BENGALURU (Reuters) - Shares of HDFC Bank Ltd slid more than 3% on Monday after India's largest private-sector lender missed quarterly profit expectations on higher bad loan provisions due to the second COVID-19 wave.
The second and more ferocious coronavirus wave forced the country into lockdowns for much of the June quarter, shutting businesses and limiting customer spending. Restrictions are now being eased some parts of the country.
The disruptions led to a decrease in retail loan originations, sale of third-party products, card spends and efficiency in collection efforts, HDFC Bank said in its results statement https://www.bseindia.com/xml-data/corpfiling/AttachLive/da967685-e312-488c-b2c8-8335e1d2047b.pdf on Saturday.
Lower business volumes and higher bad loan additions led to lower revenues and more provisions, the lender added.
Shares of the bank dropped by their most since April 30, dragging the Nifty Bank index 2.1% lower. The stock was the top drag on the benchmark NSE Nifty 50 index.
"Even as we remain sanguine about the bank's growth prospects..., we think that the asset quality deterioration will be a key investor concern in the near term," Nirmal Bang institutional equities research said in a note.
The trend of elevated slippages, or the fresh addition of bad loans, due to COVID-19 will be seen in other banks too, ICICI Securities said in a note, adding that the lenders would follow suit in creating disruption buffers.
HDFC Bank's net profit for the three months ended June 30 rose 16.1% to 77.3 billion rupees ($1.04 billion), but missed analysts' expectations for a profit of 80.72 billion rupees, according to Refinitiv data.
Provisions for bad loans jumped 24% to 48.31 billion rupees, while gross bad loans as a measure of total loans, a measure of asset quality, ticked up to 1.47% from 1.32% in the previous quarter.
HDFC Bank's stock was up around 6% this year by Friday's close, underperforming both the banking index and the Nifty.
($1 = 74.6060 Indian rupees)
(Reporting by Chris Thomas in Bengaluru; Editing by Subhranshu Sahu)