India's largest private-sector lender delivered profit that matched expectations, with standalone net income at 195.1 billion rupees for the September quarter, up 4.7% from a year ago and equivalent to $2.1 billion. The result was in line with Bloomberg's analyst poll average of 195.89 billion rupees.
Net interest income rose 9.7% from a year earlier. Even so, the bank reported its core net interest margin at 3.16% on total assets, down from 3.3% a year earlier. It also said it mobilized $11.5 billion under an incentivized program for foreign-currency non-resident deposits.
Credit expansion stayed brisk, with loans up 16.3% and deposits advancing 18.8% year on year. Across India, lending has picked up on stronger corporate borrowing and consumption, and retail credit is expected to hold up through the festival season despite this month's 25 basis point repo rate increase by the central bank.
Banks are expected to put newly raised FCNR deposits to work over coming quarters, but because lending follows with a lag, analysts see near-term pressure on margins. Bernstein's Pranav Gundlapalle wrote that while balance-sheet growth was solid and asset quality held up, weaker treasury income and thinner margins weighed on profitability, adding that a "weak earnings growth trend" persisted for the bank.
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Earlier this month, the Reserve Bank of India cleared Anup Bagchi to become CEO for a three-year term that begins on Oct. 27, opening the door for an external leader to step in. "The bank has a strong foundation," Bagchi said at a media conference, adding he will engage with regulators and stakeholders after he takes over.
The board consented to Deputy Managing Director Kaizad Bharucha stepping down at year's close. A three-decade veteran long seen as carrying crucial institutional memory, he is expected to trigger faster exits by executives uneasy with the succession process. The board also signed off on the three-year reappointment of Lily Vadera as an independent director.
The bank, whose major owners include foreign institutional investors, has been under the microscope for governance shortcomings since March. Then part-time chairman Atanu Chakraborty resigned unexpectedly, citing that "certain happenings and practices" at the bank clashed with his "personal values and ethics", a development that sent its shares tumbling. HDFC Bank has rejected Chakraborty's claims. Bagchi's immediate agenda includes shoring up investor trust and dialing down governance concerns that have dogged the lender for much of the year, and Bloomberg News said technology and customer service may likewise be areas of focus as he seeks to maintain growth amid intensifying competition.
The mix is clear: fast loan and deposit growth, thinner margins, and a CEO handover against a governance backdrop. The bottom line: the bank is expanding while earning slightly less per unit of assets, with execution under new leadership in focus as FCNR-funded lending ramps and the festival season supports retail credit.
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