HDFC Bank Jan-Mar quarter net profit rises 18%

India’s largest private sector lender by market capitalisation, HDFC Bank has reported a 17.7% on year growth in profit at Rs 6,927.69 crore for the quarter ended March 2020.

Higher other income, operating income, net interest income (NII) and lower tax cost has helped boost profitability, but the sharply higher provisions limited growth.

NII, the difference between interest earned and interest expended, grew by 16.2% on year to Rs 15,204.06 crore for the quarter driven by strong loan and deposits growth.

Net interest margin for the quarter stood at 4.3%.

Earlier, the lender had released strong operating performance for Jan-Mar quarter. Advances aggregated to approximately Rs 9,93,000 crore, a growth of 21.2% as compared to Rs 8,19,400 crore as of Mar 2019 (Rs 9,36,000 crore as of Dec 2019).

The private sector lender registered a strong business growth during the quarter and continued to gain market share as deposits grew by 24.2% on year (up 7.4% QoQ) to Rs 11,46,500 crore, the second best in last 15 quarters.

HDFC Banks asset quality improved with gross non-performing assets falling 16bp sequentially to 1.26% and net NPA declining 12bp to 0.36% by the end of Mar quarter 2020.

It held provisions as on Mar 2020 against the potential impact of COVID-19 and the same are in excess of RBI prescribed norms.

As a result, gross NPA and net NPA ratios were lower by 10 bps and 6 bps on year respectively.

This was after the Reserve Bank of India granted a moratorium of three months on the payments of all installments and/or interest due between March 1 and May 31, 2020 to all eligible borrowers classified as standard, on account of the 40-day lockdown to limit the spread of COVID-19.

In the absolute terms, gross NPAs were lower by 5.8% at Rs 12,649.97 crore and net NPAs were down by 20.72% to Rs 3,542.36 crore compared to December quarter.

Provisions and contingencies for the quarter stood at Rs 3,784.49 crore, increasing sharply by 24.34%.

CASA ratio stood at around 42% in March quarter as compared to 42.4% in year ago period and 39.5% in previous quarter.

The lender skipped dividend announcement inline with the RBI diktat.

Overall a decent set of Q4 numbers from HDFC Bank.

But what is important to monitor ahead is the level of asset stress from the banks unsecured loan book, its exposure to SMEs and MSMEs where the next 6 months one may see increased asset quality stress ahead.

The stock will also closely monitor RBIs action on the 3 probhables names of the future Ceo & MD for the bank as Mr Aditya Puri retires in Oct 2020.

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