HDFC Bank on October 15 reported healthy second-quarter earnings with double-digit growth in the bottom line on strong growth in loans and improvement in asset quality.
Here are the top five takeaways from the private lender's Q2FY23 earnings:
1 Strong net profit
The bank’s standalone profit after tax grew by 20.1 percent year-on-year to Rs 10,605.8 crore in the July-September quarter, up from Rs 8,834.3 crore in the same quarter of the previous financial year.
The profit growth was higher than estimates. Analysts were expecting a 16 percent increase in net profit for the fiscal second quarter.
Net interest income (NII), or the difference between interest earned and interest expended, rose nearly 19 percent year-on-year to Rs 21,021.2 crore in the reporting quarter from Rs 17,684.4 crore last year.
Kotak Institutional Equities expected an NII growth of 17 percent YoY for the quarter. Core net interest margin was at 4.1 percent on total assets, and 4.3 percent based on interest-earning assets.
2 Robust credit growth
HDFC Bank’s total advances as of September 30, 2022 were Rs 14.4 lakh crore, an increase of 23.4 percent over the previous year. The balance sheet size was Rs 22.3 lakh crore as against Rs 18.4 lakh crore in the year-ago period year, registering a growth of nearly 21 percent.
Growth in advances came across segments. Domestic retail loans grew by 21.4 percent, commercial and rural banking loans grew by 31.3 percent and corporate and other wholesale loans grew by 27 percent. Overseas advances constituted 3.1 percent of total advances.
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3 Upbeat deposit growth
The lender's total deposits showed healthy growth and were at Rs 16.73 lakh crore as of September-end, a 19 percent YoY increase. The growth in deposits comes at a time when banks are struggling to mobilise deposits amid a fast-tightening of liquidity surplus and to protect their margins.
Current Account Savings Account (CASA) deposits grew by 15.4 percent, with savings account deposits at Rs 5.30 lakh crore and current account deposits at Rs 2.3 lakh crore.
4 Improved asset quality
The asset quality of the lender improved during the second quarter of the financial year 2022-23. Gross non-performing assets (NPAs) were at 1.23 percent of gross advances as on September 30, 2022, as against 1.35 percent as on September 30, 2021. Net non-performing assets were at 0.33 percent of net advances as on September 30, 2022.
Provisions and contingencies for bad loans also dropped to Rs 3,240.1 crore as against Rs 3,924.7 crore in the same quarter of the previous financial year.
5 Healthy capital ratios
The bank’s Capital Adequacy Ratio (CAR) as per Basel III guidelines was at 18 percent at the end of September against a regulatory requirement of 11.7 percent. Tier 1 CAR was at 17.1 percent compared to 18.7 percent last year. Common Equity Tier 1 capital ratio was at 16.3 percent as of September 30. Risk-weighted assets were at Rs 14.78 lakh crore.
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