HDFC Bank on Friday reported a 20% year-on-year rise in its net profit for the quarter ended March, gaining from increased demand from both retail and wholesale segments. The bank’s retail loan book grew by over 29% compared to the corresponding quarter last year as almost every product within the retail portfolio registered strong growth. In an interaction with reporters through a conference call, deputy managing director Paresh Sukthankar speaks about the performance of the retail book, opportunities arising from the digital banking space and where demand for credit is coming from. Excerpts…
What is the amount of loans you have bought from HDFC Ltd this quarter and what is the quantum for the whole fiscal?
For this quarter, the total loans we bought stood at Rs 4,799 crore. It was slightly higher than the normal average that we buy every quarter. For the year as a whole, the total purchases of home loans that we had originated was about Rs 12,773 crore, which again reflects a pretty strong growth. So if you look at our home loan book, that has seen a fairly strong growth, it was around 32%, because this year we have bought roughly about 70% of what we originate as against what we were taking earlier, which was about 50-55% till last year.
Our agreement has always been that we could buy up to 70%, and I think we will continue buying around 70%.
How has the commercial vehicle (CV) and construction equipment (CE) segments performed?
On a year-on-year basis, the CV/CE segment, as a business, has actually grown by 24%. On a sequential basis, it has grown by 3.9%. So I think that seems pretty much back on track in terms of the growth rate. It is a little more on the CV side. CE is still a mixed bag. But clearly on the CV side, in the medium and heavy commercial fields, we have seen for the past couple of quarters a pick-up and that has been maintained. Obviously, it is coming off a lower base so the growth is looking a little elevated.
Which side are you focusing on in terms of digitising the banking process – retail or wholesale?
I think from a business perspective there are strong opportunities in both wholesale and retail. There are various initiatives that we have rolled out to execute our plans there. Digital has been an extremely strong and important part of our strategy and that, again, is not just retail. A major portion of it is retail but some of it also extends into our wholesale businesses. On the retail side, products like 10-second online loans have contributed to personal loans growing faster than the rest of retail loans.
Where is credit demand originating from?
Obviously, we have gained market share in the wholesale business, which has meant a larger share of the existing customers on the corporate banking side, and adding some new customers on the emerging corporates side and the business banking side, on the wholesale front. And on the retail front, actually, almost every product has shown growth.
Usually in a retail portfolio of 6-7 products, you have 2-3 growing fast and 2-3 that are showing moderate growth. But every meaningful product has shown growth in excess of 20%. Auto grew at 22%, commercial vehicles and construction equipment grew at 24%, home loans grew at 32%. So I can’t single out anything and say that growth came from X and not Y. We have seen a consistent growth across our entire range of retail products and across two-three segments in wholesale.
Your provisions have risen substantially, both and annually and sequentially. Can you throw some light on that?
No counter-cyclical provision has been made. Because the loan book has grown substantially on a sequential basis, general provisions for standard assets have seen a fairly high growth.
In fact, we made general provisions of around Rs 161 crore. Last year, this was around Rs 118 crore. So majority of the rise in provisions is due to increase in general provision for standard assets.
