HDFC Bank loan growth hits 19% in FY18 as retail business outperforms

Loans particularly auto, credit cards, and business banking charged ahead.

HDFC Bank clocked in healthy loan growth figures at 19% in FY18, according to Maybank Kim Eng, thanks to the bank’s strong retail business.

Financial products like auto loans, credit cards, personal loans and business banking performed strongly to buoy yearly figures although wholesale loans grew slower from a higher base last year. Retail loan demand may also benefit from higher consumption-led growth.

“HDFCB was able to maintain NIM at 4.3% despite higher interest offered for term deposits. A tilt in its loan mix towards high-yielding retail loans anchored NIMs,” said analyst Vishal Modi. “Asset quality remained benign, with gross NPLs at 1.3% and net NPLs 0.4 flat sequentially.”

Term deposits also surged 33% to post the highest growth in 10 quarters as interest rates offered were more attractive than other fixed income products.

The bank’s digital investments will also pay off in the coming years as its sustainable ROEs is within the range of 16-17%, which is amongst the best in the industry.

“CASA at 43.5% was stable. Increases in the distribution of third-party products such as mutual funds and insurance, card issuance and retail loan processing led to fee-income growth of 32% YoY. Management guides for mid-20s growth in the near term. We forecast a 19% CAGR for FY19-21E,” Modi added.