Analyst Concall
HDFC Bank aims loan-deposit ratio of 'high 80%' in 2-3 yrs
This story was originally published at 22:08 IST on 19 October 2024
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-- HDFC Bank CFO: Credit-deposit ratio at 99.8% as of Sept 30
-- HDFC Bank CFO: Loan growth rate modest particularly in unsecured category
-- HDFC Bank MD: Deposit rates continue to be elevated and sticky
-- HDFC Bank MD: Customer preference is still towards time deposits
-- HDFC Bank MD: May be around system growth rate in FY26
-- HDFC Bank MD: Will be faster than system growth rate in FY27
-- Will achieve loan-deposit ratio of high 80% in 2-3 yrs
By Kshipra Petkar
MUMBAI – With the inevitable credit slowdown in the overall banking system, HDFC Bank Ltd. aims to achieve loan-deposit ratio of high 80s (80%) in 2-3 years, the bank's management said in a post-earnings analyst call Saturday. As on Sept. 30, the bank's loan-to-deposit ratio was at 99.8%. Before the merger of the bank with Housing Development Finance Corp. on Jul. 1, the bank had a loan-deposit ratio of 80-85%. But, after the merger, the ratio shot up to 110% as HDFC was funded mostly through longer-term borrowings.
"...we had thought that it would take four or five years to be at that level of what historically we have run, which is the mid 80s to high 80s. Instead, there is an opportunity right now with the rate of credit growth being high over the last two years and it's expected to come down to maybe the deposit level rate of growth. So in this scenario it was appropriate for us to rethink to say we'll do it within two to three years to get to the high 80s," the bank's management said in the analyst call.
On Saturday, the largest private sector bank announced its Jul-Sept results. The bank's gross advances rose 7% on year to INR 25.19 trillion as on Sept. 30, while deposits were up 15.1% on year at INR 25.00 trillion. The bank's net profit rose 5.3% on year to INR 168.21 billion, the lowest growth in 17 quarters, for Jul-Sept.
The bank's Managing Director Sashidhar Jagdishan said, "FY25 we would probably grow (loan growth) slower than the system. FY26 we may be at or around the system growth rate and by FY27 we should be faster than the system growth rate."
He said that currently, even though the liquidity has been gradually improving, deposit rates continue to be sticky. "...probably the credit growth still outpaces deposit growth in the system, and that's maybe the reason why it continues to be sticky," he said. Customers are still attracted towards time deposits to lock in at higher rates, Jagdishan said. The bank's time deposits were up 19.3% on year to INR 16.17 trillion as on Sept. 30.
While speaking on the growth in the unsecured segment, the bank's management said that the loan growth rate is modest particularly in the unsecured category. "We slowed the unsecured loan to a rate of growth which is 10%. In the recent time periods, one to two quarters, this year, we slowed it down to between 9% and 10%. And if you look at the year before, we grew at 19%. So the risk calibrated in terms of seeing it far ahead of time in terms of how to time it from a calibration, which is what has happened."
On the National Stock Exchange, the shares of HDFC Bank closed 0.5% higher at INR 1,681.85 on Friday. End
Edited by Vandana Hingorani
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