Is HDFC Bank shifting from Retail Banking towards Corporate Banking? Do HDFC Bank Shareholders need to be concerned about this? Let’s understand the whole case in detail.
The event of IL&FS took place in the year 2018, which caused a great hindrance and problems in Financial Market specifically Debt Market. As a result, Banks especially market leaders in Wholesale banking like PSUs banks, ICICI Banks, etc. not become more cautious for Corporate Lending.
Witnessing the market situation where Lending to Corporates from the banking sector is under stress, it seems that HDFC Bank is now trying to grab these opportunities.
Despite the change in management of the HDFC Bank, the vision and strategies of the Banks look similar as it was earlier.
In HDFC Bank, wholesale lending was around 47% during 2018, now the same has increased to more than 53%.
The same has worked oppositely in the retail side of the bank where the share of retail has gone down to near around 47% from an earlier share of 53%-54%.
HDFC Bank witnessed the opportunity in Wholesale Lending due to IL&FS Crisis as competitors were reluctant to lend to Corporate bodies.
The slowdown in Personal Loans due to the effect of Covid-19 Pandemics like Employment Crisis, Job Crisis, and Uncertainties. Here, the HDFC Bank was having a lucrative business, but it got slowed down due to Uncertainties arisen due to Covid-19.
A year back issue of Franklin Funds also proved beneficiary for the bank as now more deposit was made into the banks which brought surplus in Bank’s reserves.
Net Interest Margin may shrink as there are low-interest margins in Corporate Lendings in comparison to Retail Loans.
This step of HDFC Bank seems to be an opportunistic and reasonable step by the bank and not just a random strategy of the business to lend loans. As of the current situation of Corporate bodies, where many other financial institutions are reluctant to lend them, this strategy of HDFC Bank looks like Cherry Picking by the bank where they are selecting the right businesses to lend. One should do investment on this counter by researching on your side and should also look at the strategy of the business, which suits your risk appetite.
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