Third-quarter results of the country’s second-largest private lender, HDFC Bank, met expectations as its net interest income rose 24% (y-o-y) to Rs 7,068.5 crore and net profit grew by 20.1% (y-o-y) to Rs 3,356.8 crore. Deputy
managing director Paresh Sukthankar spoke to the media after the results. Excerpts:
How are you managing to grow at 20% in a market that has no demand? Are you undercutting and winning away from other players?
Our high rate of growth is not something that happened this quarter. We have been gaining market share in the wholesale segment for the last 2-3 quarters. Moreover, it’s not that there is no demand at all. No doubt the demand for new project loans and greenfield financing is muted, but there is some demand for working capital loans.
As far as undercutting is concerned, we have a base rate below which we cannot lend, and there are 2-3 more banks operating at the same base rate. So, even for lending at the base rate, there is enough competition. Moreover, if its purely a question of competing on rates, the commercial paper market is, actually, much more competitive.
Throw some light on NIM expanding marginally compared to Q2FY16.
This quarter, sequentially, our retail loan book grew by 4.7% as compared to slightly under 4% for our wholesale book. Since retail comes with slightly higher yields, our overall yield expanded. This, coupled with better-than-last-quarter CASA growth, saw our NIM expand by 7 bps sequentially.
Can you explain the rapid growth in your CASA deposits?
We have seen some growth in current account deposits even at the system level, but our growth in this quarter – close to 29% – was distorted to some extent due to a tax-free bond issue, for which we were the collections bank. But even when adjusted for that, current account deposit growth for us has been 23%. Similarly, savings account deposits, which didn’t have any such distortions, grew at 20.6%.
From which segments in retail is the pick-up in demand coming from? Given that RBI is flagging off that the retail segment is growing too fast, do you have any such concerns?
The largest two segments in our retail business – auto and business banking – each of which account for Rs 50,00-60,000 crore of our total book, have grown at 23% and 22% respectively. While the former has been aided by car sales growing at mid-to-high single digits, price increases and we managing to increase our market share, the later has seen some bounce back in loans for products like commercial vehicles and construction equipment. At least as of now, the asset quality in our retail portfolio has been fairly stable.
Though asset quality remains very good, what is the outlook going forward?
In retail, our portfolio is, by and large, reasonably stable. Though delinquencies vary from product to product – high in personal loans, credit cards, etc and low in mortgages, new car loans, etc – on a weighted average basis, the retail asset quality is holding up reasonably well. The wholesale side, on the other hand, is a little more unpredictable because it includes both SMEs and mid-to-large sized corporate, which are going through strain.
Though the environment remains challenging and one has to be cautious in terms of the outlook, our NPLs, which have been around 1% for the last couple of quarters, are still below our 20-year average of about 1.3%. And as long as we are below such historical averages, we remain comfortable.