HDFC Bank reports 18.4% y-o-y growth in net profit in Q2, provisions up 37%

HDFC Bank on Saturday reported an 18.4% year-on-year (y-o-y) growth in net profit for the quarter ended September to Rs 7,513 crore on the back of a 16.77% y-o-y rise in net interest income (NII) to Rs 15,776 crore, with non-interest income growing 9% y-o-y.

However, the bank’s provisions rose 37% y-o-y to Rs 3,703.5 crore.

In a statement, HDFC Bank said total provisions for the current quarter includes contingent provisions of approximately Rs 2,300 crore for proforma non-performing assets (NPA), as well as additional contingent provisions to make the balance sheet more resilient.

The bank said if it had recognised as bad the accounts which were not declared NPA till August 31, 2020, under the Supreme Court’s orders, the proforma gross NPA ratio would have been 1.37% as on September 30, 2020, as against 1.36% as on June 30, 2020, and 1.38% as on September 30, 2019. The bank’s proforma net NPA ratio would have been 0.35%. Its actual gross NPA ratio in Q2 was 1.08% and net NPA ratio was 0.17%.

“Pending disposal of the case, the bank, as a matter of prudence, has made a contingent provision in respect of these accounts,” the lender said. It also continues to hold provisions as on September 30, 2020, against the potential impact of Covid-19 based on the information available at this point in time and in excess of prescribed norms. The bank held floating provisions of Rs 1,451 crore and contingent provisions of Rs 6,304 crore as on September 30, 2020. Total provisions (comprising specific, floating, contingent and general provisions) were 195% of the reported gross NPAs or 154% of proforma gross NPAs as on September 30, 2020.

The bank continued to see the impact of the pandemic in Q2, though the blow was softer than in Q1. “While the previous quarter largely bore the brunt of the pandemic, some of the softness continued into the current quarter leading to lower retail loan origination, use of debit and credit cards by customers, efficiency in collection efforts and waivers of certain fees,” HDFC Bank said. As a result, fees/other income were lower by approximately Rs 800 crore.

“However, the loan and card momentum has improved over the previous quarter, thereby reducing the gap to less than half,” the bank said.

Core net interest margin (NIM) in Q2 fell to 4.1% from 4.3% at the end of June.

Total advances as on September 30 were Rs 10.38 lakh crore, up 15.8% over September 30, 2019. Domestic advances grew by 15.4% y-o-y. Domestic retail loans grew by 5.3% and domestic wholesale loans grew by 26.5%. The domestic loan mix as per Basel 2 classification between retail:wholesale was 48:52.

Total deposits as on September 30 were Rs 11.47 lakh crore, an increase of 24% over March 31, 2019. Current account savings account (CASA) deposits grew 24% y-o-y, with SA deposits at Rs 3.1 lakh crore and CA deposits at Rs 1.74 lakh crore. Time deposits stood at Rs 6.63 lakh crore, an increase of 24.6% over the previous year. The CASA ratio stood at 42.2%, up from 40.1% a quarter ago.

The bank’s total capital adequacy ratio (CAR) as per Basel III guidelines was at 19.1% as on September 30 (17.5% as on September 30, 2019) as against a regulatory requirement of 11.075% which includes capital conservation buffer of 1.875%, and an additional requirement of 0.20% on account of the bank being identified as a domestic systemically important bank (D-SIB). Tier 1 CAR was at 17.7% as of September 30 compared to 16.2% as of September 30, 2019. Common equity tier 1 capital ratio was at 17.0% as of September 30. Risk weighted assets were at Rs 10.37 lakh crore, as against Rs 9.63 lakh crore as at September 30, 2019.

The bank’s NBFC subsidiary HDB Financial Services posted a net profit of Rs 30 crore in Q2. The total loan book grew by 2.3% to Rs 57,014 crore as on September 30, 2020 as against Rs 55,759 crore as of September 30, 2019.