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In Q1FY25, HDFC Bank’s total advances grew by 52.5 per cent Y-o-Y to Rs 24.63 trillion, while deposits grew by 24.4 per cent Y-o-Y to Rs 23.71 trillion (Photo: Reuters)
HDFC Bank’s loan growth on a year-on-year (Y-o-Y) basis could slip below 10 per cent in the quarter ending September 2025 due to the base effect and the sell-down of portfolios to manage the loan-deposit ratio (LDR), said Macquarie analysts in a research report on Wednesday.
“Due to the base effect (further run-downs of the corporate portfolio of erstwhile HDFC Ltd picked up in subsequent quarters), coupled with the sell-down, Q2FY25 loan growth could be less than 10 per cent Y-o-Y, in our view,” the Macquarie report said.
HDFC Bank has previously indicated that it will grow its advances at a slower pace than its deposits, as it seeks to bring down its elevated loan-deposit ratio to pre-merger levels. The former mortgage financier HDFC Ltd was merged with the bank with effect from July 1, 2023.
“HDFC Bank’s LDR, from a peak of approximately 110 per cent, has already declined to 103.5 per cent,” the Macquarie report stated, adding that the LDR is expected to decline further. “This is in line with the bank’s stated strategy of consolidating the balance sheet and focusing on margins and profitability in the medium term,” the report added.
In the post-earnings analyst call, the bank’s managing director and chief executive officer, Sashidhar Jagdishan, had stated that the bank is aiming to reduce its loan-deposit ratio “as quickly as possible” while maintaining its commitment to profitable growth.
“We are cognisant of the risks in the system, and instead of being nudged on that, we want to do it ourselves because it makes economic sense to bring it down as quickly as possible,” Jagdishan had said in July. However, he did not specify a timeframe within which the bank would reduce its LDR to pre-merger levels. “I would love to do it in one year. But it’s not something that I can drop in one go. It’s not practical,” he added.
“We expect net interest margins (NIMs) to improve by a further 5 basis points (bps) quarter-on-quarter (Q-o-Q) in Q2FY25 to 3.52 per cent, compared to most other banks which may report flat to slightly declining margins,” the report stated.
In Q1FY25, HDFC Bank’s total advances grew by 52.5 per cent Y-o-Y to Rs 24.63 trillion, while deposits grew by 24.4 per cent Y-o-Y to Rs 23.71 trillion.
First Published: Sep 25 2024 | 2:48 PM IST
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