HDFC Bank provisioning for bad loans drops 34% YoY; net interest income 14.5% higher

India’s largest private sector lender reported a net profit of Rs7,730 crore in the corresponding period last year.

Analysts polled by Bloomberg had estimated net profit of Rs8,197 crore for April-June.

“Despite the bond losses, we have produced a 19% rise in net profit. . . it’s a reasonably healthy performance,” said Sashidhar Jagdishan, managing director of

Bank at the lender’s AGM. “We will be able to recoup those losses as yields stabilise. ”

The bank announced a dividend of Rs15. 50 per equity share.

Net interest income (NII), or interest earned versus interest distributed, rose 14. 5% to Rs19,481 crore. It had reported NII of Rs17,009 crore in the same period last year. NII growth was driven by a 22. 5% increase in advances, 19. 2% rise in deposits and a total balance sheet expansion of 20. 3%.

Other income showed tepid growth of 1. 6% year-on-year to touch Rs6,388 crore, on a loss on sale and revaluation of investments amounting to Rs1,312 crore.

The bank’s asset quality was stable, with its gross non-performing asset (NPA) ratio falling to 1. 28% as of June 30, versus 1. 47% in the year-ago quarter. Its net NPA ratio was at 0. 35%. Provisioning for bad loans during the quarter stood at Rs3,188 crore, down 34% from last year.

The bank said it holds floating provisions of Rs1,451 crore and contingent provisions of Rs 9,630 crore. HDFC Bank’s total credit grew 21.6% to Rs13.95 lakh crore, of which retail loans grew 21.7%, and commercial and rural banking loans rose 28.9%. Corporate and other wholesale loans climbed 15.7%.

The bank continued to add new liability relationships at a robust pace of 2.6 million during the quarter. Total deposits rose 19.2% on year to touch Rs 16.05 lakh crore.

IPO Plans

Responding to shareholder questions at the annual general meeting, Jagdishan said HDFC Bank will be looking at public listing of its subsidiaries — brokerage HDFC Securities and non-bank finance company HDB Financial Services — only after its merger with parent HDFC Ltd goes through.

“The IPO plans (of HDFC Securities and HDB Financial Services) is something we will contemplate after we have absorbed (the merger)… we’ve got directions from the regulator,” Jagdishan said.

The managing director added that the bank would likely maintain a majority stake in HDFC Securities, given the complementarity in business offerings. A decision on whether to keep the stake at the current 95% or dilute it is yet to be taken.

According to Jagdishan, despite having got approval from RBI, HDFC Bank has put on hold its plans to invest more in HDFC Ergo General Insurance pending its merger with HDFC. After the merger, the insurer will become a subsidiary of the bank itself, he said.