The recent merger of HDFC Bank and HDFC Ltd has brought forward the loan growth of the combined entity, triggering the need for the private bank to raise funds, said MD and CEO Sashidhar Jagdishan.
“There is a need to mobilise sustainable deposits in order to replace the maturing bonds,” Jagdishan said at an investor conference hosted by Goldman Sachs on February 19.
The bank’s deposit growth will not match loan growth overnight but will rather follow a glide path, he said. "We realise that we have preponed our loan growth and so we need a transition time to warm up the engine and raise a sustainable funding which will substitute some of the bond maturity," said Jagdishan. He further said that this will help the bank match its share of loans and deposits.
Despite this transition, the bank aims to maintain financial stability and continue its trajectory of profitable growth, said Jagdishan.
HDFC Bank currently has a 14-15 percent market share in loans and a 11-12 percent market share in deposits, said Jagdishan. After the merger, HDFC Bank got access to a large loan book from its home finance arm. In comparison, the bank has a smaller deposit book.
HDFC Bank's loan-to-deposit ratio (LDR) shot up to 110 percent in Q3FY24, as compared to 85 percent before the merger.
Analysts say that the bank needs to step up its deposit growth as a higher LDR could restrict loan growth in the near-term. Jagdishan said that HDFC Bank got a huge loan book from the merger. However, going ahead, the bank aims to maintain a healthy incremental LDR by balancing loan deployment and payments.
Jagdishan also said that Q3FY24 is not an indicator of the bank's future growth and so investors should be patient and watch how the bank mobilises deposits in the subsequent quarters.
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