HDFC Bank reports 14% increase in Q1 net, performance hit by second COVID-19 wave

HDFC Bank’s consolidated net profit for the June quarter increased 14% to ₹7,922 crore, but the largest private sector lender reported reverses because of the second wave of the pandemic which compressed its growth.

When compared with the preceding March quarter’s ₹8,434 crore, there was a decline in the consolidated profit. On a standalone basis, the bank reported a post-tax profit of ₹7,730 crore as against ₹6,659 crore in the year-ago period and ₹8,187 crore in the January-March period.

Its core net interest income grew 8.57% to ₹17,009 crore on advances growth of 14.4% and the net interest margin coming at 4.1%, while the other income grew 54.3% to ₹4,075 crore.

It can be noted that the year-ago quarter had a deep impact of the national lockdown and the ensuing impact in economic activity, whereas the reporting quarter had an impact due to localised lockdowns.

“These disruptions led to a decrease in retail loan originations, sale of third party products, card spends and efficiency in collection efforts. The lower business volumes, coupled with higher slippages, resulted in lower revenues, as well as an enhanced level of provisioning,” the bank said in a statement.

The specific loan loss provisions jumped 54% to ₹4,219 crore, while the overall provisions, including ₹600 crore set aside as contingency provisions, stood at ₹4,830.8 crore as against ₹3,891.5 crore.

The total credit cost ratio came at 1.67%, as compared to 1.64% for the quarter ending March and 1.54% for the quarter ending June 30, 2020.

HDFC Bank also said that the disruptions may lead to a continued rise in the “number of customer defaults and consequently an increase in provisions thereagainst”.

The bank, which is the first to report numbers for the quarter, said the gross non-performing assets ratio increased to 1.47% as of June 30, up from the 1.32% in March and 1.36% in the year-ago period.

It reported a 14.4% increase in assets for the reporting quarter when compared to the year-ago period but the overall advances declined marginally when compared with March. When compared to last year, retail loans grew 9.3%, commercial and rural banking loans grew 25.1% and wholesale loans grew 10.2%.

Its deposit growth was 13.2% during the quarter and the share of the low-cost current and savings accounts balances in the overall base stood at 45.5%.

Its total Capital Adequacy Ratio (CAR) was at 19.1% as on June 30 with the core Tier-1 CAR at 17.9%.

The total number of employees increased to 1,23,473 at the end of the June quarter, as against 1,15,822 in the year-ago period. It had a network of 5,653 branches and 16,291 ATMs as of June.

Among the subsidiaries, HDB Financial Services reported a decline in June quarter net profit at ₹130.6 crore as against ₹232.7 crore on the back of a spike in dud assets to 7.75%.