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HDCF Bank Q2 takeaways: Stable asset quality, Covid provisions, new CEO & MD announcement & more

NEW DELHI: HDFC Bank‘s asset quality was strong at the end of September quarter. The private lender made lesser provisions for the quarter compared with June quarter and beat Street estimates on the bottom line front. A pre-provision profit growth of 18 per cent was healthy; so were growth in deposits and advances.

Here are the key takeaways from the HDFC Bank’s Q2 results:
3rd straight quarter of sub-20% growth
Profit growth for the quarter at 18.41 per cent was the third straight quarter of sub-20 per cent growth for HDFC Bank. The lender reported a profit growth of 19.58 per cent in June and 17.71 per cent in the March quarter, data compiled from database AceEquity suggests.

That said, the September quarter growth was delivered on a high base. The private lender had reported almost 26.75 per cent in the base quarter. The profit figure of Rs 7,315 crore announced on Saturday beat ET NOW poll estimate of Rs 6,445 crore.

NIM at multi-quarter low
Reported NIM for the quarter at 4.1 per cent was the lowest for the bank in at least nine quarters. The private bank reported NIM of 4.3 per cent each in June and March quarters. It reported 4.2 per cent NIM each for December and September quarters of 2019. NIM was in fact as high as 4.4 per cent in the March quarter of 2019.

Covid-related provisions
The bank said it was holding Rs 1,451 crore in floating provisions and Rs 6,304 crore in contingent provisions as of September 30. These provisions, it said, were 195 per cent of the reported gross NPAs or 154 per cent of performa gross NPAs as of September 30.

For the September quarter, the lender made provisions of Rs 3,703.50 crore, which were less than June quarter’s Rs 3,891.52 crore, but higher than year-ago’s Rs 2,700 crore in the year-ago quarter.

The September quarter’s provisions and contingencies included specific loan loss provisions of Rs 1,240.60 crore and general and other provisions of Rs 2,462.90 crore.

Strong asset quality
Even if the bank were to account for classified borrower accounts as NPAs after August 31 and also adopt an early recognition of NPA using analytical models, the gross NPA would have been steady at 1.38 per cent for September quarter compared with 1.36 per cent in the June quarter and 1.38 per cent in the September quarter of last year.

Since those accounts were not included, the bank reported a lesser gross NPA of 1.08 per cent for the September quarter.

Fee income fall
The bank said its fee income for the quarter was down by Rs 800 crore. While the June quarter bore the brunt of the Covid-19 pandemic, some of the softness continued into the September quarter as well, leading to lower retail loan origination, use of debit and credit cards by customers, efficiency in collection efforts and waiver of certain fees, it said.

New MD & CEO appointed
Alongside the results, the bank appointed Sashidhar Jagdishan as an additional director and the managing director and CEO of the bank for a period of three years from October 27, as approved by the Reserve Bank of India vide its email dated August 3. Jagdishan’s approval would be subject to the approval of the shareholders of the bank through remote e-voting, in accordance with the MCA circulars.

Strong deposit, advance growth
Total deposits rose 20.30 per cent YoY to Rs 12,29,310 crore as of September 30, while advances were up 15.8 per cent at Rs 10,38,335 crore. Domestic retail loans grew 5.3 per cent while wholesale loans were up 26.5 per cent for the quarter. Overall, the retail loans stood at 48 per cent of total advances. Overseas loans accounted for 3 per cent of total advances.

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