HDFC Bank’s Q2 net jumps 20% on strong loan growth and improved asset quality

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HDFC Bank reported a 20% year-on-year (YoY) increase in net profit for Q2FY23, helped by strong loan growth and improving asset quality.

The bank’s net profit for the quarter was ₹10,606 crore compared to ₹8,834 crore a year ago. Net income for the current quarter increased 15% sequentially.

The country’s largest private sector lender recorded loan growth of 23% in the quarter under review, with total advances of ₹14.8 lakh crore. Including transfers by interbank participation certificates and rediscounted bills, advances increased by 26%.

The strong loan growth was driven by a 21% increase in domestic retail loans, a 31% increase in commercial and rural bank loans and a 27% growth in business and other wholesale loans.

Net interest income for the quarter increased by 19% to ₹21,021 crore. The bank’s base net interest margin was 4 percent.

On a consolidated basis, which includes the results of HDFC Securities and HDB Financial Services, HDFC Bank’s net profit rose 22% year-on-year to ₹11,125 crore. Consolidated advances increased by 23% to ₹15.3 lakh crore.

Asset quality is improving

HDFC Bank’s provisions for the quarter fell 17% year-on-year to ₹3,240 crore, which included loan loss provisions of ₹3,000 crore. The cost of credit ratio was 0.9%, down from 1.3% a year ago.

The bank’s gross NPA ratio improved to 1.23% as of September 30, from 1.28% in the previous quarter and 1.35% a year ago. The net NPA ratio, too, at 0.33%, was better than 0.35% a quarter ago and 0.40% in the corresponding quarter of the previous year.

The lender also saw strong growth in deposits, which rose 19% year-on-year to ₹16.7 lakh crore, driven by a 15% increase in low-cost checking and savings account deposits (CASA ). At ₹5.3 lakh crore, CASA deposits accounted for 45% of total deposits at the end of September.

The bank’s capital adequacy ratio was 18% at September 30, against a regulatory requirement of 11.7%. Tier I capital was 17% and Tier I capital ratio (CET-1) was 16%.

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