HDFC Bank

The Q1FY18 financial performance of HDFC Bank reflects how loan waiver has changed the behavior of the agriculture sector. There was a 60% increase in NPAs from the agriculture sector  and this goes on to reflect the borrowers expectation of farm loan waiver from some states. And worse still, the Bank expects this lack of credit discipline from borrowers to continue. In the current Q1, it earmarked additional Rs.203 crore towards stressed telecom and iron & steel sectors and some more towards the agri sector. Its total provisions for bad loans increased 23.53% (QoQ) and 80% (YoY) to Rs 1,559 crore.

The stock price after the numbers fell as NPA had risen – Gross NPA was up from 1.05% to 1.24% (QoQ) and Net NPA rose 11 bps to 0.44%. But the price recovered once it was clarified that the rise in NPA was mainly on account of the agri sector. Otherwise, overall, it has been a good Q1 show by the Bank, very much on the expected lines.

NII was up 20% at Rs.9,371 core and this was driven by an average loan growth of  21% a core net interest margin for the quarter at 4.4% v/s 4.3% (QoQ). Net profit rose 20% (YoY) to Rs.3,894 crore. A 25% rise in other income aided the growth in net profit.

Advances during the quarter rose 23% (YoY), retail loan grew 22% and wholsesale loans rose 25.5%. Deposits increased 17%. Its CASA grew 26.5% and current account deposits increased 34%.