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

Q2 Earnings: HDFC Bank’s Profit Meets Estimates, Asset Quality Stable

HDFC Bank Ltd.’s quarterly profit met analysts’ estimates on the of back stable asset quality and healthy fee income.

Net profit rose 20.6 percent year-on-year in the second quarter to Rs 5,005.7 crore, the country’s largest private lender by market value said today. That compares with the Rs 5,033-crore consensus estimate of analysts tracked by Bloomberg.

Operational Performance

The bank’s net interest income, or the core income from operations, rose 20.6 percent to Rs 11,763.4 crore. This is above Rs 11,544 crore forecast. The net interest margin rose 10 basis points sequentially to 4.3 percent during the quarter.

The asset quality remained stable as bad loans as a percentage of total assets remained unchanged. Gross non-performing assets ratio stood at 1.33 percent for the September quarter. The net NPA ratio was stable at 0.40 percent. The bank has a high provision coverage ratio of 70 percent.

The lender’s retail loan portfolio rose 23.8 percent from compared to the year-ago period, while the overall advances stood at Rs 7,50,838 crore. Total deposits grew 20.9 percent to Rs 8,33,364 crore, with current account and savings account deposits rising by 18.3 percent.

Other Highlights

  • Capital adequacy ratio stood at 17.1 percent.
  • Provisions for bad loans increased to Rs 1,820 crore from Rs 1,629.4 crore in the quarter-ended June.
  • Fees and commission income stood at Rs 3,295.6 crore for the quarter, which was 82.1 percent of the other income.
  • Other income was Rs 4,015.6 crore.
  • The bank’s balance sheet size rose to Rs 11,69,898 crore.

HDFC Bank’s results were in line with expectations, with much stronger operating parameters compared with the recent past, said Lalitabh Shrivastawa, assistant vice-president (research) at Sharekhan.

Strong advances growth but stable asset quality are clear stand outs, Shrivastawa said. NIMs were helped by rising capital and a strong current account-saving account traction. Valuations of HDFC Bank, he said, are attractive as it has a cushion of Rs 1,450 crore of floating provisions, with healthy capitalisation levels.

Siddharth Purohit, research analyst at SMC Institutional Equities, agreed. The bank’s result has been impressive with loan growth meeting expectations, he said. “Asset quality remaining stable during the quarter when there was some fear of weakness comes as a big relief.”

Shares of the company fell 0.4 percent to Rs 1,967.75 per share at close on Friday. The stock has returned 5.7 percent so far this year compared to 1.8 percent advance in the S&P BSE Sensex Index.