HDFC Bank has reported 45 percent jump in net profit in the December quarter (Q3), despite witnessing an increase in bad debts.

HDFC Bank, which is India's second largest private sector lender in terms of assets, said its net profit in Q3 FY09 stood at Rs.621.74 crore, up from Rs.429.36 crore in Q3 FY08 (year-on-year or YoY rise of 44.80 percent).

During the same period, the bank's total income surged from Rs.5407.89 crore to Rs.3405.79 crore (YoY rise of 58.78 percent).

The bank's operating profit (before provisions and contingencies) also rose from Rs.1066.35 crore to Rs.1458.08 crore (YoY rise of 36.73 percent).

However, during the period under review, the bank's total expenditure (excluding provisions and contingencies) rose from Rs.2339.44 crore to Rs.3949.81 crore (YoY rise of 68.83 percent), while its bad debts rose 25.68 percent (YoY) from Rs.423.13 crore to Rs.531.79 crore comprising primarily of loan loss provisions, which rose from Rs.350.1 crore to Rs.465.4 crore (YoY rise of 32.93 percent).

Basic earnings per share (EPS) rose from Rs.12.1 to Rs.14.6.

The bank's total balance sheet size also increased by 39.36 percent from Rs.131,439.45 crore as of December 31, 2007 to Rs.183,185.26 crore as of December 31, 2008.

CAR

Segment wise, the bank's revenues from retail banking and wholesale banking soared 55.74 percent and 74.63 percent respectively.

In Q3 FY09, the capital adequacy ratio (CAR) or the ratio of a bank's capital to its risk-weighted assets, a key indicator to its financial strength, stood at 13.7 percent as against the regulatory minimum of 9 percent. The Tier-I ratio was at a healthy 9.7 percent.

The bank's CAR rose to 13.7 percent in December quarter from 11.4 percent in September quarter after the bank raised Rs.1730 crore in bonds in the December quarter, analysts said.

NPA

In the December quarter, the bank's gross NPA rose to Rs.1911.41 crore from Rs.866.97 crore (YoY rise of 120.47 percent) while its net NPA rose from Rs.279.78 crore to Rs.614.33 crore (YoY rise of 119.57 percent). While net NPA rose to 0.6 percent from 0.4 percent of net advances, gross NPA rose from 1.2 percent to 1.9 percent of gross advances, during the quarter under review.

Net Interest Income

The bank said its net interest income (NII), or the difference between what it paid for funds and what it earned from lending, rose a healthy 37.67 percent (YoY basis) to Rs.1979.25 crore from Rs.1437.58 crore, driven by average asset growth of 44.1 percent and a net interest margin (NIM), which is a key measure of efficiency, of around 4.3 percent (up from 4.2 percent) for the quarter ended December 31, 2008.

Total Deposits

During the period under review, the bank said its total deposits rose 45.75 percent (YoY) to Rs.144,862.47 crore from Rs.99,386.93 crore.

Savings account deposits grew by 32.5 percent to Rs.33,081 crore as of December 31, 2008. With time (fixed) deposits having grown by as high as 79.3 percent to Rs.87,523 crore as at December 31, 2008, the CASA mix for the merged entity was around 40 percent of total deposits, the bank said in a statement.

While the bank's total customer assets (including advances, corporate debentures, etc.) increased to Rs.100,682 crore as against Rs.74,979 crore as of December 31, 2007 (YoY growth of 34.3 percent), retail loans saw a healthy growth to form 59.6 percent of gross advances.

The bank said it also saw a significant expansion of its business over the year with the number of its ATMs growing from 1906 as of December 31, 2007 to 3177 as of December 31, 2008 (YoY rise of 66.68 percent) and the number of branches growing from 754 as of December 31, 2007 to 1412 as of December 2008 (YoY rise of 87.26 percent).

However, HDFC Bank noted that the earnings of the two quarters (Q3 FY09 and Q3 FY08) should not be compared as the earnings for the most recent quarter included results from Centurion Bank of Punjab Ltd. (CBoP), whose acquisition was completed last May.

India