HDFC Bank Q2 Results: Profit Rises 17.6%, Beats Estimates
HDFC Bank Ltd.'s profit rose in the quarter ended September, beating estimates, aided by higher other income.
Net profit of India's largest private lender climbed 17.6% year-on-year to Rs 8,834 crore in the quarter ended September, according to its exchange filing. Analysts' estimates compiled by Bloomberg had pegged the metric at Rs 8,183 crore.
Net interest income, or the lender's core income, increased 12% over the preceding year to Rs 17,684 crore. Other income, too, jumped 21.5% from last year to Rs 7,401 crore.
HDFC Bank's asset quality improved on a sequential basis, with gross non-performing asset ratio at 1.35%, as compared with 1.47% as of June. Net NPA ratio improved by 8 basis points quarter-on-quarter to 0.4%.
Total provisions for the bank rose 6% year-on-year to Rs 3,925 crore.
Retail loans amounting to Rs 1,283 crore out of the Rs 5,647.5 crore that were restructured under the Reserve Bank of India's framework for borrowers affected by the Covid-19 pandemic turned non-performing as on September, the bank said. The lender also wrote off retail loans worth Rs 808.5 crore during the second quarter.
Total restructured loans under the RBI's special window stood at Rs 7,829.48 crore, of which Rs 1,687 crore turned NPA and Rs 856.7 crore were written off.
In May, the RBI had extended the Covid restructuring framework for individual and small business borrowers till Sept. 30. Including this scheme, restructuring plans have been implemented for:
Individual retail loans worth Rs 14,102.6 crore.
Individual business loans worth Rs 1,506.5 crore.
Small business loans worth Rs 1,788 crore.
The bank said it had made provisions worth Rs 1,944 crore against these loans.
During an analyst call after announcing the quarterly results, the bank's Chief Financial Officer Srininvasan Vaidyanathan said that the total restructured loans, including both schemes announced by the RBI, stood at 1.5% of the loan book, or approximately Rs 18,000 crore.
Total advances rose 15.4% year-on-year to Rs 11.98 lakh crore.
Retail advances rose 12.9%, commercial and rural banking loans rose 27.6%, while wholesale loans were up by 6% from a year ago.
Total deposits stood at Rs 14.06 lakh crore, up 14.4% year-on-year.
Current account savings account deposits were up by 28.7% from a year ago, where CASA deposits now constitute 46.8% of total deposits.
Among retail assets, personal loans rose 11.6% from a year ago to Rs 1.26 lakh crore. Loans classified as payment products, which includes credit card loans, were up by 13% and stood at Rs 67,783 crore. Outstanding gold loans stood at Rs 8,109 crore, up 17% year-on-year.
Expecting Strong Loan Growth In FY22
"In the last five weeks of the (second) quarter, we issued about 416,000 new credit cards," Vaidyanathan said.
To be sure, HDFC Bank had faced a bar by the RBI on issuance of fresh credit cards between December 2020 and August 2021. The bar was introduced as a punitive measure because of multiple system outages at HDFC Bank over the last few years, which severely inconvenienced customers. The regulator had asked the bank to fix its IT infrastructure to avoid such events and had also conducted a third party audit of the system.
HDFC Bank's retail lending operations is showing a resurgence, Vaidyanathan told analysts. After a lull over recent quarters, the retail book is expected to return to a growth phase now, supported by the festive season demand, he said. This will also aid in growing the net interest income for the bank.
Arvind Kapil, country head - retail lending at HDFC Bank, said that the normal monsoon will result in "feel good factor" from the rural lending business.
"Our auto loan book has grown against the tide at a healthy pace... On the unsecured personal loan side, our incremental disbursals are showing a sustained growth. On the combined mortgage book, we are seeing strong quarter-on-quarter growth and we expect this growth to sustain in the latter half of the year as well," Kapil said.
Another area for growth is HDFC Bank's rural and micro, small and medium enterprises lending business, said Rahul Shukla, head of corporate and business banking. HDFC Bank believes that it is poised for the strongest growth over the last few years, in these segments.
"When we look at the SME growth outlook for the next fiscal, we are on track for a 1+1 model, which means that whatever is our book as of March 31, 2022, we feel confident that we will be able to aid the exact amount of disbursments in the next fiscal year," Shukla told analysts.
HDB Financial Services
According to information disclosed in the HDFC Bank press statement, HDB Financial Services, the non-bank lending arm of the bank, reported a net profit of Rs 192 crore, as compared with a net loss of Rs 85 crore a year ago.
The company's outstanding loans rose marginally to Rs 60,008 crore. Total revenue improved 12.5% year-on-year to Rs 1,916.7 crore. Gross stage 3 assets, or loans which have been in default for more than 90 days, fell to 6.1% of the loan book, down 200 basis points sequentially.
According to Vaidyanathan, about 70% of HDB Financial's loan book was secured, while the unsecured loan book carried a provision coverage ratio of 88%. HDB Financial is optimistic of strong growth in the last two quarters of this fiscal, Vaidyanathan said.