HDFC Bank shares trade in red even the lender aims to expand its corporate loans

By: | Published: August 9, 2017 11:36 AM

HDFC Bank shares continue to drag Bank Nifty even after the announcement to expand its corporate loans through refinancing. Shares of the most valuable private sector lender were trading down 0.95% to Rs 1,761.

The gross non-performing assets as a percentage of total loans and advances rose to 1.24% at end-June, from 1.05% at end-March. (Image: Reuters)

HDFC Bank shares continue to drag Bank Nifty even after the announcement to expand its corporate loans through refinancing. Shares of the most valuable private sector lender were trading down 0.95% to Rs 1,761 while the banking sector index Bank Nifty loses 0.62% at 24,448.15 points. At a time when a majority of lenders are going slow on corporate loans due to their exposure and capital limits, HDFC Bank is seeking to expand its corporate loan book through refinancing.

The bank had reported a total capital adequacy of 15.6% with the core tier-I component at 13.6% as of 30 June this year. HDFC Bank corporate loans grew 20% to Rs 1.25 lakh crore in the financial year 2016-2017. Executive Director Kaizad Bharucha of HDFC Bank said, “We are also optimistic about increasing market share. Thanks to our strong asset quality, we do not face capital constraints unlike a large part of the banking system”.

He was, however, quick to add that the second largest private sector lender will not let go of its prudent philosophy, which has ensured that it is the bank with lowest non-performing assets. The gross non-performing assets as a percentage of total loans and advances rose to 1.24% at end-June, from 1.05% at end-March.

The asset quality of the bank deteriorated because of exposure to one account identified under insolvency and bankruptcy code. HDFC had an exposure of Rs 909 crore to one of such accounts. Recently in July 2017, HDFC Bank’s net profit rose to Rs 3,894 crore for the April-June quarter of FY 2018 as compared to Rs 3,239 crore a year ago in the same period.

In line with the consensus view among bankers, who are saying that greenfield projects are hard to come by as the private capex keeps sagging, Bharucha said the bank will eye refinance opportunities. Bharucha, however, said in the last few years, it has been able to increase the share of its term loans in the overall corporate loan book to 30% from 27%.

It can be noted that capital constraints, coupled with wariness from chunky bad assets, is making its peers concentrate on the resilient retail segment in the last two years. “Despite the challenges we remain optimistic. Excellent opportunities exist in further extending the WC loan book across business segments,” Bharucha said. He was speaking at an event where it announced the latest Greenwich study where the bank has been voted as the No. 1 in large corporate relationships and mid-market penetration.

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