HDFC Bank Q1 net up 30%; stocks down 2.36% on NPA rise

The proportion of retail loans in the portfolio grew to 54 percent, while corporates accounted for the remaining.

Last Updated: Jul 17, 2013, 18:49 PM IST

Mumbai: Country's second largest private sector lender HDFC Bank on Wednesday reported a 30.1 percent increase in its June quarter net at Rs 1,844 crore, driven by healthy growth in retail lending.

Its net profit for the corresponding April-June period last year was Rs 1,417 crore.

The bank's net interest income was up 21 percent at Rs 4,418.7 crore as against Rs 3,652.4 crore a year ago, driven largely by a credit growth of 21.2 percent, which included a 25 percent jump in retail lending.

The proportion of retail loans in the portfolio grew to 54 percent, while corporates accounted for the remaining.

"We believe that private consumption is still strong despite the overall difficulties on the economic front. Unless the investment cycle returns, we will see growth in retail lending outpacing the wholesale book," HDFC Bank Executive Director Paresh Sukhtankar told reporters.

The bank was able to retain its net interest margin (NIM) at 4.6 percent, even though the ratio of the low-cost current and savings account (Casa) deposits fell below the 45 percent level.

Sukhtankar said the bank is targeting to hold the NIM in the 4.1-4.6 percent band.

It was able to hold on to asset quality, with the gross non-performing assets ratio remaining flat at 1 percent. Its fresh slippages were Rs 380 crore during the quarter, while the proportion of restructured advances improved to 0.2 percent as against 0.3 percent a year ago.

He said the generation of NPAs from retail lending, otherwise considered resilient to economic woes, was 55 percent, while corporates generated the remaining 45 percent.

The bank is experiencing some pressure in the commercial vehicle and construction portfolio, which stood at Rs 16,848 crore as of June 30, he said.

The bank stock was down 2.36 percent to Rs 662.65 apiece on the BSE, whose 30-share benchmark Sensex ended the session with a 0.49 percent gain.

"Balance sheet quality did see some pressure during the reporting quarter. Stress was witnessed on commercial vehicles and construction equipment segments, in line with previous two quarters but more akin to Q3 of FY13," said Saday Sinha, analyst at Kotak Securities.

The bank's provisions were down to Rs 527 crore as against the Rs 581.6 crore in the year ago period.

HDFC Bank, which, alongwith other banks, figured in the expose by the online portal Cobrapost which alleged non-adherence to the `know your customer' and anti money laundering guidelines, experienced a slowdown in fees from the sale of third party products, Sukhtankar said.

Apart from greater regulatory oversight following the Cobrapost expose, he said there has also been a change in fee structures and expressed optimism of getting back to reasonable volumes soon.

The bank's overall fees and commissions pie rose marginally to Rs 1,284.5 crore as against Rs 1,150.4 crore a year ago, even though larger non-interest revenue was up 30.4 percent at Rs 1,925.6 crore.

The bank's capital adequacy ratio stood at 16 percent, with the core tier-I at 10.6 percent.

Reacting to the recent liquidity absorption measures of the RBI, Sukhtankar said the hardening in the money market as a result of these moves reduces the chances of a lending rate cut which everybody is expecting.

On asked if the bank would contemplate a hike in lending rate, he saiod HDFC Bank has the "flexibility" given that its base rate of 9.6 percent is among the lowest in the industry.

The decision will be based on the movement of deposit rates in reaction to the RBI measures and the RBI's moves in the forthcoming policy announcement including that on the cash reserve ratio, he said.

Sukhtankar, however, said it is very unlikely that RBI will take an accommodative stance in the July 30 announcement.