HDFC Bank saw a rise of 20 per cent in profit in the first quarter, backed by a rise in revenue and a reduction in cost-to-income ratio.
The private sector lender’s net profit rose 20 per cent to Rs 3,893 crore in the quarter ended June from Rs 3,239 crore in the year-ago quarter.
Analysts say that HDFC Bank’s performance exceeded expectations on most operating performances. This was despite the marginal impact on asset quality due to the spate of farm-loan waiver demands across the country.
Net interest income, the difference between interest earned and interest expended, was Rs 9,370 crore in the June quarter, 20 per cent more than Rs 7,781 crore in the year-ago period. Other income, mainly fees and commission, grew 25 per cent to Rs 3,517 crore in June from Rs 2,806 crore previously. Net interest margin, a key indicator of the bank’s stability, was 4.4 per cent for the June quarter.
Its advances rose 23 per cent to Rs 5,80,975 crore and deposits were up by 17 per cent to Rs 6,71,376 crore.
The asset quality of the bank saw a deterioration as gross non-performing assets stood at 1.24 per cent as of June 2017, against 1.04 per cent as of June 2016.
The agricultural segment formed 60 per cent of the total increase in gross NPAs. “Recoveries from agricultural advances were impacted during the quarter by borrower expectations of farm loan waivers arising out of policy announcements in certain states. These loan waiver policies are in the process of being finalised and implemented. As a prudent measure, the bank has enhanced specific provision coverage for its non-performing agricultural advances,” said the bank.
The private lender's capital adequacy ratio (CAR) was at 15.6 per cent as of June 2017 against 15.5 per cent in the previous year’s quarter. Tier-I CAR was at 13.6 per cent as of June 2017, against 13.3 per cent earlier.