HDFC Bank Q4 net growth dips to 26%

 

MUMBAI: HDFC Bank reported a net profit of Rs 2,327 crore for the quarter ended March 2014 compared to Rs 1,890 crore in the corresponding quarter last year, recording a growth of 26% — the slowest in over 10 years. The bank attributed the slowdown to a higher tax liability this year compared to the previous year. The country's most valuable private bank also saw growth in high-margin retail loans slowing down due to sluggishness in auto sales and a drop in gold loans.

The bank's total income grew nearly 15% to Rs 12,790 crore from Rs 11,128 crore a year earlier on the back of an over 20% growth in assets. It has recommended a dividend of Rs 6.85 per equity share of Rs 2 for the year ended March 31 as against Rs 5.5 in FY13. For FY14, the bank posted a net profit of Rs 8,478 crore, an increase of 26% from Rs 6,726 crore in FY13.

"Last year, the effective tax rate on the bank was 29% while this year it was around 31%," said HDFC Bank deputy MD Paresh Sukthankar. He said that the base was lower last year because of deferred tax benefit the bank received in the last quarter.
On the positive side, bad loans reduced from Rs 3,018 crore as of December 2013 to Rs 2,989 crore by end-March. According to Sukthankar, there were signs that bad loans had peaked in certain stressed segments such as commercial vehicles. Overall, the pace of accretion of bad loans had also slowed down, he added.

The bank's net interest margins had improved to 4.5% from 4.4% in the earlier quarter as it had deployed a large part of funds raised by way of non-resident foreign currency (non-resident) deposits. FCNR(B) deposits surged in the third quarter after RBI said it would subsidize the cost of hedging NRI deposits raised by banks.

"A major portion of this quarter's growth has come from the wholesale side. Overall, the retail-wholesale mix at the end of the year was 53:47," said Sukthankar. He said that growth in retail loans was lower because commercial vehicles loans were down 10% and loans against gold dropped 17-18%. Auto loans — a large segment of the bank's retail portfolio— grew by only 7% because of the slowdown in car sales.

Sukthankar said that non-interest income was also hit because of the drop in earnings from sale of insurance and mutual funds. "Income from distribution of third-party products was around 14-15% of our other income. Income from this segment has shrunk 19% because there have been some changes on the regulatory side. Also, in the first couple of months, there was some loss of momentum because we were tightening norms after the sting operation," said Sukthankar.

In early FY14, a sting operation by a web portal showed branch officials of various banks expressing willingness to deploy unaccounted money in financial products.

 

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