HDFC Bank on Saturday reported first-quarter net profit rose 19.6% to ₹6,658.6 crore, from ₹5,568.16 crore a year earlier, helped by double-digit growth in net interest income and reduced operating costs.

The private sector lender, however, registered a 48.9% increase in provisioning for possible defaults. Provisions and contingencies rose to ₹3,891.5 crore in the three months ended June, from ₹2,613.7 crore in the corresponding period in 2019. Total provisions for the quarter included contingent provisions of about ₹1,000 crore and the bank cautioned that there was a risk that defaults could rise as a result of the economic impact of the COVID-19 pandemic.

“The continued slowdown may lead to a rise in the number of customer defaults and consequently an increase in provisions thereagainst,” the bank said in a regulatory filing to the stock exchanges.

“The continued slowdown in economic activity has led to a decrease in loan originations, the sale of third party products, the use of credit and debit cards by customers, the efficiency in collection efforts and waiver of certain fees,” the lender stated, adding that fees/other income were lower by about ₹2,000 crore as a result.

Net revenue (net interest income plus other income) grew to ₹19,740.7 crore in the April-June quarter, from ₹18,264.5 crore.

Net interest income (interest earned less interest expended) grew by 17.8% to ₹15,665.4 crore, driven by growth in advances of 20.9%, and a growth in deposits of 24.6%. The net interest margin was 4.3%.

‘Management transition’

“Such resilient performance is highly comforting,” said Rajiv Mehta, lead analyst at Yes Securities. “However, we would be closely monitoring moratorium data, management’s recent assessment of the COVID impact and management transition,” Mr. Mehta added.

The total balance sheet size was ₹15,45,103 crore, an increase of 22.1%. Deposits rose to ₹11,89,387 crore.

“The bank’s continued focus on deposits helped in the maintenance of a healthy liquidity coverage ratio at 140%, well above the regulatory requirement. Total advances as of June 30, 2020, were ₹10,03,299 crore, up 20.9%.” the lender said.

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