HDFC Bank Q2 performance betters expectations

HDFC Bank Q2 performance betters expectations

Shares of HDFC Bank nudged lower Monday even after beating street’s expectations of earnings expectations in otherwise tough operating environment.
On Saturday, the largest private sector lender reported 18.4% rise in standalone net profit at Rs 7,513.10 crore during the September quarter.
Net interest income (NII), which is the difference between the interest income a bank earns from its lending activities and the interest it pays to depositors, rose 16.7% to Rs 15,776.40 crore from Rs 13,515 crore in the year-ago quarter.
Core net interest margin (NIM) came in at 4.1%.
Provision and contingencies stood at Rs 3,703.50 crore for the September quarter, which included specific loan loss provisions of Rs 1,240.60 crore and general and other provisions of Rs 2,462.90 crore.
The private lender had made provisions worth Rs 2,700 crore in the year-ago quarter. Provisions, however, were lower than June quarter’s Rs 3,891.52 crore.
Asset quality improved, with gross non-performing assets (NPAs) falling to 1.08% of gross advances from 1.36% in June quarter and 1.38% in the year-ago quarter.
Pre-provision profit for the bank rose 18.1% to Rs 13,813 crore.
Total deposits rose 20.30% YoY to Rs 12,29,310 crore as of September 30, while advances were up 15.8% at Rs 10,38,335 crore.
Domestic retail loans grew 5.3% while wholesale loans were up 26.5% for the quarter. Overall, the retail loans stood at 48% of total advances. Overseas loans accounted for 3% of total advances.
HDFC Bank numbers are good in the context of the environment in which they are operating. They have put out a lot of data which indicates how they would have done if they had to recognise the NPAs which are not yet recognised because of the norms laid down by the Supreme Court. That is the positive part and that also indicates stability.
The loan growth was decent for the bank. The only chink in the armour is that a large part of the growth in the advances has come from the corporate rather than the retail book which was the trend earlier. The retail book grew by just 5% year on year as they have been running cautious as many of the banks and large NBFCs expect the pain to be more on the retail side this time because of job losses etc. That is where they have been playing cautious and that led to the NIM compression because a focus on the corporate side compresses NIMs.

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