HDFC Bank Q4 results: Asset quality, Net Interest Income, Profit and more

HDFC Bank Q4 results: Asset quality, Net Interest Income, Profit and more

Last updated: 17 Apr, 2021 | 11:44 am

HDFC Bank Q4 results: Asset quality, Net Interest Income, Profit and more

Profit below estimates: The net profit grew 18.17% on-year to ₹8,186 crore in Q4FY21, missing street expectations. Analysts had earlier anticipated a profit of about ₹8,450 crore. Higher other income and pre-provision operating profit (PPoP) supported HDFC Bank’s bottomline, but provisions and tax expenses weighed on the income growth.

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. Net interest income for HDFC Bank grew 13% YoY to ₹17,120 crore. Analysts had expected NII of about Rs 17,000 crore. Net interest margin was at a steady at 4.2% for the quarter. The chart below shows segment-wise percentage revenue for HDFC Bank.

Asset quality improves: The bank’s asset quality improved with the gross non-performing asset ratio reducing to 1.32% of total advances as against 1.38% in Q3. Net NPA ratio was unchanged at 0.4%. The reported provisions and contingencies for the March quarter stood at Rs 4,693.7 crore, an increase of 38% over the previous quarter. The quarterly results did not have the distinction between pro-forma and actual NPA, as the Supreme Court directed that the six-month loan moratorium offered by the Reserve Bank of India will not be extended further. 

Impact of restructuring: The bank approved one-time restructuring schemes for loans worth Rs 6,508.37 crore. The one-time restructuring scheme was announced by the Reserve Bank of India in August 2020, to help borrowers impacted by the Covid-19 pandemic. The bank held provisions worth Rs 650.83 crore against these restructured accounts.

Deposits: The Bank’s deposits aggregated to approximately Rs 16.5% to 13.35 lakh crore as of Mar-21. Bank’s CASA (current and savings account) deposit now comprise 46.1% 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 14% on-year to Rs 11.32 lakh crore.

No dividend: HDFC Bank said that it has not declared any dividend for FY21, as a matter of prudence. “Given that the current 'second wave' has significantly increased the number of Covid-19 cases in India and uncertainty remains, the board has considered it prudent to currently not propose a dividend for the financial year ended March 31, 2021,” the bank said.

HDFC Bank’s bottomline has missed street expectations, owing to higher provisions. However, the bank has been able to meet expectations on Net Interest Income. Further, the bank has been able to maintain a healthy deposit and advances growth rate. Another positive in the quarter is that the subsidiary HDB Financial Services has returned to profit. HDB Financial  has reported a profit of Rs 285 crore. 

The asset quality of the bank has also shown marginal improvement. The bank’s capital adequacy ratio (18.8%) remains well above the regulatory requirements (11.075%). The bank has followed a conservative approach and not declared any dividends. 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.

We are a SEBI registered investement advisor