HDFC Bank, the largest private lender in the country, will grow its advances slower than deposits as it aims to pursue profitable growth without sacrificing the asset quality. The lender will also work to lower its credit-to-deposit ratio to pre-merger levels, its managing director and chief executive officer Sashidhar Jagdishan said in a message to shareholders.
“During this time of adjustment, the bank would grow its advances a little slower than the deposit growth,” Jagdishan said in the annual report released on Thursday. “We will avoid pursuing growth which does not meet our risk-adjusted profitability thresholds, in line with the bank’s philosophy,” he added.
It has been a little more than a year since mortgage lender HDFC was merged with HDFC Bank. After the merger, the bank received a large pool of mortgage loans to its portfolio but a much smaller amount of deposits, taking its CD ratio above the 100% mark. Prior to the merger, the bank’s CD ratio was at 85% and it had maintained the ratio at 85-87% over a long period.
“It is our endeavour to bring down the credit-to-deposit ratio to pre-merger levels and our focus would be to maintain adequate liquidity buffers, repayment of eHDFC borrowings as and when they mature, including weighing any prepayment opportunities that may arise, and pursuing profitable sources of lending,” he said. “We will continue to pursue profitable growth without sacrificing asset quality,” he added.
As the banking sector is struggling to raise low-cost deposits, the bank will focus on granular deposit mobilisation, leveraging its distribution strengths. The bank is taking significant steps to transform its digital channels into holistic platforms. Its mobile and netbanking platforms are set to introduce a host of new features.
“Looking ahead, I am excited about the opportunities that come our way as we continue our journey towards becoming a future-ready digital bank,” he said. “Our commitment to delivering exceptional experiences and inclusive banking services will be driven by the adoption of new-age technologies focusing on scalability, resilience and security while building the bank for the future,” he added.
In his message, HDFC Bank chairman Atanu Chakraborty said the bank has completed one year of the merger and the process of integration has been completed seamlessly and efficiently across all dimensions of the business.
“The synergies of the merger are being manifested through the combined strengths of the two merged entities, the home loan expertise of erstwhile HDFC Limited and the extensive distribution franchise of HDFC Bank,” said Chakraborty. “As the nation’s growth story unfolds, we stand prepared to reap the benefits through this historic combination,” he added.
Chakraborty said that HDFC Bank’s financial performance in the past year demonstrated resilience amid challenges, with market share growth in deposits as well as advances. The bank ensured prudent risk management and asset quality across portfolios, he added.