Updated: July 18, 2021 12:47:01 am
Amid disruptions due to the second wave of the pandemic, the nation’s largest private lender HDFC Bank on Saturday registered lower than estimated net profit of Rs 7,730 crore during the June quarter as the asset quality of the bank worsened.
Although the net profit of the bank posted a 16.1 per cent year-on-year (y-o-y) growth, the bottomline missed the Rs 7,931-crore consensus estimate by Bloomberg. The net interest income (NII) of the lender, however, grew 9 per cent y-o-y to Rs 17,009 crore, but remained flat sequentially.
The bank has acknowledged that business activities remained curtailed for almost two-thirds of the quarter due to Covid-19, which has led to a decrease in retail loan originations, sale of third-party products, card spends and efficiency in collection efforts.
The lower business volumes, coupled with higher slippages, resulted in lower revenues, as well as an enhanced level of provisioning. Provisions during the quarter rose 24 per cent y-o-y to Rs 4,831 crore, compared with Rs 3,892 crore in the year-ago quarter.
Provisions and contingencies for the quarter included specific loan loss provisions of Rs 4,219.7 crore and other provisions of Rs 611 crore. The core net interest margin (NIM) of the bank declined 10 basis points (bps) sequentially to 4.1 per cent, against 4.2 per cent in the March quarter.
Localised curbs hit results
While performance in the year-ago quarter was severely hit by the national lockdown, the June 2021 quarter was when the bank’s financials were marred by localised curbs. These restrictions led to issues such as rise in customer defaults, fall in sale of third party products, lower collection efficiency, among others.
The asset quality of the lender worsened during the June quarter. Gross non-performing assets (NPAs) ratio of the lender declined 8 bps to 0.48 per cent, compared to gross NPAs of 0.4 per cent in the previous quarter. However, net NPAs ratio improved 5 bps to 0.45 per cent from 0.5 per cent in the March quarter. The total credit cost ratio was 1.67 per cent, compared to 1.64 per cent in the March quarter and 1.54 per cent in the quarter ending June 30, 2020.
The bank said it has restructured loans worth Rs 7,800 crore, under the Reserve Bank of India’s one-time restructuring scheme. This included Rs 5,457 crore worth retail loans, and Rs 1,735 crore worth of corporate loans. It has also restructured loans worth Rs 608 crore to other borrowers under the scheme.
Other income of the bank grew 54.3 per cent y-o-y at Rs 6,288.5 crore. The four components of other income were fees and commissions of Rs 3,885.4 crore, foreign exchange and derivatives revenue of Rs 1,198.7 crore, gain on sale or revaluation of investments of Rs 601.0 crore. Total advances rose 14.4 per cent y-o-y to Rs 11.5 lakh crore, of which retail loans were up 9.3 per cent y-o-y to Rs 4.58 lakh crore.
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