Although HDFC Bank's retail portfolio has taken the brunt of the impact of the coronavirus epidemic, experts anticipate a turnaround in business performance in the coming quarters as the macroeconomic situation improves.
Kotak Institutional Equities analysts identified a few main problems in the retail portfolio. To begin, loan growth patterns have begun to quicken, although this is mostly due to business banking. Second, even if the retail portfolio accelerates, analysts expect it will take a little longer for net interest income (NII) growth to contribute as the percentage of high-yielding assets declines and the high-yielding fixed-rate book is re-priced at a lower interest rate. Third, the June quarter revealed that provisions are still fairly high, and given the type of slippages, analysts anticipate a speedier recovery, but timetables are a bit tricky since they are also depending on the recovery environment of existing bad loans. Loan growth has been roughly consistent with previous quarters, with the corporate category performing the most of the heavy lifting in terms of year-on-year increase. Its 14 percent year-on-year loan growth is driven by 18 percent year-on-year business loan growth and 10 percent year-on-year retail loan growth. In the retail category, HDFC Bank has seen a significant increase in demand for unsecured, house loans, and loans against property.
According to the study, the HDFC bank increased market share in the car loan category during the quarter, and July disbursements are moving back to pre-covid levels, showing confidence in the year's growth prospects. According to the bank, "it intends to strengthen its focus on the government employee market in the future. We expect the bank to produce 14-15 percent loan compounded annual growth over the next three years, underpinned by a retail growth rebound with growth rates in the 13-15 percent range. A faster economic rebound, as well as increased retail credit demand, may support higher growth projections," it added.
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