Strong growth in interest income helped HDFC Bank post a 34 per cent increase in net profit at Rs 1,085 crore in the quarter ended June 30, 2011, against Rs 812 crore in the corresponding year-ago quarter.
There was stronger demand for working capital loans, than capex, said Mr Paresh Sukthankar, Executive Director, HDFC Bank. “The environment is not very conducive for greenfield projects,” he said while announcing the bank's results.
In the current fiscal, the bank is expecting credit growth to be 4-5 percentage points higher than the industry average, he added.
During the quarter the bank also raised Rs 3,650 crore of Tier-II capital by issuing Upper Tier-II bonds.
CASA share
The share of low-cost CASA (current and savings accounts) to total deposits was 49.1 per cent. “We deliberately did not pick up wholesale deposits because we raised Tier-II capital. We have continued to grow retail fixed deposits and CASA deposits,” Mr Sukthankar said.
Given the increase in bond yields, the bank incurred a loss on revaluation or sale of investments of Rs 41.3 crore, against a gain of Rs 21.5 crore in the year-ago quarter.
As a large part of the loans are working capital loans, they are short term in nature and therefore, get re-priced as interest rates go up. Similarly, the bank's focus has been on retail deposits, including term deposits. This helped the bank maintain its margins, Mr Sukthankar said.
“The broad range for net interest margin in the last few quarters has been between 3.9 and 4.2 per cent and will continue to be so,” he added.
On account of the improvement in asset quality, provisions and contingences reduced to Rs 443.7 crore (Rs 555 crore).
The outlook on asset quality is stable and there is no immediate concern, Mr Sukthankar said.
Rate hikes
About interest rates, Mr Sukthankar said that there could be one last round of hikes in policy and lending rates. But deposit rates at the shorter end may have probably peaked.
This year HDFC Bank will add about 100 branches.
“There are concerns such as decline in margins — both on a year-on-year and quarter-on-quarter basis and increase in gross NPAs on a Q-o-Q basis. Gross NPAs increased to Rs 1,833 crore as on end-June 2011, from Rs 1,694 crore as on end-March 2011,” said Mr Ajay Parmar, Head Institutional Research, Emkay Global.
Shares of HDFC Bank closed at Rs 510.8, down 0.7 per cent on the BSE, on Tuesday. During the day it had touched a new high of Rs 519.5.