Robust loans lift HDFC Bank profit up 32%

HDFC Bank reported a 32% rise in quarterly profit riding on robust loan growth. Analysts said they expected the bank to maintain the pace in the coming quarter.

Demand for bank loans in India has been sluggish, but the New York-listed HDFC Bank’s focus on retail loans has helped it do well.

“We are bullish on HDFC Bank. We expect auto and mortgage loans to be the key segments to drive the loan growth,” said a banking analyst at brokerage India Infoline Ltd.

Bad debt provisions fell 6% in the December quarter from a year earlier, while loans grew 21%, the bank said.

In comparison, the banking sector’s annual loan growth at the start of January was 13.7% after falling to 9.7% in October.

“We traditionally target growth rate of 3 to 4% faster than the banking system. At the current pace, we expect to have a similar rate of credit growth by end of March,” HDFC Bank executive director Paresh Sukthankar said in a conference call.

Angel Broking analyst Vaibhav Agrawal said HDFC Bank’s access to cheap funds - 49% of the bank’s deposits were in current and savings accounts that cost zero to 3.5% — would continue to help its earnings.

The bank’s net profit rose to Rs 819 crore in the December quarter from Rs 622 crore a year earlier, as its net interest margin improved to 4.3% from 4.2%. “We have gained market share in almost every retail loan product and retail makes up half our book.
Even in wholesale, our diversified portfolio has helped growth,” Sukthankar said.

He said interest income would contribute more towards earnings in the coming quarter as rising bond yields hit treasury income.

The bank posted a loss of Rs 26.5 crore on its bond holdings in the December quarter when bond yields rose around 50 basis points, compared with a treasury profit of Rs 232 crore in the year earlier.