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HDFC Bank Q2 net profit jumps 18% to Rs 7,513 crore; loan, card momentum improves

BusinessToday.In     October 17, 2020

HDFC Bank reported an increase of 18.4 per cent in standalone net profit during September quarter of current fiscal on the back of rise in net interest income and pre-provision operating profit. The private lender reported net profit of Rs 7,513.1 crore for the quarter under review, as opposed to Rs 6,345 crore in the year-ago period.

HDFC Bank reported net revenue of Rs 21,868.8 crore for Q2 FY21, as compared to Rs 19,103.8 crore in Q2 FY20, marking an increase of 14.47 per cent. Net interest income (NII) increased 16.7 per cent during the second quarter of FY21 to Rs 15,776.4 crore from Rs 13,515 crore in the corresponding quarter last fiscal. The rise in NII was driven by asset growth of 21.5 per cent and a core net interest margin of 4.1 per cent during the quarter under review.

Operating expenses for September quarter this fiscal stood at Rs 8,055.1 crore, rising 8.8 per cent over Rs 7,405.7 crore during the same period last fiscal. The cost-to-income ratio for the quarter stood at 36.8 per cent as against 38.8 per cent. Growth in operating expenses was relatively moderate due to lower loan origination and sales volume, HDFC bank said in a regulatory filing.

"While the previous quarter largely bore the brunt of the COVID-19 pandemic, some of the softness continued into the current quarter leading to lower retail loan origination, use of debit and credit card by customers, efficiency in collection efforts and waivers of certain fees. As a result, fees and other income were lower by approximately Rs 800 crore. However, the loan and card momentum improved over the previous quarter, thereby reducing the gap to less than half," the lender told the exchanges.

Pre-provision operating profit grew at 18.1 per cent year-on-year to Rs 13,813.8 crore. Provisions and contingencies for the quarter ended September 30, 2020, were Rs 3,703.5 crore, consisting of specific loan loss provisions of Rs 1,240.6 crore and general and other provisions of Rs 2,462.9 crore. The total provisions for the September quarter included contingent provisions of Rs 2,300 crore proforma NPAs, as well as additional contingent provisions to make the bank's balance sheet more resilient, HDFC Bank said.

Gross and net non-performing assets (NPAs) for the second quarter of FY21 stood at 1.08 per cent of gross advances and 0.17 per cent of net advances, respectively. HDC Bank said that it refrained from classifying stressed accounts that were not declared NPAs till August 31, 2020, as bad loans following an interim order by the Supreme Court. This course of action will be retained until further notice in the matter, it added.

"However, if the bank had classified borrower accounts as NPAs after August 31, 2020, and also adopted an early recognition of NPA using its analytical models (proforma approach), the proforma gross NPA ratio would have been 1.37 per cent as on September 20, 2020, as against 1.36 per cent as on June 30, 2020, and 1.38 per cent on September 30, 2019. The bank's proforma net NPA ratio would have been 0.35 per cent. Pending disposal of the case, the bank, as a matter of prudence, has made contingent provision in respect of these accounts," it said.

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