HDFC Bank Q1 profit dips 6.5% sequentially on higher tax outgo, lower other income

The country's largest private lender HDFC Bank on Saturday reported a 6.51 per cent decline in its consolidated net profit to Rs 16,474.85 crore in the April-June quarter compared to the previous January-March quarter.

The city-headquartered lender, which merged its mortgage major parent HDFC into itself in July last year, had reported a net profit of Rs 17,622.38 crore in the March quarter.

On a standalone basis, the net profit declined to Rs 16,174.75 crore in April-June 2024-25 from Rs 16,511.85 crore in January-March 2023-24.

The bank reported a consolidated net profit of Rs 12,370.38 crore in the June quarter of 2023-24.

On year-over-year basis, net profit rose by 33 per cent.

Its core net interest income rose by 2.6 per cent to Rs 29,840 crore on the back of a marginal uptick in the net interest margin to 3.47 per cent from 3.44 per cent, and a marginal reduction in the loan book.

The non-interest income declined 41.3 per cent to Rs 10,670 crore for the reporting quarter, as against the Rs 18,170 crore in the January-March period.

The other income was impacted by a decline in fee income and also in the trading and mark to market lines.

At a time when the system is facing challenges on the deposit accretion front, the bank's average deposits during the quarter were up 4.6 per cent sequentially, and its executive director Srinavasa Rangan said the same was driven by its over 8,800 branches.

The bank will not resort to pricing as a strategy to attract deposits, he said, pointing out that the current account balances dipped sequentially as the businesses started to spend the high amounts deposited in the preceding quarter.

On the front of the advances, retail now constitutes 56 per cent share in the overall loanbook while wholesale is the remaining one, he said, pointing to some challenges faced in the latter.

He said the demand is good on the wholesale side, but the spread that the bank is able to make a very thin spread on it due to factors including competitive pressures.

As a result of this, it has ended up taking smaller volumes of the demand and this has led to a dip in the overall wholesale book by 5.3 per cent, he said.

On the retail front, the bank is exercising caution on the unsecured book, he said, adding that the credit card and personal loan exposures are holding up well from an asset quality perspective for the bank.

At present, the unsecured exposures are growing at a rate of 10 per cent annualised, he said.

From an asset quality perspective, the gross slippages came at Rs 7,900 crore, and the overall gross non-performing assets ratio increased marginally to 1.33 per cent from 1.24 per cent.

The overall provisions reduced sizeably to Rs 2,602 crore from the Rs 13,511 crore in the quarter-ago period, where it had decided to set aside floating provisions of over Rs 10,000 crore courtesy a stake sale in the education loan arm.

The tax expenses for the quarter stood at Rs 5,107 crore as against a write-back of Rs 749 crore in the quarter-ago period, which was one of the major reasons for the decline in the overall profit.

To a question on selling off loan portfolios, Rangan said the credit deposit ratio of the lender is stable at 104 per cent and the bank did sell Rs 5,000 crore of mortgage portfolio in the June quarter.

The securitisation was done more as a signal to the market of what is planned to be undertaken as a routine activity, he said, maintaining that the bank does not have any targets on the same.

The bank's overall capital adequacy stood at a comfortable 19.33 per cent as on June 30, 2024.

Its board decided to go ahead with the initial public offering of its in-house non-bank lender HDB Financial Services, and Rangan said the bank will get to executing the decisions now before the deadline of September 2025.

The bank is also open for non-IPO related transactions on stake sale, he said, adding that there is nothing particular to disclose at this point of time on it.

Among the subsidiaries, HDB Financial Services' profit grew 2.6 per cent over-year to Rs 570 crore during the quarter, HDFC Life's bottomline had a 15 per cent growth at Rs 480 crore while HDFC Ergo's dipped to Rs 130 crore from Rs 200 crore.