HDFC Bank will be happy to grow slowly in the case of irrational or heightened competition for mobilising deposits and growing advances, said Sashidhar Jagdishan, CEO of HDFC Bank during an analyst call. As a token of appreciation for the hard work during the merger of HDFC Bank with HDFC Ltd, the bank has announced an ex-gratia payment of around Rs 1,500 crore to its staff.
“We are not a quantity player for liabilities or assets. Our focus is on quality, which is a balance between risk and margins. We have demonstrated that whenever there are any adverse or early indicators on the risk side, we tend to grow slow,” said Jagdishan.
“If there is heightened competition or irrational competition both on the liabilities and assets side, we are happy to give up that kind of a share. We’re happy to grow slowly.”
HDFC Bank on Saturday reported a 37% year-on-year increase in net profit to Rs 16,512 crore in the fourth quarter of the previous financial year. However, net profit grew by only 0.84% on a quarter-on-quarter basis, impacted by a floating provision of Rs 10,900 crore during the fourth quarter.
In the medium to long term, the bank will focus on improving its profitability metrics defined by return on assets (RoA) and earnings per share.
“To achieve that the key is to ensure the most important focus is the sustainability of our deposit franchise, especially the retail deposit franchise,” Jagdishan said.
“Key to sustainable momentum is our enhanced customer engagement and elevated service-first culture,” he stated.
Regarding the rationale behind the ex-gratia payment of around Rs 1,500 crore for staff, he said the team’s hard work during the merger and subsequent challenges, aiming to motivate them to stay with the bank amid high attrition rates in recent years.
“There was a lot of hard work that happened in the run-up to the merger and subsequent to that on a much larger balance sheet and led by a complex and adverse liquidity situation in the system. I think the team has rallied to adjust to the new norms; they worked hard after being battered from all fronts at the ground level,” Jagdishan said. “It is our endeavour to ensure that the large ground workforce, which is 90% of our total manpower, is motivated and this is a way of trying to say thank you to them,” he said.
He clarified that was a one-time ex-gratia that the bank has provided for after getting a one-off gain from its stake sale in its education subsidiary HDFC Credila.
The bank’s high deposit growth in the fourth quarter has lowered its credit-to-deposit ratio to around 105% and liquidity coverage ratio to 115% as of March-end, compared to 110% for both metrics in December.
“While the fourth-quarter mobilisation is healthy, I must upfront tell you that there are some transitory flows that have come in which is more than what we have anticipated. Even adjusting for that, retail growth was rather healthy,” he said.