HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank all reported higher net profits and net interest income for the second quarter of the current financial year. Despite facing pressure on their net interest margins, these banks showed improvement in asset quality by the end of September.
- All four banks increased net profit and net interest income in Q2.
- Net interest margins declined due to higher funding costs.
- Asset quality improved, with lower gross non-performing assets (NPAs).
- Cost of funds rose due to increased deposits via the FCNR(B) scheme.
How did HDFC Bank perform in Q2?
HDFC Bank, the largest private lender in India, posted a net profit of ₹9,510 crore in Q2, a 5% increase from ₹9,051 crore in the same quarter last year. Its net interest income (NII) rose 10% to ₹34,619 crore compared to ₹31,551 crore a year ago.
The bank's net interest margin (NIM) was 3.16% on total assets and 3.32% on interest-earning assets, down from 3.27% the previous year. This decline was mainly due to higher costs of raising funds, especially through the Foreign Currency Non-Resident (Bank) FCNR(B) scheme.
HDFC Bank’s asset quality improved, with gross NPAs falling to 1.11% of total advances from 1.24% a year earlier.
What were ICICI Bank's key Q2 results?
ICICI Bank reported a 20.1% rise in standalone net profit to ₹14,843 crore for Q2, up from ₹12,359 crore in the previous year. Its net interest income increased by 17.7% to ₹25,339 crore.
Despite higher interest income, ICICI Bank’s NIM declined by 12 basis points to 4.18% due to increased funding costs. The bank’s expenses rose by 14% during the quarter.
Asset quality improved significantly, with gross NPAs dropping to 1.20% from 1.58% a year earlier.
How did Axis Bank's earnings change in Q2?
Axis Bank’s net profit jumped 38% to ₹7,003 crore in Q2, compared to ₹5,089 crore a year ago. This growth was largely driven by a 52.2% reduction in provisions, which fell to ₹1,693 crore from ₹3,547 crore.
The bank’s net interest income increased 11.8% year-on-year to ₹15,371 crore. However, its net interest margin declined to 3.36% from 3.73% the previous year.
Interest expenses grew by 22%, outpacing the 17% growth in interest income, which contributed to margin pressure.
What were Kotak Mahindra Bank's Q2 highlights?
Kotak Mahindra Bank’s net interest income rose 16% to ₹8,459 crore, while net profit increased 29% to ₹4,212 crore compared to the previous year.
The bank’s net interest margin softened to 4.31% from 4.54%. Asset quality improved, with gross NPAs decreasing to 1.04% from 1.39% a year earlier.
Why did net interest margins decline despite profit growth?
All four banks experienced a decline in net interest margins mainly due to higher costs of funds. This was influenced by increased deposit mobilization through the Foreign Currency Non-Resident (Bank) FCNR(B) scheme, which raised the cost of raising funds significantly.
What does improved asset quality mean for these banks?
Improved asset quality means that the banks have fewer non-performing assets (NPAs) relative to their total advances. Lower NPAs indicate better loan performance and reduced risk of defaults, which strengthens the banks’ financial health.
