HDFC Bank, the country’s second largest private sector lender, On Wednesday said its net profit rose 44.81 per cent during the third quarter to Rs 621.74 crore, even as the stock of non-performing assets (NPAs) more than doubled.
The rise in non-performing assets was attributed to the merger of Centurion Bank of Punjab (CBoP) with itself in May 2008. Due to the merger, the results are not comparable with HDFC Bank’s standalone performance during October-December, 2007.
The bank’s total income went up 58.79 per cent to Rs 5,407.90 crore, while net interest income was 37.7 per cent higher at Rs 1,979.3 crore. Higher fees and commission and better interest margins also helped. The net interest margin (NIM) for the quarter was estimated at 4.3 per cent, as against 4.2 per cent during the second quarter. HDFC Bank Executive Director Paresh Sukhtankar said the bank is expected to maintain the NIM at around the same level during 2008-09.
But the steep rise in NPAs resulted in the bank’s share closing 1.17 per cent lower Rs 977.35 on the Bombay Stock Exchange. During the quarter, the gross NPAs rose over 120 per cent to Rs 1911.41 crore, as against Rs 866.97 crore during the October-December 2007.
| Performance in Q3 ended Dec 31 | ||
| Rs crore | 2007 | 2008* |
| Interest earned | 2,726.90 | 4,468.50 |
| Other income | 678.89 | 939.39 |
| Expenditure | 2,339.44 | 3,949.81 |
| PBT | 1,066.35 | 1,458.08 |
| Net profit | 429.36 | 621.74 |
| CAR (%) | 13.80 | 13.70 |
| NPR (%) | 15.75 | 13.91 |
| Source: BSE *CBoP merged with HDFC Bank in May 2008 | ||
Similarly, net NPAs were also 120 per cent higher at Rs 614.33 crore at the end of December 2008, compared with Rs 279.78 crore during the corresponding period last year.
“Although there has been an increase in NPAs on HDFC Bank’s retail and SME loan portfolio, over 50 per cent of the bank’s NPAs were generated from CBoP’s loan book,” Sukhtankar said.
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Non-tax provisions went up by 25.6 per cent during the quarter to Rs 531.79 crore. Of this Rs 465.4 crore was for losses accruing from specific and general loans during the quarter, as against Rs 350.1 crore under this head during the third quarter of 2007-08.
The proportion of current account and savings accounts balances in HDFC Bank’s deposit portfolio shrunk to 40 per cent at the end of the third quarter, compared with 44 per cent during July-September 2008.
Sukhtankar attributed this to depositors shifting balances from their savings bank and current accounts to term deposits to take advantage of the higher rates on offer.
As a result, the term deposit portfolio grew nearly 80 per cent to Rs 87,523 crore at the end of December, while savings account balances went up 32.5 per cent to Rs 33,081 crore. “We have managed to maintain our margins despite interest rates. Moving on to the next few quarters, our target is to improve our Casa to 44 per cent,” Sukhtankar said.
With NPAs rising, HDFC Bank said it has tried to moderate loan growth during the third quarter, and will continue with the strategy during the fourth quarter. While retail advances grew by around 30 per cent to Rs 59,647 crore, Sukhtankar said, the corporate loan book has grown at a lower rate, partly due to the liquidity crunch during October and November.