Reasonably well positioned in retail: HDFC Bank ED

Moneycontrol Bureau

Private sector lender HDFC Bank, known for its expertise in transaction banking, expects more growth in retail rather than wholesale banking in the year ahead. During October-December quarter, the bank expanded its retails loans by 29% year-on-year to Rs 1.30 lakh crore while corporate loans increased 18.5% y-o-y to about Rs 1.11 lakh crore.

"There is an increased focus on retail. We are reasonably well positioned here," Paresh Sukthankar, the executive director, HDFC Bank told reporters while announcing the quarterly earnings.

"We will continue to gain market share. Retail is outpacing the corporate growth.  In retail, we have around 7-8 products. When a single product does not grow, another product makes good for it. Hence, the growth keeps coming. Coupled with this, branch expansions too helped attain retail escalation," he said.

Also read: HDFC Bank Q3 profit up 30%, challenges ahead

HDFC Bank recorded the highest annualized return on assets at 1.8% in Q3. To sustain this level, the bank has to either achieve around 30% loan growth going forward or take the inorganic route to acquire loan portfolios.

According to Sukthankar, the bank's annualized return on assets was usually in the range of 1.4-1.6%. It depends on the credit cost. "Currently, our credit cost is way lower to the normal credit cost. As long as it remains there, we will continue to enjoy higher level of RoE. Getting a normal credit cost depends on the economic environment and individual products as well," he said replying to a moneycontrol.com query.

HDFC Bank is hopeful of 25 basis point cut in the repo rate, at which banks borrow money from the Reserve Bank of India. The liquidity position is a key factor for rate cuts by banks.

First, banks need to reduce their deposit rates then, base rate will be reduced. However, banks are unlikely to reduce deposit rate unless they mop up enough resources through deposits, observed the executive director.

HDFC Bank generally lends to corporates for their working capital requirement, which is of shorter duration. However, the bank of late started project financing more than a year back for long term (5-10 years) credit disbursals.

"Immediate, we do not see it growing rapidly. We expect it to grow over years. Currently, it forms around 10% of the corporate book while it is just at 3-4% of the total loan book. Our composition between retail and corporate loans stood at 53:47, little changed from the previous quarter," Sukthankar said.

On non-performing asset front, retail formed the majority of incremental bad assets to the tune of 80%. Gross non-performing asset (NPA) ratio rose to 1% as against 0.91% in the July-September quarter. Net NPA ratio remained unchanged at 0.20%.

"Our NPAs still remain low and stable. Commercial vehicle and construction equipments are the two segments, wherein retail NPAs came," he said adding that the bank recorded around Rs 10,000 crore incremental loans during the quarter. Retails contributed to the tune of Rs 6,800 crore.

saikat.das@network18online.com