HDFC Bank Q1 net profit rises 20%, despite increasing bad loans

The second largest private lender, HDFC Bank, on Monday, posted highest net profit growth in last four quarters, even after the lenders asset quality deteriorated.

The bank's net profit rose 20.2 percent to Rs 3,894 crore for the quarter ended June from Rs 3,238 crore same quarter last year, according to the National Stock Exchange (NSE) filing.

Total income earned rose 14.81 percent from Rs 22,185.3 crore to Rs 19,322.63 crore in the sorresponding quarter last year.

Net interest income (NIM) rose 20.4 percent to Rs 9,370.74 crore from Rs 7,781.44 crore last year. Loan advances grew more than 23 percent to Rs 5,80,976 crore. 

Lender asset quality worsened primarily due to increase in non-performing assets. Gross non-performing assets (NPAs) rose to 23.1 percent to Rs 7,243 crore on a quarter-on-quarter basis from Rs 5,885.66 crore in the same quarter last year. 

HDFC Bank attributed the sickening of its asset quality to lower recoveries from agricultural loans due to farm loan waivers announced by few state governments. "Recoveries from agricultural advances were impacted during the quarter by borrower expectations of farm loan waivers arising out of policy announcement in certain states," HDFC Bank said in exchange filing.

The bank further explained in the filing that 60 percent of the increase in gross NPAs were from to the agricultural segment.

Provisioning, or the money set aside for anticipated future losses, climbed 23.5 percent to Rs 1,558.76 crore in the quarter from Rs 1,261.80 crore in last quarter. On year-on-year basis, it surged by 79.84 percent from Rs 866.73 crore to Rs 1,158.76 crore.

Economic times reported brokerage house KR Choksey saying, "We expect HDFC Bank to maintain its quarterly growth rate of 4-5 per cent. NIM and cost/income are expected to hold steady while credit costs may be slightly higher on account of newly recognized stress. However, we expect the bank to continue to outperform industry peers."

At 12:55 pm, HDFC Bank shares were trading at Rs 1,731.00 on BSE, up as much as 1.6 percent after the announcement of the results.