HDFC Bank posts 20% rise in profit; asset quality improves

HDFC Bank announced its September quarter results on Saturday afternoon. The stock has been in the news for a long time for its poor performance despite excellent quarterly numbers. On Friday, the stock jumped nearly 4% to close at Rs 1446 per share. In 2022, HDFC Bank's share has fallen by nearly 5%. Let us look at its September quarter numbers in detail.

HDFC Bank Q2FY23 highlights

HDFC Bank Q2 2022 net profit above expectations: The Net profit for the bank grew 20.1% year-on-year to Rs 10,605.8 crore, above analysts’ expectations. Analysts had earlier anticipated a net profit growth of about 16% on the year. During the same period last year, the bank reported a net profit of Rs 8,834.3 crore. Sequentially, the profit increased by 15.3%. HDFC Bank was able to post a higher profit both sequentially and on year because of healthy growth in net interest income and a decline in loan loss provisions.

HDFC Bank Jul-Sep 22- net interest income beat estimates: A bank’s primary business is to make money and lend the same at a higher rate at which they borrowed. The income generated from this differential is known as net interest income. It is one of the most important numbers for any bank as it tells how much a bank is earning from its core operations. Net interest income for the bank grew 18.9% YoY to Rs 21,021.2 crore. Analysts had estimated a Net Interest Income growth of 17% for the September quarter. Sequentially, the NII increased from Rs 19,481.4 crore.

HDFC Bank Q2FY23 segment revenue: Highlights 

HDFC Bank Net Interest Margin: The bank’s Core Net Interest Margin was 4.1% of total assets and 4.3% based on interest-earning assets. The bank continues to add new liability relationships at a robust pace of 2.6 million during the quarter. 

HDFC Bank Results- Other Income: The non-interest income increased to Rs 7,596 crore, a marginal growth of 2.6% from the year-ago period. Sequentially, the Other Income decreased from Rs 9,011.6 crore. The fees & commissions grew to Rs 5,802.9 crore (against Rs 4,945.9 crore last year), while the foreign exchange & derivatives revenue was up at Rs 947.8 crore (against Rs 867.3 crore in the year-ago period). However, it reported a loss on the sale/revaluation of investments of Rs 253.1 crore against a Rs 675.5 crore gain in the year-ago period. The miscellaneous income, including recoveries and dividends, rose to Rs 1,097.9 crore from Rs 912.1 crore.

HDFC Bank Q2 Asset quality improves: The bank’s asset quality improved with the gross NPA ratio reducing to 1.23% of total advances as against 1.35% in Q2FY22 (a year ago). Sequentially, gross NPA fell by 5 basis points. Net NPA was at 0.33% of net advances for the quarter that ended September 30, a decline of 2 basis points, sequentially. 

HDFC Bank Q2 FY23 Provisions: Provisions and contingencies for bad loans dropped to Rs 3,240.1 crore as against Rs 3,924.7 crore in the same quarter of the previous financial year. The total credit cost ratio was 0.87%, as compared to 1.30% for the quarter ending September 30, 2021.

HDFC Bank Q2: Deposits and Advances: CASA capital is the cheapest source of capital for banks. The higher the number, the more profit a bank can earn. The CASA (Current and Saving Account) deposit grew by 15.4% year on year, with saving deposits at Rs 5.30 lakh crore and current account deposits at Rs 2.30 lakh crore at the end of the September quarter. The CASA deposits constitute 45.4% of the bank's total deposits. 

Total advances for Q2FY23 grew 23.4% year on year to 14.80 lakh crore. Retail loans grew by 21.4%, commercial and rural banking loans grew by 31.3%, and corporate and other wholesale loans grew by 27%. Overseas advances constituted 3.1% of total advances.

HDFC Bank Capital Adequacy Ratio: The capital adequacy ratio (CAR) is a measurement of a bank's available capital expressed as a percentage of a bank's risk-weighted credit exposures. The Bank's CAR as per Base III guidelines was at 18.0% in Q2FY23 (18.7% in the year-ago period), as against a regulatory requirement of 11.7%.

HDFC Bank Branches & Employees added: As of September 30, 2022, the Bank's distribution network was at 6,499 branches as against 5,686 branches as of September 30, 2021. The number of employees at the end of Sep quarter stood at 161,027 as against 129,341 in the year-ago period.

HDFC Bank Q2 earnings: subsidiaries Updates

HDFC Securities Limited (HSL): It is the leading retail broking firm in India. HDFC Bank holds a 95.8% stake in HSL. HSL's total income fell to Rs 468.2 crore from Rs 489.5 crore in Q2FY22. Profit After Tax fell to Rs 190.9 crore from Rs 239.6 crore in the year-ago period.

HDB Financial Services Limited: It is a non-deposit-taking non-banking finance company offering a wide range of loans and asset finance products. For the quarter that ended in September, Bank held a 94.9% stake in the company. The loan increased to Rs 63,112 crore in the September quarter. The net revenue was up by 14.9% YoY to Rs 2201.3 crore and profit after tax was Rs 471.4 crore from Rs 191.7 crore in the year-ago period.