HDFC Bank's Q4 Profit Hits Rs 17,257 Cr; Rs 10,900 Cr Set for Future Provisions

HDFC Bank, India's leading private sector bank, has announced a net profit of Rs 17,257.87 crore for the January-March quarter on a consolidated basis, marking a modest increase of over 2% from the previous quarter. The bank's performance for the fiscal year 2024 has been robust, with a consolidated net profit reaching Rs 64,060 crore. On a standalone basis, the profit for the January-March quarter was reported at Rs 16,511.85 crore, slightly higher than Rs 16,372.54 crore in the October-December quarter.

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In a strategic move in July 2023, HDFC Bank merged with its home loan-focused parent company HDFC, enhancing its financial portfolio and market presence. This merger has been a significant step towards consolidating its position in the banking sector. Additionally, the bank has prudently set aside over Rs 10,900 crore in floating provisions to safeguard against potential future setbacks. This decision comes after a notable Rs 7,340 crore gain from selling its education loan business, Credila, to private equity firms.

Srinivasan Vaidyanathan, HDFC Bank's Chief Financial Officer, emphasized that these floating provisions are made during favorable times and are not indicative of any anticipated events. The bank's core net interest income saw a substantial increase to Rs 29,080 crore for the reported quarter, with other income also growing to Rs 18,170 crore.

Addressing investor concerns regarding net interest margin (NIM), the bank reported a slight improvement of 0.04 percent to 3.44 percent for the quarter. Despite not providing a future outlook on NIM, Vaidyanathan highlighted that past figures ranged between 4-4.4 percent.

The bank witnessed an 18.4 percent growth in deposits on a normalized basis for FY24 and reported over 17 percent loan growth during the same period. This growth includes loans acquired post-merger with HDFC Ltd. The credit-to-deposit ratio stood at 104 percent post-merger, maintaining stability when excluding merger impacts.

Despite regulatory concerns over unsecured loans, HDFC Bank's overall slippages were reported at Rs 7,300 crore for the quarter without any significant increase in unsecured book stress. The gross non-performing assets ratio saw a marginal improvement to 1.24 percent from 1.26 percent in the previous quarter.

Total provisions for the March quarter were Rs 13,510 crore, which included floating provisions and a Rs 1,500 crore ex-gratia for staff. Additionally, there was a release of Rs 1,200 crore on provisions for alternative investment funds investment made in December.

The bank expanded its network by opening nearly 650 branches in the March quarter, bringing its total to 8,738 branches. While no specific outlook for FY25 was provided, Vaidyanathan reiterated the bank's goal to exceed 12,000 branches. The cost-to-income ratio stood at 38 percent but adjusted to 41.3 percent when excluding transaction gains and ex-gratia provisions.

Regarding potential investments, Vaidyanathan addressed speculations about Japanese lender MUFG's interest in acquiring a stake in HDFC Bank's non-banking finance company HDB Financial Services. He confirmed that all options are being explored ahead of the mandatory listing by September 2025 but did not confirm or deny ongoing discussions.

As of March 31, 2024, HDFC Bank reported an overall capital adequacy ratio of 18.8 percent with a tier-I ratio of 16.8 percent. This financial stability underscores HDFC Bank's robust position in India's banking sector as it continues to navigate through evolving market dynamics and regulatory landscapes.