HDFC Bank has taken the crown away from ICICI Bank to become the largest private sector lender in the country with a balance-sheet size of Rs 895,653 crore.
ICICI Bank, once the fastest-growing private sector bank and the longtime ruler, has slipped to the second place with a balance-sheet size of Rs 760,916 crore.
The gap in profitability is also widening. For the fiscal's first quarter ended June 30, the net profit of ICICI Bank grew 8.2% over the prior year to rest at Rs 2,049 crore. HDFC Bank was way ahead and posted a net profit of Rs 3,893 crore with a year-on-year growth of 20.2%.
Among private sector lenders, HDFC Bank's total advances are in tent-pole position. At the end of the quarter ended June 30, it had advances of Rs 580,976 crore compared to ICICI Bank's loan portfolio of Rs 464,200 crore.
Even the deposit franchise of HDFC Bank has outgrown ICICI Bank. While HDFC Bank had a total deposit base of Rs 671,376 crore, for ICICI Bank it was just Rs 486,254 crore.
HDFC Bank has not only grown faster in recent times but also managed to keep its asset quality in stronger shape than its peer ICICI Bank, which funded some big infrastructure projects. At the end of the quarter ended June 30, ICICI Bank had gross non-performing assets (stressed loans where the repayment of principal and interest is delayed beyond 90 days) of Rs 43,148 crore compared to HDFC Bank's Rs 7,204.2 crore.
The corporate book of ICICI Bank shrunk by 2.8% over the previous year as the bank became cautious in selecting the companies it lent to. During this period, HDFC Bank increased its corporate book as safe refinance opportunities abounded with initial risks of some of the project loans wearing off.
Both the banks refused to comment for the story saying they are in a silent period due to a regulatory requirement before the announcement of their results later this month.
Incidentally, the strategic approach of the two top private sector banks has been different. Over the years, HDFC Bank has focused mostly on retail loans and shorter-term advances. The exposure to the infrastructure loans has been limited.
Big exposures of ICICI Bank to the power, cement and iron and steel have got impaired, a general trend reflected in infrastructure financing of most banks, accentuated by the slowing economic growth. The cancellations of the coal mining licences, fall in commodity prices and stunted growth in exports have damaged the repaying capacity of corporates, dragging down the profits of banks.
ICICI Bank's gross additions to NPAs stood at Rs 4,976 crore for the quarter ended June 30, in contrast to HDFC Bank's Rs 3,100 crore. However, for ICICI Bank, the NPA additions were lower than its previous seven quarters. But going by the first quarter results, the bank's retail NPAs are growing. The gross delinquencies in the retail portfolio rose to Rs 4,140 crore from Rs 3,667 crore a quarter ago.
For HDFC Bank, the gross NPA additions were elevated from the previous quarters due to agri loans where repayments were delayed with many state governments declaring a loan waiver.
"During the quarter ended June 30, 60% of the total increase in gross NPAs pertained to the agricultural segment. Recoveries from agricultural advances were impacted during the quarter by borrower expectations of farm loan waivers. On the asset quality front, we did see an increase in gross NPAs from 1.05% in March to 1.24%. Again, roughly 60% of the increase, about Rs 800-odd crore, came from the agricultural segment, and the rest of it is pretty much in line with the kind of slippages that we have seen in other segments over a period of time. The net reductions in NPAs were Rs 1,750 crore, of which Rs 490 crore was upgrades and write-offs were Rs 737 crore," HDFC Bank management told analysts after the first quarter results.
...& ANALYSIS
- The gap in profitability is also widening. For Q1 FY2018, the net profit of ICICI Bank grew 8.2% year on year to Rs 2,049 crore. HDFC Bank posted a growth of 20.2% at Rs 3,893 crore
- HDFC Bank has not only grown faster in recent times but also managed to keep its asset quality in stronger shape than its peer ICICI Bank, which funded some big infrastructure projects
- Among private sector lenders, HDFC Bank's total advances are in tent-pole position. At the end of the quarter ended June 30, it had advances of Rs 5,80,976 crore compared to ICICI Bank's loan portfolio of Rs 4,64,200 crore
- Even the deposit franchise of HDFC Bank has outgrown ICICI Bank. While HDFC Bank had a total deposit base of Rs 6,71,376 crore, for ICICI Bank it was just Rs 4,86,254 crore
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