HDFC Bank Q3 Results: Net Profit Rises 2.5%

India's largest private lender HDFC Bank Ltd.'s net profit rose 2.5% sequentially on higher provisions.

Net profit for the quarter stood at Rs 16,373 crore in the October–December period, as compared with Rs 15,976 crore in the previous quarter. Analysts polled by Bloomberg estimated a net profit of Rs 15,763 crore for the quarter.

Figures are not comparable year-on-year as HDFC Bank concluded the merger with Housing Development Finance Corp. in July 2023.

HDFC Bank Q3 Highlights (QoQ)

• Net Profit: Rs 16,373 crore vs Rs 15,976 crore.

• Net interest income: Rs 28,471 crore vs Rs 27,385 crore.

• Gross NPA: 1.26% vs 1.34%.

• Net NPA: 0.31% vs 0.35%.

• Capital adequacy ratio: 18.39% vs 19.54%.

In November, the Reserve Bank of India raised risk weights for certain consumer loans in a bid to curb unsecured lending growth. Higher risk weights typically lead to a fall in capital adequacy as the bank has to set aside additional capital against such loans.

According to the bank, the impact of the risk weight norms on the capital adequacy ratio is at 97 basis points.

Core net interest margin for the bank stood at 3.4% as of Dec. 31, and at 3.6% on an interest earning assets basis. The numbers remained flat sequentially.

The rise in HDFC Bank's bottom-line was weighed down by a significant rise in provisions during the quarter. Provisions rose to Rs 4,216.6 crore in the reporting quarter, up 50% year-on-year. The provision number for the quarter is inclusive of contingent provisions worth Rs 1,212 crore.

The contingent provisions are on account of investments in alternative investment funds, said Srinivasan Vaidyanathan, CFO at HDFC Bank.

Gross advances of the bank rose to Rs 24.7 lakh crore during the reporting quarter, 4.9% higher on a quarterly basis.

The bank currently has 4.8 million pre-qualified customers within its own customer base for mortgage financing. It has also created a list of 1.7 million customers who are eligible for balance transfers within the home loan business, Vaidyanathan said.

HDFC Bank's total deposits were at Rs 22.14 lakh crore, up 2% sequentially.

"We do need granular deposit base. We have focused on retail deposit growth now. Saw Rs 530 billion (Rs 53,000 crore) during the quarter, while non-retail book reduced," Vaidyanathan said.