HDFC Bank Q1 Results: Net Profit Rises 16%, Misses Estimate

Pedestrians walk past a security guard outside an HDFC Bank Ltd. branch in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

HDFC Bank Q1 Results: Net Profit Rises 16%, Misses Estimate

India's largest private sector lender HDFC Bank Ltd. missed estimates, as the bank's asset quality worsened.

Net profit for the first quarter stood at Rs 7,729.62 crore, up 16% year-on-year. This was lower than the Rs 7,931 crore consensus estimate of analysts in a Bloomberg poll.

Net interest income, or core income, rose 8.6% year-on-year to Rs 17,009 crore, according to the bank's statement to exchanges. Analysts had estimated the first quarter NII at Rs 17,634 crore.

Asset Quality

Gross non-performing assets rose 15 basis points sequentially to 1.47% of gross advances. Net NPA ratio for the first quarter was at 0.48%, as compared with 0.4% on March 31, 2021.

Total provisions rose 24% year-on-year to Rs 4,831 crore, according to the bank's disclosures.

"The second wave of Covid-19 disrupted business activities for close to two thirds of the quarter, leading to a decrease in efficiency in collection efforts and a higher level of provisions," the bank said in a statement with its results.

As of June 30, the bank said that it had restructured loans worth Rs 7,800 crore, under the Reserve Bank of India's one time restructuring scheme. This included Rs 5,457 crore worth retail loans, and Rs 1,735 crore worth corporate loans. The bank also restructured loans worth Rs 608 crore to other borrowers under the scheme.

"The restructured portfolio stands at 80 basis points (of the loan book) as of June, as compared with 60 basis points in March," Jimmy Tata, chief credit officer, HDFC Bank, told analysts during a conference call on Saturday.

During the first quarter the bank sold bad loans worth Rs 1,800 crore to asset reconstruction companies, Tata said.

The disruptions from the Covid-19 pandemic affected retail loan originations, sale of third party products and card spends, which affected business volumes and revenue, the bank said.

Advances & Deposits

  • Total advances rose 14.4% year-on-year to Rs 11.5 lakh crore.

  • Retail loans up 9.3% year-on-year to Rs 4.58 lakh crore

  • Commercial and rural banking loans up 25% from a year ago to Rs 3.86 lakh crore

  • Other wholesale loans were up 10% year-on-year, at Rs 3.14 lakh crore

  • Total deposits rose 13.2% from a year ago to Rs 13.4 lakh crore

  • CASA deposits rose 28% year-on-year

  • Time deposits rose to Rs 7.34 lakh crore, up 3.1% from last year

  • Credit card advances rose 10.4% year-on-year to Rs 60,429 crore as of June 30

On a sequential basis, outstanding credit card loans dropped 6.5%. Similarly, outstanding auto loans stood at Rs 83,795 crore, up 3.3% year-on-year, but marginally lower quarter-on-quarter.

The first quarter saw fewer customers revolving their credit card dues, according to Srinivasan Vaidyanathan, chief financial officer.

"With higher concentration of low yielding assets, fewer customers revolving their credit card dues and higher slippages, the net interest income growth was impacted by about 6% on a year-on-year basis," Vaidyanathan said.

HDFC Bank's capital adequacy ratio improved marginally to 19.1% as of June 30. In this, common equity Tier-1 capital stood at 17.2% at the end of the first quarter.

The bank's board also approved a proposal to raise funds through issuance of unsecured additional Tier-1 bonds to foreign investors this fiscal.

HDB Financial Results

HDB Financial Services, the non-banking finance arm of the bank reported a steep rise in its bad loans and a drop in profit.

For the quarter ended June 30, HDB Financial's net profit was Rs 130.6 crore, down 44% year-on-year. Gross NPA ratio rose to 7.75% at the end of the first quarter, up from 3.89% as of March 31.

The NBFC's gross advances rose marginally to Rs 57,390 crore, while capital adequacy ratio stood at 19.8%.

Speaking to shareholders during the bank's annual general meeting on Saturday, Sashidhar Jagdishan, MD & CEO, HDFC Bank said that the customer segment which HDB Financial Services addresses was significantly hit during the pandemic.

"We believe the rise in NPAs is a temporary phenomena, which will recover the moment the economy opens up again," Jagdishan told shareholders.

According to him, there was no immediate plan to monetise HDB Financial Services.

"We may undertake a price discovery exercise for HDB Financial Services. But in the medium term we would like to see how the business recovers before we take a call on listing it," Jagdishan said.

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