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For the first time in about a decade, HDFC Bank failed to report annual growth of at least 30 per cent in its quarterly net profit, as the uncertain macroeconomic situation resulted in cautious lending by the bank. The tight liquidity situation, with its cascading effect on the cost of funds, trimmed the bank's margins.
On Tuesday, the bank said its net profit for the quarter ended September 2013 stood at Rs 1,982.3 crore, a rise of 27.1 per cent compared to the corresponding period last year. According to some estimates, the bank had reported quarterly net profit growth of at least 30 per cent for the preceding 55 quarters.
"We have always been saying we are not fixed on any particular (growth) number. We have moderated our top line growth, responding to the slow economic environment. We were also conservative because the yields on incremental advances were not very attractive. But we still reported 31.7 per cent increase in our profit before tax. The higher tax rate also had a role to play (in moderating year-on-year growth in the September quarter profit)," Paresh Sukthankar, executive director, said in post-earnings comments.
Net interest income, or the difference between interest income and interest expenditure, increased 15.3 per cent to Rs 4,476.5 crore. Net interest margin narrowed 10 basis points from a year ago to 4.3 per cent at the end of September. Sukthankar was confident the bank would be able to maintain its margin within the estimated range of 4.1-4.5 per cent in the coming quarters.
During the September quarter, HDFC Bank's other income rose 25.3 per cent year-on-year. Growth in other income, however, was capped, as the loss on sale of investments widened to Rs 173.3 crore, against Rs 105.9 crore a year earlier. The lender managed to keep a tight control on its costs, with operating expenses rising only 9.3 per cent and the cost-to-income ratio falling to 46.4 per cent from 50.2 per cent a year ago.
At Rs 385.9 crore, provisions and contingencies were largely flat on a year-on-year basis, despite a marginal rise in non-performing assets. Gross non-performing asset ratio deteriorated five basis points sequentially and 18 basis points annually to 1.09 per cent. Net bad loan ratio stood at 0.3 per cent at the end of September.
Sukthankar said while the bank was comfortable with the overall portfolio quality, stress on the quality of commercial vehicle and commercial equipment loans had continued during the quarter. Total restructured loans, including the applications received and those being processed, stood at 0.2 per cent of gross advances.
Advances increased 16 per cent year-on-year to Rs 2,68,617 crore at the end of September. Retail loan growth was 16.9 per cent, while corporate advances rose 15 per cent. The share of retail loans to total advances stood at 53 per cent.
Sukthankar said the underlying demand for some retail loan products had moderated during the September quarter. He added the bank had taken a conscious decision to offer corporate loans cautiously, as the yields weren't attractive and the economic environment remained uncertain. These factors, according to him, resulted in slower-than-expected growth in the bank's advances. He said in the coming quarters, the bank would aim to increase its advances at a rate faster than the industry average.
Total deposits stood at Rs 3,13,011 crore, up 14.2 per cent from a year ago. The share of low-cost current account and savings account deposits was 45 per cent.
HDFC Bank closed the quarter with a capital adequacy ratio of 14.6 per cent, according to Basel-III norms. Its tier-I capital adequacy ratio was 9.9 per cent. The bank has no immediate plans to raise fresh capital.
