HDFC Bank slips below 20% profit growth
Still higher than estimates; provisioning for loan losses up, assets healthy
HDFC Bank, the country’s second-largest private sector lender in terms of assets, reported an 18.3 per cent rise in both its fourth quarter as well as yearly net profit. This was so even as provisioning increased, mainly on the asset classification leeway given in the third quarter by the Reserve Bank of India and due to aggressive expansion of the loan book in the fourth quarter. Profit for the financial year’s fourth quarter ended March was ~3,990 crore; for all of 2016-17, it was ~14,549.7 crore.
HDFC Bank, the country's second-largest in the private sector in terms of assets, reported an 18.3 per cent rise in both its fourth quarter as well as yearly net profit.
This was so even as provisioning increased, mainly on the asset classification leeway given in the third quarter by the Reserve Bank of India (RBI) and due to aggressive expansion of the loan book in the fourth quarter.
Profit for the financial year's fourth quarter ended March was ~3,990 crore; for all of 201617, it was 14,549.7 crore. 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.
Analysts were expecting quarterly net profit of ~3,956 crore. The bank’s shares rose 2.4 per cent to close at ~1,496.75 a share, having hit a lifetime high of ~1,499 in the trading session. Provisions and contingencies for the fourth quarter were ~1,261.8 crore, as against ~662.5 crore in the year-ago quarter. In the December quarter, the provisioning was ~715.78 crore. Those for the March quarter comprised ~977.9 crore in specific loan loss provisions, ~280.3 crore in general provisions and others of ~3.6 crore.
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 only in the latest quarter. RBI, the country’s central bank, had given a special dispensation to banks, for loans up to ~1 crore, to extend their NPA classification by a further 60 days, from the standard 90 days, considering the uncertainties caused by the demonetisation drive. In a call with media to discuss the results, Paresh Sukthankar, deputy managing director, said the ‘provisions spillover’ in the March quarter from the December one was about ~100 crore. In the year-ago quarter, specific loan loss provision was ~490.3 crore, general provision ~161.1 crore and others were ~11.1 crore. The incremental rise in provisioning over the December quarter due to purely bad debt accretion was ~7080 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 mix between retail (individual) and wholesale (corporate) loans was 53:47. The loan growth helped a healthy net interest income growth of 21.5 per cent.
However, 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 shortterm loans,” Sukthankar said, adding they were “extremely well positioned in the retail and wholesale segments”.
For the bank’s customers, he said, the situation had largely become normal after demonetisation. Current and savings account deposits consisted of 48 per cent of total deposits, against 43-44 per cent in March 2016. Sukthankar said he did not wish to guess of how much of the bank’s deposits, garnered after demonetisation, would remain sticky with it.