HDFC Bank Q4 Net Up 20% on Treasury, Interest Gains
Net interest income grew 24%; retail focus to help bank benefit from rising consumer spend
Joel Rebello & Saloni Shukla
Mumbai: HDFC Bank, India’s most valuable bank, said its March quarter earnings rose 20% in line with expectations as both its corporate as well as retail lending are accelerating.
The bank said its net profit in the fourth quarter advanced to .₹ 3,374 crore from .₹ 2,807 crore in the year earlier as income from treasury also increased along with interest income on loans, which mostly drove profits.
Profits were in line with expectations with a 20% growth — a new normal for the bank — which had logged 30% growth for many years, said Rahul Shah, vice president, equity advisory at Motilal Oswal. HDFC Bank will continue to benefit from the rising consumerism in India due to its retail focus, Shah said in a note, post the results. The bank led by Aditya Puri has remained an outperformer amidst a crisis in the Indian banking industry which is grappling with bad loans from corporate lending. The bank was once known for a consistent 30% rise in earnings. However, HDFC Bank’s pace of
profit growth has slackened too, a sign that it has not managed to escape the economic downturn completely.
“Clearly, the 30% was at a time when the nominal GDP growth was clearly in the teens, the system loan growth used to be in the low 20s and we grew 4-5% faster than that,” Paresh Sukthankar, joint, managing director, said. “Right now, given the pace at which the economy is growing, our growing at roughly 20% actually means that the delta growth is higher today than when we were growing 30% in absolute.”
Net interest income, or the difference between interest earned on loans and that for deposits, grew 24% to .₹ 7,453 crore from .₹ 6,013 crore last year as both retail and corporate loans in- creased at a fast 30% and 27%, respectively. HDFC Bank has declared a dividend of .₹ 9.50 per equity share for the year. The bank’s performance was better across the board with the wholesale and retail banking aiding the treasury gains. Its pretax profits from treasury jumped 30% to .₹ 373 crore from .₹ 288 crore a year earlier.
Corporate banking, its new thrust area, saw pre-tax earnings climb 9% to .₹ 2,038 crore from .₹ 1,876 crore a year earlier. It has hired K Balasubramanian of Citibank to push lending to big com- panies, including multinationals with whom he has built relationships over the years at Citi.
Retail banking, which has become a focus area even for the state-run banks in the absence of corporate demand, looked up for HDFC Bank. Pre-tax earnings in lending to cars and personal loans climbed faster at 41% to .₹ 2,264 crore.
“Personal and credit cards have both grown well and we have seen that traction almost continuing now for more than a couple of quarters,” Sukthankar said.