HDFC Bank Ltd., India’s largest private sector lender, kicked off the earnings season for the nation’s banks with an increase in profit that topped expectations.
(Bloomberg) — HDFC Bank Ltd., India’s largest private sector lender, kicked off the earnings season for the nation’s banks with an increase in profit that topped expectations.
Net income rose to 159.8 billion rupees ($1.91 billion) in the three months ended Sept. 30, according to a statement Monday. That surpassed analyst expectations of 141.2 billion rupees in a Bloomberg survey.
It marks the firm’s first consolidated set of results since merging with mortgage financier Housing Development Finance Corp. in July. Now one of the most valuable banks globally, analysts anticipate a challenging period as it integrates the two firms. Credit growth is slowing for Indian banks amid a weaker mortgage market and an uneven global recovery.
Investors are watching for any further deterioration in the outlook for net interest margins and for a potential pickup in delinquencies. A rise in unsecured loans saw the central bank issue a warning to banks to ensure risk strategies are robust.
Read: UBS Warns Unsecured Loans in India Face Rising Risk of Defaults
The bank’s erstwhile net interest margin of 4.1% declined because of the merger, Srinivasan Vaidyanathan, the bank’s chief financial officer, said in a call with media. The bank’s liquidity requirements were debt-funded and had been “augmented in order to provide comfort around the merger plan,” Vaidyanathan said.
The bank’s reported net interest margin was 3.4% on total assets and 3.6% on interest-earning assets, Vaidyanathan said. “As we progress and consume these loans and replace with deposits, it will progressively go up,” he said declining to give guidance on how long it could take for net interest margins to climb back towards the 4% mark.
Credit growth, which has remained between 12% and 14% in the world’s most populous nation, is expected to remain strong for the next few months as the festive season kicks off in India. Loans at the merged HDFC entity grew by 5% quarter-on-quarter ended Sept. 30, according to an update earlier this month. The bank’s soured loans stood at 1.34% for the quarter ended September.
–With assistance from Anirban Nag.
(adds comments in fifth and sixth paragraph.)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.