Shares of the country's largest private sector lender - HDFC Bank - fell as much as 3.65 per cent to hit an intraday low of Rs 1,466 on the BSE after its net profit missed analysts' estimates on the first quarter of current financial year on higher provisions for bad loans due to the second wave of Covid-19. HDFC Bank's net profit in April-June period rose 16 per cent to Rs 7,730 crore versus Rs 6,659 crore during the same period last year. The profit came in lower than what analysts were expecting as they had estimated profit of Rs 8,072 crore, according to Refinitiv data.
Its provisions for bad loans surged 24 per cent to Rs 4,830.84 crore versus Rs 3,891.52 crore during the same quarter last year.
"The disruptions following the outbreak, have led to a decrease in loan originations, the sale of third party products, the use of credit and debit cards by customers and the efficiency in collection efforts. This may lead to a continued rise in the number of customer defaults and consequently an increase in provisions there against. The extent to which the COVID-19 pandemic will continue to impact the Bank's results will depend on ongoing as well as future developments, which are highly uncertain, including, among other things, any new information concerning the severity of the COVID-19 pandemic, and any action to contain its spread or mitigate its impact whether government-mandated or elected by us," HDFC Bank said in an exchange filing.
HDFC Bank's net interest income or the difference between interest earned and interest expended rose 8.57 per cent to Rs 17,008.96 crore versus Rs 15,665.42 crore in the same month last year.
The trend of elevated slippages, or the fresh addition of bad loans, due to COVID-19 will be seen in other banks too, ICICI Securities said in a note, adding that the lenders would follow suit in creating disruption buffers.
As of 2:17 pm, HDFC Bank was top Nifty loser, with its shares trading 3.41 per cent lower at Rs 1,470, underperforming the Sensex which was down 1.16 per cent.