HDFC Bank net profit jumps 27% to Rs 6,345 crore in Q2

HDFC Bank on Saturday reported a 27% year-on-year (y-o-y) growth in net profit for the quarter ended September to Rs 6,345 crore on the back of a 20% y-o-y rise in total income to Rs 33,755 crore, with non-interest income growing 39% y-o-y. However, the bank’s provisions shot up 48.4% y-o-y to Rs 2,701 crore and its current account savings account (CASA) ratio slipped further to 39.3% from 39.7% at the end of June. The impact of the recent tax cut announced by the government was Rs 450 crore during the quarter for HDFC Bank.

In a statement, HDFC Bank said the key components for provisions for the quarter were specific loan loss of Rs 2,038 crore, as against Rs 1,820 crore for the corresponding quarter of the previous year, and general and other provisions worth Rs 663 crore, as against Rs 247.5 crore for Q2FY19.

Slippages, or fresh bad loans, during the quarter added up to Rs 3,714 crore. HDFC Bank wrote off loans worth Rs 1,589 crore in the September quarter, the management conveyed during its conference call. The commercial vehicle (CV) segment was a key source of stress.

“Anyone going through capacity utilisation issues will bounce back and repay. Given the time we will go through the NPA (non-performing asset) cycle,” chief financial officer (CFO) Srinivasan Vaidyanathan said.

The management conveyed that the bank had stepped up provisioning to cover personal loans too in the last quarter, which continues at an elevated level. “The newer portfolio is definitely trending better,” Vaidyanathan said.

The bank’s net interest income (NII), or the difference between interest earned and interest expended, rose 15% y-o-y to Rs 13,515 crore. Core net interest margin (NIM) in Q2 fell to 4.2% from 4.4% at the end of June.

Asset quality performance showed a marginal improvement, with the gross NPA ratio falling two basis points (bps) sequentially to 1.38% and the net NPA ratio down by a basis point to 0.42%.  Total advances grew 19.5% y-o-y to Rs 8.97 lakh crore at the end of September. Retail loans constituted 54% of the loan book, while 46% came from wholesale loans. Auto loans grew by 2.3% y-o-y during the quarter as sales continued to moderate. Growth came from both the retail and wholesale segments, which grew 14.7% and 27%, respectively.

Total deposits as on September 30 were Rs 10.22 lakh crore, an increase of 22.6% over September 30, 2018. CASA deposits grew 14.7% y-o-y, with SA deposits at Rs 2.64 lakh crore and CA deposits at Rs 1.37 lakh crore. Time deposits stood at Rs 6.2 lakh crore, an increase of 28.3% over the previous year.

HDFC Bank’s total capital adequacy ratio (CAR) as per Basel III guidelines was at 17.5% as on September 30, 2019, up from 17.1% on September 30, 2018 and as against a regulatory requirement of 11.075%. The CAR includes capital conservation buffer (CCB) of 1.875% and an additional requirement of 0.2% on account of the bank being identified as a domestic systemically important bank (D-SIB). Tier 1 CAR was at 16.2% as of September 30, 2019, compared to 15.6% as of September 30, 2018. Common equity tier 1 (CET 1) ratio was at 15.3% as of September 30, 2019. Risk-weighted assets were at Rs 9.63 lakh crore, up from Rs 8.86 lakh crore on September 30, 2018.

The bank’s NBFC subsidiary HDB Financial Services posted a net profit of Rs 213 crore in Q2, down from Rs 246.3 crore in the June quarter. Its net interest income grew 25% sequentially to Rs 971 crore As on June 30, HDB Financial’s balance sheet size was at Rs 58,454 crore. The total loan book grew by 16% yo-y to Rs 55,759 crore as on September 30. Gross non-performing loans were at 3.4% of gross loans and net non-performing loans were at 2.5% of net loans as on September 30. Total CAR was at 18.2%, with tier-I CAR at 13.3%.