HDFC Bank Profit Tops Estimate as Loans Jump, Bad Debt Falls

HDFC Bank Ltd., India’s largest private lender, posted second-quarter profit that beat analyst expectations due to strong loan growth and a fall in bad loans.

Net income was 75.1 billion rupees ($1.02 billion) for the three months to September, up from 63.4 billion rupees a year earlier, the lender said in a filing on Saturday. The profit was 17% higher than the 64.1 billion rupees average estimate from 15 analysts, according to the data compiled by Bloomberg.

The Mumbai-based lender said its loan book grew 16% in the September quarter from a year earlier, out pacing an average 5.1% rise for the nation’s banking sector. CEO-designate Sashidhar Jagdishan, who takes over from Aditya Puri later this month, expects bad loans to rise to a decade high of 1.4-2.0%, he said in August.

HDFC Bank Profit Tops Estimate as Loans Jump, Bad Debt Falls

HDFC Bank’s profit growth “continues to set the pace for healthy fiscal 2021 profit, led by resilient revenue and an ability to defy India’s broader economic weakness, despite a change in CEO,” said Bloomberg Intelligence banking analyst Diksha Gera.

Shares in HDFC Bank were trading 0.8% higher at 9.32 a.m. in Mumbai compared with a 1.5% rise in the main banking gauge.

HDFC Bank’s results indicate that the nation’s financial sector, which has been hit hard by the fallout from the pandemic, may be more resilient than expected. While a six-month moratorium and a loan restructuring program has masked some of the bad loans, many banks are being more cautious about lending to avoid further weakness in asset quality.

HDFC Bank’s gross bad-loan ratio narrowed to 1.08% as of September end from 1.36% in the previous quarter. According to the lender, the ratio would have been 1.37% if the nation’s top court didn’t allow banks to continue with a relaxation in soured debt recognition, over-riding the Reserve Bank of India’s order.

A U.S. law firm has filed a class action suit on behalf of HDFC Bank shareholders over alleged improper lending practices in its vehicle-lending unit. The bank had also delayed reporting details of its loans, including its millions of retail borrowers’ repayment status, to one of India’s biggest credit bureaus.

©2020 Bloomberg L.P.

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