HDFC reports robust profit growth in Q1 2019 | Sunday Observer

HDFC reports robust profit growth in Q1 2019

HDFC Bank has reported profit growth in the first quarter of 2019 compared to the corresponding period in 2018 signaling a strong start to the financial year 2019.

The Bank posted a profit before VAT, NBT and Debt Repayment Levy (DRL) of Rs. 284.18 mn up by 42% while the post-tax profits increased to Rs.128.6 mn up by 48% over the corresponding period of 2018. It is important to note that the Bank has been able report this performance after paying Rs. 40.55 mn for DRL which was applicable only with effect from October 1, 2018.

HDFC’s CEO/General Manager Palitha Gamage said that core banking activities contributed to the strong results recorded for the period backed by conducive business environment and the improvement effected to the internal operations.

The Bank has been able to maintain a substantial development in profitability driven by the healthy improvement of the Net Interest Income (NII) ratio from 31-36%. The interest income that account for 95% of the gross revenue of the Bank has increased from Rs.1,696.57 mn to Rs.1,895.7 mn, reporting an increase of 12%. Timely re-pricing of loans and advances and the growth in the loan book supported the healthy escalation of interest income.

Meanwhile, the Bank had been successful in containing growth in interest expenses to 3% over the corresponding quarter of 2018, despite a shift in its deposit mix towards high cost deposits, thereby achieving the desired increase in net interest income from Rs. 530.6 mn to Rs. 691.3 mn, reflecting a healthy increase of 30%.

The operating expenses has increased from Rs. 422.43 mn to Rs. 453.59 mn an increase of 7% due to placing some probationary staff to permanent carder and implementation of new business and marketing strategies.

This has resulted in a growth of customer deposits by Rs. 3,280 mn in the first quarter 2019, compared to the growth of Rs. 95 mn recorded in the corresponding period 2018. However, the Bank has not recorded a loans and advances growth due to the consolidation approach implemented to improve the quality of the loan book.

Despite the challenge of meeting the regulatory minimum capital requirement of Rs.5,000 mn, HDFC maintains the regulatory capital ratios: Common Equity Tier-1, Total Tier-1 an Total Capital Ratios at a healthy level of 12.88% as against the minimum requirement of 7.0%, 8.5% and 12.5% respectively.

After the 2018 results are audited and the corresponding profits are added to the ca Oncepital of the bank, these capital ratios will improve further.

Central Bank has extended the deadline until June 30, 2019 to meet the regulatory minimum capital of Rs. 5,000 mn. With the improved profitability, the Bank is confident of meeting the minimum capital within the extended deadline from the retained earnings.

Meanwhile, being a mandated housing finance bank, the above industry non-performing loan ratio reflects the Bank’s commitment to the low and middle-income customer group that is the largest segment of the country’s housing finance market. 

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