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HDFC, Federal And Kotak Bank Put Up a Good Show, NPA’s Stable: Results Analysis


Banks are finally showing some resilience towards NPAs, at least till now. HDFC, Federal, Kotak, South Indian, IndusInd and DCB have shown a declining percentage of NPAs compared to their advances growth. Meaning, their increase in NPAs if any is seeing an even higher increase in lending.
But note that many Banks have not yet made adequate provisions for the identified NPAs and they are bleeding in terms of their capital adequacy ratio.
There are only two ways for your bank’s NPA% to decline. Either NPAs should come down – meaning a recovery of some sort and not too many additions – or NPA growth should be lesser compared to advances growth. Most banks have seen a higher advance growth than the NPA growth. But note that the big boys – SBI, ICICI, BoB etc. – have not yet announced results.
Click to read the complete banking sector report for Q1FY17.
Yesterday, HDFC, Federal and Kotak have come up with results. Lets look at them on individual terms.


hdfc-bank-logoHDFC Bank is the second largest bank in India with respect to deposits. The bank has been reporting steady growth. HDFC has reported 15.28% increase YoY in revenue for the quarter, which has generated PAT of Rs 3455 Cr – an increase of 20% YoY. (Strangely, HDFC has done 20% PAT increase regularly for a long time now)
Key Take Aways:

  • Gross NPA % has declined from 1.04% last quarter to 1.02% for current quarter. But NPA grew by 2.81% QoQ. Its mainly because of higher advance growth compared to Gross NPA growth, the NPA % has declined.
  • Net NPA% has also come down from 0.32% to 0.30% QoQ. Net NPA has come down by 0.3% QoQ, indicating their are no fresh slippages in doubtful debts and in turn there have been write backs.
  • Provisioning has come down by 13.5% QoQ.  But we were unable to find the provision coverage ratio for the bank. It would have given a cleaner picture on banks provisioning front.
  • Deposits and advances showed a healthy growth, reported 17% and 18% respectively YoY.
  • Net interest margin has come down from 4.40% last quarter to 4.20% for current quarter.
  • Capital adequacy ratio is healthy at 15.40% for current quarter. But has declined marginally from  15.50% last quarter.


Federal Bank

federal-bank-logoFederal Bank with major concentration in Kerala, Maharastra and Karnataka has reported 25% profit growth with a revenue growth of 12% YoY. The bank has kept the reigns tight for NPAs. It has limited itself with Gross NPA below 3%. Federal Bank provides loans to mainly into wholesale and retail sector.
Key Take Aways:

  • Gross NPA% has come down from 2.92% from last quarter to 2.78% for current quarter. But NPA growth was at 4.14% QoQ, which is comparatively lower with advance growth 8.08% QoQ.
  • Provisions have remained same at Rs 168 Cr with respect to last quarter.  Provision coverage ratio has declined from 72.09% last quarter to 71.70% for current period. But it is not a worrying factor as long as PCR is above 70%.
  • Federal bank has reported outstanding advance growth at 27.17% YoY. The deposit growth also has been healthy at 17% YoY. The bank with its small size and huge potential can easily show big growth numbers.
  •  Net Interest Margin has improved from 3.28% last quarter to 3.31% for the current quarter. This would be from lower funding costs.
  • CAR has been showing a declining trend. Though the bank is good at current CAR level, but its declining trend is a worrying factor, and the current number is 12.85%.
  • The bank has opened a single new branch since last Q2 last year. Currently the number of branches stand at 1252


Kotak Mahindra Bank

kotak-mahindra-bank-logoThe diversified financial services company has reported a profit growth 25.05%.The bank has major presence in Maharashtra, Karnataka and Gujarat.
Key Take Aways:

  • Gross NPA % have been limited to 2.18% compared to 2.20% last quarter. While the NPA growth has been at 3.99% from last quarter, it has been overshadowed by advance growth of 4.35%.
  • Provisioning has increased by 2.04% in comparison to last quarter. PCR was not declared by the company.
  • Advance and deposit growth was healthy at 12.85% and 14.47% YoY.
  • Net Interest Margin has improved to 4.46% from 4.37% last quarter.
  • Capital Adequacy ratio has been outstanding at 15.77%.



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