Private sector lender HDFC Bank on Tuesday reported a 20.4% increase in its net profit for the September quarter. Its deputy managing director Paresh Sukthankar spoke to journalists on a host of issues.
Loan growth break-up
Within the overall growth of just under 19%, if you look at domestic advances, the growth was about 19.3%. There is an element of overseas advances, which will gradually come off this quarter. Of 19.3% overall domestic advances growth, the retail portion did grow at a little under 22%. In auto, you had most of the other products growing in medium to high teens. On the wholesale side, although we continue to have some disbursements which were fairly healthy, we had some short-term loans which had been done in the March quarter and ran off in this quarter. So, the overall growth in wholesale lagged the retail loan growth.
Liquidity is comfortable. Of course, in our case, we have built additional liquidity in the last few months in anticipation of the run-offs we will see in the FCNR (redemption). So, in fact, if you look at the net interest margin, which has come off by a few bps, part of that is because we have built additional liquidity which we have raised and which we are holding in either treasury bills or short-term investments to meet maturing obligations. But, overall, we are at the system level.
Credit card growth
While we remain a market leader and we continue to grow the number of cards, there is a heightened focus on the quality of origination in terms of not just the credit quality, but customers who actually use cards.
It’s still very early because the amounts which came off last quarter were really the non-leveraged ones, which were very small. Much of the redemption actually starts literally this week and going into the next few weeks…A lot of those who had gone for this had done this on a leveraged basis, so unless there are other investment opportunities for them, they would probably unwind those. From our point of view, from a liquidity or maturing FCNR basis, we’ve obviously raised that liquidity and are ready for it. In terms of the lending, it was about $1.9 billion. And then the total amount which we had got in here between FCNR and the others was about $3.4 billion.
When you look at this (4% a quarter ago) in comparison to 4.2%, there is a slight change going forward as well. There was a May 16 circular from the RBI which asked banks to cross up their balance sheet for LAF. If you do that consistently between the last quarter, this quarter and of course the next quarter, then on a comparative basis, the last quarter would actually have been a 4.3% and this quarter would remain at 4.2%.
We would look to have some tier-II raise, either this quarter or the next. There’s no urgency, but it’s an enabling resolution and we will probably, at some stage, look to access AT-I (additional tier-I) as well as tier-II, but there’s really no immediate time line to that.