HDFC Bank posts 34 per cent rise in Q1 net profit

HDFC Bank, India's second-largest private lender, has posted a 34 per cent rise in net profit at Rs812 crore for the first quarter ended June 2010, supported by healthy growth in net interest income and core non-interest income.

Net interest income rose 29.4 per cent to Rs 2,401 crore on a year-on-year basis. Core non-interest income, comprising fees and commission, rose 15 per cent to Rs746 crore and income from foreign exchange and derivatives rose 25 per cent to Rs172 crore during the review period.

Rise in net interest income and higher ratio of low-cost deposits helped the bank maintain its net interest margin (NIM) at 4.3 per cent in the first quarter of this fiscal against 4.2 per cent a year ago. Low-cost deposits (savings and current accounts) improved to 49.2 per cent from 45.2 per cent a year ago.

HDFC Bank executive director Paresh Sukthankar said the bank managed to maintain its NIM despite calculating interest (at 3.5 per cent) on saving deposits on a daily basis and not on the minimum amount held in a month. He said the new system, which came into effect in the first quarter, had an 18 basis point impact on margins. He expects NIMs to remain in the range of 4-4.3 per cent in the coming quarters.

The bank's total expenses stood at Rs3,611 crore against Rs3,618 crore in the year-ago period, partly due to lower provision for bad loans at Rs555 crore against Rs659 crore. Sukthankar said improved asset quality helped the bank lower the provisioning. Operating expenses for the quarter was up 15.3 per cent at Rs1,592 crore. The bank's loan book rose 40 per cent to Rs1,47,610 crore at the end of the first quarter. However, 10 per cent of the increase is on account of short-term loans which could be one-off in nature, he said. The core loan book rose 30 per cent, while the retail loan book rose 24.5 per cent to Rs76,068 crore.

Retail loans accounted for 51.5 per cent of total advances. Of this, auto loans comprised Rs21,000 crore and home loans Rs9,500 crore. The bank had purchased about Rs900 crore worth of home loans from its parent HDFC.

Deposits rose 25 per cent to Rs1,83,033 crore. Low-cost deposits stood at Rs90,038 crore, while saving account deposits stood at Rs53,869 crore and current account deposits at Rs36,169 crore. However, due to the hardening of yields treasury income was much lower in the first quarter. Treasury gains from sale and revaluation of investments was Rs22 crore against Rs250 crore a year ago.

Capital adequacy ratio was 16.3 per cent, of which Tier I capital accounted for 12.4 per cent. Net NPA stood at Rs412 crore against Rs656 crore, while gross NPA stood at Rs1,791 crore against Rs2,163 crore in the year-ago period. The restructured advances were 0.3 per cent of gross loan book. The bank provision coverage ratio stood at 77 per cent.