HDFC Bank Q4 net rises 18% to Rs3,990 cr despite higher Q4 provisioning

HDFC Bank, the country's second-largest private sector lender, reported an 18.3 per cent rise in net profit for fiscal fourth quarter and the full financial year as well.

The increase in annual profit was helped by an aggressive expansion in credit that offset the effects of increased provisioning for bad or doubtful debt, HDFC Bank said. The loan growth also helped net interest income to grow at 21.5 per cent.

HDFC Bank said its net interest margin increased to 4.3 per cent, from 4.1 per cent earlier.

However, the bank said, despite the leeway given by the Reserve bank in asset classification in the third quarter, its provisioning increased due to aggressive expansion of the loan book in the fourth quarter.

Profit for the fiscal fourth quarter ended 31 March stood at Rs3,990 crore while it was Rs14,549.7 crore for the full fiscal of 2016-17.

This is the second quarter in a row that the bank reported quarterly profit growth below 20 per cent; it is also the first time in its history that yearly profit growth has dipped below 20 per cent.

Provisions and contingencies for the fourth quarter almost doubled to Rs1,261.8 crore, against Rs662.5 crore in the year-ago quarter. It was Rs715.78 crore for the October-December 2016-17 quarter. Provisioning for the March quarter included Rs977.9 crore in specific loan-loss provisions, Rs280.3 crore in general provisioning and Rs3.6 crore on miscellaneous accounts.

The specific loan loss provisions for the quarter included those accounts that would have turned non-performing (NPA) during the quarter ended December 2016 but were classified as NPA in the latest quarter after the RBI allowed banks to delay NPA classification for loans up to Rs1 crore by a further 60 days, from the standard 90 days, considering the uncertainties caused by the demonetisation drive.

Paresh Sukthankar, deputy managing director told the media during a results presentation that there was a Rs100 crore  'provisions spillover' in the March quarter from the December quarter.

In the year-ago quarter, specific loan loss provision was Rs490.3 crore, general provision Rs161.1 crore and others Rs11.1 crore.

The incremental rise in provisioning over the December quarter due to bad debt accretion was Rs70-80 crore. These arose out of small-ticket loans such as micro lending and from agriculture, typically cash-dependent sectors that could be still recovering from a shortage of cash after demonetisation, Sukthankar said.

The domestic loan portfolio grew 23.7 per cent year on year, outpacing the system growth of below five per cent. Deposits grew 17.8 per cent, above the sector average. The domestic loan ratio for retail (individual) and wholesale (corporate) loans was 53:47.

The corporate loan book grew largely due to working capital loans. "On the wholesale side, a very substantial increase is due to working capital and short-term loans. We haven't seen capex-related growth of late and remain bullish on trade finance and short-term loans," Sukthankar said, adding they were "extremely well positioned in the retail and wholesale segments".

Current and savings account deposits comprised 48 per cent of total deposits, against 43-44 per cent in March 2016. Sukthankar, however, declined to predict the amount of post-demonetisation loans that would remain sticky.

Gross NPA in absolute terms in the January-March 2016-17 quarter rose to Rs5,886 crore from Rs5,232 crore in the December quarter and Rs4,393 crore in the year-ago March quarter. However, in percentage terms against total advances, the gross NPA ratio remained stable at 1.05 per cent from the December quarter and slightly up from its year-ago quarter's 0.94 per cent.

"Asset quality remains very healthy and we remain very comfortable with that," said Sukthankar.

The recent RBI directive to increase provisioning on telecom loans would have "no meaningful impact", as their exposure to the sector was less than four per cent of the loan book, he said.

Sukthankar also ruled out tweaking of lending rates. "Right now, we are comfortable with the rates. Our base rate and MCLR (marginal cost of funds-based lending rate) are among the lowest in the industry and we have the highest