The second wave of the coronavirus impacted 12% of HDFC Bank’s staff in the fiscal first quarter, leading to higher accretion of bad loans as recovery efforts considerably slowed down.

This also triggered a fall in retail loan originations, sale of third-party products and card spends for the quarter ended 30 June. India’s largest private lender’s business activities remained curtailed for almost two-thirds of the quarter as it imposed self-restrictions to protect its employees from Covid-19.

HDFC Bank’s asset quality weakened during the quarter with gross non-performing assets (NPA) standing at 1.47% of gross advances compared to 1.32% in the preceding quarter and 1.36% a year ago. The bank added Rs 7,300 crore of bad loans in the quarter. Net NPAs were at 0.48% versus 0.40% in the previous quarter.

“The recovery efforts of the bank were impacted during the quarter as 12% of the bank’s staff got impacted by Covid. For the first two months of the quarter, the bank put health over work and imposed self-inflicted restrictions. Recovery and collection efforts were curtailed with just 35 to 40 days of work,” HDFC Bank chief financial officer Srinivasan Vaidyanathan told analysts on Saturday.

This disruption in work led to lower business volumes, higher slippages, less revenues as well as an enhanced level of provisioning. Provisions and contingencies for the June quarter were at Rs 4,830.8 crore (including contingent provisions of Rs 600 crore), versus Rs 3,891.5 crore a year ago and Rs 4,693.7 crore a quarter ago.

The bank held floating provisions of Rs 1,451 crore and contingent provisions of Rs 6,596 crore as of 30 June 2021. Total provisions (comprising specific, floating, contingent and general provisions) were 146% of the gross NPAs.

Despite fewer effective working days and elevated provisioning, the bank reported a 16.1% year-on-year growth in its net profit to Rs 7,729.64 crore for the quarter ended June 2021. Pre-provision operating profit stood at Rs 15,137 crore, up 18 % over the corresponding quarter of the previous year.

Total advances at the end of the quarter stood at Rs 1,147,652 crore, an increase of 14.4% over the earlier year and incremental growth of Rs 15,000 crore during the quarter. The bank’s lending to public sector enterprises jumped from 3% to 11% of the total advances. Retail loans grew by 9.3%, commercial and rural banking loans by 25.1% and other wholesale loans by 10.2%. Overseas advances constituted 3% of total advances.

The bank wrote off Rs 3,100 crore of loans during the quarter compared to Rs 1,500 crore in the year-ago quarter.

HDFC Bank said it has restructured loans worth Rs 7,800 crore under the Reserve Bank of India’s one-time restructuring scheme. Out of this, Rs 5,457 crore of retail loans and Rs 1,735 crore of corporate loans have been restructured. The bank has also restructured Rs 608 crore of loans to other borrowers under the scheme.

Total deposits, at Rs 13.45 lakh crore, grew by 13.2% YoY. The bank added Rs 11,000 crore of deposits during the quarter. CASA deposits grew by 28.1%, with savings account deposits at Rs 426,132 crore and current account deposits at Rs 185,669 crore.

Higher other income and pre-provision operating profit along with net interest income (NII) supported profitability. Net interest income, the difference between interest earned and interest expended, grew by 8.6% to Rs 17,009 crore compared to the year-ago quarter.

The bank said its continued focus on deposits helped in the maintenance of a healthy liquidity coverage ratio at 126%, well above the regulatory requirement.

The total credit cost was at 1.67% during the quarter as against 1.64% in the preceding quarter and 1.54% in the year-ago quarter.

Other income (non-interest income) was at Rs 6,288.5 crore, up 54.3% YoY. The fees & commissions segment grew 74.2% to Rs 3,885.4 crore and foreign exchange & derivatives revenue rose 174.6% to Rs 1,198.7 crore for the quarter.