Strong loan growth and stable margins drove net interest income for HDFC Bank in the quarter ended June 30. The healthy profit growth of 30 per cent was backed by 21 per cent growth in net interest income. While fee income continued to languish, growing 12 per cent, treasury income trebled from last year.

What was surprising was the pressure on asset quality, with gross non-performing assets (GNPAs) increasing 16 per cent sequentially. However, GNPA is still around 1 per cent of loans, which is comforting.

HDFC Bank continues to outperform the industry, its loan book growing 21 per cent during the quarter over the last year.

This was driven by a 25.5 per cent growth in retail loans and 16.5 per cent growth in corporate loans. But it is corporate loans which are now growing faster.

Within the retail segment, personal loans, credit card and business banking were key drivers.

Loans towards commercial vehicles and construction equipment, which had seen weakness during the March quarter, showed a marginal improvement of 4 per cent sequentially.

The net interest margin (NIM) for the quarter improved by 10 basis points to 4.6 per cent. This is even as the low-cost CASA (current account, savings account) ratio declined sequentially by close to 270 basis points to 44.7 per cent in the quarter.

HDFC Bank is known to have one of the lowest NPAs on its loan book. However, during the quarter its GNPA increased 16 per cent sequentially.

This was on account of stress, both in the retail and corporate loan segments. Within retail loans, the commercial vehicle and construction equipment segments contributed to the increased NPAs.

Sequentially, the net NPAs were higher at 47 per cent.

However, the net non-performing assets are just 0.3 per cent of loans, still among the lowest within private banks.

>radhika.merwin@thehindu.co.in

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