HDFC Bank, the second largest private sector bank, on Friday reported a 31.5 per

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cent increase in net profit to Rs 818.50 crore in the third quarter ended December 31, 2009 from Rs 621.74 crore a year ago particularly helped by lower provisioning requirement for non-performing assets and a gain in net interest income (NII). The rise in net profit was despite total income falling by 9 per cent to Rs 4,887.82 crore during the third quarter from Rs 5,407.89 crore a year earlier.

“The growth in the bottom line is the result of a healthy growth in fees and commissions. Going forward, the bank sees pressures due to repricing of savings bank accounts where interest has to be paid on a daily balance and the (expected) hike in CRR may be negative on the margins. A large amount of the deposits (would also) have to be repriced,” said Paresh Sukthankar, Executive Director, HDFC Bank.

HDFC Bank's other income dipped by 9 per cent to Rs 853 crore in the October-December period, partly due to rise of bond yields that led to mark-to-market loss of Rs 26.5 crore. It reported an operating loss of Rs 6.86 crore in treasury operations. However, fees and commissions--the main contributors to its other income--rose 12.4 per cent to Rs724 crore.

The bank said its net interest income -- the difference between interest earned and interest paid -- grew 12.4 per cent from a year earlier to Rs 2,224 crore. The bank's net interest margin improved to 4.3 per cent from 4.2 per cent a year earlier.

The bank's operating expenses were flat at Rs 1,453 crore in the October-December 2009 quarter compared to Rs 1,461 crore a year earlier.

The credit growth of the bank was about 20 per cent from April to September and in the third quarter was just 5 per cent. The bank's total advances stood at Rs 1,19,613 crore at the end of December 2009. “The corporate book had year on year growth of 30 per cent with rise in demand for working capital and term loans from infrastructure sector, particularly from the power sector,” Sukthankar said.

On a sequential basis the bank has managed to bring down its non-performing assets. The gross net NPAs of the bank was at 1.6 per cent down from 1.9 per cent reported in the year ago period and also lower than the 1.8 per cent of gross NPAs reported in the previous quarter. Total restructured assets of the bank are about Rs 500 crore.