Healthy retail loan growth, lower provisions on the back of improving asset quality and an increase in non-interest income aided HDFC Bank to report 31.5 per cent growth in its net profit in the second quarter. Net profit stood at Rs 1,199.3 crore, against Rs 912. 14 crore a year earlier.
Net interest income, or the difference between interest income and interest expenditure, was Rs 2,944.5 crore, up 16.6 per cent from a year ago. However, the net interest margin narrowed by 10 basis points to 4.1 per cent, owing to the higher cost of funds.
“We believe our net interest margin will remain in the broad range of 3.9-4.2 per cent in the next few quarters,” Paresh Sukthankar, executive director, said in his post-earnings comments. The bank’s non-interest income grew 26.1 per cent year-on-year to Rs 1,211.7 crore, driven by higher fee income, increase in foreign exchange and derivative revenues, and lower trading losses.
Operating expenses rose 20.9 per cent to Rs 2,030.4 crore, as the lender opened 385 new branches, taking its total number of branches to 2,150.
The private lender reduced its provisions to Rs 366 crore in the July-September period from Rs 454.5 crore a year ago, on good asset quality. The gross non-performing asset ratio improved by 20 basis points to one per cent, while net bad loan ratio declined by 10 basis points to 0.2 per cent.
| PERFORMANCE METER (in Rs crore) | ||
| Apr-Sep ‘11 | % Chg* | |
| Interest earned | 6,718 | 3966.0% |
| Other income | 1,211.68 | 2612.0% |
| Total income | 7,929.38 | 3741.0% |
| Interest expended | 4/30/1910 | 6522.0% |
| Net interest income | 2,944.51 | 1656.0% |
| Net profit | 1,199.35 | 31.49 |
| *Over same period previous year Source: Capitaline Data compiled by BS Research Bureau | ||
Total restructured assets accounted for 0.4 per cent of the bank’s gross advances. The bank restructured Rs 35 crore of loans in the period.
Gross advances expanded 25.6 per cent from a year ago and 7.3 per cent sequentially to Rs 189,917 crore. Retail loans were up 34.2 per cent at Rs 92,878 crore.
“At this point growth momentum in retail loans is slightly faster than wholesale loans. We expect the system loan growth to stay in the high teens this financial year. Traditionally, we have been growing a little ahead of the system. We don’t see any reason why it should be different this year,” Sukthankar said.
Small business loans, commercial vehicle and equipment finances were the fastest-growing segments in the bank’s retail loan portfolio. In wholesale advances, working capital finances have been driving growth, as project finances continue to stay subdued because of uncertain economic environment and high interest rates. Total deposits stood at Rs 230,676 crore as of June-end, up 18.1 per cent year-on-year and 9.2 per cent sequentially.
