Consumer loans buoy HDFC profit

HDFC Bank, the second largest private sector bank, today said its net profit in the third quarter ended December 31, 2006 rose 32 per cent on rising demand for consumer loans boosting net interest margin and with a robust increase in fee income.

The bank's net profit rose to Rs 295.64 crore in October-December 2006 from Rs 224.40 crore a year earlier.

Advances grew by 32.8 per cent to Rs 48,201 crore from a year earlier, with retail loans forming 52 per cent of gross advances. The bank's deposit growth at 30 per cent matched that of its loans growth, in an industry that's hard pressed for liquidity with deposit accretion lagging loans growth.

"The growth in net profit comes on the back of what was a strong quarter for net interest income with assets growing almost 32 per. The growth in other income such as fee income was another key driver for this increase," said Paresh Sukhthankar, head - credit and market risks.

The loans growth for the industry is close to 30 per cent for the third successive year and the deposits growth is at 21 per cent, which is higher than less than 20 per cent in the previous two years. 
 

(In Rs crore)	Quarter ended Dec
	2005	2006
Interest earned	1378.50	1759.31
Other income	304.15	373.30
Total income	1682.65	2132.61
Total expenses	1121.41	1435.70
Operating profit	561.24	696.91
Net profit	263.21	295.64
CAR (%)	11.40	12.80
EPS (Rs)	8.40	9.40

The bank's total income in the third quarter of 2006-07 rose 44 per cent to Rs 2,132.6 crore from Rs 1,475.9 crore a year earlier. Net revenues (net interest income plus other income) for the quarter were Rs1,301.9 crore, an increase of 34.7 per cent over Rs 966.7 crore a year earlier.

HDFC said its net interest income (interest earned less interest expended) for the quarter ended December 31, 2006 increased by 38.5 per cent to Rs 928.6 crore, leading to an improvement in its net interest margin (NIM) to just over 4 per cent as compared to around 3.9 per cent a year earlier.

"The improvement in NIM can be attributed to a favourable mix of deposits with current and savings accounts forming a healthy proportion and to a change in asset mix with retail book forming a slightly higher proportion of loan book," said Sukhthankar.

With savings account deposits of Rs.19,238 crore and current account deposits at Rs 17,433 crore, the CASA (current account and savings account) mix was at 54.9 per cent of total deposits as at December 31, 2006, against 53.1 per cent a year earlier.

Provisions and contingencies for the third quarter was Rs 401.3 crore against Rs.293.2 crore a year earlier, principally comprising specific provision for non-performing assets and general provision for standard assets of Rs.192.9 crores.

Net non-performing assets stood at 0.4 per cent of total customer assets at the end of December.