HDFC Bank Q1 net profit jumps by 20% led by higher net interest income

Image: Shailesh Andrade / Reuters

HDFC Bank reported a net profit of Rs 3,238.91 crore for the June ended quarter, compared to Rs 2,695. 72 crore for the corresponding period a year earlier

HDFC Bank, India's second largest private sector lender, reported a 20.15 percent jump in net profit for the quarter ended June 30, led by higher net interest income. But the bank showed a small rise in bad loans and made higher provisions.

HDFC Bank reported a net profit of Rs 3,238.91 crore for the June-ended quarter compared to Rs 2,695. 72 crore for the corresponding period last year. The bank reported a net interest income—the difference between interest earned and interest expended—of Rs 7,781.4 crore, up by 21.8 percent from the quarter last year. This was due to average asset growth of 20.2 percent and net interest margin of 4.4 percent for the June-ended quarter.

The HDFC Bank stock fell by 0.6 percent to Rs 1,224 at the Bombay Stock Exchange, after the earnings were announced.

Gross non-performing assets (NPAs) as a percentage of total loans, stood at 1.04 percent as on June 30, 2016, compared to 0.95 percent on June 30, 2015. Net NPAs stood at 0.32 percent of net advances on June 30, compared to 0.27 percent last year. In actual terms, gross NPAs jumped by 34 percent to Rs 4,920.9 crore at the end of the June quarter, compared to Rs 3,652.2 crore for the same period a year ago. Provisions for the bank rose by 19 percent to Rs 866.7 crore for the June 30 quarter, compared to Rs 728 crore for the same period a year ago.

All banks are in the race to clean up their balance sheets and reduce rising levels of NPAs and stressed assets. The Reserve Bank of India (RBI), which has carried out its asset quality review (AQR) has told these banks to clean their balance sheets off these bad assets by March next year. To make matters worse, this is deeply impacting their ability to expand, particularly several public sector banks, which are in an urgent need of fresh capital infusion in order to help them lend more.

Total deposits for HDFC Bank rose by 18.5 percent year-on-year to Rs 573,755 crore as on June 30, 2016. Current and savings accounts (CASA) deposits saw healthy growth in the June quarter, with savings accounts deposits growing by 22 percent over the previous year to touch Rs 152,701 crore and current account deposits growing 13.7 percent over the previous year to touch Rs 76,082 crore.  

Last month, HDFC Bank launched digital banking services for its small and medium enterprises (SMEs) clientele, to allow them access the complete range of services instantly and 24x7 through their desktop, laptop, tablet or mobile.

HDFC Bank provides banking services to about 100,000 SMEs, out of a total universe of 360, 00,000 SMEs across India.  

HDFC Bank has over the past two years provided a strong digital thrust to its customers. The bank had introduced internet banking in 1999 and SMS-based banking a year after that. Mobile banking started at the bank in 2012 and in 2015, HDFC Bank launched its banking application for the Apple Watch in 2015. HDFC Bank has also launched a mobile app called Chillr, which allowed customers to transfer funds instantly to any contact in their phone book.