HDFC Bank Q3 net increases 30%, on higher loan growth

Credit card segment has grown faster than others, registering Rs 1,301 cr growth

HDFC Bank, India’s second largest private bank by assets, on Friday reported 30 per cent rise year-on-year in its net profit to Rs 1,859 crore for the quarter ended December 31, driven by aggressive loan growth, healthy other income and a stable asset quality. The incremental credit growth during the quarter was Rs 10,000 crore of which Rs 6,800 crore came from retail assets like credit cards, auto loans and others, while the wholesale or the corporate book grew by Rs 3,200 crore during the quarter.

Paresh Sukhthankar, executive director, HDFC Bank, said in a media concall after the results, “The bank managed to maintain a healthy asset quality and grew its advances higher than the average banking credit growth of over 15.6 per cent. We will continue to grow faster than the system and maintain our NIM at around 3.9-4.2 per cent.”

The net interest margin (NIM) of the bank stood at 4.1 per cent, higher than the 3.9 per cent the bank clocked in the year ago period but a tad lower than the 4.2 per cent that the bank reported earlier this year. Net interest margin, a key performance indicator, is the difference between the interest income generated by the bank and the amount of interest paid to depositors.

HDFC Bank has been consistently focusing on high yielding short term advances on the whole sale banking side and unsecured loans like personal loans and credit cards to grow its book.

During the quarter the credit card segment has grown faster than the rest registering an incremental growth of Rs 1,301 crore taking the total outstanding credit card portfolio to Rs 10,011 crore at the end of December 31, 2012. The ratio of the retail book to the corporate book was at 53: 47 with retail garnering a bigger growth with total outstanding loans at Rs 1.30 lakh crore while the whole sale book was at Rs 1,11,493 crore at the end of the third quarter. Total net advances of the bank was at Rs 2,41,493 crore a increase of 24.3 per cent over the year ago period.

“We expect the trend of retail advances outpacing the wholesale advances to continue for the next few months until project implementations begin from the companies,” said Sukhthankar.

During the quarter, net interest income or the difference between the interest earned and paid out, rose nearly 22 per cent to Rs 3,800 crore. Other income increased 27 per cent to Rs 1,800 crore major portion contributed by growth in fee and commission income.

Saday Sinha, banking analyst, Kotak Securities, said in a note, “HDFC Bank has delivered yet another quarter of 30 per cent PAT growth, which is not a surprise, as they have been consistently doing this for last one decade. Its NII also came strong at 22 per cent (year-on-year) on the back of strong loan growth along with stable NIM. Strong traction in fee-based income growth is positive while some up-tick in NPAs in absolute terms, can be viewed negative. However, NPAs in the percentage terms remained within the management guidance.”

Gross non-performing asset (NPA) ratio rose to 1 per cent as against 0.91per cent in the July-September quarter. The incremental gross non-performing assets (NPAs) during the quarter were Rs 300 crore mostly coming from construction equipment, commercial vehicle and retail loans. About Rs 11 crore of loans were restructured during the quarter.

The HDFC Bank stock was down 1.18 per cent closing at Rs 659 on the Bombay Stock Exchange (BSE).

Hatim Broachwala, analyst at Karvy Broking, said in a note that the bank’s asset quality has seen a slight deterioration. “Gross NPA has increased by 9 basis points sequentially to 1 per cent, yet net NPA has been flat sequentially at 0.2 per cent, supported by higher loan loss provision of Rs 280 crore, as against Rs 170 crore during last quarter. Some amount of stress is seen in commercial vehicle/construction equipment segment. It made a floating provision of Rs 3 crore during the quarter. Provision coverage has slightly fallen to 79.6 per cent. We believe asset quality has peaked and it will be a major challenge to improve further, hence, we factor slight deterioration from here on.”

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