HDFC Bank to increase growth as macroeconomic environment improves

HDFC Bank, India’s largest private sector lender, stated on Wednesday that it is well-positioned to accelerate its growth pace once the macroeconomic environment becomes more favourable. Earlier, the bank had announced its aim to grow faster than the system by FY27.

 

In his opening remarks, Sashidhar Jagdishan, managing director (MD) and chief executive officer (CEO) of HDFC Bank, discussed the challenging macroeconomic environment, highlighting tight liquidity conditions, moderating urban demand, and tepid private capital expenditure, among other issues.

 

In February 2024, Jagdishan had indicated that the bank would work to reduce its credit-deposit ratio quickly and achieve growth exceeding the system’s pace by FY27.

 

 

During a post-earnings analyst call on Wednesday, Srinivasan Vaidyanathan, chief financial officer (CFO) of HDFC Bank, addressed a query on growth targets. “We are present across all segments, products, and geographies. We have liquidity and capital tailwind. Currently, growth is calibrated either through credit models, particularly in retail, or pricing models. Tightening spreads in the corporate and non-retail sectors are being observed. However, the resources to scale up loans are in place. As the macroeconomic conditions improve, we can accelerate growth,” he said.

 

Advances and deposits 

The bank’s advances under management, on an average basis, stood at Rs 26.27 trillion for the December 2024 quarter, reflecting a growth of 7.6 per cent over Rs 24.41 trillion in the December 2023 quarter and 2.5 per cent over Rs 25.63 trillion in the September 2024 quarter.

 

Gross advances were Rs 25.43 trillion as of December 31, 2024, marking a 3 per cent increase year-on-year (Y-o-Y). Retail loans grew by 10 per cent Y-o-Y, commercial and rural banking loans increased by 11.6 per cent, while corporate and other wholesale loans declined by 10.4 per cent.

 

The management noted that it has been cautious with retail loans over the past 12 to 18 months, calibrating the growth rate through credit models. Despite this, the bank continues to invest in retail-focused personnel, products, and technology and expects the retail loan mix to increase.

 

The bank’s average deposits grew by nearly 16 per cent Y-o-Y to Rs 24.54 trillion in the December 2024 quarter. Average current account savings account (Casa) deposits rose by 6 per cent Y-o-Y to Rs 8.17 trillion during the same period.

 

Casa outlook 

The bank expects Casa volumes to grow and term deposit (TD) volumes to reduce as economic growth improves and the interest rate cycle moderates.

 

“We anticipate Casa volumes to increase as TD rates cool off. There is a strong correlation between interest rates and Casa volumes across the system. As a segment we consistently focus on, Casa ratio growth could accelerate for us,” Jagdishan said.