HDFC Bank Q3 results: Key takeaways on earnings, credit growth and asset quality

HDFC Bank, India’s most valued lender, reported strong earnings growth for the third quarter thanks to an increase in advances and a decline in provisions for possible bad loans.

HDFC Bank’s standalone net profit rose 18.1% to Rs 10,342.2 crore for the three months ended Dec. 31 from Rs 8,758 crore a year earlier. Profit before tax climbed 17.1% to Rs 13,782 crore.

The bank’s net interest margins stayed at 4.1%, which took away some sheen off the bottom line.

Net interest income—interest earned less interest expended—for the quarter ended Dec. 31 grew 13% to Rs 18,443.5 crore from Rs 16,317.6 crore for the quarter ended December 31, 2020.

HDFC Bank: Balance Sheet

As of December 31, the bank’s total balance sheet size was Rs 1,938,286 crore as against Rs 1,654,228 crore a year earlier, a growth of 17.2%.

Total deposits increased 13.8% to Rs 1,445,918 crore while the low-cost current and saving account (CASA) deposits grew 24.6%. CASA deposits comprised 47.1% of total deposits as of Dec. 31.

The lender said that its continued focus on deposits helped maintain a healthy liquidity coverage ratio of 123%, well above the regulatory requirement, which positions the bank favourably to capitalise on growth opportunities.

Total advances increased 16.5% from a year earlier Rs 1,260,863 crore. This compares with the 15.5% growth in the second quarter ended Sept. 30, 2021.

Retail loans during the third quarter grew by 13.3%, commercial and rural banking loans increased by 29.4%, and corporate and other wholesale loans grew by 7.5%. Overseas advances constituted 3.4% of total advances.

The bank said that advances touched new heights thanks to its strong relationship management, digital offering and breadth of products.

HDFC Bank: Asset quality

The bank’s gross non-performing assets (GNPA) was at 1.26% of gross advances as on December 31, 2021, as against 1.35% as on September 30, 2021 and 1.38% (Proforma approach) as on December 31, 2020.

Net non-performing assets were at 0.37% of net advances as on December 31, 2021.

Provisions and contingencies fell from Rs 3,414.1 crore to Rs 2,994.0 crore, consisting of specific loan-loss provisions of Rs 1,820.6 crore and general and other provisions of Rs 1,173.4 crore.

The bank’s total Capital Adequacy Ratio (CAR) was at 19.5% as on Dec. 31, 2021, up from 18.9% a year earlier and far above the regulatory requirement of 11.7%. Tier 1 CAR was at 18.4%, compared with 17.6% a year earlier.