 "HDFC Bank Q1 result: Net profit up 35% at Rs 16,175 cr, NII at Rs 29,837 cr")
The country’s largest private sector lender HDFC Bank on Saturday reported a 35 per cent Year-on-Year (Y-o-Y) growth in net profit at Rs 16,175 crore for the quarter ended June 2024 (Q1FY25), aided by healthy net interest income (NII) and lower provisions.
Analysts at Bloomberg had estimated that the bank may post a net profit of Rs 15,652 crore.
However, sequentially net profit of the lender was down 2 per cent from Rs 16,511.85 crore in Q4FY24 due to lower income growth and higher tax expenses.
The lender had reported a net profit of Rs 11,952 crore in the corresponding period a year ago (Q1FY24).
The figures for Q1FY25 include the operations of erstwhile HDFC Ltd, which was amalgamated with and into the bank on July 1, 2023.
The bank reported a NII of Rs 29,837 crore in Q1FY25, up 26.4 per cent from the corresponding period a year ago, aided by robust growth in advances. Sequentially, NII was up 2.6 per cent sequentially from Q4FY24. Net interest margin of the lender improved to 3.47 per cent in Q1FY25, compared to 3.44 per cent in Q4FY24.
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Provisions of the lender was down 9 per cent Y-o-Y to Rs 2,602 crore in Q1FY25 and sequentially provisions made by the lender were down over five times from Rs 13,511 crore in Q4FY24.
The bank’s asset quality declined as gross non-performing asset (NPA) ratio was up 9 basis points (bps) sequentially to 1.33 per cent in Q1FY25. Net NPAs also saw a 6 bps increase during this period to 0.39 per cent.
The bank reported a 52.6 per cent Y-o-Y rise in advances in Q1FY25 mainly aided by growth in retail loans, which were up over 100 per cent Y-o-Y, followed by growth in commercial and rural banking loans at 23 per cent Y-o-Y, and growth in corporate and wholesale loans at 18.7 per cent Y-o-Y.
Deposit growth, however, it has trailed loan growth. In Q1FY25, the bank reported a 24.4 per cent Y-o-Y growth in deposits to Rs 23.91 trillion. The bank's average deposits stood at Rs 22.83 trillion during this period, up 25.2 per cent from Rs 18.2 trillion in Q1FY24. Its average current account savings account (Casa) deposits were up 8.1 per cent Y-o-Y to Rs 8.10 trillion.
"The rate of growth of deposits will be higher than the rate of growth of loans," said Srinivasan Vaidyanthan, Chief Financial Officer, HDFC Bank on a media call after the bank's Q1 earnings.
"Typically, Q1 is a very low accretion quarter for the banking system and Q4 is the highest. System liquidity was also in the negative. (Mostly) Our retail branch drives deposits and constitutes about 84 per cent of the total deposits. We want the branches to drive deposits instead of looking for non-retail or large ticket size deposits," said Vaidyanthan.
"Typically, Q1 is a very low accretion quarter for the banking system and Q4 is the highest. System liquidity was also in the negative. (Mostly) Our retail branch drives deposits and constitutes about 84 per cent of the total deposits. We want the branches to drive deposits instead of looking for non-retail or large ticket size deposits," said Vaidyanthan.
Commenting on how they plan to calibrate growth in the advances side, Vaidyanathan said, "In the wholesale category, credit demand is high and good but the rates are benign. The spread on these loans over the risk free government securities is thin and competition is making it thinner. Given that, we want to ensure that we are circumspect in how we price and choose"
"On the retail side, in the secured segments such as mortgages, we are the leader post the merger and we will continue to be leading in this segment. On the unsecured segment, we have heard the regulator talking about being cautious about the credit quality and the end use. So, we have to be cautious and we have been cautious in this segment. Our growth in this segment was about 10 per cent on an annualised basis and we will calibrate the rate of growth", he added.
Meanwhile, he also highlighted that the bank has engaged in securitisation of its mortgage assets and will continue to do so going forward. In Q1FY25, the bank has securitised Rs 5,000 crore worth of mortgage loans. "There is no particular target that the bank has on securitisation. We are trying to get the market started so that over time as the country is growing, home ownership will increase and mortgages will be a large part of the asset demand in the market and there are many investors who are interested in holding it in a securitised form. We will continue to do many forms of that such as securitisation, loan assignments, etc.".