Fee income growth as we have often remarked here remains at a standstill for the bank even as that creates a pressure on the topline as market sensitivities ensure the bank approaches a lending income based operating model, ramping up Interest income (NII) on lending spreads to INR 5.5 Bln for a $1.25 Bln quarter. With growth in deposits tamping down growth in Interest Expenses, NII has been boosted by increasing spreads on an already large base, with gross spreads for the Bank/HDFC at 226 basis points (not this quarter’s data) on any incremental borrowing over low cost deposits
The bank’s reported NIMs have moved up to 4.5% while Fee Income has crawled to 27% of Income at INR 20 Bln incl almost INR 2 Bln from recoveries on substandard loans declared in default, also a steady stream of income now , that we question but was a hefty INR 1.6 Bln in the year ago quarter as well, implying the Fee income was even lower including normal fees and commission of INR 15 Bln and Derivative and Revaluation/sale of investments of another INR 3 Bln
The bank thus is ably rewarded for investing in additional Provisions on time growing Provisions of INR 4.55 Bln from under 4 bln in September 2013. CASA deposits have grown to INR 1.68 trillion with tha Bank growing Current accounts custom a bit faster again int he current quarter
The Topline has grown only 15% over the 6 months of FY2014 because of the Q1 slowness keeping them out of the reckoning despite a substantially higher than industry average and a go slow on credit by the bank after the KFA account last year in view of credit conditions. REstructured Loans have reduced after growing to 0.2% of advances in the previous quarter.
It has increased 200 branches(197) and 260 ATMs(259) so far since April 2014