HDFC Bank will witness some moderation in its net interest margin (NIM) in the second quarter as the mortgage book of Housing Development Finance Corp (HDFC) carries a lower spread, MD and CEO Sashidhar Jagdishan said at the bank’s 29th annual general meeting on Friday.
The merger of HDFC and HDFC Bank became effective on July 1, and Q2FY24 will be the first quarter when the lender reports results of the merged entity.
“We operate within a range of 4-4.4% (of NIM) over multiple businesses and interest rate cycles. It is also dependent on the business mix, but this is largely the kind of NIMs that we will operate in,” the MD said. During April-June, HDFC Bank’s net interest margin stood at 4.1%.
Jagdishan said the merger presents a host of opportunities for the bank as it now has subsidiaries in the life insurance, general insurance, realty investment and asset management sectors. He added that just 2% of HDFC Bank customers had opted for an HDFC home loan and the scope of further penetration in this customer segment provides a lot of growth runway. “If we do manage to execute well, there is an opportunity for the bank to create a new HDFC Bank every 4-5 years without compromising on our credit policy and profitability. I think there is a great opportunity this merger is going to give us.”
HDFC Bank part-time chairman Atanu Chakraborty shared similar views, saying that the lender will benefit from the addition of home loan products which can now be directly offered through the bank’s large network of branches. The home loan business will also benefit from low cost of funds that a bank traditionally enjoys, he said.
“As a consequence of this merger, the larger balance sheet of the bank would offer to the national economy possibilities of higher credit growth, a larger bouquet of financial products and higher flows into affordable housing, agriculture, MSME etc,” the chairman said.
Speaking about the viral video of a senior bank employee verbally abusing his sales team for not meeting targets, Jagdishan said that such one-off cases occur due to the sheer size and large manpower of the bank. However, the bank will not tolerate any of such incident which is not in consonance with its culture. The bank is working towards improving employee experience and will launch an employee happiness index in due course, he added.