India’s HDFC Bank beats Q3 profit forecast, plans to list consumer finance unit

MUMBAI - HDFC Bank, India’s biggest private lender, posted a bigger-than-expected profit for the third quarter on Jan 16, bolstered by robust loan growth, and said it will soon start work on listing its non-bank consumer financing business.

Indian banks have consistently clocked double-digit loan growth over the past few months as demand for credit has stayed strong. The festive season, which began in the fiscal third quarter, has also helped boost demand for retail loans.

HDFC Bank, the first major lender to post results for that period, reported a standalone net profit of 163.73 billion rupees (S$2.64 billion), higher than both analysts’ expectations of 156.51 billion rupees, as per LSEG data, and its profit of 159.76 billion rupees in the previous quarter.

This is only HDFC Bank’s second quarterly report since it merged with parent Housing Development Finance Corp (HDFC), meaning its results are incomparable on a year-over-year basis.

The bank’s net interest income – the difference between interest earned and paid – rose about 4 per cent quarter-over-quarter to 284.71 billion rupees, but missed estimates of 286.47 billion rupees, as per LSEG data.

Its core net interest margin was 3.4 per cent on total assets and 3.6 per cent on interest-earning ones, versus 3.65 per cent and 3.85 per cent, respectively, in the previous quarter and a blended 4.1 per cent in its last ever quarter as a standalone company.

Gross loans rose 4.8 per cent sequentially, while deposits edged up 1.9 per cent, the lender said, adding gross bad loans were steady at 1.26 per cent of assets.

HDFC Bank is hopeful of building momentum on deposit growth in 2024-25, chief financial officer Srinivasan Vaidyanathan said in a post-earnings call, adding that the lender expects to start the process of listing HDB Financial Services, which provides secured and unsecured loans, in the next few months.

HDFC Bank took a 97 basis points hit on capital due to higher risk weights on unsecured loans, but said growth in unsecured loans has been modest.

Separately, the bank said its exposure to alternative investment funds (AIFs) was 12.2 billion rupees, but was completely provided for.

In December 2023, the Reserve Bank of India barred all entities under its regulation from investing in AIFs that have investments in recent borrowers, or must provision against such exposure, if an exit wasn’t possible. REUTERS