HDFC Bank on Tuesday reported a 20.4 per cent increase in its net profit at Rs 3,455.3 crore for the September quarter on a faster rise in retail assets that led to a robust growth in core interest income.
The country’s second largest private sector lender had clocked Rs 2,869.5 crore profit in the corresponding three months a year ago.
The core net interest income rose 19.6 per cent to Rs 7,993.6 crore in the second quarter ended September 30, while other income shot up 13.7 per cent to Rs 2,901 crore.
A 22 per cent growth in the high-margin retail advances pushed up the overall advances 18.1 per cent compared to the year-ago period. The retail loans were driven across the segment, including auto, which saw a 20 per cent rise.
The net interest margin dipped by 0.10 per cent to 4.2 per cent, which was attributed by Deputy Managing Director Paresh Sukthankar to a liquidity build up in the run-up to the FCNR-B deposit redemptions.
He said much of the $3.4 billion in deposits -- the largest in the system -- raised by the bank are leveraged ones, wherein the depositors will be looking not to roll them over due to which it has increased the liquidity cover.
Sukthankar explained that this money has been deployed in low-earnings assets like treasury bills or short-term investments and it has hit the margins.
The bank expects the redemptions to start this week, Sukthankar said, adding it is fully prepared for it.
Siddharth Purohit of Angel Broking said the numbers were in-line with the forecast, except for the negative surprise of moderation in loan growth to 18.1 per cent from 23.3 per cent it had reported in the first quarter.
“On a positive side, the bank reported a marginal improvement in its asset quality with GNPAs at 1.02 per cent against 1.04 per cent QoQ,” he said, adding since the bank has strong credit monitoring system “we hope the bank will be able to maintain stable asset quality going ahead as well”.
Emkay Research also termed the numbers as steady and as per its forecast. The share of the low cost current and savings account deposits stood at 40 per cent as of end September.
On the recent ATM security breach, Sukthankar admitted the bank also had to do “recarding” or replacement of cards for a few customers, besides the already announced PIN changes. Without specifying the amount which has been withdrawnby the fraudsters, Sukthankar said the bank has compensated the affected customers. He did not provide more details.
The bank hired 4,000 employees during the quarter to take the total strength to 95,000, but was still able to get its cost to income ratio to 44.7 per cent and Sukthankar said it plans to bring it down further over the next two years.
During the reporting quarter, the retail-focused bank bought back housing loans worth Rs 1,900 crore originated by it from parent HDFC and Sukthankar said this ratio will go up to normal figures of around Rs 3,000 crore per quarter.
On the asset quality front, where it had suffered some reverses in the preceding quarter, things seemed to be improving with the gross non-performing assets ratio coming down marginally to 1.02 per cent.
The overall provisions stood at Rs 749 crore as against Rs 681 crore, and Sukthankar added it did not have to dip into any reserve this quarter for provisions. There were no asset sales to asset reconstruction companies during the quarter as well, he said.