HDFC Bank posts Rs 17,258 cr net profit for Q3; sets aside Rs 1,200 cr on AIF exposure

HDFC Bank posts Rs 17,258 cr net profit for Q3; sets aside Rs 1,200 cr on AIF exposure

Mumbai | HDFC Bank on Tuesday reported a 2.65 per cent rise in consolidated net profit of Rs 17,258 crore for the October-December period against Rs 16,811 crore in the preceding September quarter.

The largest private sector lender, which merged mortgage lender parent HDFC into itself in July, reported a net profit of Rs 16,372 crore against Rs 15,976 crore in the quarter-ago period on a standalone basis.

Its core net interest income grew to Rs 28,470 crore during the quarter, while the other income stood at Rs 11,140 crore, according to exchange filings.

Its chief financial officer Srinivasan Vaidyanathan said that the net interest margin was maintained at 3.4 per cent at the overall level, but did not directly answer a question on whether the lender, which publicly expressed concerns on margins after the merger, considers this level as the lowest that the number can reach to.

It has registered a nearly 5 per cent growth in advances led by retail, small businesses and retail, while the deposit growth trailed at 1.9 per cent, the CFO said.

On the asset quality front, it registered an improvement in the gross non-performing assets ratio at 1.26 per cent against 1.34 per cent in the quarter-ago period, he said, adding that the gross slippages fell down to Rs 7,000 crore from Rs 7,800 crore in the quarter-ago period.

The overall provisions came at Rs 4,217 crore on a standalone basis compared to Rs 2,904 crore in the quarter-ago period. Provisions for the reporting quarter included a Rs 1,200 crore hit taken on the entire exposure to the alternate investment funds (AIFs) segment, where RBI has tightened the norms due to fears of it being used for evergreening of loans.

Vaidyanathan said the provision has been taken as a prudent measure despite the bank feeling that the "fair value" of the book at Rs 500 crore, and has been ahead of the January 18 deadline set by the regulator.

He said the bank has done a lot of balancing after executing the merger and is hopeful of a better business momentum as an integrated entity in FY25, which he termed as an "important year for growth" for the bank, which aspires to double in size in four years.

The bank is more hopeful of the momentum on deposits and the advances front, and it will look to grow more on the retail loans, which currently constitute 54 per cent of the Rs 24.69 lakh crore of assets.

In a first, the bank spelt out the potential possibilities to grow on the mortgage business, wherein it has identified 56 lakh customers servicing loans from other lenders, of which 17 lakh will be targeted for transferring their balances.

The bank will also be looking to get other loans, Vaidyanathan said, adding that typically, a borrower keeps over 2 EMIs worth of money in a savings account, which helps a lender get sufficient float as sticky deposits.

During the quarter, the bank has reduced its reliance on bulk deposits by over Rs 11,100 crore, Vaidyanathan said, hinting that the high-cost deposits have been shed.

The wholesale book grew by only 1.9 per cent during the reporting quarter on a sequential basis, and the growth was impacted by "competitive" play by some state-run lenders, who are managing to secure a bigger market share, he said.

HDFC Bank follows certain pricing parameters to price the risk that it is taking and is happy to leave the lending business to the aggressive competition, he said, adding that it seeks to maintain every such relationship by tapping into other business opportunities from the same entity.

The bank is witnessing some conversations over private capital expenditure, Vaidyanathan said, adding that it will take up to 3 quarters more for the exact picture to be clear.

The private lender, which had 8,091 branches as of December 2023, wants to grow the network to over 13,000 branches in the next five years, the CFO said, adding that it will add 1,000 branches in the next year alone.

Amid the regulatory concerns on unsecured lending, the bank's growth in personal loans and credit cards has been much lower than the system, he said, adding that the RBI move on risk weights has impacted the overall capital position by nearly 1 percentage point.

As of December 31, the overall capital adequacy at the bank was 18.4 per cent.

Among the subsidiaries, HDB Financial Services witnessed a 27 per cent growth in net profit to Rs 640 crore, the life insurance arm's net grew by nearly 16 per cent to Rs 370 crore and the general insurance company reported a 6.2 per cent increase to Rs 130 crore.

Underlining that the bank has time till September 2025 to list HDB Financial Services, the in-house non-bank finance company, Vaidyanathan said preparatory work on the IPO will begin shortly.

The bank has also sold a substantial stake in Bandhan Bank held by HDFC, Vaidyanathan said, adding that "no material stake" is held now. The stake sale happened over a period of time and was executed by the treasury.

HDFC Bank scrip closed 0.42 per cent up at Rs 1,678.95 apiece on the BSE on Tuesday against a 0.27 per cent correction on the benchmark.

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