HDFC Bank Q2 net up 27.1 pc, earnings growth falls below 30 pc

HDFC Bank, the country's second-largest private sector lender, has posted a 27.1 per cent increase in profit to Rs 1,982 crore, the first time in a decade that its earnings growth has fallen below 30 per cent.

Profit in the September quarter was helped by a healthy jump in core income but there were issues on asset quality.

The bank chose not to amortise net depreciation on available-for-sale (AFS) and held-to-maturity (HTM) bonds over three quarters and took a one-time hit, which dragged profit down by Rs 76.61 crore, Executive Director Paresh Sukthankar said.

"We have not had any fixation of a particular number. The actual number rolls out," he said.

The Reserve Bank of India (RBI) had given banks the one-time flexibility after its unconventional liquidity tightening measures of July jacked up bond yields.

RBI had also allowed banks to transfer securities from the AFS/held-for-trade category to HTM, and accordingly, HDFC Bank transfered Rs 1,932 crore of government bonds from AFS to HTM, thereby protecting its profit by Rs 25.51 crore, the bank said in a note.

During the quarter, the bank continued to face issues on asset quality from the construction equipment and commercial vehicles front, and also a marginal squeeze in the net interest margin.

HDFC Bank's core net interest income was up 15.3 per cent to Rs 4,476.5 crore while non-interest income rose 25.3 per cent to Rs 1,844 crore. It took a mark-to-market loss of Rs 173.3 crore, which is reflected in non-interest income.

Its gross non-performing assets (NPAs) ratio slipped by 0.20 per cent to 1.1 per cent on the back of the stress in twin segments on the retail front, Sukthankar said, adding that its restructured assets stood stable at 0.2 per cent of the book.

Asked if the worst is over on asset quality troubles, Sukthankar said the ongoing stress is the result of overall economic troubles and it will be "naive" to think that it will pick up unless the economy looks up.