HDFC Bank Q1 net up 21%; all eyes on state-run banks

HDFC Bank, the second largest private lender after ICICI Bank, on Monday posted a 21% jump in its net profit for the quarter ended 30 June, even though the profit numbers lagged estimates.

The lender posted a profit of Rs2,233 crore in the June quarter from Rs1,844 crore a year earlier. A CNBC-TV18 poll had estimated the net profit at Rs 2,345 crore.

Gross non-performing assets (NPA) of the bank, during the quarter stood at 1.07% of the total loans in the June quarter, marginally higher than 1.04% in the year-ago quarter. Similarly, the amount of restructured loans on the books too remained at about the same level, about 0.2% of total loans, during the quarter.

Growth in bad loans has come from agriculture and commercial vehicle segment.

The bank’s growth has primarily come from the 17% rise in net interest income, or the difference between interest earned on loans and spent on deposits, which grew to Rs 5,171.6 crore from Rs 4,418.7 crore in the year-ago quarter.

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Net interest margin of the bank was at 4.4%, flat sequentially but lower than 4.6% in the year-ago quarter.

Current and savings deposits stands at 43% of total deposits at end June, registering a growth of 18% over the year, Paresh Sukthankar, deputy managing director of HDFC Bank said.

On the possible merger of HDFC Bank with its parent Housing Development Finance Corporation in the backdrop of recent liberalisation in the norms for infrastructure lending by the Reserve Bank of India, Sukthankar said the entities are still analysing the norms in detail.

A possible merger may not make any immediate sense to the entities even though it might benefit the combined entity in the longer term if HDFC manages to replace its current borrowing with cheaper money from infra bond issue .

HDFC bank is the first among the major banks that announced results for the June quarter. But its number may not necessarily be an indication of state-run banks, which account for more than 70% of the industry.

That’s because most of the high-risk loan segments, a large section of small and medium sized firms and high risk-agriculture loans are on their books. The sign of stress is visible on the earnings reported by Canara Bank on Monday. Its bad loans have risen sequentially.

Canara Bank reported a lower-than-expected net profit of Rs 807 crore as against a CNBC-TV18 poll estimate of Rs 871 crore, on higher operating expenses. The bank’s net profit rose 2 percent over the year-ago quarter and 32 percent on quarter.

Its gross non-performing assets stood at 2.67 percent, up from 2.49 percent a quarter ago and lower than 2.91 percent a year ago.

At 1.20 pm, shares of HDFC Bank were trading at Rs 831, down 0.2 percent, and those of Canara Bank at Rs 404.8, down 1.7 percent. Benchmark Sensex was up up 0.3 percent.

All eyes are on the asset quality situation of state-run banks, which constituted over 90 percent of the total Rs 2.42 lakh crore bad loans of the 40-listed banks of India in the March quarter.

A clearer picture will emerge only after larger state-run banks announce their earnings.