HDFC Bank's change in asset mix boosts NIMs

HDFC Bank's net profit grew 31% in the third quarter to Rs 1,430 crore despite pressure on margins in a tough macroeconomic environment.

Its net interest income grew 12 per cent annually and six per cent sequentially, to Rs 3,120 crore.

Analysts say the bank's profitability has been driven by higher foreign exchange income and lower provisions.

According to Spark Capital, forex and derivative income grew by an astounding 68 per cent, both year-on-year and quarter-on-quarter, while core fee income grew 20 per cent annually and 14 per cent sequentially.

The bank tweaked its asset mix to remain profitable causing net interest margins to stay at 4.1 per cent. Retail loans now account for 51.3 per cent of the bank's total loan book, higher than the usual asset mix. Its strategy of slowing down on low-yielding, short-term corporate lending, coupled with stable yields, helped it maintain
NIMs at 4.1 per cent.