Private sector lender HDFC Bank on January 16 announced its quarterly earnings for the October-December period of 2020. It was the first company among banks to release quarterly results.
HDFC Bank shares surged 33 percent during the December quarter of 2020, thereby underperforming the Bank Nifty that gained 46 percent during the same period. However, the stock rose 13 percent in the year 2020, thus displaying a much better performance than Bank Nifty, that corrected 2.8 percent during the said period.
Here are 10 key highlights of earnings:
After providing Rs 3,013.6 crore for taxation, the bank earned a net profit of Rs 8,758.3 crore for the quarter ended December 2020, an increase of 18.1 percent over the quarter ended December 2019. The CNBC-TV18 poll had estimated a profit of Rs 8,264.8 crore.
Net Interest Income
Net interest income - interest earned less interest expended - for the quarter ended December 2020 grew by 15.1 percent to Rs 16,317.6 crore from Rs 14,172.9 crore in the corresponding period, driven by advances growth of 15.6 percent, and a core net interest margin for the quarter of 4.2 percent. The bank's persistent focus on deposits helped in the maintenance of a healthy liquidity coverage ratio at 146 percent, well above the regulatory requirement.
Total advances as of December 2020 were Rs 10.82 lakh crore, an increase of 15.6 percent over December 2019. Domestic advances grew by 14.9 percent over December 2019. As per regulatory [Basel 2] segment classification, domestic retail loans grew by 5.2 percent and domestic wholesale loans grew by 25.5 percent, the bank said.
Total deposits as of December 2020 were Rs 12.71 lakh crore, an increase of 19.1 percent over December 2019. CASA deposits grew by 29.6 percent with savings account deposits at Rs 3,74,639 crore and current account deposits at Rs 172,108 crore, said the bank, adding time deposits were at Rs 7,24,377 crore, an increase of 12.2 percent over the corresponding period, resulting in CASA deposits comprising 43.0 percent of total deposits as of December 2020.
Other income or non-interest income was Rs 7,443.2 crore at 31.3 percent of the net revenues for the quarter ended December 2020 as against Rs 6,669.3 crore in the corresponding quarter.
The four components of other income for the quarter ended December 2020 were fees & commissions of Rs 4,974.9 crore (up 9.9 percent over the corresponding period), foreign exchange & derivatives revenue of Rs 562.2 crore (up 7 percent over the corresponding period), gain on sale/revaluation of investments of Rs 1,109.0 crore (up 17.9 percent over the corresponding period) and miscellaneous income, including recoveries, of Rs 7,97.1 crore (down 15.2 percent compared with the corresponding period), HDFC Bank said.
Pre-Provision Operating Profit
The pre-provision operating profit (PPOP) at Rs 15,186.0 crore in Q3FY21 grew by 17.3 percent over the corresponding quarter of the previous year.
"The cost-to-income ratio for December quarter 2020 was at 36.1 percent as against 37.9 percent in the corresponding period," HDFC Bank said.
The total credit cost ratio was at 1.25 percent, as compared to 1.41 percent in the quarter ending September 2020 and 1.29 percent in the quarter ending December 2019, it added.
Provisions and contingencies for the quarter ended December 2020 were Rs 3,414.1 crore (consisting of specific loan loss provisions of Rs 691.2 crore and general and other provisions of Rs 2,722.9 crore) as against Rs 3,043.6 crore (consisting of specific loan loss provisions of Rs 2,883.6 crore and general and other provisions of Rs 159.9 crore) for the quarter ended December 2019.
Total provisions for the current quarter included contingent provisions of approximately Rs 2,400 crore for proforma NPA, said the bank.
The gross and net non-performing assets were at 0.81 percent of gross advances and 0.09 percent of net advances as of December 2020 respectively, against 1.08 percent and 0.17 percent in the corresponding period.
The restructuring under the RBI resolution framework for COVID-19 was approximately 0.5 percent of advances, said the bank.
The Supreme Court directed banks that accounts that were not declared NPA till August 2020 shall not be declared NPA until further orders. However, "if the Bank had classified borrower accounts as NPA after August 2020 using its analytical models (proforma approach), the proforma gross NPA ratio would have been 1.38 percent as on December 2020, as against 1.37 percent as on September 2020 and 1.42 percent as on December 2019. The proforma net NPA ratio would have been 0.40 percent," said HDFC Bank.
The bank further said it continued to hold provisions as of December 2020 against the potential impact of COVID-19 based on the information available at this point in time and the same are in excess of the RBI prescribed norms.
The bank held floating provisions of Rs 1,451 crore and contingent provisions of Rs 8,656 crore as of December 2020, it added.
Capital Adequacy Ratio
The bank's total capital adequacy ratio (CAR) as per Basel III guidelines was at 18.9 percent as of December 2020 (18.5 percent as of December 2019) as against a regulatory requirement of 11.075 percent, HDFC Bank said.
Tier 1 CAR was at 17.6 percent as of December 2020 compared to 17.1 percent as of December 2019, it added.
As of December 2020, the bank's distribution network was at 5,485 branches and 15,541 ATMs/cash deposit & withdrawal machines across 2,866 cities-towns as against 5,203 branches and 14,533 ATMs / CDMs across 2,787 cities-towns as of December 2019.
"50 percent of our branches are in semi-urban and rural areas. The number of employees was at 1,17,560 as of December 2020 as against 1,13,981 as of December 2019," the bank said.