Shares of HDFC Bank fell 3 percent to Rs 1,475 on the BSE in intraday trading on Monday after the lender reported a lower than expected return for the quarter ending June (Q1FY22). The bank posted a 16.1 percent jump in first-quarter net profit to Rs 7,729.6 crore as the bank’s asset quality deteriorated and provisions rose. The profit of the largest private sector lender in the country stood at 6,659 crore in the same period last year (Q1FY21).
Lender’s Net Interest Income (NII) increased 8.57 percent YoY (YoY) in the first quarter of fiscal 21 to Rs 17,009 crore, driven by advance payment growth of 14.4 percent and a net interest margin of 4.1 percent. In the same period, the lender’s other income increased 54.3 percent year-on-year to Rs 6,228.5 crore. HDFC Bank posted moderate operating performance due to a drop in net interest margins (NIM) by 10 basis points (bps) qoq (qoq) to 4.1%.
The bank’s asset quality deteriorated slightly at the end of the June quarter. The bank’s gross non-performing assets (NPA) stood at 1.47% compared to gross NPA of 1.32% at the end of the March quarter and 1.36% as of June 30, 2020. Net NPA of the bank stood at 0.48 percent of the advance portfolio.
“The cost to income (C / I) ratio decreased to 35% from 37.2% QoQ due to low trading activity. Provisions rose to Rs 4,830 crore. As a result, profit after Taxes were slightly lower than estimates. The bank currently has floating provisions of Rs 1,451 crore and contingent provisions of Rs 6,596 crore. Loan growth slowed sequentially by 1.3 percent to Rs 11.47 trillion, while that deposit buildup was decent at 13.2 percent yoy at Rs 1.34 trillion, “ICICI Securities said in a rating.
HDFC Bank continues to generate higher growth in advances, led by healthy trends in commercial and rural bank lending. The bank’s operating performance remains in line, although the margin has been under pressure due to ongoing foreclosures, Motilal Oswal Financial Services said in a results update.
The brokerage further said that asset quality has deteriorated marginally due to interruptions in collections due to the second wave of Covid. The bank continues to make additional contingent provisions to further strengthen its balance sheet. The total book restructured increased to 0.8 percent of loans (versus 0.6 percent of loans), however, the overall build-up of tensions remains under control. The lifting of restrictions by the Reserve Bank of India (RBI) remains a key that can be controlled in the short term, he said.