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HDFC Bank posts decent earnings in Q4 despite higher provisions; key highlights from analysts call

In corporate loan, over 80 percent of the disbursal during the quarter was for the tenor less than 1 year.

April 20, 2020 / 11:31 AM IST
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HDFC Bank on April 18 reported a 17.72 percent year-on-year growth in profit at Rs 6,927.69 crore for the quarter ended March 2020 and net interest income rose 16 percent compared to the same period last year.

Advances during the quarter grew by 21.2 percent to Rs 9.93 lakh crore, while deposits rose by 24.2 percent YoY to Rs 11.46 lakh crore.

Bank said it held provisions as on March 2020 against the potential impact of COVID-19 and the same are in excess of RBI prescribed norms. As a result, gross NPA and net NPA ratios were lower by 10 bps (16bp QoQ) and 6 bps (12bp QoQ) YoY to 1.26 percent and 0.36 percent respectively.

Also Read: HDFC Bank Q4: Good show, but the COVID-19 shock is likely to weigh heavily beginning June quarter

Here are the highlights of HDFC Bank's earnings conference call as compiled by Narnolia Financial Advisors:


Management Participant: Srinivasan Vaidyanathan - CFO

Excess Liquidity impacted 10 bps NIM for the quarter.

93 percent of the fee income is from retail. Around Rs 350 crore of the fee income was lower due to lockdown impact.

Total provision included credit reserves relating to COVID-19 in the form of contingent provisions of Rs 1,550 crore. This provision is ascertained after the stress test scenario in the current situation. Contingent provisions and floating provisions in the balance sheet is Rs 4,400 crore built over the period of time. The management feels the bank has enough provisions in balance sheet in case the lockdown extends.

As a result of RBI circular dated March 27 and April 17, GNPA, NNPA and slippages were lower by 10 bps, 6 bps and 40 bps respectively. Annualised slippage for the quarter was 1.2 percent versus 1.7 percent QoQ.

Strong corporate loan growth was led by corporates desire to keep liquidity post lockdown. Bank focused on disbursement to the businesses that have strong access to the liquidity through public market (debt or equity) or have govenment or PE ownership. Saw growth in power and power infrastructure, agriculture and allied activity, material, energy, discretionary consumer etc.

Also Read: What should investors do with HDFC Bank stock post Q4: buy, sell or hold?

Corporate loan: Top 20 disbursal by value during the quarter- 41.9 percent was towards working capital requirement, 23.6 percent was capital expenditure, 15.5 percent was towards acquisition of balance sheet items including in the NCLT process, 9.3 percent was for lending towards PSL purpose and balance for other purposes including building liquidity buffer.

Corporate Loan: Over 80 percent of the disbursal during the quarter was for the tenure of less than 1 year.

80 percent of the unsecured portfolio is towards salaried individual and rest is self-employed. Two-thirds of the salaried belongs to a very well entity like AAA rated, Government employee, MNC etc. Observed delinquency in the remaining 1/3rd of the portfolio is only 9 bps more than the former one.

77 percent of the SME portfolio is collateralised by real estate property.

Strong stress test scenario- 9 percent of the SME portfolio is vulnerable and would find difficulty in obligation. But this strong stress test doesn’t build any moratorium and concession given by the regulatory.

Low single-digit customers have applied for the moratorium. In retail 95-98 percent of the customer was not in default in the time of moratorium application. According to the survey by HDFC BANK, the moratorium is taken only for cautious approach by the customer rather than stress.

The retail advance growth is expected to be slower during the next couple of quarters and wholesale advances are expected to perform well.

Credit card spends were lower by 21 percent in March compared to the average of January and February month.

In full year FY19-20, the bank acquired 6.3 million new liability relationships, growth of 44 percent over the previous year.
Moneycontrol News
first published: Apr 20, 2020 11:31 am

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