Money & Banking

HDFC Bank: Healthy traction in loans, stable asset quality

Radhika Merwin | Updated on October 21, 2018 Published on October 21, 2018

The growth in the bank’s core net interest income has picked up, after moderating in the previous two quarters

BL Research Bureau

Strong loan growth, marginal improvement in net interest margin and a stable asset quality has kept private lender HDFC Bank’s earnings in good stead in the latest September quarter.

Aside from the good traction in both retail and corporate loans, the bank’s improving cost to income ratio and healthy growth in fee income are key positives. Notably, the pace of growth in the bank’s core net interest income that had moderated in the past two quarters, has witnessed a pick up in the latest September quarter.

Overall, the bank’s net profit for the quarter has grown by 20.6 per cent year-on-year (YoY), a healthy performance given the ongoing challenges within the sector.

Improved margins

Despite the healthy traction in loans, the growth in the bank’s net interest income had somewhat slowed in the previous quarters. From 24 per cent YoY growth in the December 2017 quarter, net interest income grew by a slower 17.7 per cent in the March 2018 quarter and by 15.4 per cent in the June 2018 quarter. However, in the latest September quarter, HDFC Bank’s net interest income has grown by a higher 20.6 per cent.

The bank’s net interest margin, after dipping to 4.2 per cent in the June quarter has also inched up to 4.3 per cent in the latest September quarter.

It has been gaining market share, as PSU banks continue to consolidate their loan book. HDFC Bank has also retained its top slot within the private bank space over the past three years.

The bank’s steady growth in loans over the last several quarters has kept its earnings in good stead. The bank has been growing its loan book by about 20-25 per cent YoY on an average over the last 7-8 quarters. In the latest September quarter too, the bank has delivered 24 per cent YoY growth in domestic loans.

Bad loans under check

While the gross non-performing assets (GNPAs) for the bank, in absolute terms, has gone up by 30-40 per cent YoY over the past few quarters, a healthy growth in loans has kept delinquency ratio at bay.

HDFC Bank’s GNPAs that had been hovering around the 1 per cent mark in the past, has inched up slightly over the past one year. In the latest September quarter, the bank’s GNPA stood at 1.33 per cent of loans.

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Published on October 21, 2018
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