HDFC Bank, India’s second-largest private bank, posted a 20.1% rise its net profit during the first quarter, even as the quantum of bad loans, a major hurdle for most Indian banks, soared 45%.
The Mumbai-based bank’s profit in the April-June quarter rose to ₹3,238.91 crore against ₹2,695.72 crore in the same period last year.
The total income for the bank – including interest earned, interest or discount on bills, income on investments and the interest earned on balances with the Reserve Bank of India -- rose 17% to ₹19,322.63 crore in the April-June quarter against Rs 16,502.97 crore in the year-ago period.
In its filing with the Bombay Stock Exchange (BSE), HDFC Bank said its net non-performing assets (NPAs) during April-June 2016 rose to ₹1,493.39 crore from ₹1,027.70 crore.
But, deputy managing director Paresh Sukthankar was quick to dismiss any concern on the asset quality front saying the bank is “comfortable” with the rise in bad loans.
“We are still very comfortable,” Sukthankar told reporters adding “no serious large chunky” corporate account had contributed to the rise in the bad loans. Primary growth driver is the rise in net interest income, which is 71% of our net revenue and grew 21.8%. So, that clearly sets the tone for the topline,” Sukthankar said.
He said loan growth, which grew nearly three times the industry average at 23.2 per cent, was driven by small-and- medium corporate borrowers and individuals.
The results, which came during market hours saw shares of HDFC Bank ended down 0.30% at ₹1,228,45, in line with a weak trading sentiment. The stock performed better than its peers on a day baking stocks saw a sell-off ahead of declaration of quarterly results.
BSE’s BANKEX index, which includes the country’s major banks, was down 1.70%, with stocks of Axis Bank and Punjab National Bank falling over 3.5% each.
HDFC Bank said that provisions and contingencies for the quarter were ₹866.7 crore against ₹728 crore during the same period last year. Typically, provisions are made when there is limited expectation of an asset generating income. In banks, provisions are made to cover for loans that have turned bad.
HDFC Bank said that its capital adequacy ratio – an indicator of the quantum of capital that is with the bank to provide comfort to depositors – as per Basel III guidelines was 15.5% as against a regulatory requirement of 9%.