HDFC Bank dips 3% as June quarter results miss Street estimates

Shares of HDFC Bank declined 3 per cent to Rs 1,475 on the BSE in intra-day trade on Monday after the lender reported lower than expected performance for the quarter ended June (Q1FY22). The bank posted a 16.1 per cent jump in Q1 net profit to Rs 7,729.6 crore as the bank’s asset quality deteriorated and provisions increased. The country’s largest private-sector lender's profit stood at Rs 6,659 crore in the same period last year (Q1FY21).

The net interest income (NII) of the lender rose 8.57 per cent year-on-year (YoY) in Q1FY21 to Rs 17,009 crore, driven by growth in advances at 14.4 per cent and a net interest margin of 4.1 per cent. In the same period, the other income of the lender was up 54.3 per cent YoY at Rs 6,228.5 crore. HDFC Bank posted a moderate operating performance due to a fall in net interest margins (NIMs) by 10 basis points (bps) quarter-on-quarter (QoQ) to 4.1 per cent.

The asset quality of the bank deteriorated slightly at the end of the June quarter. Gross non-performing assets (NPAs) of the bank stood at 1.47 per cent as opposed to gross NPAs of 1.32 per cent at the end of the March quarter and 1.36 per cent as of June 30, 2020. Net NPAs of the bank stood at 0.48 per cent of the advances portfolio.

"The cost to income ratio (C/I) ratio came down to 35 per cent from 37.2 per cent QoQ due to low business activity. Provisions were elevated at Rs 4,830 crore. As a result, profit after tax was slightly below estimate. The bank currently holds floating provisions worth Rs 1,451 crore and contingent provisions of Rs 6,596 crore. Loan growth moderated sequentially at 1.3 per cent to Rs 11.47 trillion while deposit accretion was decent at 13.2 per cent YoY to Rs 1.34 trillion," ICICI Securities said in a note.

HDFC Bank continues to deliver better growth in advances, led by healthy trends in Commercial and Rural Banking loans. The bank’s operating performance remains broadly in line, though the margin has been under pressure owing to continued embargoes, Motilal Oswal Financial Services said in a result update.

The brokerage further said the asset quality has deteriorated marginally due to disruptions in collections on account of the second Covid wave. The bank continues to make additional contingent provisions to further strengthen its balance sheet. Total restructured book increased to 0.8 per cent of loans (versus 0.6 per cent of loans), however, overall stress formation remains under control. Lifting of restrictions by Reserve Bank of India (RBI) remains a key monitorable in the near term, it said.