.4% to Rs 2,401 crore. Gross advances rose 40.2% to Rs 1.48 lakh crore as on June-end, of which a 10% increase was due to short-term, one-off movements in wholesale loans, the bank said.One-off loans included credit extended for payments for 3G spectrum and advance tax.
Retail loans grew 24.4% to constitute 51.5% of gross advances as on June 30, while the balance sheet size grew 25.3% to stand at Rs 2.33 lakh crore.
Total deposits as on June 30 rose 25.6% to Rs 1.83 lakh crore, of which current and savings account (CASA) deposits rose 37%. CASA ratio was 49.2% of total deposits, up from 45% a year ago. Since April 1, incremental credit growth was around 16%.
“We have seen a steady improvement in asset quality leading to a decline in provisions and contingency requirements,” Paresh Sukthankar, executive director, said. The bank achieved a 77% provision coverage as on June-end, up 70% on year. Provisions and contingencies reduced to Rs 555 crore for April-June from Rs 659 crore in the same period last fiscal.
Sukthankar expects improvement in the bank’s asset quality going forward even as HDFC Bank’s loan book continues to grow faster than the industry this fiscal. He expects industry credit growth of 21-22% in 2010-11.
HDFC Bank’s net interest margin (NIM), as on June 30 was 4.3%, up from 4.2% a year ago but marginally lower from 4.4% in January-March.
“Our NIM is fairly stable, despite absorbing the impact of cost of
daily payment of interest rate from April 1 which was around 18 basis points... Going forward, I expect it to stay in the 4-4.3% range,” Sukthankar said. During the quarter ended June, the bank bought around Rs 900 crore worth of loans from parent Housing
Development Finance Corporation and could continue to buy back loans worth the same amount in the quarters going forward, he said.
HDFC Bank sources home loans for its parent company, but retains the option of buying back 70% of these loans to help meet their priority sector lending targets.
He said the bank was not looking at increasing interest rates on credit or deposits “as of now” but added that it would await RBI’s rate action at its July 27 policy before taking a call. The central bank may hike policy rates by 50-75 bps in 2-3 tranches until December-end, he said.
HDFC Bank improved its loan book quality with net non-performing assets down sharply to 0.3% for the quarter under review, down from 0.63% a year ago, whereas June-end gross non-performing assets stood at 1.21%, down from 2.05%.
A key factor responsible for easing of NPA levels is the lower impact from bad loans reflected on its books after the merger of Centurion Bank of Punjab along with improvement in the overall economy, Sukthankar said.
“As the new NPA formation is coming down, that’s how I see our level of provisioning coming down further,” he said.
Total restructured assets accounted for 0.3% of the bank’s gross advances.
Other income during the quarter stood at Rs 940 crore, driven by rise in fees and commissions, and foreign exchange revenues.
However, profit from sale of investments fell sharply to Rs 21.5 crore from Rs 256 crore in FY10.
NewsWire18
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