The Reserve Bank of India (RBI) has approved the re-appointment of Sashidhar Jagdishan as MD and CEO of HDFC Bank for a period of three years effective October 27, the bank said in an exchange filing on Tuesday.
“The RBI, vide its communication dated September 18, has approved the re-appointment of Sashidhar Jagdishan as the MD and CEO of the bank for a period of 3 years, effectively from October 27, 2023 to October 26, 2026. Please note that a meeting of the board of directors of the bank will be convened in due course inter alia to give effect to the above-mentioned appointment,” the notice said.
Credited with leading the merger of HDFC twins earlier this year, Jagdishan has an overall banking experience of 31 years. He had joined HDFC Bank in 1996 as a manager in the finance department and rose to become a business head of the finance department in 1999. He was subsequently promoted to the role of HDFC Bank’s CFO in 2008.
Prior to becoming the successor of former HDFC Bank chief Aditya Puri in 2020, Jagdishan was the group head of HDFC Bank, in addition to overseeing the functions of finance, human resources, legal & secretarial, administration, infrastructure, corporate communications and corporate social responsibility.
Merger pangs
While the RBI has approved Jagdishan’s second stint as head of country’s largest private bank, the lender is likely to see a muted financial performance in Q2FY24 and in the medium term, analysts say.
HDFC Bank held an analyst meeting on September 18 wherein its management said they expect a harder impact on net interest margin (NIM) post completing the merger with Housing Development Finance Corp (HDFC) on July 1.
Analysts at Jefferies said in a note on Tuesday that the key drag on HDFC Bank’s NIMs arises from high surplus liquidity of Rs 1.1 trillion that HDFC built as on June-end. This has pulled down HDFC’s NIMs from 2.7% for Q1FY24 to 2%. Further, the impact of RBI’s incremental-CRR move will drag near-term NIMs to 2%. The impact will normalise from FY25 onwards as liquidity gets deployed and I-CRR measure is taken back in phases this month. HDFC Bank’s NIM stood at 4.1% during Q1FY24.
HDFC Bank’s asset quality will also take a hit on account of rise in corporate sector bad loans of HDFC. HDFC’s gross non-performing asset ratio of 1.2% as of March-end rose to 2% as on June-end. This was majorly led by rise in corporate bad loan ratio, which rose from 2.9% to 7% during the same period.
“This lifts merged NPL (non-performing loan) ratio from 1.2% to 1.4% of loans & impact of higher provisions (on NPLs & conservative policies) is a slight drag on net worth & credit cost,” Jefferies said.
Retail deposit mobilisation would remain a key area of focus for HDFC Bank, the brokerage said, adding that it was “encouraging” to see management confirm that deposit mobilisation continues to hold-up and is a key target. The management also indicated that only for wholesale deposits do they keep evaluating interest rates against bonds, which come at slightly higher cost.
Jefferies has trimmed HDFC Bank’s share target price to Rs 2,030 apiece from Rs 2,100 earlier. The bank’s stock ended trading 2% lower at Rs 1,629 apiece on Monday. “We see 17% CAGR in profit over FY23-26, ROA of 1.9% and ROE of 17% by FY25. We retain our BUY rating,” it said.