HDFC Bank Q2 Results: Net Profit Rises 5% Led by NII; Asset Quality Worsens

• Net profit up 5% to Rs 16,821 crore versus Rs 15,976 crore.

• NII up 10% to Rs 30,114 crore versus Rs 27,385 crore.

• Gross NPA at 1.36% versus 1.33%.

• Net NPA at 0.41% Vs 0.39%.

Net interest income of the bank rose 10% on year to Rs 30,114 crore. Slight deterioration in asset quality capped the rise in profit after tax.

Core net interest margin stood at 3.46% for the bank, and 3.65% on an interest earning asset basis. In the June quarter, the respective figures were at 3.5% and 3.7%.

The private sector bank's asset quality deteriorated, with the gross non-performing assets ratio rising to 1.36% as of Sept. 30, compared to 1.33% in the previous quarter. The net NPA ratio rose to 0.41% from 0.39% in the prior quarter.

Provisions of the bank fell to Rs 2,700 crore against Rs 2,903 crore a year, further aiding net profit.

Gross advances for HDFC Bank rose 7% year-on-year to Rs 25.2 lakh crore. Retail loans rose 11.3%, commercial and rural banking loans were up 17.4%, while wholesale loans were up 12%.

Total deposits rose 15% from last year to Rs 25 lakh crore. Current account, savings account deposits accounted for 35.3% of total deposits, as of September 30.

"Historically, we have had incremental deposit share of 15-18%...Quarter-to-quarter we see some changes in deposit accretion. We have always tried to capture what is available in the market," said Srinivasan Vaidyanathan, chief financial officer in a call with reporters.

While the bank did not give any specific guidance on deposit growth, Vaidyanathan reiterated that the lender would look out for all opportunities it can find to add to its deposit base.

Speaking about recent asset sales that HDFC Bank undertook, Vaidyanthan said that this was part of a strategic move by the lender. Going ahead, depending on the amount of appetite in the market, HDFC Bank would continue to use asset sales, along side deposit accretion to bring down its credit-deposit ratio.

Before its merger with Housing Development Finance Corporation Ltd, the bank had a credit-deposit ratio of around 86-87%. This rose to 110% immediately after the merger in July 2023. Currently the bank's ratio between loans and deposits is around 100%, Vaidyanathan said.

In the July-September quarter, the bank offloaded Rs 19,000 crore worth loans through direct assignment route. NDTV Profit previously reported that the bank is looking to sell Rs 60,000-70,000 crore worth loans through direct assignment in the coming quarters.