HDFC Bank profit up 32%

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HDFC Bank, the country's second largest private sector bank, today said its net profit in the second quarter of 2006-07 rose 32 per cent on sharp increases in fee as well as interest incomes.

This is the 18th consecutive quarter in which the bank's net profit growth was around 30 per cent, said analysts. The bank's net profit rose to Rs 262.94 crore in the July-September 2006 quarter quarter from Rs 199.64 crore a year earlier.

HDFC Bank has been among the few banks which have reaped huge benefits from a phenomenal growth in credit over the last few years.There is still no appreciable slowdown in loans offtake despite the Reserve Bank of India's attempts at checking expansion of bank credit.

The bank's non-interest income, comprising fees, commissions and trading revenues, rose by 52.9 per cent to Rs 397.7 crore in the second quarter from Rs 260.2 crore a year earlier. Fees and commissions contributed Rs 314.1 crore in July-September 2006. HDFC Bank's net interest income "" interest earned minus interest paid "" was up 38.1 per cent to Rs 845.6 crore a year earlier.

However, the bank's revenue from treasury operations fell 23 per cent to 179.62 crore from Rs 234.84 crore a year earlier.

HDFC Bank is among a string of banks which the Reserve Bank of India (RBI) has penalised for inadequate controls which led to some people utilising multiple dematerialised accounts route to undermine the process of allotment to retail investors in initial public offers. The central bank has adopted an undeclared stance that these banks would not be allowed to expand the branch network as an exemplary penalty.

Analysts said the bank has thus far managed to grow without feeling the pinch of the restriction on growth in branches. They feel it would take another two-three quarters for the limitation on branch expansion to start hurting the bank's growth.

The bank's retail loans grew by 44.4 per cent to Rs 25,211 crore and now form 56 per cent of total advances. Total customer assets (including advances, corporate debentures, investments in securitised paper, etc) increased by 34.2 per cent to Rs 49,326 crore as of September 30, 2006 from Rs 36,764 crore a year earlier.

The bank had savings account deposits of Rs 18,241 crore and current account deposits of Rs 14,851 crore as on September 30, 2006, which together account for around 52 per cent of total deposit at the end of the second quarter.

"Despite the higher interest rate environment and the branch network remaining unchanged, the bank's business momentum remained healthy in both its retail and wholesale customer franchises," the bank said in a statement.

Paresh Sukhthankar, head - credit and market risks at HDFC Bank, said both cost of funds and average yield on assets have increased by 80-90 basis points from a year earlier and that has helped the bank to maintain its net interest margin at just around 4 per cent. HDFC Bank has not been able to open new branches for the last 3-4 quarters. Sukhthankar said the bank's inability to add branches for another few quarters would not matter.