Apr 21, 2017 07:32 PM IST

Retail bad loans rise for HDFC Bank in Q4; overall NPAs stable

Even as banks reel from large corporate bad loans, HDFC Bank, the country’s second largest private lender, witnessed an increase in retail bad loans driven by spillovers from the demonetisation period.

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Even as banks reel from large corporate bad loans, HDFC Bank, the country’s second largest private lender, witnessed an increase in retail bad loans driven by spillovers from the demonetisation period.

Announcing its fourth quarter financial results on Friday, the bank posted a 34 percent increase in gross non-performing assets (NPAs) in gross NPAs jumped 34 percent to Rs 5,885 crore from a year ago’s Rs 1,320 crore and 12.5 percent from a quarter ago’s Rs 5,232 crore.

Of the about Rs 600 crore worth of increase in NPAs, Rs 245 crore were the spillovers due to the additional 60/90 day dispensation allowed by the Reserve Bank of India on account of cash crunch during demonetisation. About 70 percent of bad loans have slipped from retail while 30 percent is from the wholesale loans.

Does that reflect a higher level of stress? "Yes, but it is a challenging environment and we cannot be completely inflated from it. There were segments that got impacted, especially in the last quarter due to demonetisation which impacted their earnings…but not out of line of our historic numbers (last 15-year average of ranging about 1 percent)," says Paresh Sukthankar, Deputy Managing Director, HDFC Bank.

He added, “If you look at the overall retail portfolio, we have seen a little bit of increase in delinquencies over the past couple of quarters but they still remain well within not just superior to the industry but also what is priced in. The couple of products which were impacted by demonetisation were the SLI (sustainable livelihood initiative) business, agriculture portfolio and some other segments which had impact on their income levels.

The bank’s retail to wholesale mix stands at 53:47.

The asset quality in the small and medium enterprises (SME) saw some stabilisation during the quarter as compared to the December and September quarter.

Provisions towards bad loans and contingencies during the quarter, rose sharply by over 90 percent during the fourth quarter to Rs 1,262 crore, up from Rs 662 crore in the January-March period last year. It increased by 76 percent from the last quarter.

From the RBI’s directions to make provisions towards standard loans, HDFC bank said it had no divergence from the regulator’s classification and hence did not require additional provisions.

In percentage terms, gross NPAs were at 1.05 percent of gross advances as on March 31, 2017, as against 1.05 percent as on December 31, 2016 and 0.94 percent in March last year.

Sukthankar said, “Relatively we have seen some stabilisation but this is an environment which in its own way is challenging. But overall at 1.05 percent, the asset quality remains healthy and we are very comfortable with that.”

The bank’s overall loans grew by 19 percent with domestic loans growing by 24 percent. Within retail; auto, commercial vehicles, credit cards and personal loans grew over 20 percent. On wholesale, both large segment and emerging corporates grew with a substantial portion of it coming from working capital and short term loans.

Sukthankar said in the near term it is unlikely that policy rates would come down and hence there is not much room to cut lending rates further.

Net profit for HDFC Bank grew 18 percent both for the fourth quarter and full year FY17 at Rs 3,990 crore and Rs 14,549 crore, respectively.

HDFC Bank's shares on Friday closed 2.38 percent higher at Rs 1496.75 per share on Bombay Stock Exchange (BSE).

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