HDFC Bank: A look at how financials evolved in last 6 years
HDFC Bank's earnings growth is likely to rebound as margins are expected to expand gradually as the bank replaces market borrowings with low-cost deposits.
HDFC Bank reported in-line earnings for the quarter ended March 2024. Although the lender has done well to recover its net interest income after the pandemic, analysts say that the falling net interest margin (NIM) remains a concern. In the medium to long term, the private bank's earnings growth is likely to rebound as margins are expected to expand gradually as the bank replaces market borrowings with low-cost deposits.
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HDFC Bank's margins have remained under pressure since the merger as the lender incorporated low-yield home loan products from parent HDFC into its balance sheet. The bank is gradually recouping the margins as it substitutes the high-cost borrowings with deposits and the changing loan mix towards retail over the next couple of quarters.
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HDFC Bank's CASA has faltered as the entire sector faces challengers in mobilising low-cost deposits. Depositors are putting money into capital market securities, instead of low-yielding savings bank deposits. HDFC Bank is among lenders trying to woo depositors by offering multiple benefits with savings accounts.
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HDFC Bank's net interest income growth has been steadily recovering from post-Covid lows riding on continuous loan growth. In the aftermath of Covid, the lender's NII growth fell to 11. However, it almost doubled in the subsequent year as advance registered robust growth. In FY24, the growth rose to nearly 25 percent.
HDFC Bank's advance growth has remained robust since it recovered from the Covid blues. However, recently the lender has intentionally slowed its advance growth to prioritise improving its deposit base, which has seen an improvement sequentially.
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HDFC Bank's asset quality deteriorated as its non-performing housing loans surged on account of more prudent delinquency recognition by the bank as compared with the erstwhile HDFC. However, the lender is expected to overcome this merger overhang gradually, according to analysts.
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HDFC Bank has bolstered floating provisions and hence total floating and contingent provisions stood healthy in FY24. The bank does not expect to revoke the floating provision in the near future, and it would help the lender strengthen its balance sheet and ensure that it is protected from any unanticipated movements, according to analysts.
![HDFC Bank has bolstered floating provisions and hence total floating and contingent provisions stood healthy in FY24. "The bank does not expect to revoke the floating provision in the near future, and it would help the lender strengthen its balance sheet and ensure that it is protected from any unanticipated movements, according to analysts.](https://images.moneycontrol.com/static-mcnews/2024/04/Provisions.jpg "HDFC Bank has bolstered floating provisions and hence total floating and contingent provisions stood healthy in FY24. "The bank does not expect to revoke the floating provision in the near future, and it would help the lender strengthen its balance sheet and ensure that it is protected from any unanticipated movements, according to analysts.")
