HDFC Bank reported a net profit of Rs 17,600 crore, a 17.4 per cent year-on-year growth in advances for the quarter ended September 30, 2024. This came after a seven per cent year-on-year growth in advances, which stood at Rs 24.95 lakh crore. In an interaction with the media, the management, represented by HDFC Bank chief financial officer V Srinivasan, said they would not like to give any forward guidance. However, on the trajectory of loan growth, he indicated that FY25 loan growth for the bank will be lower than market growth and in FY26, the bank should grow slightly faster than the market.
In recent quarters, HDFC Bank has slightly reduced its advances compared to its deposits, to ensure that the bank is operating at an optimal credit deposit ratio. With deposits of Rs 25 lakh crore, the quarter’s deposits grew by over 15 per cent year-on-year.
The credit-deposit or CD ratio, which measures how a bank’s deposits are monetised to grow its loans, stood at 100% in Q2 FY20. This is a fair improvement from the 105% seen in March 2024. Historically, HDFC Bank has maintained its CD ratio at 86 – 87 per cent, according to Srinivasan. We will finance our balance sheet more from deposits than borrowings, he said in a media call. The bank aims to bring its CD ratio to pre-merger levels in the next two years. Accordingly, this may have an impact on the bank’s loan growth.
For instance, in FY25, the bank has indicated that its advances may grow at a rate lower than the market rate. “Next year, loan growth may be slightly higher than market growth,” Srinivasan said.
Elaborating on loan growth, the CFO said HDFC Bank has reduced its loan growth in the unsecured segment since FY23. “We grew our unsecured loans by 19 per cent, while the industry grew by 23 per cent (that year). In FY24, we came down to 10 per cent and in FY25 also it is continuing with 9-10 per cent growth,” he said. HDFC Ltd announced its merger with HDFC Bank in April 2022 and the merger is set to materialise from July 1, 2023.
Post the merger, the management had initially given directions that they will not ignore profitability or net interest margin which has historically been above 4 per cent for the bank and that every four years, the bank will grow so fast that it will become another HDFC Bank. Not only has HDFC Bank been able to grow its NIM beyond 3.4 – 3.5 per cent post the merger, but due to the housing loan portfolio which is 30 per cent of its loan book, loan growth is also slowing down leading to re-calibration of the bank’s CD ratio from December 2024. When asked where the bank stands on these guidelines, Srinivasan said that what took us 2 – 3 years to do will take 4 – 5 years to do.
