HDFC, Federal Bank net profit beats market estimates, asset quality stable

Mumbai: The country’s largest private sector lender HDFC Bank on Monday reported Rs 15,976 crore in standalone net profit for second quarter ended September 2023 surpassing market expectations of Rs 14,000 crore. However, it reported a sharp sequential drop in its lending margin and an increase in bad loans for the second quarter as it reported results as a single company for the first time since merging with parent Housing Development Finance Corp (HDFC). The Q2FY24 numbers can not be compared on a QoQ or YoY basis due to the merger with HDFC Ltd coming into effect from July 1, 2023. Another private lender Federal Bank posted its highest ever net profit at Rs 954 crore for Q2FY24, up 11.7 per cent QoQ and 35.5 per cent year on year aided by right product mix.

The Net Interest Income (interest earned less interest expended) for HDFC Bank Q2FY24 stood at Rs 27,385 crore while for Federal Bank it stood at Rs 2,056 crore, showing a 7.2 per cent quarter on quarter growth and 16.7 per cent year on year growth.

Speaking to reporters, HDFC Bank’s chief financial officer Srinivasan Vaidyanathan said that, “The Bank’s net interest margin (NIM) before the merger (for the June quarter) was 4.1 per cent. After absorbing the debt funded cost for additional liquidity and merger management, the reported NIM for the quarter is 3.4 per cent on total assets and 3.6 per cent on interest earning assets.”

The bank's gross non-performing assets ratio or bad loans grew to 1.34 per cent including the impact of Rs 4500-5000 crore in loans restructured from the HDFC loan book. The bank's gross NPA ratio was 1.17 per cent in the fiscal first quarter prior to the merger.

Vaidyanathan said that HDFC Bank would continue to grow the loan book at 5 per cent higher than the system growth.

Net Interest Margin for Federal Bank stood at 3.16 per cent in Q2FY24, up 1bps QoQ but down 14bps YoY, mainly due to the rise in cost of funds. Its Gross NPA was the lowest in the last thirty-four quarters and stood at 2.26 per cent in Q2FY24, down 12bps QoQ / down 2bps YoY on account of improvement in the asset quality.

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