HDFC Bank Q3 2023-24: A Deep Dive into Strong Profits, Growth Metrics, and Key Takeaways

HDFC Bank, India’s largest private lender, delivered a robust performance in Q3 2023-24, surpassing Street expectations for profit and demonstrating strong growth across core metrics. This comprehensive analysis delves deeper into the key takeaways from the bank’s Q3 results, providing insights beyond the headlines.

Profit Soars, Meeting Street Estimates: HDFC Bank

Headlining the performance was a 33.54% YoY surge in standalone net profit to Rs 16,372.54 crore, exceeding analyst expectations. This impressive growth cemented HDFC Bank‘s position as a leader in the Indian banking landscape. Contributing to this rise was a 23.9% YoY increase in net interest income (NII) to Rs 28,470 crore, reflecting the bank’s success in capitalizing on the rising interest rate environment. While slightly below estimates of 25% NII growth, the overall profit figure provided a shot of confidence to investors.

Pre-provision Operating Profit and Provisions:

Further adding to the positive picture was a 24.3% YoY jump in pre-provision operating profit to Rs 23,650 crore. This metric, indicative of the bank’s core earning power before accounting for bad loans, showcased its operational efficiency and ability to generate income. However, provisions for the quarter also witnessed a significant increase, jumping to Rs 4,220 crore from Rs 2,810 crore in the year-ago period. This reflected a prudent approach to managing potential credit risks in the face of economic uncertainties.

Net Interest Margin and Asset Quality:

Despite the rising provisions, HDFC Bank maintained a healthy core net interest margin (NIM) of 3.4% on total assets and 3.6% on interest earning assets. This indicated effective management of interest rates and efficient utilization of its funds. Moreover, the bank’s asset quality remained robust, with gross non-performing assets (GNPAs) declining to 1.26% of gross advances as of December 31, 2023, compared to 1.34% in Q2 and 1.23% a year ago. Net non-performing assets (NNPAs) stood at a low 0.31% of net advances, demonstrating the bank’s strong credit risk management practices.

Non-Interest Revenue and Operating Expenses:

Beyond interest income, HDFC Bank also showcased impressive growth in non-interest revenue, which climbed 31.3% YoY to Rs 11,140 crore. This diversification in revenue streams added further stability to the bank’s income profile. Among the key components, fees & commissions witnessed a substantial 14.6% YoY rise to Rs 6,940 crore, while foreign exchange & derivatives revenue and net trading income also contributed positively. However, operating expenses also saw a significant increase of 28.1% YoY to Rs 15,960 crore, reflecting investments in technology, branch expansion, and personnel. As a result, the cost-to-income ratio came in at 40.3%, highlighting the need for continued focus on expense management.

Capital Adequacy and Branch Network Expansion:

On the capital front, HDFC Bank remained comfortably above regulatory requirements, with its total Capital Adequacy Ratio (CAR) standing at 18.4% as per Basel II guidelines, compared to 19.4% a year ago. This strong capital position provides adequate buffers to absorb potential losses and support future growth plans. The bank also continued its impressive network expansion, adding 908 branches and 1,681 ATMs during the year, bringing its total footprint to 8,091 branches and 20,688 ATMs. Notably, 52% of its branches are now located in semi-urban and rural areas, reflecting its commitment to financial inclusion.

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Loan Growth Across Segments:

HDFC Bank demonstrated robust loan growth across all major segments. Domestic retail loans witnessed a phenomenal 111.1% YoY surge, driven by strong demand for mortgages and other consumer loans. Commercial and rural banking loans also grew at a healthy 31.4%, highlighting the bank’s focus on expanding its presence in these segments. Even corporate and other wholesale loans, excluding non-individual loans of eHDFC Ltd, saw a modest 11.2% growth, indicating resilience in a more challenging environment.