“On the wholesale category, we have seen that credit demand is high but the rates are benign,” said chief financial officer Srinivasan Vaidyanathan. “The spread over government securities is thinner and competition pushes it even down. We want to be circumspect in how we price and choose (loans). In the retail segment, we are leaders on mortgages but on the unsecured side, we have seen regulators talking about being cautious of credit quality. We are cautious of the credit and calibrate accordingly.”
The lender said advances grew 52.6% on year in the June quarter driven by retail loans, which more than doubled. Corporate and wholesale loans grew 18.7% on year. Total loans stood at Rs 24.8 lakh crore.
The lender reported a 35% rise in profit to Rs 16,175 crore in June quarter from the year ago, helped by lower provisions and strong net interest income, exceeding the Rs 15,652 crore Bloomberg estimate.
The bank had posted a profit of Rs 11,952 crore in the year before.This is the first time that HDFC Bank earnings have factored in the numbers of the erstwhile Housing Development Finance Corp. The two merged on July 1, 2023.
Deposit growth was slower than loan growth with liabilities rising 24.4% over last year to Rs 22.83 lakh crore, underscoring a broader concern of the central bank.“The first quarter is a low accretion quarter for the banking system,” Vaidyanathan said. “Available liquidity in the system was negative half a trillion rupees. Our retail branch drives deposits and contributes 84% of the total deposits. We want the branches to drive deposits and not look for non-retail high cost deposits.”On the asset-quality front, the gross non-performing asset (NPA) ratio widened to 1.33% at the end of the quarter from 1.17% in the year ago. Net NPAs rose to 0.39% from 0.30% a year ago. Provisions on loans fell to Rs 2,602 crore from Rs 2,860 crore a year earlier.
The bank reported net interest income (NII) of Rs 29,837 crore, up 26.4% on year. Net interest margin (NIM) improved to 3.47%.
“A marginal NIM increase was the key positive, aided by a sharp sequential decline in the borrowings,” said Pranav Gundlapalle, head, India Financials, Bernstein. “Borrowings for the bank declined by nearly 10% sequentially, which helped provide support to the sequential rise in NIM.”
Fee income was down 12% sequentially and is likely to bring back questions on the sustainable level of fee income from the combined entity, he said.
“The deposit growth, though better than the system, was lower than the growth rate required for an accelerated normalisation of the bank’s liability profile,” Gundlapalle said.
Reserve Bank of India governor Shaktikanta Das on Friday highlighted concerns about deposits not keeping pace with credit.
“Households and consumers who traditionally leaned on banks for parking or investing their savings are increasingly turning to capital markets and other financial intermediaries,” he had said. “Banks have sought to fill the credit-deposit gap by increasing their reliance on other sources like short-term borrowings, certificates of deposits etc.” This poses challenges to liquidity management, he said.
