Aided by a steady growth in interest and fee incomes, HDFC Bank's net profit increased by 31 per cent to Rs 1,199 crore in the quarter ended September 30, 2011, from Rs 912 crore in the corresponding quarter last year.
While the bank saw a higher growth in retail loans in the just ended quarter, there have been no new proposals on the corporate side for capital expenditure.
“Most of the growth on the corporate side was driven by working capital. All capex or term loans were those that were tied up sometime back,” said Mr Paresh Sukthankar, Executive Director, HDFC Bank.
The sequential (July-September quarter against April-June quarter) growth in loans was 7 per cent, of which retail loans grew by 9 per cent and corporate loans grew by 4 per cent.
Retail loans
Despite the hike in interest rates, the demand for retail loans such as auto loans and home loans has not dropped as much as they should have probably because people's incomes have also increased. So, people probably feel they are able to afford the high interest rates, Mr Sukthankar said.
However, going ahead, high interest rates could translate into slightly lower loan growth, on both the retail and corporate side, he added.
An increased pressure on margins is unlikely going ahead as the current deposit growth is sufficient to fund the loan demand. Therefore, there is no incentive for banks to raise deposit rates, Mr Sukthankar said.
Within other income, fees and commissions increased by 15 per cent to Rs 988 crore (Rs 857 crore) and foreign exchange and derivative revenues increased by 43 per cent to Rs 218 crore (Rs 152 crore).
The loss on account of revaluation or sale of investments declined to Rs 1.3 crore from Rs 52 crore in the September quarter last year.
“The commission rates on mutual funds and insurance have come off in the last couple of quarters.
“That is why contribution of income from third-party distribution was lower in the fee income. Otherwise, growth in fee income would have been higher,” Mr Sukthankar said.
Low-cost deposits
Though the bank saw one of its strongest growth in low-cost deposits (savings and current account) in the just-ended quarter, the proportion of CASA came down as inflow into fixed deposits was higher, given the high interest rate environment.
Provisions declined by 19.5 per cent to Rs 366 crore (Rs 454 crore) as the absolute increase in non-performing loans was higher last year, compared with this year, due to which specific provision requirements this year was lower, Mr Sukthankar said.
Operating expenses increased to Rs 2,030 crore (Rs 1,680 crore), a rise of 21 per cent, as the bank increased its branch network.
“A portion of operating expenses is investment which is part of our conscious strategy. We will continue to add a couple of hundred branches on an annualised basis,” he said.
Going ahead, the bank is likely to maintain a NIM of between 3.9 and 4.2 per cent and see higher than industry growth in credit and deposits, he added.
For the half year ended September 30, 2011, the bank's net profit was Rs 2,284 crore, up 32.5 per cent from Rs 1,724 crore in the year-ago period.
The shares of HDFC Bank closed at Rs 491.10, 3 per cent higher from the previous close on the BSE on Wednesday.