The country’s largest private sector lender, HDFC Bank, reported a 2.5 per cent growth in its pre-tax profit at Rs 9,174.3 crore in the March quarter as it doubled its provisioning and contingencies in light of the Covid-19 crisis.
It had reported a pre-tax profit of Rs 8,954.38 crore in the same period last financial year (Q4FY19).
However, net profit rose 17.7 per cent to Rs 6,927.7 crore in the quarter ending March 2020 versus Rs 5,885.2 crore in Q4FY19 because of lower tax outgo of Rs 2,246 crore. It was also aided by a healthy growth in net revenues and net interest income (NII).
For the full year (FY20), the bank reported a net profit of Rs 26,257.3 crore, up 24.6 per cent over FY19.
NII grew 16 per cent to Rs 15,204 crore in Q4FY20 compared with Rs 13,089.5 crore, driven by a 21.3 per cent growth in advances and a 24.3 per cent growth in deposits. The bank’s net interest margin (NIM), a measure of profitability, stood at 4.3 per cent in Q4FY20. In Q3FY20, NIM stood at 4.2 per cent.
The bank made higher provisioning in the quarter as it included credit reserves in light of Covid-19 in the form of contingent reserves totalling Rs 1,550 crore.
Hence, the banks’ provisions for the March quarter stood at Rs 3,784.5 crore compared to Rs 1,889.2 crore in Q4FY19. In Q3FY20, it had made Rs 3,043.6 crore of provisions.
“The board of directors has not proposed any final dividend for the year in light of the Reserve Bank of India’s (RBI’s) directive to banks to not make any further dividend payouts until further instructions with a view that banks must conserve capital in an environment of heightened uncertainty caused by Covid19,” the bank said.
The bank’s gross non-performing assets (GNPAs) improved both year-on-year and quarter-on-quarter. Its GNPA stood at 1.26 per cent at the end of March 2020 versus 1.36 per cent in Q4FY19 and 1.42 per cent in Q3FY20. Similarly, the net NPAs improved to 0.36 per cent in Q4FY20 versus 0.39 per cent in Q4FY19. It reported net NPA of 0.48 per cent in Q3FY20.
The lender said it would grant a three-month moratorium on the payment of all installments that are due between March 1 and May 31 to eligible borrowers who are classified as standard, even if overdue, as of February 29. Standard account for a bank is one that has not been classified as NPA. An account turns NPA if interest or principal remains overdue for 90 days.
“For all such accounts where moratorium is granted, the asset classification shall remain standstill during the moratorium period.”
The lender said its provisions for Covid-19 are in excess of the RBI has prescribed. Because of this, the GNPA and net NPA ratios were lower by 10 basis points (bps) and 6 bps, respectively.
The private lender held floating provisions of Rs 1,451 crore and contingent provisions of Rs 2,996 crore at the end of March 2020 and the total provisions were 142 per cent of the GNPAs.
“During the quarter, there was a considerable slowdown in economic activities following the outbreak of Covid19,” HDFC Bank said.
“Furthermore, with the government initiating a lockdown in the latter half of March, and our strict adherence to social distancing, not only did we see an impact on business volume — in terms of loan originations, distribution of third-party products, and payments product activities — but we also could not optimise our collection efforts, as a result of which fee/other income was lower by Rs 450 crore,” the bank said in a release to the stock exchanges.
The bank’s advances grew 21.3 per cent in Q4FY20 to Rs 9.93 trillion at a time when credit growth in the economy has remained muted. Retail advance grew14.6 per cent while wholesale advances grew 29.3 per cent. Retail comprised 51 per cent of the bank’s loan book while wholesale was 49 per cent.
Deposits increased 24.3 per cent to Rs 11.47 trillion. Current account, saving account (CASA) deposits grew 24 per cent with savings deposits at Rs 3.10 trillion and current deposits at 1.74 trillion. Time deposits of the bank were to the tune of Rs 6.62 trillion. CASA deposits made up for 42.2 per cent of the total deposits.
It reported a capital adequacy ratio at 18.5 per cent against a regulatory requirement of 11.07 per cent.