HDFC Bank on Monday posted a mixed set of results when net profits came ahead of expectations, but asset quality deteriorated even as net interest margin (NIM) a key metric dipped on a sequential basis.

The country’s largest private sector bank reported a 50.6 per cent growth in net profits for the quarter ended September 30 at Rs 15,976 crore compared with Rs 10,605.78 crore a year ago. On a sequential basis, net profit increased almost 34 per cent.

Brokerages had estimated its net profit to show a growth of between 40 per cent and 45 per cent.

This was the first quarterly result of the lender after the reverse merger with parent HDFC and therefore the numbers are not strictly comparable. HDFC Bank merged with HDFC on July 1 in a $40 billion deal to better tap the rising demand for credit.

The rise in its bottom line came on the back of a strong growth in its core income or net interest income (NII) which grew 30.3 per cent to Rs 27,385 crore from Rs 21,021 crore in the year-ago period.

However, its net interest margins — which is the difference between interest income and interest paid relative to assets that earn interest — declined to 3.4 per cent on a sequential basis from 4.1 per cent.

Speaking at the earnings call, Srinivasan Vaidyanathan, chief financial officer, HDFC Bank, said that one of the reasons behind the decline in NIM was the incremental cash reserve ratio (I-CRR) that was imposed by the Reserve Bank of India (RBI) on all banks.

During the quarter, the lender’s asset quality deteriorated with the percentage of gross non-performing assets (NPAs) rising to 1.34 per cent from 1.17 per cent in the April-June period.

Deposits grew 29.8 per cent or Rs 1.1 lakh crore on an annual basis to Rs 21.72 lakh crore

Its low-cost CASA (current account and saving account) deposits grew 7.6 per cent with savings account deposits at Rs 5.69 lakh crore and current account deposits at Rs 2.47 lakh crore.

Time deposits increased 48.3 per cent to Rs 13.55 lakh crore.

On the asset front, gross advances stood at Rs 23.5 lakh crore during the quarter an increase of 57.7 per cent over the year-ago period.

Of its loans, the retail segment showed a growth of 112.1 per cent, whereas commercial and rural banking loans grew 29.5 per cent with corporate and other wholesale loans up almost 8 per cent.

Fed Bank net

Private sector lender Federal Bank on Monday reported a 36 per cent jump in its September quarter net profit at Rs 994 crore on a consolidated basis, as provisions declined sharply.

Its core net interest income grew 17 per cent to Rs 2,056 crore for the quarter on the back of a 20 per cent growth in advances and a slight expansion in the net interest margin to 3.16 per cent.

Its overall provisions decreased to Rs 43.9 crore on a standalone basis compared with Rs 267.86 crore in the year-ago period, majorly on a heavy reduction in the money set aside for potential loan losses, which came down to Rs 61 crore, from Rs 205 crore.