HDFC Bank, India’s largest private lender, reported strong first-quarter results, exceeding analysts’ profit expectations. The bank posted a net profit of 161.75 billion rupees ($1.93 billion), despite a 2% decline from the previous quarter due to higher tax expenses. Notably, loan-loss provisions significantly decreased to 26.02 billion rupees, demonstrating the bank’s confidence in its loan portfolio.
HDFC Bank’s core net interest margin remained stable at 3.47% on total assets and 3.66% on interest-earning assets, highlighting its ability to maintain profitability despite economic challenges. However, the bank experienced slower loan growth, with gross loans dipping 0.8% sequentially, while deposits remained flat. This can be attributed to the recent merger with HDFC, which added a substantial amount of mortgage loans but less deposits, creating a need to attract more deposits or slow down loan growth.
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Despite the positive performance, the bank’s asset quality deteriorated. The gross non-performing assets ratio increased to 1.33% at the end of June, compared to 1.24% in the previous quarter. This suggests potential challenges in managing credit risk, especially in the post-merger environment. Overall, HDFC Bank’s Q1 results showcase a solid financial performance with opportunities for growth, as the bank navigates the complexities of its recent merger and focuses on managing its deposit base and maintaining stable margins.