HDFC Bank, the country’s largest private sector lender, on Saturday missed estimates for the quarter ended June 2021 because of a spike in provisions. Net profits came in at Rs 7,729.6 crore, a 16.1 per cent increase over Rs 6,658.62 crore in the same period of the previous fiscal.

Analysts had expected the bank to post profits of around Rs 7,900 crore. Provisions jumped to Rs 4,830.84 crore from Rs 3,891.52 crore in the year-ago period, a rise of 24 per cent. Further, the asset quality also deteriorated with the percentage of gross non-performing assets (NPAs) rising to 1.47 per cent from 1.32 per cent sequentially and 1.36 per cent in the April-June 2020 quarter.

In absolute terms, the gross NPAs stood at Rs 17,098.51 crore against Rs 15,086 crore in the preceding three months and Rs 13,773.46 crore in the year-ago period.

Provisions and contingencies for the quarter included specific loan loss provision of Rs 4,219.7 crore and general and other provisions of Rs 611.1 crore. The lender said that the second wave of Covid-19 disrupted business activities for close to two-thirds of the quarter, leading to a decrease in efficiency in collection efforts and a higher level of provision.

The bank disclosed in its notes to accounts that it implemented a one-time restructuring (according to the RBI’s August 2020 circular) for 3,36,107 accounts where the exposure stood at around Rs 7,801 crore. Of this, personal loans stood at Rs 5,457.35 crore and corporate loan recast were at Rs 1,735.30 crore. The rest belonged to MSMEs and others.

Under the central bank’s second resolution framework announced in May, it has implemented such plans for 33 borrower accounts having aggregate exposure of Rs 10.64 crore.

While HDFC Bank is the first big lender to declare the first-quarter numbers, the deterioration in its asset quality indicates that banks would see stress in their books due to the second wave. However, analysts are of the view that the impact will be considerably lesser this time than what was seen after the pandemic hit last year.

The lender disclosed that total advances as on June 2021 were Rs 1,147,652 crore, an increase of 14.4 per cent over June 2020. According to its internal business classification, retail loans grew 9.3 per cent, commercial and rural banking loans rose 25.1 per cent and other wholesale loans grew 10.2 per cent.

Domestic retail advances stood at Rs 5,23,489 crore during the quarter.

During the first quarter, the bank’s net interest income (interest earned less interest expended) increased to Rs 17,009 crore from Rs 15,665.4 crore in the year-ago period.

Meanwhile, the board of HDFC Bank on Saturday decided to tap the international markets to raise capital through Basel-III compliant additional tier-I capital (AT1 bonds) on a public or a private placement basis. However, the lender did not disclose the size of the proposed offering.