HDFC Bank Q2 Results: Profit Rises 18%, Asset Quality Steady

HDFC Bank Ltd.’s quarterly profit rose as asset quality remained steady and interest income rose.

Net profit of India’s largest private lender rose 18% year-on-year to Rs 7,513 crore in the quarter ended September, according to an exchange filing. That compares with the Rs 6,409-crore consensus estimate of analysts tracked by Bloomberg.

Net interest income, or the bank’s core income, rose 17% year-on-year to Rs 15,776 crore. Analysts had forecast Rs 12,274 crore in net interest income. Net interest margin held steady at 4.1% for the quarter.

Other income rose 9% year-on-year to Rs 6,092.5 crore.

The bank’s capital adequacy ratio stood at 19.1% at the end of the second quarter, as compared with 18.9% as on June 30. Unlike other private lenders, HDFC Bank is yet to raise any equity capital this financial year.

The September quarter will be the last under the leadership of long-time Chief Executive Officer Aditya Puri, who will step down by October-end. In a separate release, the bank said its board approved the appointment of Sashidhar Jagdishan as MD & CEO for a period of three years from October 27, 2020. The appointment shall be placed before the shareholders of the bank for their approval, the lender said. Jagdishan’s appointment has been cleared by the RBI.

Asset Quality

The bank’s asset quality improved: gross non-performing asset ratio stood at 1.08% at the end of the second quarter, as compared to 1.36% as on June 30. Net NPA ratio for the bank fell 16 basis points to 0.17%.

HDFC Bank set aside total provisions worth Rs 3,704 crore, higher than the Rs 2,700 crore reported last year. In the April-June quarter, the lender had reported provisions worth Rs 3,891 crore.

Banks were permitted to offer a moratorium to borrowers until the end of August to tide over stress brought on by the Covid-19 pandemic. Thereafter, starting September, the Reserve Bank of India has permitted one-time restructuring of advances of companies and retail borrowers hit by the Covid-19 pandemic. While these assets don’t have to be marked as NPAs, banks have been asked to disclose details of restructured assets.

HDFC Bank said that it followed the Supreme Court's order in the ‘Gajendra Sharma vs Union of India' case and did not downgrade certain accounts to NPA after Aug. 31.

• Including above accounts, gross NPA ratio and net NPA ratio would have been 1.37% and 0.35%, respectively, as on Sept. 30.
• Special mention accounts and overdue accounts where moratorium or deferment were announced stood at Rs 15,744 crore.
• Amount where asset classification benefit has been extended stood at Rs 4,639.50 crore.
• Provisions against accounts taking benefit under Covid-19 moratorium scheme at Rs 620 crore.

Growth In Advances, Deposits

The bank saw steady growth in total deposits, which rose 20.3% to Rs 12.29 lakh crore. Low-cost current and savings account deposits comprised 41.6% of total deposits as of Sept. 30, 2020.

Total advances grew 15.8% year-on-year to Rs 10.38 lakh crore as on Sept. 30. Domestic retail loans grew 5.3% and domestic wholesale loans 26.5%.

According to disclosures made by HDFC Bank, outstanding retail loans rose 5.43% year-on-year to Rs 4.85 lakh crore as on Sept. 30. Sequentially, that’s a rise of 2.1%.

HDB Financial Sees Profit Drop

According to a press release issued by the lender, HDB Financial Services Ltd., a non-banking financial company where HDFC Bank holds 95.3% stake, total advances rose 2.3% year-on-year to Rs 57,014 crore. During the quarter, HDB Financial increased its liquidity buffers: liquidity coverage ratio now stands 214%, well above the regulatory requirement, according to the release.

HDB Financial Services reported a sharp fall in profit to Rs 29.9 crore compared to Rs 213 crore in the previous quarter. Net interest income fell 4.8% quarter-on-quarter to Rs 924.2 crore.

Financials for the year ago quarter are not available.

As on Sept. 30, the NBFC’s gross and net NPA ratios were 4.3% and 3.1%, respectively. Total capital adequacy ratio was 19.6% with Tier-I capital at 14.6%. It currently has 1,342 branches across 986 cities and towns in the country.