HDFC Bank reported a 21 per cent rise in net profit at ₹2,233 crore in the first quarter ending June 30, 2014 driven by lower provisions, higher interest income and loan growth.
The country’s second largest private lender missed its consistent 30 per cent profit growth mark for the second consecutive quarter because of a drop in other income and net interest margins (NIM).
“The rise in profitability was largely from net interest income (NII) and the tight leash on operating expenses… Also, there was a marginal increase in NPAs (non-performing assets) in agriculture linked to some States, commercial vehicles and equipment and small and medium sector loans,” said Paresh Sukthankar, Deputy Managing Director.
In addition, lower provisions during the quarter, at ₹483 crore, (from ₹527 crore) aided profits.
NII, the difference between interest earned and expended, grew 17 per cent, while other income declined 4 per cent at ₹1,851 crore due to lower bond gains (₹25 crore against ₹200 crore in June last year) and foreign exchange income.
NIM declined to 4.4 per cent from 4.6 per cent in the same period last year. Sequentially, the NIM was flat.
Further, bad loans or gross NPAs increased to 1.07 per cent as on June 30, 2014, compared with 1.04 per cent last year. As on June end 2014, total advances increased 21 per cent year-on-year, backed by growth in corporate loan book, while total deposits rose 23 per cent.
Asked about the reverse merger of HDFC with HDFC Bank, Sukthankar said: “At this point, there is no such discussion. Though the reserve requirement on HDFC's liabilities was certainly a major hurdle, it is not clear if the guidelines provide the necessary relief and if it does, to what proportion. We are yet to go through and work on it.”
The guidelines would require further clarifications whether the RBI circular is on an ongoing basis or if the assets can be funded through bonds, he added.
The Bank has also increased its stake in HDFC Securities to 98 per cent now. HDFC Bank, whose board has passed an enabling resolution to raise up to ₹10,000 crore, intends to raise capital this fiscal year.
“As of now, there is no foregone conclusion by the FIPB on raising the FII limit. The capital raised will be for organic growth for the next two years, Sukthankar said. HDFC Bank’s scrip ended weaker at ₹828.05 per share, down by 0.53 per cent over its previous close on the BSE.