HDFC Bank to grow its advances a little slower than deposits

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HDFC Bank will grow its advances a little slower than the deposit growth in a bid to bring down the credit-to-deposit (CD) ratio to pre-merger levels.

Pre-merger, the CD ratio of India’s largest private sector bank was at 80-85 per cent. HDFC merged with HDFC Bank with effect from July 1, 2023.

Post-merger, HDFC Bank’s CD ratio was at about 104 per cent as at March-end 2024.

“It is our endeavour to bring down the credit-to-deposit ratio to pre-merger levels and our focus would be to maintain adequate liquidity buffers, repayment of erstwhile HDFC borrowings as and when they mature, including weighing any prepayment opportunities that may arise, and pursuing profitable sources of lending,” said Sashidhar Jagdishan, MD & CEO, in a letter to shareholders.

During this time of adjustment, the Bank would grow its advances a little slower than the deposit growth.

“We will avoid pursuing growth which does not meet our risk-adjusted profitability thresholds, in line with the Bank’s philosophy,” said the HDFC Bank chief.

Jagdishan emphasised that in many ways the consolidated Bank is now a new organisation with a different balance sheet composition.

For example, it has a higher proportion of borrowing at 21 per cent versus 8 per cent pre-merger and a lower CASA (current account, savings account) ratio.

“Key metrics of the new organisation will be different than that of pre-merger levels. For us, this is HDFC Bank 2.0 that has to be seen differently, and comparing it with the past in terms of metrics would not be the right way.

“The merger has presented the Bank with a massive opportunity which we’re working to seize,” he said.

Jagdishan noted that pre-merger approximately 30 to 35 per cent of incremental home loan disbursals were to customers with an HDFC Bank savings account. This has now touched approximately 85 per cent of incremental disbursals in a space of just nine months.

“Our ability to build a strong liability franchise leveraging home loan customers is well on its way to fruition,” he said.