Backed by a robust loan growth and fee income, India’s second largest private sector lender HDFC Bank’s second quarter net profit rose a 31.5% at Rs 1,199 crore. Net interest income increased nearly 17% to Rs 2,945 crore. The numbers were almost in-line with CNBC TV18 estimates.
“Retail loans have been the largest contributor to our asset book,” said Paresh Sukhtankar, executive director, HDFC Bank in analyst conference call.
“Gross retail loans grew around 34% to Rs 92,878 crore. We have seen our retail assets growing across India including small towns and cities. However, our asset quality remains stable. Our deposit growth has been strong enough. People wanted to lock in their money in fixed deposit schemes offering high rate of interest. Such growth is more than adequate to fund our loan growth.”
During the July-September quarter, other income rose 26% Y-o-Y to Rs 1,212 crore. Many contributors of other income were fees and commissions as well as foreign exchange revenues, the bank said in a release.
Under retail portfolio, loans expanded significantly to the tune of 35-40% each in segments like business banking (SME), commercial vehicle and construction equipments as well as auto. The bank expects the retail growth momentum to continue in FY12.
Advances grew at 25.6% Y-o-Y to Rs 1,90,000 crore while deposits base increased 18.1% to Rs 2,31,000 crore. Retail loans forms around 50% of their total loan book. Project loans remained unchanged at 9.5%.
Its gross non performing assets (NPAs) improved to 1% as against 1.04% a quarter back. However, net NPAs rose marginally to 0.20% from 0.18% in June quarter. Net interest margin (NIM) slipped by 10 basis points sequentially to 4.1% as CASA ratio too fell.
CASA (current account and savings account) ratio stood at 47.3% of total deposits versus 49.1% in the previous quarter. Traditionally, CASA is a cheap source of funds as it offers 0-4% rate of interest. According to Sukthankar, customers are more inclined towards term deposits that are offering higher rate of interest. The bank would not reduce deposit rates in the near term. However, CASA mix is expected to be above 40% level during the fiscal year.
"I see stabilisation of fixed deposit rates. Further increase of deposit rates is most unlikely. At the same time, there will be no reduction of deposit rates in the next two months," he said.
Meanwhile, bank's cost of funds have gone up by 100 basis points year-on-year. The bank seems to be treading caution on corporate lending that grew 19% compared to 34% retail growth in the quarter. It has limited exposure in the so-called risky sectors. For example, the power sector forms around 2% of the loan book and real estate too has negligible expsoure.
HDFC Bank shares on Wedesday rose nearly 3% to close the day at Rs 492 on the NSE.
Source: www.moneycontrol.com
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DENIP Consultants Pvt Ltd
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