Analyst Concall
HDFC Bank says provisioning prudent, not for any pain point
This story was originally published at 21:52 IST on 19 July 2025
Register to read our real-time news.Informist, Saturday, Jul. 19, 2025
Please click here to read all liners published on this story
--HDFC Bank: Rate cycle on downward trend is headwind for the bank
--CONTEXT: Comments by HDFC Bank mgmt in post-earnings concall with analysts
--HDFC Bank: Not focused on any particular segment for credit growth
--HDFC Bank: Seeing growing demand for credit from rural segment
--HDFC Bank: Festival mood could be good trigger for retail loan demand
--HDFC Bank: Some buoyancy in MSME segment loans to continue going ahead
--HDFC Bank: Home loans should pick up in festival season
--HDFC Bank: Don't see HDFC Bank customers going to HDB Fincl for loans
--HDFC Bank: Not competing for home loans at low rates like some PSU bks
--HDFC Bank: Aspire for credit-deposit ratio to be 85-90% in medium term
--HDFC Bank: Current provisioning prudent, not to address any pain point
By Kabir Sharma
MUMBAI – The provision of INR 107.00 billion made by HDFC Bank Ltd. in the June quarter is prudent and does not mean there is a pain point within the bank, the bank's management said in a conference call with analysts Saturday after releasing its results for the June quarter. The bank made floating provisions of INR 90.00 billion and additional contingent provisions of INR 17.00 billion during the quarter.
On the back of this cautious provisioning, the bank's total provisions ballooned to INR 144.42 billion, up 455% on year. "The credit cost... it's been pretty much stable, so we are extremely happy, and even the outlook is pretty much benign and so even the so-called counter cyclical buffer, all the contingent provisions, has no correlation to any pain points that we have or that we are likely to have," the bank's management told analysts.
The management also said that the bank is focused on the middle- and upper-middle-income layer of consumers and will not be competing with public-sector banks to give home loans at cheaper rates. "The disbursal growth in mortgages if you see is consciously down," the bank's officials told analysts. "The reason being that when there are certain institutions, particularly on the public-sector side, which have a rate of 7.1% or 7.3% or thereabouts, we are not competing at those kind of rates."
However, the bank expects to see good demand from consumers in the upcoming festival season, resulting in an uptick in home loans. "...with the onset of the festival demand, we do expect a good amount of uptick there (in retail loans) and we are positioning ourselves to take advantage of that in the next few quarters," the management said.
The bank said demand for loans from the rural segment is also growing, but the bank is not focused on any particular segment. Chief Financial Officer Srinivasan Vaidyanathan had also said in a post-earnings media call that the bank is not focusing on any particular portfolio to support credit growth.
On the credit-deposit ratio, which the bank has been focused on since the merger of parent Housing Development Finance Corp. Ltd. with itself, the management said it aims to bring it to the pre-merger level of 87-88% and keep it between 85% and 90% in the medium term. The bank's credit-deposit ratio was 95% at the end of June.
Asked if some customers were overlapping between the bank and its non-banking finance subsidiary HDB Financial Services Ltd., HDFC Bank said its customers will not go to a company like HDB Financial and the customers of the non-bank lender are a notch or two below those of the bank.
The management said there would be headwinds for the bank's margin from the rate cuts frontloaded by the Reserve Bank of India. "You know, as they probably would have mentioned, a large part of our asset side of the balance sheet is floating in nature. It's somewhere around the 70% mark whilst the liability side is more or less fixed in nature. So this would be a headwind in terms of when a cycle is on a downward trend. This impact is dependent on the pace and depth of the rate cuts," it said.
In early June, the RBI had announced a cut of 50 basis points in the policy repo rate to 5.50%, along with a reduction of 100 bps in the cash reserve ratio to 3% of banks' net demand and time liabilities, to be implemented starting September.
Despite the sharp rise in provisions, HDFC Bank managed to beat the Street's expectations on net profit for the June quarter on the back of a stake sale in HDB Financial Services Ltd. It reported a net profit of INR 181.55 billion, up 12.2% on year and higher than analysts' estimate of INR 173.12 billion. Sequentially, however, the net profit rose a mere 3.1%. End
Edited by Rajeev Pai
For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.
Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com
© Informist Media Pvt. Ltd. 2025. All rights reserved.
To read more please subscribe
Share this Story:
