HDFC Bank net rises 34% on growth in advances

HDFC Bank has recorded a net profit of Rs 1,085 crore for the quarter ended June 30, 2011, an increase of 34 per cent from Rs 812 crore during the corresponding year ago quarter, on account of strong growth in advances.

During the quarter, Net Interest Income rose 19 per cent to Rs 2,848.0 crore (Rs 2,401 crore). Other income increased to Rs 1,120 crore (Rs 991 crore), an increase of 13 per cent.

Given the increase in bond yields, the bank incurred a loss on revaluation or sale of investments of Rs 41.3 crore during the June quarter compared to a gain of Rs 21.5 crore during the year-ago quarter, said a release issued by the bank.

On account of improvement in asset quality, provisions and contingencies reduced to Rs 443.7 crore from Rs 555 crore.

Gross advances touched Rs 1,76,964 crore — a year-on-year growth of 29.1 per cent adjusted for short-term one-off wholesale loans outstanding.

There has been stronger demand for working capital loans than capex, said Mr Paresh Sukthankar, Executive Director, HDFC Bank. “The environment is not very conducive for new greenfield projects,’’ he said while announcing the bank’s results.

During the current fiscal, the bank is expecting credit growth of about 4-5 percentage points faster than the industry growth, he added.

Total deposits increased to Rs 2,11,151 crore, a growth of over 15 per cent (Rs 1,83,033 crore). During the quarter, the bank also raised Rs 3,650 crore of Tier II capital by issuing Upper Tier II bonds.

The share of current and savings accounts (CASA) was 49.1 per cent. “We deliberately did not pick up wholesale deposits because we raised Tier II capital. We have continued to grow retail deposits and CASA deposits,” Mr Sukthankar said.

Net Interest Margin was 4.2 per cent.

As a large part of the loans are working capital loans, they are short-term in nature and therefore, get re-priced as interest rates go up. Similarly, the bank’s focus has been on retail deposits, even in term deposits. Due to a combination of these reasons the bank was able to maintain its margins, Mr Sukthankar said.

The ratio of net non performing assets to total assets fell to 0.2 per cent (0.3 per cent).

“The outlook on asset quality is stable and there is no immediate concern,’’ he said.

About interest rates, the Executive Director said that there could be one last round of hike in policy rates and lending rates. But deposit rates at the shorter end may have probably peaked. This year HDFC Bank will add about 100 branches.

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