Last updated: 16 Jan, 2021 | 04:07 pm
Profit beats estimates: The Net profit grew 18.1% on-year to ₹8,758.3 crore in Q3FY21, beating street expectations. Analysts had earlier anticipated a profit of about ₹7,641 crore. The bank was able to post a higher profit on the back of stable provisions and a healthy rise in Net Interest Income.
Net interest income rises: A bank’s primary business is to borrow money and lend the same at a rate higher than the rate at which they borrowed. The income generated from this differential is known as net interest income. Modern-day banks have a lot of sources of revenue. However, this is an extremely important number to truly find out as to how much a bank is earning from its core operations. Net interest income for HDFC Bank grew 15% YoY to ₹16,317 crore. Net interest margin was at a steady at 4.2% for the quarter.
Asset quality improves: The bank’s asset quality improved with the gross non-performing asset ratio reducing to 0.8% of total advances as against 1.08% in Q2. Net NPA ratio for the bank fell 8 basis points to 0.09%. HDFC Bank set aside total provisions worth Rs 3,414 crore, lower than the Rs 3,703 crore in the previous quarter.
Update on moratorium: The RBI had permitted banks to offer a moratorium to borrowers until the end of August to help them mitigate the impact of the pandemic. Following this, the Reserve Bank of India in September permitted one-time restructuring of advances of companies and retail borrowers hit by the Covid-19 pandemic. While these assets don’t have to be marked as NPAs, banks have been asked to disclose details of the restructured assets.
HDFC Bank said that if the bank were to account for classified borrower accounts as NPAs after August 31 and also adopt an early recognition of NPA using analytical models, the gross NPA would have been 1.38% (as against 0.8%) for December quarter. The Net NPA ratio would have been 0.40% (as against 0.09%). The bank, as a matter of prudence, has made contingent provisions in respect of such accounts.
Deposits: The Bank’s deposits aggregated to approximately ₹12.71 as of Dec-20, a growth of around 19% on-year. Bank’s CASA (current and savings account) deposit now comprise 43% of total deposits of the bank. CASA capital is the cheapest source of capital for banks. The higher the number the more profit a bank can earn. Advances were up 15.6% on-year to Rs 10.82 lakh crore.
New CEO: The September quarter was the last under the leadership of Aditya Puri, who stepped down in October. This was the first quarter under the leadership of Sashidhar Jagdishan. Jagdishan's appointment will be for a period of three years.
Despite the effects of the pandemic, HDFC Bank has delivered strong results in the Oct-Dec 20 period. The bank has been able to maintain a healthy deposit and advances growth rate, on the back of a festive pick-up and continued momentum in working capital corporate loans.
The asset quality of the bank has also shown improvement. The bank’s capital adequacy ratio (18.9%) remains well above the regulatory requirements (11.075%). Even though the current economic environment is extremely stressful for the Banking Industry, we believe HDFC Bank has the necessary firepower to tide over these turbulent times.