Q4 Results: HDFC Bank Profit Meets Estimates As Provisions Decline

HDFC Bank Ltd.’s quarterly profit met analyst estimates on the back of stable asset quality and lower provisioning for bad loans.

Net profit rose 23 percent year-on-year to Rs 5,885 crore in the January-March period, the private lender said in a stock exchange filing today. That was above the Rs 5,715 crore consensus estimate of analysts tracked by Bloomberg.

Net interest income of jumped 23 percent to Rs 13,090 crore, higher-than the analysts’ forecast of Rs 12,465 crore.

• Gross non-performing assets ratio narrowed 1.36 percent from 1.38 percent in the previous quarter.
• Net NPA ratio stood at 0.39 percent from 0.42 percent in the December-ended quarter.
• Provisions for bad loans declined 14.5 percent sequentially to Rs 2,211.53 crore.

HDFC Bank was able to continue its growth run by focussing on its improving loan growth and garnering deposits. “Retail products are sustaining growth momentum with the bank also gaining market share in wholesale financing, largely from capital and medium-term funding and some from refinancing of term loans,” Edelweiss Financial Services had said in a pre-earnings note.

And that was visible in the numbers. Domestic retail loans went up 19 percent over last year, while the wholesale loan book grew 32 percent. The bank's 24.5 percent loan growth is also way above the industry average, according to Edelweiss. A sequential deposit accretion of 8 percent also suggested strong business momentum.

HDFC Bank’s other income in the March ended quarter grew 15 percent over last year to Rs 4,871 crore. Typically, in the fourth quarter lenders’ other income goes up due to higher processing fees and third-party distribution income. Dividend and interest on income tax refund also tend to be higher adding to the overall revenue.

However, with revenue growth, the bank’s operating expenses have also risen. That number increased 17.6 percent over last year to Rs 7,117.1 crore weighing on the operating profit--which remained flat sequentially.

Key Numbers

• Net interest margin at 4.4 percent versus 4.3 percent last quarter.
• Cost-to-income ratio at 40.1 percent versus 40.6 percent year-on-year.
• CASA deposits grew 14 percent year-on-year.
• Capital adequacy ratio at 17.1 percent from 14.8 percent last year.
• Tier 1 capital ratio at 15.8 percent from 13.2 percent last year.
• Sequential deposits growth at 8.3 percent.
• Loan growth at 24.5 percent.

The board recommended a dividend of Rs 15 per share for the year ended March 2019. It also decided that it will terminate and delist the bank’s 22 global depository receipts from the Luxembourg Stock Exchange due to low trading volumes.

Shares of the country’s largest private lender by market cap rose 9.29 percent during the quarter compared to the over 12 percent gain in the NSE Bank Nifty index during the same period. On Friday, the stock closed 0.6 percent lower.