Strong growth in net interest income boosts bottomline, provisions fall
India’s largest private lender HDFC Bank on Saturday reported an 18.5 per cent year-on-year (YoY) increase in net profit to Rs 12,259 crore in the third quarter of FY23 as healthy growth in net interest income boosted the bank’s bottomline, said the company’s BSE filing.
On a sequential basis, the bank’s net profit grew 15.6 per cent from Rs 10,606 crore in July-September.
In the third quarter of the current financial year, HDFC Bank’s net interest income – which is the difference between interest earned and interest expended – registered a growth of 24.6 per cent on-year to Rs 22,987 crore. The bank’s core net interest margin was 4.1 per cent on total assets and 4.3 per cent on interest-earning assets, the lender said.
Banks have been reporting healthy interest incomes for the last couple of quarters as lending rates have risen sharply in tandem with the Reserve Bank of India’s rate hikes. The rise in deposit rates has lagged that in lending rates, many of which are linked to external benchmarks tied to the central bank’s policy rates.
Stripping away net trading and marked-to-market income, HDFC Bank’s other income grew 15.4 per cent in October-December. The net trading and marked-to-market income were at Rs 261.4 crore in October-December, sharply lower than Rs 1,046.5 crore the same period a year ago.
Other income includes fees and commissions, foreign exchange and derivatives revenue, marked-to-market income, and miscellaneous income including recoveries and dividends.
For the period under review, HDFC Bank’s net revenue rose 18.3 per cent YoY to Rs 31,487 crore from Rs 26,627 crore a year ago.
In Q3, the bank’s pre-provision operating profit was at Rs 19,024.1 crore. Excluding net trading and marked-to-market income, the pre-provision operating profit grew 19.3 per cent on-year.
As on December 31, 2022, HDFC Bank’s provisions and contingencies were at Rs 2,806.4 crore, 6.3 per cent lower than a year ago.
The lender’s asset quality improved on a yearly basis, with the gross non-performing asset ratio falling to 1.23 per cent as on December 31, 2022 from 1.26 per cent a year ago. Net NPA ratio was at 0.33 per cent as on December 31, 2022 versus 0.37 per cent a year ago. On a sequential basis, however, the NPA ratios were flat.
In the previous quarter, the bank’s total credit cost ratio was at 0.74 per cent versus 0.94 per cent for the same period a year ago.
HDFC Bank’s total Capital Adequacy Ratio according to Basel III norms – including profits for the nine months ended December 31 — was at 19.4 per cent. The regulatory requirement is 11.7 per cent including a capital conversation buffer of 2.5 per cent. HFDC Bank has an additional requirement of 0.2 per cent on the buffer as it is classified Domestic Systemically Important Bank by the RBI.
The private bank’s total deposits were at Rs 17.33 trillion as on December 31, 2022, clocking a growth of 19.9 per cent on-year. Current account savings accounts (CASA) deposits, which are low-cost deposits, rose 12 per cent, with savings account deposits at Rs 5,35,206 crore and current account deposits at Rs 2,27,745 crore. CASA deposits comprised 44 per cent of total deposits as on December 31.
As on December 31, the bank’s total advances were at Rs 15.07 trillion, having risen 19.5 per cent year-on-year. Domestic retail loans jumped 21.4 per cent on-year, while commercial and rural banking loans grew 30.2 per cent. Corporate and other wholesale loans grew 20.3 per cent, while overseas advances accounted for 2.8 per cent of total loans.