HDFC Bank, the country’s largest lender by market cap, has reported a 17.72 percent year-on-year growth in profit at Rs 6,927.69 crore for the quarter ended March 2020. It was lower than the average of estimates of analysts polled by CNBC-TV18 which was pegged at Rs 7,228.9 crore.
Profitability was supported by higher other income, operating income, NII and lower tax cost, but the sharply higher provisions limited growth.
Net interest income, the difference between interest earned and interest expended, grew by 16.15 percent YoY to Rs 15,204.06 crore for the quarter driven by strong loan and deposits growth, against CNBC-TV18 poll estimates of Rs 14,972.7 crore. Net interest margin for the quarter stood at 4.3 percent.
The bank immediately after the end of March quarter had said advances aggregated to approximately Rs 9,93,000 crore as of March 2020, a growth of 21.2 percent as compared to Rs 8,19,400 crore as of March 2019 (Rs 9,36,000 crore as of December 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 percent year-on-year (up 7.4 percent QoQ) to Rs 11,46,500 crore, the second best in last 15 quarters.
Asset quality improved with gross non-performing assets falling 16bp sequentially to 1.26 percent and net NPA declining 12bp to 0.36 percent by the end of March quarter 2020.
While explaining the reason for lower NPAs, bank said it held provisions as on March 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 YoY 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.
“For all such accounts where the moratorium is granted, the asset classification shall remain standstill during the moratorium period,” said HDFC Bank.
In the absolute terms, gross NPAs were lower by 5.8 percent at Rs 12,649.97 crore and net NPAs were down by 20.72 percent 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 percent compared to previous quarter and doubled over a same quarter last year.
“Total provisions for the March quarter included credit reserves relating to COVID-19 in the form of contingent provisions of approximately Rs 1,550 crore,” said the bank.
Other income or non-interest income during the quarter grew by 23.84 percent to Rs 6,032.57 crore YoY, driven by fees & commissions (up 14.61 percent YoY), gain on sale/revaluation of investments (up 147 percent) and recoveries & dividend (up 33.5 percent).
HDFC Bank in its BSE filing said that the lockdown enforced to limit the spread of COVID-19 had impacted not only business volumes, but it also could not optimise collection efforts and as a result of this fees/other incomes were lower by Rs 450 crore for the quarter.
Pre-provision operating profit increased by 19.51 percent to Rs 12,958.82 crore compared to year-ago period, HDFC Bank said in its BSE filing.
CASA ratio stood at around 42 percent in March quarter as compared to 42.4 percent in year-ago period and 39.5 percent in previous quarter, it added.
During the quarter ended March 2020, HDFC Bank said it purchased loans aggregating Rs 5,479 crore through the direct assignment route under the home loan arrangement with parent company Housing Development Finance Corporation.
Other incomes or non-interest income during the quarter grew by 23.84 percent to Rs 6,032.57 crore and pre-provision operating profit increased by 19.51 percent to Rs 12,958.82 crore compared to year-ago period, HDFC Bank said in its BSE filing.
For the financial year 2019-20, the bank reported profit growth of 24.6 percent at Rs 26,257.32 crore and NII grew by 16.5 percent to Rs 56,186.25 crore compared to previous year.
Meanwhile, the Reserve Bank of India, in its circular dated April 17, has decided that banks shall not make any further dividend payouts from profits pertaining to the financial year ended March 31, 2020 until further instructions, with a view that banks must conserve capital in an environment of heightened uncertainty caused by COVID-19.
Accordingly, the board of directors of the bank has not proposed any final dividend for the year ended March 31, 2020.
The COVID-19 butchered the stock price during the quarter and in the financial year 2019-20 as a whole, falling 32.25 percent and 25.66 percent respectively. However, it outperformed Nifty Bank index that lost 40.48 percent and 37.08 percent respectively in the same periods.
During the quarter, mutual funds increased their stake in the bank to 15.01 percent (from 14.38 percent in December quarter) and LIC also raised its stake to 3.04 percent from 2.74 percent in similar period.