A strong credit growth in the second quarter shows that the economy is on the mend and consumers are not holding back amid higher inflation and rising interest rates.
Private sector lender HDFC Bank’s loan book showed a remarkable growth of 23% in the July-September quarter, a good 700 basis points or 7% above the systemic growth.
“HDFC Bank’s overall loan growth was around 700 bps-plus above system loan growth of around 16%, which is very encouraging,” said Suresh Ganapathy, associate director, Macquarie Capital.
The growth has been led by retail, commercial and rural banking loans. Its total advances now stand at Rs 14.80 lakh crore against a total loan book of Rs 11.98 lakh crore in the same period last year, provisional numbers showed.
Commercial and rural banking loans increased 31.5 per cent over the previous year while the domestic retail loans and corporate & wholesale loans saw a rise of above 20 per cent over last year.
Brokerage firm Prabhudas Lilladher said that the credit growth and NIM could see an uptick for private banks. “NIM expansion for private banks may be higher by 11 bps compared to 5 bps for PSU banks as proportion of repo linked loans is higher for private banks,” it said in a report.
“HDFC Bank might see sustained growth in PAT while NIM expansion could lower as compared to peers,” the report added.
Narendra Solanki, head of equity research at Anand Rathi, said that the current environment looks positive for private banks as higher low cost deposit mobilisation aides in sustaining better NIMs.
The private lender has revamped its digital journey after facing the wrath of the regulator over repeated glitches.
The bank launched SmartHub Vyapar merchant app that is going to cater to the needs of the merchant community.
“We have crafted the new SmartHub Vyapar app to meet every need of the merchant and bring efficiencies to their banking and business ecosystem,” Parag Rao, group head, Payments Business, Digital & IT, HDFC Bank, said. “Our aim is to solve problems and difficulties merchants face in their day-to-day business, help them grow their business, deepen our reach across India and connect with trade hubs. This app brings a vibrant suite of payment, lending and business solutions onto a single platform.”
The merger with mortgage lender is another positive that will help HDFC Bank to expand its balance sheet with the addition of the long tenor mortgage loans.
Rao said that the merger will provide the lender with a good set of customers and it’s an opportunity on multiple fronts.
“We will get a good set of customers who have a housing loan for more than 10 years, they are well-underwritten so it’s an opportunity on multiple fronts. It’s an opportunity for more assets, it’s an opportunity for liability accounts, it’s also an opportunity for payments because all of them.”
Gaurav Jani of Prabhudas Lilladher sees the bank performing well in the near-term and the advanced economies tipping into a recession won’t have any impact on India’s banking sector.
“The growth story for Indian banks looks intact even as recessionary winds blow in the advanced economies,” he said.