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India's HDFC Bank misses Q4 profit view on higher provisions; margins stable

A bird flies past a window of a HDFC Bank branch office in Mumbai

By Siddhi Nayak

MUMBAI (Reuters) -HDFC Bank, India's largest private lender, posted a smaller-than-expected quarterly profit on Saturday due to higher loan provisions, even as the bank's lending margins held steady from the previous quarter.

HDFC Bank, the first Indian lender to report fiscal fourth-quarter results, posted a standalone net profit of 165.12 billion rupees ($1.98 billion) for the January-March quarter, below analysts' forecast of 173.15 billion rupees, according to LSEG data.

Profit was up from the 163.73 billion rupees reported in the previous quarter.

HDFC Bank merged with parent Housing Development Finance Corp in July, meaning its results are not comparable on a year-over-year basis.


Provisions and contingencies were 135.1 billion rupees during the quarter, up more than three-times from the previous three-month period "as a countercyclical buffer for making the balance sheet more resilient", the bank said in a statement.

The bank's net interest income - the difference between interest earned and paid - rose 2.1% on quarter to 290.8 billion rupees.

Its core net interest margin was 3.44% on total assets and 3.63% on interest-earning ones, versus 3.4% and 3.6%, respectively, in the previous quarter and a blended 4.1% in the same quarter last year.

HDFC's higher borrowing costs and lower-yielding loan book weighed on the merged entity's margins. Following the merger, analysts had said the bank's margins were weak and that it was facing liquidity pressures.

HDFC Bank has signalled a period of slower growth to help move its margins and other key ratios closer to pre-merger levels.

The bank's gross loans grew 1.6% sequentially to 25.08 trillion rupees in the January-March quarter, slower than in the previous quarter. Deposits grew 7.5% sequentially to 23.8 trillion rupees.

Its loan-to-deposit ratio, improved on-quarter helped by strong deposit growth and a pullback in loan growth.

LDR is an important metric for banks as it helps assess their liquidity position by gauging whether it has enough deposits on its balance sheet to fund loan growth.

The bank's capital base got a boost from the conclusion of the sale of 90% stake in education loan unit HDFC Credila Financial Services in the fourth quarter.

HDFC Bank's gross non-performing assets ratio was at 1.24% at the end of March, compared with 1.26% three months earlier.

($1 = 83.3580 Indian rupees)

(Reporting by Siddhi NayakEditing by William Mallard and Helen Popper)