(Bloomberg) -- HDFC Bank Ltd., India’s largest private lender, second-quarter profit came ahead of analysts’ expectations helped by strong growth in deposits and loans.
Net income rose 5.3% to 168.2 billion rupees ($2 billion) in the three months ended September 30 from a year ago, according to a company statement Saturday. That compared with the average analysts’ estimate of 162.84 billion rupees in a Bloomberg survey.
The September quarter will be the first time HDFC’s year-on-year numbers will be comparable after its merger with Housing Development Finance Corp. was completed in July last year.
The Reserve Bank of India has expressed concern about the increase in credit-deposit ratios, a measure of how much of a bank’s deposits are being lent out. Bank deposit growth has persistently lagged the strong credit expansion in the country, leading to an elevated credit-deposit ratio for most banks. The regulator has also clamped down on unsecured loans that grew almost twice as fast as overall credit, and asked banks to increase buffers for some consumer loans in November last year.
HDFC has been selling down parts of its retail loan portfolio in a bid to improve its credit-deposit ratio that shot up after its merger with Housing Development Finance last year. The bank’s CD ratio stood at 104% as of March 31, after hitting 107% after the merger, but remains above the pre-merger levels of between 85% and 88%, according to a report from ratings agency ICRA, an affiliate of Moody’s.
HDFC decided to go slow on growing its loan book and repay HDFC borrowings on maturity and consider any prepayment opportunities while pursuing profitable sources of lending, CEO Sashidhar Jagdishan said in the bank’s latest annual report.
The bank took a “conscious call” to take a slow approach in its unsecured loan book, Jagdishan said at an analyst call in July. “I guess at the right time, we will step up on the pedal,” he said at the time.
HDFC’s deposits grew 15.1% year-on-year to 25 trillion rupees in the September quarter, significantly higher than the industry growth of about 11.5% as of Oct. 11, based on data from Reserve Bank of India.
The bank’s loans grew 7% to 25.19 trillion rupees as of September 30 led by a decline in corporate loans and moderate growth in retail loans during the quarter. Net interest margin moderated to 3.46%, less than analyst expectations of 3.48%.
Rival Axis Bank reported Thursday that its second-quarter net income rose 18%, beating analysts’ estimate and helping lift its shares by the most in four months on Friday.
--With assistance from Rakesh Sharma.
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