Private sector lender HDFC Bank's first quarter (April – June) earnings did not reflect any inconsistency in its growth numbers. However, the bank shares dropped 3 percent immediately after the result announcement on Wednesday. They closed the day at Rs 663, down more than 2 percent on NSE.
Reason: A marginal rise of 10 basis points in the bank's net non-performing asset ratio, which stood at 0.30 percent as against a static level 0.20 percent recorded for last so many quarters.
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You may call it a flippant reaction or whatsoever, investors discounted one of the banking elites on this crucial deviation. The bank expanded its loan book by more than 21 percent y-o-y to about Rs 2.59 lakh crore. In absolute term, the net NPAs would come around Rs 700 crore.
"Going forward, I do not see it as a trend. It should stabilize at around the current levels of gross and net NPA ratios (1 percent and 0.30 percent)," Paresh Sukthankar, executive director at HDFC Bank told moneycontrol.com in a conference call.
"The rise on net NPAs came from retail and corporate segments equally. Some loans in the commercial vehicle and construction equipments added to it while individual corporate loans from two-three different sectors, contributed as well. In terms of out total book size, NPAs are not significant. Our net interest margin (NIM) should be in the range of 4.1-4.6 range," he.
On being asked to ascertain the impact of RBI's liquidity measures on HDFC Bank, Sukthankar said, the tighter liquidity situation will only affect the lender's bond portfolio especially in two categories available for sales (AFS) and available for trading (AFT). It is mostly deposit funded.
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"Bond yields have risen sharply. In those categories, impact will be booked on mark-to-market (M-to-M) basis. These bonds are roughly about 20-25 percent of our SLR portfolio," said the ED.
HDFC Bank's total deposits stood at Rs 3.03 lakh crore. Currently, the statutory liquidity ratio is at 23 percent as mandated by the RBI. Hence, the bank maintains an investment worth of Rs 69,762 crore (approx.) in the government securities under the SLR obligation. Accordingly, AFS and AFT portfolios come to around Rs 17,440 crore (25 percent).
Sukthankar does not see much of a scope for any base rate reduction as the bank cannot reduce its deposit rates. On lending front, the pace of retail credit expansion will be higher than loans to companies.
"In an election year, we are likely to see some pick-up in domestic consumption. A good monsoon too is a positive trigger for the economy," he concluded.