HDFC Bank's post-merger results exceeded expectations

 HDFC Bank's post-merger results exceeded expectations

Deposits climb 30% to 21.72 trillion while advances grow 58% to 23.54 trillion.

Mumbai: On the strength of stronger other income and lesser provisions, HDFC Bank Ltd. on Monday announced a 51% increase in profit for the September quarter, exceeding analysts' projections.

The largest private lender in India reported its first quarterly earnings on July 1 following the completion of a $40 billion mega-merger with its parent company, Housing Development Finance Corp. Ltd. As a result, direct comparisons to the data from the previous year may present an inaccurate image.

The bank's net profit increased from 10 605 crore to 15 976 crore in the three months that ended on September 30. In a Bloomberg survey, analysts had predicted revenue of 14,120 crore, but this was higher.

The bank's net interest margin (NIM) decreased from 4.1% at the end of the previous quarter to 3.6% at the end of September, as predicted by management in a call with investors in September. The management did not, however, provide a timeline for when the bank anticipates achieving 3.7–3.8% pro-forma merged NIM.

"We had indicated going into the acquisition that there was a build-up of liquidity to tide over the merger management, and 25-30 bps influence on margin is coming from there," added Srinivasan Vaidyanathan, chief financial officer of HDFC Bank. "Our profit margin was 4%. Now, the cost of borrowing is more than the cost of deposit when you have a balance sheet that is partially backed by debt. Deposits will eventually take the place of borrowing. The margin will then begin to increase, he continued.

The bank's core income increased from 21,021 crore a year earlier to 27,385 crore in the quarter that ended on September 30 by a factor of 30%.

At the conclusion of the September quarter, advances had increased by 58% to 23.54 trillion yen. The combined book of HDFC was a major factor in the increases in advances. At 30 September, deposits had increased by 30% to 21.72 trillion yen. Vaidyanathan expressed his confidence in the bank's ability to maintain its emphasis on bringing in 1 trillion in new deposits every three months. As of September 30, the current and savings account (Casa) ratio decreased to 37.6% of all deposits, down from 42.5% the previous quarter.

At the end of September, other income, which includes income from fees and commissions, was 10,708 crore, up from 7,596 crore during the same time last year.

At the end of September, it had gross non-performing assets of $31.57 trillion, up from $18.3 trillion in the same period last year. Gross NPAs were 1.34% of total assets at the end of September, up from 1.17% at the end of June. As of September 30, net non-performing assets as a proportion of total assets were 0.35 percent, up from 0.3% in the June quarter.

According to the management, the bank's wholesale loan book of HDFC Ltd. totaled 5,000 crore in the second quarter, which is what caused the surge in NPAs.

The former HDFC non-individual book, which is still active and performing, accounts for over 22 bps of the 1.34% gross NPA. The fact that it has been reformed and is now NPA, according to RBI regulations, said Vaidyanathan.

At the conclusion of the September quarter, there were 2,903 crores in total provisions, down from 3,240 crores in the same period last year.

Shares of HDFC Bank decreased 0.4% to 1,529.5 on Monday.