India's HDFC Bank reports 5% rise in Q1 profit, meeting estimates

MUMBAI: India’s largest private lender HDFC Bank reported a 5% rise in first-quarter profit on Saturday, broadly meeting analyst estimates, on a pick-up in consumer lending and lower provisions for bad loans.

The Mumbai-based bank reported a standalone net profit of 190.60 billion Indian rupees ($1.98 billion) for the quarter ended June 30, compared with 181.5 billion rupees a year earlier. Analysts had forecast earnings of 191.9 billion rupees, according to data compiled by LSEG.

The bank, which has been under investors’ lens since part-time chair Atanu Chakraborty resigned in March citing ethical differences, completed a legal review of the matter that found no evidence to support the concerns raised by Chakraborty.

The bank is yet to make an application for reappointing CEO Sashidhar Jagdishan but appointed former bureaucrat Rajiv Kumar chairman last month.

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Loan growth pickup

Indian banks have seen a pickup in loan growth since April, with demand for personal credit and loans against gold rising.

Small businesses have also stepped up borrowing, in part backed by government default guarantees made available amid disruptions caused by the Iran war.

HDFC Bank’s advances were up 15.4% from a year earlier at end-June, driven primarily by retail loans that include mortgages and personal debt. Total deposits rose 13.3% and net interest income – the gap between interest earned on loans and interest paid on deposits, an important measure of profitability – rose 6.7% to 335.3 billion rupees.

The net interest margin was stable at 3.26% but remained below the 4% level seen before the bank merged with its parent HDFC in 2023.

Analysts have watched for an improvement in margins as an indicator of the success of the $40 billion merger.

Gross non-performing loans as a share of total loans edged up to 1.17% from 1.15% in the previous quarter. Provisions and contingencies fell 78% year-on-year to 30.6 billion rupees.

Other income from treasury operations and fee income fell 41% quarter-on-quarter to 128.21 billion rupees as rising bond yields and the Indian central bank’s curbs on forex options hurt banks’ treasury income.