HDFC Bank posts lowest profit growth in over 10 years

HDFC Bank today reported its lowest profit growth of 21.1 percent in over 10 years in the first quarter of this fiscal as net interest margin dropped slightly.

Mumbai: HDFC Bank today reported its lowest profit growth of 21.1 percent in over 10 years in the first quarter of this fiscal as net interest margin dropped slightly.

The bank reported Rs 2,233 crore profit against Rs 1,844 crore in the April-June quarter of 2013-14.

The bank attributed the fall in profit to a 20-basis point dip in net interest margin (NIM), which declined to 4.4 percent in the reporting quarter.

However, total income jumped to Rs 13,070.7 crore from Rs 11,588.56 crore in the year-ago period.

"NIM in the first quarter was stable sequentially, but on a y-o-y basis it has dropped slightly. If you look at our range of NIM, it has been around 4.1-4.4 percent. It would be at the upper end of the range going forward," HDFC Bank Deputy Managing Director Paresh Sukthankar told reporters here.

Interest earned rose 16.1 percent to Rs 11,220.1 crore from Rs 9,663 crore last year same period.

Net interest income, which is the interest earned minus interest paid, during the period grew 17 percent to Rs 5,171.6 crore he said. It accounted for 74 percent of net revenue.

The asset quality slightly deteriorated with gross non-performing assets (NPAs) at 1.07 percent as against 1.04 percent, while net NPA was stable at 0.3 percent.

"The three-four basis points increase in NPAs has happened from agriculture, SME and a little bit on retail, including commercial vehicles and commercial equipment businesses. There is not a large particular segment which showed any material deterioration," Sukthankar said, adding the bank did not sell any NPAs during the quarter.

Provisions and contingencies, consisting of specific loan losses and general provisions stood at Rs 482.8 crore for the quarter, including Rs 40 crore provided for its exposure to corporates with unhedged forex loans following the recent RBI circular.

HDFC Bank had earned a reputation for delivering over 30 percent profit growth for 37 straight quarters in the past 10 years (40 quarters).

In the previous quarter, it had reported 23 percent growth in profit, the lowest in 10 years. For the October-December period, the bank's profit growth was 25 percent. In the preceding quarter, the rise was 27 percent.

Shares of HDFC Bank ended 0.71 percent down at Rs 826.50 apiece on the BSE.

Total restructured loans, including applications under process for recast, were flat at 0.2 percent of gross advances compared to the same period last year.

The Mumbai-headquartered bank's advances rose 20.7 per cent to Rs 3,12,109 crore, while total deposits also increased 22.7 per cent to Rs 3,72,074 crore.

Sukthankar said if new measures announced by the government result into economic revival, then the bank would also see some uptick in its loans as well as deposits. Savings account deposits grew 18.1 percent over the previous year to Rs 1,05,639 crore.

Commenting on the results Motilal Oswal Securities vice-president Rahul Shah said: "The numbers are slightly below estimates. Still we believe its asset quality remains the best in class with lowest net stressed loans."

When asked about the plan to raise Rs 10,000 crore capital for which it already has board approval in place, Sukthankar said the bank is yet to take a decision.

"We haven't decided on what structure or which market we will access (for raising funds). Certainly, it will be function of various things including approval from FIPB. But there is no forgone conclusion about whether it will be domestic or international," he said.

To a query about status on the Foreign Investment Promotion Board approval for increasing foreign holdings in the bank, Sukthankar said there is no update on the issue.