HDFC reports robust profit growth in 2019 Q1

HDFC Bank has reported robust profit growth in the first quarter of 2019 compared to the corresponding period in 2018, signalling a strong start to the financial year 2019. The Bank posted a profit before VAT, NBT and Debt Repayment Levy (DRL) of Rs. 284.18 million up by 42%, while the post-tax profits increased to Rs. 128.6 million up by 48% over the corresponding period of 2018. It is important to note that the Bank has been able to report this performance after paying Rs. 40.55 million for DRL which was applicable only with effect from 1 October 2018.

HDFC Bank Chairman Dr. R.H. Meewakkala

HDFC Bank CEO/GM Palitha Gamage

Commenting on the quarter’s performance, HDFC CEO/General Manager Palitha Gamage said that core banking activities contributed to the strong results recorded for the period, backed by conducive business environment and the improvement effected to the internal operations.

The Bank has been able to maintain a substantial development in profitability driven by the healthy improvement of the Net Interest Income (NII) ratio from 31% to 36%. The interest income that account for 95% of the gross revenue of the Bank has increased from Rs. 1,696.57 million to Rs. 1,895.7 million, reporting an increase of 12%. Timely re-pricing of loans and advances and the growth in the loan book supported the healthy escalation of interest income.

Meanwhile, the Bank had been successful in containing growth in interest expenses to 3% over the corresponding quarter of 2018, despite a shift in its deposit mix towards high cost deposits, thereby achieving the desired increase in net interest income from Rs. 530.6 million to Rs. 691.3 million, reflecting a healthy increase of 30%.

The Operating Expenses has increased from Rs. 422.43 million to Rs. 453.59 million, an increase of 7% due to placing some probationary staff to permanent cadre, and implementation of new business and marketing strategies. 

This has resulted in a growth of customer deposits by Rs. 3,280 million in the first quarter 2019, compared to the growth of Rs. 95 million recorded in the corresponding period in 2018. However the Bank has not recorded a loans and advances growth, due to the consolidation approach implemented to improve the quality of the loan book.

Despite the challenge of meeting the regulatory minimum capital requirement of Rs. 5,000 million, HDFC maintains the regulatory capital ratios: Common Equity Tier-1, Total Tier-1 an Total Capital Ratios at a healthy level of 12.88% as against the minimum requirement of 7.0%, 8.5% and 12.5% respectively. Once the 2018 results are audited and the corresponding profits are added to the capital of the bank, these capital ratios will improve further. The Central Bank has granted an extended deadline until 30 June to meet the regulatory minimum capital of Rs. 5,000 million. With the improved profitability, the Bank is confident of meeting the minimum capital within this extended deadline from the retained earnings.

Meanwhile, being a mandated housing finance bank, the above industry non-performing loan ratio reflects the Bank’s commitment to the low and middle-income customer group that is the largest segment of the country’s housing finance market.