India's HDFC Bank beats Q3 profit forecast, plans listing consumer finance unit

By Siddhi Nayak and Sethuraman N R

MUMBAI (Reuters) -HDFC Bank, India's biggest private lender, posted a bigger-than-expected profit for the third quarter on Tuesday, bolstered by robust loan growth, and said it will soon start work on listing its non-bank consumer financing business.

Indian banks have consistently clocked double-digit loan growth over the past few months as demand for credit has stayed strong. The festive season, which began in the fiscal third quarter, has also helped boost demand for retail loans.

HDFC Bank, the first major lender to post results for that period, reported a standalone net profit of 163.73 billion rupees ($1.97 billion), higher than both analysts' expectations of 156.51 billion rupees, per LSEG data, and its profit of 159.76 billion rupees in the previous quarter.

This is only HDFC Bank's second quarterly report since it merged with parent Housing Development Finance Corp (HDFC), meaning its results are incomparable on a year-over-year basis.

The bank's net interest income (NII) -- the difference between interest earned and paid -- rose about 4% quarter-over-quarter to 284.71 billion rupees, but missed estimates of 286.47 billion rupees, as per LSEG data.

Its core net interest margin (NIM) was 3.4% on total assets and 3.6% on interest-earning ones, versus 3.65% and 3.85%, respectively, in the previous quarter and a blended 4.1% in its last ever quarter as a standalone company.

Gross loans rose 4.8% sequentially, while deposits edged up 1.9%, the lender said, adding gross bad loans were steady at 1.26% of assets.

HDFC Bank is hopeful of building momentum on deposit growth in 2024-25, Chief Financial Officer Srinivasan Vaidyanathan said in a post-earnings call.

Vaidyanathan also said the lender expects to start the process of listing HDB Financial Services, which provides secured and unsecured loans, in the next few months.

HDFC Bank took a 97 basis points hit on capital due to higher risk weights on unsecured loans, but said growth in unsecured loans has been modest.

Separately, the bank said its exposure to alternative investment funds (AIFs) was 12.2 billion rupees, but was completely provided for.

Last month, the Reserve Bank of India barred all entities under its regulation from investing in AIFs that have investments in recent borrowers, or must provision against such exposure, if an exit wasn't possible. ($1 = 83.0650 Indian rupees)

(Reporting by Siddhi Nayak in Mumbai and Sethuraman NR in Bangalore; Editing by Janane Venkatraman and Savio D'Souza)