HDFC Bank Q2 FY2019-20 Financial Highlights
In this article, we are going to see HDFC Bank Q2 FY2019-20 results update. Lower tax rate and steady operating performance lead to 27% rise YoY in Net Profit of HDFC Bank for the July-September quarter.
HDFC Bank Q2 FY2019-20 Results Update
Q2 FY2019-20 Results Analysis
- Net Interest Income increased by 14.9% YoY because of 2 reasons :
- Asset growth of 15%
- Net Interest Margin of 4.2% for Q2 FY20
- Non-Interest Income growth is 39.2% YoY as well as 12.5% QoQ mainly because of :
- Rise in Fees & Commission Income
- Excellent Gains on Revaluation / Sale of investments in Q2 FY20
- Operating profit increased by almost 23.4% YoY on account of :
- Increase in the size of Balance sheet by 13.2% YoY and 4.7% QoQ
- Improved efficiency of bank (Improved cost to income ratio)
- Provisions and contingencies for the quarter Q2 FY20, were Rs.2,700 Cr with a YoY growth of 48.4% as against Rs.1,820 Cr for Q2 FY19.
- The key components of provisions are specific provisions, general provisions and floating provisions.
- General provisions include additional provisions for standard advances to the NBFC / HFC sector.
- Net profit rise of almost 26.8% YoY and 14% QoQ is mainly due to corporate tax rate cut. So the effective tax rate has came down to 29% in Q2 FY20 from 35% in earlier quarters Q1 FY20 as well as Q2 FY19.
HDFC Bank Q2 FY2019-20 Balance sheet Summary & Key Ratios
Stable Asset Quality
- Asset quality in Q2 FY20 is stable QoQ and it is improving by considering the Q1 FY20 NPAs. However when compared to Q2 FY19, the asset quality slightly deteriorated YoY.
- That is – Gross NPA and Net NPA ratios have increased in Q2 FY20 (1.38% & 0.42%) as compared to Q2 FY19 (1.33% & 0.40%) due to exposure to the bad loans post NBFC crisis.
- However, the asset quality is stable (improving slightly) on QoQ basis Q1 FY20 (1.40% & 0.43%)
- CASA Ratio reduced to 39.2% from 42% last year and 40% last quarter. It is because :
- Though Total deposits have grown by 22.6% YoY and 7% QoQ, the contribution of CASA deposits in the total deposits was not with the same growth rate.
- The share of Time deposits is higher and it has increased at a very good growth rate of 28.3% YoY, higher than the growth rate of even total deposits. It indicates total deposits are increased mainly on account of Time deposits.
Capital Adequacy Ratio (CAR)
- HDFC Bank’s total Capital Adequacy Ratio (CAR) as per Basel III guidelines was at 17.5% as on September 30, 2019 from 17.1% as on June 30, 2019. CAR is well above the regulatory requirement level given by RBI.
- CAR has improved to 17.5% in Q2 FY20 from 16.9% in Q1 FY20.
Net Interest Margin (NIM)
- Net Interest Margin (NIM) and the asset growth, both drives the Net Interest income of the bank.
- NIM for the quarter Q2 FY20 is 4.2%, which is reduced from 4.3% in Q1 FY20 and same as 4.2% in Q2 FY19.
Cost to Income Ratio
- For Q2 FY20, the Cost to Income Ratio improved to 38.8% from 39.9% in Q2 FY19. While the ratio was 39.4% in Q1 FY20.
- Cost to income ratio of any bank tells how much cost is incurred to generate operating income of Rs.100 for the bank. The improvement in the cost to income ratio of HDFC bank in Q2 FY20 indicates :
- The rise in operational efficiency of the bank
- Increased profitability as compared to Q2 FY19 & Q1 FY20