Strong deposit growth, a robust fee income growth and a decline in net non-performing assets (NPA) of HDFC Bank in the fourth quarter took precedence over the company's results, which fell short of estimates.
Provision coverage ratio of about 70% was the key highlight of the results. While the bank missed street estimates owing to lower than estimated loan growth, strong fee income aided earnings momentum for the bank.
HDFC Bank now awaits government’s approval for their fund raising plans owing to higher than Rs 5000 crore being raised from foreign investors.
Net interest margin remained stable owing to healthy share of low cost deposits coupled with growth in high yielding portfolio like business banking, personal loans and credit cards, among other factors.
Asset quality remained stable as annualized slippage ratio was the lowest in five quarters. This has led to annualized credit cost, which refers to provisions on NPAs divided by advances ratio, being the lowest in five quarters.
The bank’s subsidiary continues to perform well and is showing healthy growth.
Strong deposit growth & loan growth largely led by retail portfolio
Deposits for the bank was at Rs 78,8875 crore up 22.6% YoY and up 12.9% QoQ.
The low cost deposit momentum remained strong for the bank. Low cost deposits (CASA) was at Rs 34,3093 crore, up 11% YoY, and up 11.7% QOQ, while low cost deposit share was at 43.5% compared to 48% YoY, and 43.9% QoQ.
While advances were at Rs 65,8333 crore, up 18.7% YoY, and up 4.3% QoQ, retail loan growth momentum remained strong for the bank.
Retail book was at Rs 36,2489 crore up 27.8% YoY, and up 6.8% QoQ.
Net interest income below estimates were due to loan growth being the lowest in five quarters, however, strong fee income boosted earnings momentum for the bank.
Net interest income was at Rs10,657.7 crore, compared to CNBC-TV 18 estimates of Rs 10,838.5 crore.
This was due to loan growth being on the lower side in five quarters. However, net interest margin for the bank remained stable at 4.3%.
On the positive side, core fee income growth was robust at Rs 3,329.7 crore, up 32% YoY, and 15.9% QoQ.
Profit for the bank was at Rs 4,799.3 crore compared to CNBC-TV 18 poll of Rs 4,881.6 crore.
Annualized slippage ratio is the lowest in five quarters, provision coverage ratio now is about 70%.
Slippages were at Rs 2790 crore compared to Rs 5055.3 crore, down 44.8% quarter-on-quarter.
Annualized slippage ratio is the lowest in five quarters at 1.7%, compared to 3.2% QoQ and 1.75% YoY.
This led to provision requirement being on the lower side, therefore aiding in improvement in credit cost for the bank which was the lowest in five quarters. Annualized credit cost was the lowest in last five quarters at 0.69%, compared to 1.8% QoQ, and 0.71% YoY.
However, the provision coverage ratio now touches 70% level, at 69.8% compared to 66.3% QoQ. Asset quality of the bank also remained stable with GNPA at 1.3% compared to 1.29% QoQ.
How the quarter panned out in terms of numbers: Q4FY18 – YOY
NII at Rs 10,657.7 crore up 17.7%
Net profit at Rs 4,799.3 crore up 20.3%
Asset quality remains stable – QOQ
GNPA at Rs 8609 crore up 4.5%
NNPA at Rs 2601 crore down 6.2%
GNPA at 1.3% vs 1.29%
NNPA at 0.4% vs 0.44%
Calculated provision coverage ratio at 69.8% vs 66.3%
Balance sheet growth details:
Low cost deposits (CASA) at Rs 34,3093 crore up 11% YoY, up 11.7% QOQ
Deposits at Rs 78,8875 crore up 22.6% YoY, up 12.9% QoQ
Advances at Rs 65,8333 crore, up 18.7% YoY, up 4.3% QoQ
Retail book at Rs 36,2489 crore up 27.8% YoY, up 6.8% QoQ
Corporate or non-retail book at Rs 29,5844 crore up 9.2% YoY, up 1.4% QOQ
Key ratios (Q4FY18 vs YOY & vs QOQ):
NIM at 4.3% vs 4.3% vs 4.3%
Capital Adequacy Ratio at 14.8% vs 14.6% vs 15.5%
Cost to income ratio at 40.7% vs 41.8% vs 40.4%ROA at 2% vs 1.92% vs 2%