HDFC Bank is a loser today as the market is taking its marginal fall in asset quality lightly. In fact the stock has been losing for the last two days and has fallen over 6% during this period. The stock hit an intraday low Rs.2194.70, going down almost 5%.
The Bank posted a 23% (YoY) rise in NII at Rs.13294 crore and net profit showed a 21% rise at Rs.5568 crore.
In terms of asset quality, Gross NPA rose from 1.36% to 1.4% (QoQ) and Net NPA also rose from 0.39% to 0.43%.
The Bank’s provisions showed a sharp rise of 60% (YoY) and 38% (QoQ) at Rs.2614 crore and this was mainly on account of stress in the bank's agri portfolio. And the slowdown in the auto sector which led to a fall in vehicle loans, showed the Bank’s loan growth slowing down 17% v/s 24.5% (QoQ).
The market is too shocked that even this bellwether bank, which is the gold standard for prudential lending is showing signs of stress, albeit small, but stress nevertheless. In a call with the management by analysts post the earnings, the management cautioned about slower retail growth and announced tighter provisioning. It also highlighted risks of unsecured loans while flagging retail demand fatigue. The Bank said that it has also tightened its provisoning norms, and now will write off loans in 150 days instead of 180 days for unsecured retail loans.
The board of directors also declared a special interim dividend of Rs 5 per equity share to commemorate 25 years of the bank’s operations.