Q4 Earnings: HDFC Bank’s Net Profit Rises, So Do Provisions
The country’s largest lender saw its asset quality improve but provisions rose quarter-on-quarter.
HDFC Bank Ltd.’s fourth-quarter profit rose despite the the disruption caused by the Covid-19 outbreak.
Net profit for India's largest private lender rose 17.7 percent year-on-year to Rs 6,927 crore in the three months ended March, according to its exchange filing, marginally below the Rs 7,253 crore consensus estimate of analysts tracked by Bloomberg.
Net interest income for the bank rose 16.2 percent over the same period last year, to Rs 15,204 crore. The net interest margin for the quarter was at 4.3 percent.
Asset quality improved on a sequential basis. Gross Non-Performing Assets stood at 1.26 percent as compared to 1.42 percent in the quarter ended December, while Net NPAs stood at 0.36 percent compared to 0.48 percent in the three months ending December.
But provisions for non-performing assets rose 24 percent on a sequential basis to Rs 3,748 crore and 100 percent over the same period in the last financial year. This includes a contingency provisioning of Rs 1,550 crore on account of the delay in collections due to the Covid-19 lockdown.
The Bank held floating provisions of Rs 1,451 crore and contingent provisions of Rs 2,996 crore as on March 31, 2020. Total provisions (comprising specific, floating, contingent and general provisions) were 142 percent of the gross non-performing loans as on March 31, 2020.HDFC Bank Statement
During the quarter, there was a considerable slowdown in economic activities following the outbreak of Covid-19, the bank said. The ensuing lockdown and social distancing measures impacted business volumes - in terms of loan originations, distribution of third party products, and payments product activities. Collection efforts were also impacted resulting in a Rs 450 crore drop in fees and other income, according to the exchange filing.
Earlier in April, the bank issued key March-end data that showed advances grew 6.3 percent quarter-on-quarter to Rs 9,93,000 crore while deposits rose 7.4 percent over the previous quarter to Rs 11,46,500 crore. On an annual basis, advances rose to a four-quarter high of 21 percent, while deposits grew 24 percent—the third consecutive quarter when the metric registered growth over 20 percent.
HDFC Bank’s CASA ratio stood at 42 percent in the fourth quarter, marginally above Q3 FY20 and largely flat when compared to the same period last year.
The bank will also not pay any dividend for the financial year, in-line with the Reserve Bank's circular on April 17.
The stock had corrected 32 percent during the January to March period, which was its worst ever quarterly drop.