HDFC Bank Q1:  Net Profit Up 19.5% On Strong Growth In Advances
A customer uses an HDFC Bank Ltd. mobile automated teller machine van in a residential neighborhood of Mumbai (Photographer: Dhiraj Singh/Bloomberg)

HDFC Bank Q1: Net Profit Up 19.5% On Strong Growth In Advances

HDFC Bank Ltd. reported strong growth in net profit, backed by a steady pick-up in advances and deposits over a year ago.

Net profit rose 19.5% year-on-year to Rs 6,658.6 crore for the quarter ended June, India’s largest private lender said in an exchange filing on July 18. The bank posted net profit of Rs 5,568.2 crore in the quarter ended June 2019.

The bank’s net interest income—or core income—rose 17.8% to Rs 15,665 crore compared to Rs 13,294 crore a year ago.

HDFC Bank set aside provisions and contingencies worth Rs 3891.5 crore during the first quarter of this fiscal.

“The Bank held floating provisions of Rs 1,451 crore and contingent provisions of Rs 4,002 crore as on June 30, 2020. Total provisions (comprising specific, floating, contingent and general provisions) were 149% of the gross non-performing loans as on June 30, 2020,” the lender said in its press release.

Gross non-performing assets rose to Rs 13,773.5 crore at the end of June compared with Rs 12,650 crore in the quarter ending March 31, 2020. As a share of total loans, the banks’ gross NPA ratio stood at 1.36% as of June 30, compared to 1.26% in the previous quarter.

“During the quarter, the Bank has used its analytical models to determine slippages, resulting in a more expedited recognition of NPAs, as well as accelerated corresponding specific provisions,” the bank said.

The Reserve Bank of India has permitted banks to offer a six-month moratorium on loan repayments.

While the bank did not disclose the share of moratorium loans in its earnings release, the bank’s group head and change agent Sashihar Jagdishan, while speaking at the lender’s AGM, said 9% of loans by value are under moratorium.

Lower Other Income

The bank’s other income stood at Rs 4,075.31 crore in the June-ended quarter compared to Rs 4,970.25 crore in the year ago period.

‘Fees & commissions’, which goes into other income, fell to Rs 2,230.7 crore compared to Rs 3,551.6 crore in the corresponding quarter of the previous year.

In contrast, treasury gains on sale / revaluation rose to Rs 1,086.7 crore compared to a gain of Rs 212 crore in the same period last year.

Advances & Deposits Growth

The banks’ advances rose 21% to Rs 10.03 lakh crore during the quarter ended June 30, 2020 from Rs 8.29 lakh crore in the same quarter of the previous fiscal.

While total retail advances rose 7.2% to Rs 4.75 lakh crore as of June 30 over the last one year, loans in the auto, two-wheeler, commercial vehicles and commercial equipment categories declines. Loans against securities also contracted. Retail loans comprise 48% of the banks’ total lending book.

“The continued slowdown in economic activity has led to a decrease in retail loan origination, sale of third party products, use of credit and debit cards by customers, efficiency in collection efforts and waivers of certain fees,” the bank said.

Incrementally, the banks’ total advances declined 4% over the quarter ended March 30, 2020, with fresh lending to all segments, barring gold loans, declining.

Deposits of the bank grew 24.6% to Rs 11.89 lakh crore as of June 30 compared to over Rs 9.54 lakh crore worth of deposit in the previous year. CASA deposits now comprise 40.1% of total deposits of the bank.

Capital Raising

Over the last few months, a number of Indian lenders have tapped the markets to raise equity capital. Commenting on HDFC Bank’s plans to raise capital, chief executive officer Aditya Puri told analysts that the bank has sufficient cushion. We have excellent capital adequacy and sufficient cushion, Puri said in an analyst conference call.

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