Mumbai : A rise in core income helped HDFC Bank report a 20.2 per cent jump in June quarter net at Rs 3,894 crore, but the rash of farm loan waivers led to a dip in repayments leading to its highest NPA ratio in years.
The higher bad loans had the bank making higher provisions which almost doubled, which led it miss the street estimate on the bottomline.
The city-headquartered bank’s total provisions almost doubled to Rs 1,558 crore from Rs 866 crore a year ago. Higher provision includes Rs 121 crore set aside for its exposure to potentially stressful sectors even if it is standard.
The second largest private sector lender reported a 20.4 per cent rise in net interest income at Rs 9,370.7 crore, which along with a 20 per cent growth in advances helped net interest margin to widen to an above target 4.4 per cent.Other income grew 25.3 per cent to Rs 3,516.7 crore, helped largely by a 30 per cent growth in fees and commissions, the largest component.
The quarter saw an increasing propensity among farmers to stop repayments on their loans, which resulted in the bank reporting a gross non-performing asset ratio of 1.24 per cent, one of the highest in recent years for the bank that has been known for its asset quality for decades. Agri loans, where its total exposure is Rs 28,000 crore and meeting the 18 per cent mandatory priority sector lending requirement to the sector, resulted in a 0.13 per cent spike in NPAs. Its operating expenses were up by a slower 12.6 per cent, leading to further reduction in the cost-to-income ratio which improved to 42.7 per cent. After multiple quarters of its declining staff strength, total number of employees remained flat at over 84,000 in the reporting period and Sukthankar said the bank will continue with its efficiency efforts.
On the margin front, he said the bank is happy achieving a higher number for a single quarter but added on an annualised basis, they will come at 4.1-4.3 per cent. Total deposits grew 17 per cent and was led by greater accretion of fixed deposits, which was the reason for the share of the low-cost current and savings account deposits falling to 44 per cent.
