HDFC Bank Q2 results: Lender's net profit jumps 51% to Rs 15,976 cr

HDFC Bank Ltd posted 51% increased in standalone net profit at Rs 15,976 crore for the July-September quarter, it said on Monday. It posted standalone net profit of Rs 10,606 crore in the year-ago period. The results mark the first quarterly earnings report following the merger of HDFC Bank with parent Housing Development Finance Corp (HDFC) on July 1 in a $40-billion deal.

The standalone numbers do not include the business of the bank's subsidiaries. The bank's standalone revenue grew by 33% to Rs 38,093 crore in Q2FY24 as against Rs 28,617 crore in Q2FY23.

Gross non-performing assets (NPA) were at 1.34% of gross advances as on September 30, 2023, as against 1.41% on a proforma merged basis as on June 30, 2023 and 1.23% as on September 30, 2022. Net NPAs were at 0.35% of net advances as on September 30, 2023.

On Monday, HDFC Bank's scrip on BSE closed 0.5% lower at Rs 1,529.5.

Net interest income of the Mumbai-based lender rose 30% to Rs 27,385 crore in Q2FY24 as compared to Rs 21,021 crore in Q2FY23. Core interest margin for the quarter was 3.65% on total assets and 3.85% on interest earning assets.

Provisions and contingencies for the September quarter were Rs 2,904 crore as compared to Rs 3,240 crore in the year-ago period.

CASA deposits grew by 7.6% with savings account deposits at Rs 5,69,956 crore and current account deposits at Rs 2,47,749 crore.

On the net interest margin (NIM) front, the bank reported a narrowing to 3.4% after absorbing the debt funded cost for additional liquidity and merger management.

The merger of two entities would have translated into margins of 3.6%-3.7%, but additional liquidity held ahead of the merger resulted in a hit of 30-35 basis points, the bank's chief financial officer Srinivasan Vaidyanathan said in a conference call with media.

Vaidyanathan did not say what margins would be in the next few quarters.

Vaidyanathan told reporters that the NIMs will rise as the share of higher-yielding assets goes up and once it replaces market borrowings of nearly Rs 4.8 lakh crore taken to execute the merger with cheaper deposits.

The bank said there was a “debt-funded cost for the additional liquidity and merger management” which was a drag on the NIMs during the quarter.

Vaidyanathan said the merger costs alone had an impact of nearly 0.30% on the NIMs and added that an additional impact of up to 0.10% came through the incremental cash reserve ratio tweak that was undertaken by the Reserve Bank of India (RBI).

There has been a positive impact of the merger on the provisions as a bulk of the assets transferred from HDFC are secured, he said.

The share of retail assets has now gone up to 55% with the rest being wholesale assets, Vaidyanathan said, adding the same was at 47:53 ratio in the year-ago period.

About forbearance requests, Vaidyanathan said the bank is yet to get a reply on the recognition of infrastructure bonds and also on the properties rented out by HDFC Ltd.

The cost to income ratio improved to 40.4% as a merged entity riding on HDFC’s low numbers, and Vaidyanthan said that the aim is to get it to mid-30s as part of a long term vision.

To a question on the regulatory caution on the unsecured assets, he said the bank’s risk management teams are aware of the developments and added that a lot of the issues in the industry are from small-ticket loans which the bank does not play in.

Sale of the education loans-focused Credila is yet to be completed, Vaidyanathan said and also added that there is no plan at present to list HDFC Securities.

Regarding the top management’s vow to double the size in three-four years, Vaidyanathan said distribution strength, brand and people will make faster growth possible.

The bank hired 16,000 people on a net basis during the September quarter to take the overall staff strength to 1.98 lakh, he said.

With inputs from PTI