Pedestrians walk by an HDFC Bank branch in Mumbai. (Photographer: Kuni Takahashi/Bloomberg)

HDFC Bank Q4 Profit Up 20%; Asset Quality Remains Stable

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HDFC Bank Ltd.’s profit in the January-March period rose on the back of stable asset quality, but the the private lender also saw loan growth fall to a five-quarter low.

Net profit grew 20.2 percent year-on-year in the January-March period to Rs 4,799 crore, said the country’s largest private sector lender in an exchange filing on Saturday. Analysts tracked by Bloomberg had pegged the profit at Rs 4,860 crore. Net interest income, or the core income from operations, rose 17.7 percent to Rs 10,658 crore, below the consensus forecast of Rs 10,880 crore.

Asset quality remained stable with gross non-performing assets ratio at 1.3 percent in the quarter. The ratio was at 1.29 percent in the September-December period. In absolute terms, the gross bad loans rose 4.5 percent to Rs 8,606 crore.

Other Financial Highlights:

  • Operating profit rose 21 percent aided by fee income growth and fewer expenses.
  • Provisions for bad loans increased sequentially to Rs 1,541 crore from Rs 1,352 crore.
  • Cost-to-income ratio at a multi-quarter low of 40.6 percent.
  • Total deposits rose 22.5 percent year-on-year to Rs 7.8 lakh crore.
  • Net interest margin unchanged at 4.3 percent.
  • Board proposed a dividend of Rs 13 per share.

HDFC Bank’s loan book growth slipped to 18.7 percent year-on-year, taking the total advances to Rs 6.58 lakh crore. This was mostly due to slower growth in wholesale lending at 9.4 percent. The retail loan book grew at 27.4 percent.

The bank’s balance sheet size crossed Rs 10 lakh crore for the first time ever.

Stable asset quality is good for a sector that’s grappling from mounting bad loans, but a sub-20 percent loan growth was not expected, according to Lalitabh Shrivastawa of Sharekhan.

It seems that the bank has decided to focus on profitability instead of growth.
Lalitabh Shrivastawa, Sharekhan

Wholesale lending in India has changed “dramatically” as as most accounts are going to the Reserve Bank of India’s prompt corrective action framework, said Ashutosh Mishra of Reliance Securities. That’s why HDFC Bank reported slower wholesale loan growth, according to Mishra. “However, going ahead, the private lender might be able to deliver better corporate loan growth due to issues in the public sector space,” he added.

Additionally, the bank did not use the Reserve Bank of India dispensation on bond losses during the quarter. The RBI had previously allowed banks to spread the mark-to-market losses and provisions on treasury portfolio for third and fourth quarter over a four-quarter period.

Watch analysts dissect HDFC Bank’s Q4 performance:

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