HDFC Bank Q2 net up 20% on healthy loan growth

Despite a near-doubling in provisions, most of it towards a project loan that underwent flexible structuring, HDFC Bank reported a 20 per cent increase in second quarter net profit.

The net profit, which came on the back of healthy growth in deposits and advances, rose to ₹4,151 crore from ₹3,455 crore in the year-ago quarter.

However, asset quality pressures showed up, with gross non-performing assets (NPAs) in the September quarter jumping 52 per cent year-on-year (y-o-y). The private sector bank reported a net increase of ₹460 crore in NPAs during the quarter.

Net interest income (interest earned less interest expended) was up 22 per cent to ₹9,752 crore.

Other income rose 24 per to ₹3,606 crore.

Total deposits increased 16.5 per cent y-o-y to ₹6,89,346 crore. Composition of low-cost current account, savings account (CASA) deposits in total deposits improved to 42.9 per cent from 40 per cent in the year-ago quarter.

Total advances rose 22 per cent to ₹6,04,867 crore. Retail and wholesale loans grew 21.6 per cent and 23.6 per cent, respectively. Net interest margin was steady at 4.3 per cent.

“We have seen significant traction (in business). If you look at the loan growth at around 23 per cent, it is way ahead of the system growth, which has been closer to about 6-6.5 per cent. Again, on the deposits side, CASA deposits grew at about 23 per cent…

“So, despite having a fairly large base and large balance sheet, I think, we have been able to maintain a strong momentum,” said HDFC Bank Deputy Managing Director Paresh Sukthankar.

NPAs nudge up

Gross non-performing assets (NPAs) nudged up to 1.26 per cent of gross advances from 1.02 per cent in the year-ago quarter.

In absolute terms, gross NPAs jumped 52 per cent to ₹7,703 crore as at September-end 2017 against ₹5,069 crore as at September-end 2016.

Provisions (other than tax) and contingencies jumped 97 per cent to ₹1,476 crore (₹749 crore).

The private sector bank said it had participated in a project loan (where the it had a 2.3 per cent share) which underwent flexible structuring under the 5:25 regulatory framework as approved by the Joint Lenders Forum (JLF) in February 2016.

“The bank is in ongoing discussions and correspondence with the regulator in relation to certain observations made on the implementation of the JLF-approved flexible structuring scheme. The conduct of this account with the bank has been standard throughout,” said a bank statement.