Mumbai: The second largest private sector lender HDFC Bank continued to witness a jump in provisions for bad assets for the second consecutive quarter, but healthy increase in both interest and non-interest incomes saw its June quarter profit rising 20.7 percent to Rs 2,695 crore.
The bank Tuesday said its core net interest income rose 23.5 percent to Rs 6,389 crore, while the non-interest component was up 33 percent at Rs 2,462 crore on a five-fold jump in sale of investments.
Total income rose by 26.3 percent to Rs 16,503 crore.
However, the jump in provisions to Rs 728 crore as against Rs 482 crore in the year-ago period restricted the bottom-line growth, the bank said.
The provisions for the quarter included Rs 557.5 crore for specific loan losses, general provisions of Rs 96 crore, floating provisions of Rs 65 crore and other provisions of Rs 9.5 crore, the bank said in a release.
"Provisions have gone up but a large portion of those are floating provisions .. Specific provisions have not gone up. Major increase came in the floating provisions which are not specific to any strain in the portfolio," managing director and chief executive Aditya Puri told reporters here this evening on the sidelines of the AGM of the bank.
"The bank is not showing any signs of stress. The marginal difference in NPAs will happen quarter to quarter depending upon some account goes in one quarter or another," Puri added.
"Are you asking us is there a strain and we see it continuing? The answer is no!" Puri said in reply to a question.
The bank witnessed a decrease in the gross non performing assets ratio at 0.95 percent as against the 1.07 percent in the year-ago period.
Puri said there has been a slowdown in the corporate credit growth, but attributed this to the sluggish economic growth and added that things are looking up for the economy.
"What is positive is that we are at the cusp and I think we are going to see an uptick in GDP growth. The government has started spending, the road projects are moving, the power projects are moving, mines have started, state-run enterprises are going to invest in projects," he said, expecting growth to accelerate to up to 7.8 percent this year from 7.3 percent last year.
On interest rates, Puri said borrowers should expect another cut of up to 0.75 percent by the year end.
He said banks are flush with liquidity and are investing the excess in money market instruments like commercial paper.
The bank scrip shed 1.52 percent to close at Rs 1,098.60 on the BSE, as against a 0.84 percent correction in the benchmark Sensex.
Puri also said the overall interest rate environment is on a downward trend on data on inflation and benign commodity prices only strengthen the view.
The bank did not do any sale of bad loans to an asset reconstruction companies this quarter, Puri said.
Without mentioning the exact amount, he said the slippages came from the small business and farm sectors, but added this is well within comfort zone.
Meanwhile, equity analysts described the HDFC bank numbers as broadly in line with their expectations.
Banking analyst at Kotak Securities Saday Sinha said the numbers are largely in line with our expectations. Healthy NII growth was aided by strong 22.4 percent loan growth and stable NIM at 4.3 percent.
"However, PAT was marginally below our view on due to higher provisions despite robust treasury gains. The bank had to make higher provisions as last year its base provision was low. The Rs 65 crore towards floating provisions resulted in higher overall provisions despite asset quality being good," Sinha said and maintained a 'retain' call on the stock.
Describing the numbers as per expectations Angel Broking's Vaibhav Agrawal also gave a thumps up to the world's most pricely stock with a call to 'accumulate' the scrips.
Meanwhile, addressing shareholders at the AGM, Puri said the exposure to Reliance Industries is within the limits prescribed by the RBI.
He also said there are no plans to get into the re-insurance business and the bank is content doing its core job of lending.
Puri also stressed that with 60 percent of the total 4,114 branches in the semi-urban and rural areas, it was a good decision to go into such areas and added that the bank looks at these both from the advances and liabilities perspective.
With other banks like IDFC Bank and Bandhan Bank inching closer to launch, Puri said competition is poaching from the bank but added that its attrition levels are lower than the industry average.
On the bank missing the run rate of 30 percent growth in profits for multiple quarter, he said the bank is neither old nor has any fatigue set-in.
It can be noted that at earlier occasions, he had said that the growth in the net profits is a function of the economic growth.
