Keeping up the banking edge
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Robust in terms of asset quality, loan growth and operational efficiency
NIM moderates 10bp q-o-q led by decline in yield on loans: NII (net interest income) grew 7% quarter-on-quarter and 27% year-on-year to R37.3 bn. However, it included a one-off dividend income of R1 bn from mutual fund. Adjusted for which, NII was in line with the estimate. This was neutral on profitability as the bank booked a loss on investment of a similar magnitude.
Reported margins declined 10bp q-o-q to 4.2%, was led by a 20bp (basis point) q-o-q contraction in yield on loan (on the back of reduction in base rate), while deposits declined by just 10bp q-o-q. Continued traction in retail liabilities, superior CASA (current and savings account) ratio and higher share of fixed rate retail loans would help HDFCB maintain superior margins, going forward.
Fee income performance remains impressive
Non-interest income stood at R13.4 bn (18% below our estimate) due to a loss on sale of investment of R1.1 bn and moderation in forex income (R2.4 bn compared to R3.1 bn in Q1FY13 and R2.2 bn in Q2FY12). Fee income growth was strong at 5% q-o-q and 22% y-o-y vs 19% y-o-y for FY12.
Impeccable asset quality; credit cost contained at 30bp
GNPAs (gross non-performing assets) in absolute terms increased just 2% q-o-q. In percentage terms, GNPA declined further to 0.9%, compared to 1% a quarter ago, while NNPAs (net NPAs) were flat q-o-q. PCR (provision coverage ratio) improved to 82% (vs 81% q-o-q). Benign asset quality in the retail segment and lower exposure to stressed sectors in the corporate segment are leading to consistently strong asset quality performance, thus keeping credit cost under check.
During the quarter, provisions stood at R2.9 bn, of which R750m is towards floating provisions. Outstanding pool of floating provision stood at R17.5 bn (R7.5/share). Specific provision related to credit cost stood at 30bp vs reported 34bp in Q4FY12 and 24bp in Q2FY12 and the gross restructured loan in percentage terms was stable q-o-q at 0.3%.