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HDFC Bank on Monday reported a consolidated net profit of Rs 16,811 crore for the September quarter, its maiden quarterly earnings announcement after merging parent HDFC with itself.
On a standalone basis, the largest private sector lender reported a net profit of Rs 15,976 crore.
In the year-ago period, the net profit of the merged entity would have been Rs 11,162 crore on a consolidated level while the same on a standalone basis would have been Rs 10,606 crore.
The largest private sector lender, which used to consistently report Net Interest Margins (NIMs) of over 4 per cent, saw its NIMs decline to 3.4 per cent as the share of low-yielding secured assets in the merged balance sheet went up.
Also, costs of market borrowings to execute the merger put pressure on the NIMs.
HDFC Bank's chief financial officer Srinivasan Vaidyanathan told reporters that the NIMs will rise as the share of higher-yielding assets goes up and once it replaces market borrowings of nearly Rs 4.8 lakh crore taken to execute the merger with cheaper deposits.
The bank said there was a "debt-funded cost for the additional liquidity and merger management" which was a drag on the NIMs during the quarter.
Vaidyanathan said the merger costs alone had an impact of nearly 0.30 per cent on the NIMs and added that an additional impact of up to 0.10 per cent came through the incremental cash reserve ratio tweak that was undertaken by the Reserve Bank of India (RBI).
For the September quarter, HDFC Bank's core net interest income stood at Rs 27,385 crore.
This is a 30 per cent growth over the Rs 21,021 crore in the year-ago period reported by HDFC and HDFC Bank.
The other income grew to Rs 10,708 crore from Rs 7,596 crore in the year-ago period.
Both the deposits and advances grew healthily by over Rs 1 lakh crore each during the reporting quarter.
Vaidyanathan said that deposits have grown by 5.3 per cent and advances by 4.9 per cent during the quarter when compared with July 1 when the merger got executed.
On the asset quality front, HDFC Bank reported a gross Non Performing Assets (NPAs) ratio at 1.34 per cent as against 1.41 per cent as on July 1 when it began operating as a single unit, Vaidyanathan said.
According to him, NPAs would have been lower by 0.22 per cent if there was no regulatory mandate to recognise erstwhile HDFC Ltd's non-individual restructured assets as NPAs.
There has been a positive impact of the merger on the provisions as a bulk of the assets transferred from HDFC are secured, he said.
The overall provisions during the quarter came at Rs 2,903 crore as against Rs 3,240 crore in the year-ago period.
The share of retail assets has now gone up to 55 per cent with the rest being wholesale assets, Vaidyanathan said, adding the same was at 47:53 ratio in the year-ago period.
About forbearance requests, Vaidyanathan said the bank is yet to get a reply on the recognition of infrastructure bonds and also on the properties rented out by HDFC Ltd.
The cost to income ratio improved to 40.4 per cent as a merged entity riding on HDFC's low numbers, and Vaidyanthan said that the aim is to get it to mid-30s as part of a long term vision.
To a question on the regulatory caution on the unsecured assets, he said the bank's risk management teams are aware of the developments and added that a lot of the issues in the industry are from small-ticket loans which the bank does not play in.
Sale of the education loans-focused Credila is yet to be completed, Vaidyanathan said and also added that there is no plan at present to list HDFC Securities.
Regarding the top management's vow to double the size in three-four years, Vaidyanathan said distribution strength, brand and people will make faster growth possible.
The bank hired 16,000 people on a net basis during the September quarter to take the overall staff strength to 1.98 lakh, he said.
Shares of HDFC Bank closed 0.47 per cent down at Rs 1,529.50 apiece on the BSE as against a 0.17 per cent correction in the benchmark.