HDFC Bank expects its current account savings account (CASA) ratio to improve as interest rates are likely to soften, Sashidhar Jagdishan, managing director and CEO, said in an analyst call. With rates on fixed deposits going up over the past one year, HDFC Bank has seen a moderation in the CASA ratio.
“We have seen it over 30 years how the composition of our deposit mix changes with different interest-rate cycles. So, in a high interest rate cycle, obviously, the CASA ratio is down. As we expect the economy to move northwards in a couple of years, we should see rates coming off. We should see the CASA volumes moving up,” said Jagdishan.
The bank is expected to protect its net interest margin because when rates are cut, the share of CASA will improve and deposit rates will fall. The private lender’s CASA ratio has witnessed a declining trend as depositors shift their funds to high-yield term deposits. The CASA ratio has declined to 34% at the end of third quarter of the current financial year, from 36% at the end Q1FY25.
“We seem to be progressing well in our journey to normalise our credit-deposit ratio, with the deposit growth outpacing the loan growth. We have seen a robust growth in our average deposits at about 16% which continue to gain market share,” said Jagdishan.
The management said the bank has sufficient liquidity and capital to comfortably support the loan growth when the macroeconomic environment becomes more favourable. The bank will continue investing in people, distribution and technology, and its loan growth is likely to align with the system in FY26 and exceed the system growth in FY27.
Meeting analysts’ expectations, HDFC Bank on Wednesday announced a 2% year-on-year rise in its net profit to Rs 16,736 crore for the third quarter.
Brokerages have retained their ‘buy’ and ‘hold’ ratings on the stock. Macquarie said HDFC Bank reported decent results in Q3 in a tough macro environment. The marginal uptick in slippages was due to a high AGRL book and that an improvement in margin trends should be watched out for.
“We believe with back-to-back positive outcomes on the asset quality in a tough macro, a substantial gain in deposit market share, consistent improvement in LDR and core margins in line with expectations, HDFC Bank delivered a strong quarter,” said Nuvama Institutional Equities. “We believe strong asset quality with flat core slippage and lowest lagged slippage ratio among large private banks is a key positive highlight of the result”.