India's second largest private sector lender HDFC Bank 's third quarter (October-December) net profit rose more than 31% year-on-year to Rs 1,430 crore on the back of robust loan growth. Net interest income or the difference between interests earned and paid out increased nearly 13% y-o-y to Rs 2,945 crore.
The quarterly numbers were a little above the CNBC TV18 poll estimates that saw 28.5% rise in the net profit.
"We have seen higher growth in retail lending segment," said Paresh Sukthankar, the executive director, HDFC Bank over a conference call.
"This trend would continue for another quarter. However, we will grow almost equally both on retail and corporate sides in the next one/two years. During the quarter, the retail loans expanded by 29% while loans to companies grew by 15% y-o-y. We have cut off some short term wholesale lending exposure on margin concern."
The lender's overall loan book grew by 22% Y-o-Y to around Rs 1.96 lakh crore. Retail loans currently account for more than 51% of the book while corporate loans form the rest. Moreover, the incremental loan growth has been around 21% to Rs 35,000 crore between April 1 and Dec 31, 2011.
For many banks, incremental loan growth has been subduded so far as against their year-on-year growth. This would force lenders either to go for aggressive lending in the last quarter to achieve their credit growth target or bring down loan growth. The Reserve Bank of India has projected the industry's credit offtake at 18% in FY12.
"We expect, the industry credit will grow at 16% while HDFC Bank's (loan growth) will be a few percentage points higher than that," added Suthankar.
The lender's cost of funds have gone up by 10 bps sequentially while it rose by 1.30% (or 130 basis points) Y-o-Y basis. Its net interest margin (NIM) however did not squeeze and remained the same at 4.1% as in the July-September quarter.
Despite concerns over economic slowdown, the bank has retained its asset quality. Its gross non-performing asset (NPA) ratio was flat at 1% quarter-on-quarter. Similarly, net NPA ratio remained unchanged at 0.20%.
According to analysts, the lender's credit expsosure to commercial vehicle (CVs) and construction equipment segments might pose some problem for its asset quality. However, if the bank expands across the nation (in this segment) with additional exposure to the light commercial vehicle sector (LCV), the risk could be mitigated.
"Along with CVs, we are also lending for LCVs. In between Dec, 2010 and Dec 2012, we have increased our presence from 883 cities to 1174 cities. We are now foraying into semi-urban areas," Sukthankar told Moneycontrol.com adding that the marginal credit exposure in construction equipments is not in the troubled areas. It has not added to bad loans.
The other income component too increased by 26% Y-o-Y to Rs 1,420 crore, supported by higher fee and commission income.
HDFC Bank shares on Thursday closed at Rs 487, up nearly 1% on the NSE.
Source: www.moneycontrol.com
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Gaurav Agarwal
Head Dealer
DENIP Consultants Pvt Ltd
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