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HDFC Bank, the country's second largest private sector lender, has reported a 21 per cent rise in net profit to Rs 2,695.7 crore on account of robust other income and increase in net interest income. Net profit was a tad below a Bloomberg estimate.
Net interest income (NII), the difference between interest earned and interest expended, increased 23.5 per cent to Rs 6,389 crore in the quarter ended June, compared with Rs 5,171.6 crore in the same period a year ago.
Other income, led by treasury gains, grew 33 per cent to Rs 2,461.9 crore in the April-June quarter compared with Rs 1,850.6 crore in the corresponding quarter last year.
“HDFC Bank’s healthy NII growth was aided by strong loan growth and stable net interest margins. However, profit after tax was marginally below our expectations on back of higher provisions despite robust treasury gains,” said Saday Sinha, analyst with Kotak Securities.
Though the gross non-performing assets (GNPAs) in the June quarter improved compared with the same quarter a year ago, but on a sequential basis, it went up marginally. The percentage of gross NPA to gross advances was at 0.95 per cent compared with 1.07 per cent in the June quarter last financial year. However, there was a marginal increased in GNPAs from the March quarter, where it stood at 0.93 per cent.
The bank's management denied there were any signs of stress with regard to asset quality. “The bank is not showing any signs of stress. Marginal difference in NPA numbers will happen from quarter to quarter but categorically the bank has no stress at this point of time. Some slippages that happened were in small and medium enterprise business and in agri business,” said Aditya Puri, managing director, HDFC Bank.
Similarly, net NPA to gross advances at the end of June 30, 2015, improved to 0.27 per cent compared with 0.32 per cent in the same quarter a year ago. But it registered a slight increase of 0.02 per cent on a sequential basis.
At the same time, provisions and contingencies for the quarter ended June 30 also increased to Rs 728 crore (consisting of specific loan loss provisions of Rs 557.5 crore, general provisions of Rs 96 crore, floating provisions of Rs 65 crore and other provisions of Rs 9.5 crore) against Rs 482.8 crore for the corresponding quarter ended June 30, 2014.
“Provisions have gone up but a large part of it is floating provisions which when times are good it is prudent to provide. But specific provisions haven't gone up,” Puri said.
Despite a growth in current and savings accounts, the share of low cost current account savings account (Casa) in total deposits came down to 39.6 per cent at the end of the June quarter compared with 44 per cent at the end of March 31, 2015. However, Puri explained this was on account of the share of fixed deposits growing faster than the Casa growth.
Net interest margin, a key indicator of a bank's profitability, remained stable at 4.3 per cent for the quarter ended June. The lender continued to remain well capitalised with a capital adequacy ratio of 15.7 per cent at the end of the June quarter.
A few days before the Reserve Bank of India's monetary policy, which is on August 4t, Puri said he expects the central bank to cut rates further.
“Based on the way inflation is moving, there isn’t much volatility and the way commodity prices are moving, the likelihood of interest rates going down is definite. We believe that interest rates should go down between now and year-end, maybe around 50-75 basis points, if not more,” he said.
The bank continued to be bullish on its digital strategy and by the end of the month was planning to launch a facility that would allow customers to pay home delivery vendors online.
