HDFC Bank shares gain 3% on strong loan growth in June quarter

Incremental disbursement to corporate/MSME is seen reducing margins, the bank said

Shares of HDFC Bank rose 3 per cent to Rs 1,110 on the BSE on Monday after the bank reported strong loan growth of 21 per cent year on year (y-o-y) at Rs 1.04 trillion for the first quarter of financial year 2020-21 (Q1FY21).

“The Bank’s advances aggregated to approximately Rs 1.04 trillion as of June 30, 2020, a growth of around 21 per cent as compared to Rs 8,297 crore as of June 30, 2019 (Rs 9,937 crore as of March 31, 2020),” HDFC Bank said in an exchange filing.

The bank’s deposit accretion remained healthy at 25 per cent y-o-y at Rs 1.19 trillion. Current Account Savings Account (CASA) ratio was up 30 basis points y-o-y to around 40 per cent as of Q1FY21.

“Sequential growth in advance despite deceleration in industry trend, indicates market share gain. Growth in the retail segment is expected to remain slower while disbursement to MSME under ECLGS and corporates is seen building momentum,” ICICI Securities said in a note.

During the quarter, the bank purchased loans aggregating Rs 1,376 crore through the direct assignment route under the home loan arrangement with HDFC.
 

Incremental disbursement to corporate/MSME is seen reducing margins, though it provided balance sheet growth ahead, it said.

“HDFC Bank has delivered strong growth despite economic activity being impacted due to the COVID-19 outbreak. On the asset quality front, slippages are likely to remain elevated due to the COVID-19 disruption from 2HFY21, which could keep credit cost higher; however, higher provisioning buffers should limit the overall impact on earnings,” analysts at Motilal Oswal Securities said in stock update.

Furthermore, a strong liability franchise would support margins, and higher liquidity levels would enable the bank to ride out the current crisis and gain higher market share. However, the CEO’s succession remains an important event in the near term, the brokerage firm said.