HDFC Bank’s Journey to Financial Resilience

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HDFC Bank’s Journey to Financial Resilience
  • By Gautam Tejwani
  • 23rd April, 2024
  • Banking

putting Profitability First: HDFC Bank’s Medium-Term Strategy :

Shashidhar Jagdishan, the CEO of HDFC Bank, described the bank’s decision to put profitability ahead of short-term growth in a recent results conference call. In order to strategically address issues including a higher credit-to-deposit ratio and decreased core income, the bank is concentrating on sustainable financial performance.

A focus on sustainability:

Jagdishan underlined that the bank’s sustainability depends on keeping a sizable base of customer deposits. HDFC Bank intends to make investments in developing its personnel, improving its distribution networks, and utilizing technology in order to do this.

There Are No Shortcuts to Achievement:
Recognizing the response of the market to his prior guidance, Jagdishan declined to provide detailed estimates at this time. Rather, he highlighted the significance of long-term goals and sustainable growth, emphasizing the requirement for improved customer interaction and a culture that values service.

Highlights of Finance:

HDFC Bank announced a noteworthy 37% year-over-year gain in net profit for the January–March period, despite a difficult quarter. This increase was primarily driven by greater net interest income and the sale of a share in its education finance unit. However, because of higher provisions and slower growth in net interest income, sequential growth was only 0.85%.

Consistent Asset Caliber:

With a gross non-performing assets (NPA) ratio of 1.24% and a net NPA ratio of 0.33%, the bank was able to maintain consistent asset quality. Provisions increased threefold to ₹13,500 crore, with gains from the HDFC Credila sale contributing to the floating provisions for future losses.

Pay Attention to Deposits:

To ₹23.8 trillion, deposits rose by 7.5%, including notable growth in retail deposits. With 84% of total deposits being retail deposits, the credit-to-deposit ratio was lowered to 105%.

Refund and Capital Obtaining:

In addition to receiving board approval to issue ₹60,000 crore in tier 2 capital through bond instruments, HDFC Bank declared a dividend of ₹19.5 per equity share.

Analyst Perspectives:

Rahul Malani, a research analyst at Sharekhan by BNP Paribas, states that HDFC Bank’s results for the fourth quarter of FY24 were mostly expected. The bank was nonetheless able to maintain a decent return on assets (RoA) of about 1.9% in spite of obstacles.

Gazing Forward:

The bank’s objective is to steadily improve its financial performance over the next quarters while maintaining its focus on improving margins, shifting its loan mix towards a more retail-oriented mix, and cutting back on high-cost borrowings.

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