HDFC Bank reported a steady performance for the first quarter, with standalone net profit rising 5 per cent year-on-year to Rs 19,060 crore for the quarter ended June 30, as healthy retail credit growth and a sharp decline in provisions helped offset pressure on lending margins.
Net interest income (NII), a key measure of core banking performance, rose 6.7 per cent year-on-year to Rs 33,530 crore, broadly in line with market expectations.
The results indicate that India’s largest private sector lender continues to navigate a lower interest rate environment while sustaining balance-sheet growth. Although margins remain below pre-merger levels, expanding retail advances and easing credit costs supported profitability during the quarter.
Retail Growth Supports Core Business
Gross advances grew 15.4 per cent year-on-year to Rs 30.61 lakh crore, led by continued demand across retail segments, including home loans and personal lending.
Average daily deposits rose 13.3 per cent year-on-year, while period-end deposits increased 14.7 per cent to Rs 31.71 lakh crore. Credit growth therefore remained slightly ahead of deposit growth during the quarter, although the gap remained narrow.
Net interest margin (NIM) stood at 3.26 per cent. While broadly stable sequentially, it remained below historical levels as lower policy rates continued to weigh on lending yields.
The largely stable margin performance, however, suggests that the bank has so far managed to absorb the immediate impact of lower interest rates on its earnings profile.
Lower Provisions Boost Profitability
A sharp decline in provisions provided a significant boost to quarterly profitability. Provisions for bad loans fell 78 per cent from a year earlier, allowing a larger share of operating income to flow through to the bottom line.
Non-interest income moderated sequentially, reflecting weaker treasury gains amid higher bond yields and the impact of regulatory changes affecting foreign exchange options.
Asset Quality Remains Broadly Stable
Asset quality remained broadly stable during the quarter. The gross non-performing asset (GNPA) ratio edged up to 1.17 per cent, indicating limited stress despite the faster pace of loan growth.
The modest increase suggests that credit costs remain contained even as the bank continues to expand its retail loan portfolio.
Governance Developments In Focus
The results come amid recent governance developments at the lender, including the appointment of Rajiv Kumar as chairman. The reappointment of Managing Director and Chief Executive Officer Sashidhar Jagdishan remains under regulatory consideration.
HDFC Bank’s June-quarter performance points to a business that continues to deliver relatively predictable earnings despite a softer interest rate environment.
Strong loan growth, resilient deposit mobilisation and sharply lower credit costs helped offset pressure on margins, positioning the lender to maintain stable profitability as monetary conditions evolve. |
