There is a piece of good news for HDFC Bank Shareholders where the Banks appears to be re-focusing the Retail Loans. So let’s discuss the same in this short article as we move ahead.
Introduction:
In the current i.e., the fourth week of September stock price of HDFC Bank has fallen by around 3.1%. The Bank stock price closed at Rs. 1,533.70 on Wednesday 22nd September 2021. But there is some good news with regards to HDFC Bank as the Retail Assets Head of the bank has given some directions and projections on the front of doubling of the Retail Loans. Let’s discuss the reason in more detail in this short article.
Good News:
- Mr. Arvind Kapil, Country’s Head for Retail Assets has given some directions and projections regarding HDFC Bank’s Business Strategy specifically on the Retail Side.
- HDFC Bank is well-known as Retail-Oriented Bank where the Bank was focused on Retail Assets i.e., Loans, but in recent past in the last 2 years, there was a shift in the focus from Retail Assets to Corporate Assets.
- Earlier, In the Retail Loan Book % Share, the Long-term Average Loan Book Comprises of 54%-55% of Retail Loans, and rest to Wholesale Loans. But as of Q1FY22, the Retail Loans share came down to 47%.
- This increasing share of Wholesale Loans in the HDFC Banks raised the question of Will HDFC Bank will be focusing on Corporate/Wholesale Lending?
- Earlier, Banks like Yes Bank, ICICI Bank, and others were more focused on Corporate Lendings and when the NPA problem has arisen, these banks took a cautious approach and reduced the aggressiveness in Wholesale/Corporate Lending. And here, HDFC Bank took the opportunity of Conservativeness of the historically Corporate Lending Banks and acquired some good corporate loans.
- This shift in the stance of HDFC Bank raised many questions. As HDFC Bank is having a total Loan Book of Rs. 11.5 Lakh Cr., which is expected to grow in double-digit, there was a serious question that whether the Bank will focus majorly on Corporate Lendings.
- This question is also supported by the fact that in the last 12 months, the growth in the total loan book is around 14.4%, where the Retail Loan Book Growth was hardly 9% as compared to 20% growth in the Corporate Loan Book Growth.
- Specific Retail Borrowings in the Retail Loan Book is Rs. 3.7 Lakh Cr. out of Rs. 11.5 Lakh Cr. as of June 2021. Here, the Head of Retail Assets has given an ambitious target of Rs. 8 Lakh Cr. in the next 2 years till June 2023.
- HDFC Bank plans to double the number of loans it makes to retail borrowers over the next couple of years as consumer demand ramps up from a pandemic-induced slowdown.
- In Retail Loans, there is a good amount of margin. As noticed earlier, the ban on issuance of new credit cards which was imposed on HDFC Bank had a negative impact on the bank. But now, this ban has been lifted up and now banks can issue new cards, this will also become part of Retail Borrowings.
- Now again it appears that Bank is again re-focusing on Retail Assets/Loans, and if the target of Rs. 8 Lakh Cr. is achieved in the next 2 years, then again the Retail Loan Book Share to the total Loan Book share will reach to the historical level of 54%-55% of the bank.
Conclusion:
This path and direction plotted by Mr. Arvind Kapil, the country’s head for Retail Assets will be an interesting thing to watch and if the Bank achieves the target efficiently and effectively, things can go very well for HDFC Bank. Hence, this could be a piece of good news for the shareholders of the HDFC Bank and could let to rise in Confidence of Investors/Shareholders. If one is planning to invest in a Banking Stocks, HDFC Bank is one of the stocks, which one should keep on their radar. Do follow due diligence before making any investment decision or should follow a financial advisor before making one.
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