Last updated: 17 Jul, 2021 | 11:48 am
HDFC Bank Q1 profit misses estimates: The net profit grew 16.1% on-year to ₹7,229.6 crore in Apr-Jun 21 period, missing street expectations. Analysts had earlier anticipated a profit of about ₹7,900 crore. Higher other income and pre-provision operating profit (PPoP) supported HDFC Bank’s bottomline, but provisions weigned on the bottomline.
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 8.6% YoY to ₹17,009 crore. Analysts had expected NII of about Rs 17,634 crore. Net interest margin declined 10 bps to 4.1% from 4.2% in the previous quarter.
HDFC Bank Q1 results: Asset quality declines- The bank’s asset quality worsened with the gross non-performing asset ratio increasing to 1.47% of total advances as against 1.32% in Q4FY21. Net NPA ratio rose to 0.48% from 0.4% in the previous quarter. Provisions and contingencies for the quarter came in at Rs 4,830.8 crore (including contingent provisions of Rs 600 crore), against Rs 3,891.5 crore for the same quarter last year, and Rs 4,693.7 crore in March quarter 2021. The quarterly results from the previous quarter do 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 7,800 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. This included Rs 5,457 crore worth retail loans, and Rs 1,735 crore worth corporate loans for HDFC Bank. The bank also restructured loans worth Rs 608 crore to other borrowers under the scheme.
Deposits: The Bank’s deposits grew 13.2% on-year to 13.4 lakh crore as of lakh crore. 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.
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HDFC Bank’s bottomline has missed street expectations, owing to higher provisions. The disruptions from the Covid-19 pandemic affected retail loan originations, sale of third party products and card spends, which affected business volumes and revenue in the quarter for HDFC Bank. Despite these disruptions, the bank has been able to maintain a healthy deposit and advances growth rate.
The asset quality of the bank has also deteriorated marginally. The bank’s capital adequacy ratio (19.1%) remains well above the regulatory requirements (11.075%). In this, common equity Tier-1 capital stood at 17.2% at the end of the first quarter. The bank's board also approved a proposal to raise funds through issuance of unsecured additional Tier-1 bonds to foreign investors in this financial year. The current economic environment is extremely stressful for the banking Industry, as seen by the lacklustre numbers for HDFC Bank in the quarter. However, we believe that HDFC Bank has the necessary firepower to tide over these turbulent times.