India's second largest private sector lender HDFC Bank matched analysts' expectations on Thursday with profit rising 20.14 percent year-on-year to Rs 3,239 crore. It was driven by other income, operating profit and slightly better-than-expected net interest income but higher provisions and tax cost limited profit growth. Net interest income, the difference between interest earned and interest expended, grew by 21.8 percent to Rs 7,781 crore in the quarter ended June 2016 compared with Rs 6,389 crore in year-ago period, supported by average assets growth of 20.2 percent and net interest margin, the private sector lender said. Net interest margin sequentially increased to 4.4 percent from 4.3 percent. Deposits stood at Rs 5.7 lakh crore at the end of June 2016, a growth 18.5 percent compared with year-ago period while advances were at Rs 4.7 lakh crore, higher by 23.2 percent over corresponding period of last fiscal. Other income (non-interest income) rose by 14 percent year-on-year to Rs 2,806.6 crore, driven by fees & commissions (15.5 percent YoY growth) and gain on revaluation or sale of investments (up by 120 percent), the bank said. Operating profit jumped 20 percent YoY to Rs 5,819.2 crore while operating expenses increased 19.2 percent to Rs 4,768.9 crore in April-June quarter. HDFC Bank said the cost to income ratio for the quarter was at 45 percent against 45.2 percent for the corresponding period of last fiscal. Provisions for bad loans remained at elevated level, up 19 percent YoY and 30.8 percent QoQ to Rs 866.7 crore in Q1FY17. Asset quality slightly weakened during the quarter with gross non-performing assets (NPA) rising 10 basis points sequentially to 1.04 percent and net NPA by 4 bps to 0.32 percent for the quarter ended June 2016. In absolute terms, gross NPA spiked 12 percent to Rs 4,921 crore and net NPA increased 13.1 percent to Rs 1,493.4 crore on QoQ basis. Total restructured loans were at 0.1 percent of gross advances as on June 2016. Capital adequacy ratio remained unchanged at 15.5 percent on sequential basis but declined 20 basis points compared with 15.7 percent in year-ago period. Tax expenses increased sharply by 20 percent to Rs 1,713.55 crore in the first quarter of FY17 compared with Rs 1,426.2 crore in corresponding period of last fiscal. Total number of branches and ATM network stood at 4,541 branches and 12,013 ATMs at the end of June 2016, respectively, the bank said. At 12:17 hours IST, the scrip of HDFC Bank was quoting at Rs 1,230.50, down 0.13 percent after hitting a 52-week high of Rs 1,239.50 in early trade on the Bombay Stock Exchange. Analyst take Reacting to the HDFC Bank's first quarter earnings, Siddharth Purohit of Angel Broking said that from here onwards, re-rating of the stock would be very difficult until it outperforms its own track record of delivering more than 20 percent growth. On the company's non-performing assets (NPAs), Rajiv Mehta of IIFL said that the minor increase in this quarter is not very alarming and termed it as seasonal in nature
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