HDFC Bank continued to cheer the market with its consistency in delivering steady profit growth. The profit growth in the December quarter, at 31.4 per cent over the corresponding year-ago period, was buoyed by strong loan book growth, revival in fee income and lower provisioning.

Contrary to the moderation in the banking system's loan growth, HDFC Bank's loan book expanded 22 per cent .

A 29 per cent rise in its retail loan portfolio was a key driver . Growth in the retail portfolio (which now constitutes 52 per cent of the loan book) also comes as a surprise given that it is higher than the industry rate .

Personal loans, credit cards and the SME (small and medium enterprises) segments of the bank's business grew at decent clip.

Rising share of retail loans helped the bank maintain its net interest margins at 4.1 per cent. High yielding retail loans coupled with improved credit-deposit ratio offset a marginal rise in cost of funds.

The cost of fundsstood at 7 per cent (annualised), which may be one of the lowest in the banking sector.

With aggressive branch expansion, the bank managed to maintain its low-cost deposit proportion in spite of the rising threat from other private banks which are pricing their savings rate products at more attractive rates.

Fee income sources also rose, logging a 19.6 per cent growth .

Asset quality

With focus on short-term loans , the bank is in a relatively better position than most of its peers. Even as the asset quality woes are threatening other private peers, HDFC Bank managed to contain its gross NPA (non-performing asset) ratio at 1.03 per cent in December 2011.

After provisioning, the net NPA ratio stood at 0.2 per cent. With relatively low NPAs, the requirement for additional provisioning is coming down. During the December quarter, provisions have fallen by 30 per cent .

>mvssantosh@thehindu.co.in

Related Topics
comment COMMENT NOW