HDFC Bank’s deposits, advances growth fall in Apr-June

Mumbai: HDFC Bank Ltd reported a sequential fall in both advances and deposit growth at the end of the first quarter, as per the pre-quarter update of the bank released on Thursday. 

Advances growth declined 0.8% quarter on quarter to ₹24.87 trillion at the end of June 2024 compared to ₹25.1 trillion at the end of March 2024. The sequential decline in loan book is mainly due to continued shedding of low yielding corporate book, including that of erstwhile HDFC Ltd.

The deposits growth also declined 0.03% quarter on quarter to ₹23.79 trillion at the end of June 2024.

However, on a year-on-year (y-o-y) basis, the advances showed a growth of 52.6% and deposits grew by 24.4%.

Also read | HDFC Bank stock grabs investor interest on likely MSCI flow

The private sector lender's low cost deposits current and savings accounts (CASA) ratio as a proportion of total deposits was down at 36.3% at the end of June 2024 compared to 38.2% at the end of March 2024.

Liquidity coverage ratio, however, improved to 123% for the quarter compared to 115% in the previous quarter.

The bank's shares fell 2% to ₹1,726.60 during trade on Thursday, a day after the stock rallied 3% to hit a record high on expectations of high passive fund inflows amid likely weight increase in MSCI index. The latest shareholding pattern of HDFC Bank shows foreign institutional investors (FIIs) ownership in the bank dropped below 55%, which is expected to boost the stock’s weightage in the MSCI index, leading to higher passive inflows.

"We believe that nearly flattish deposit growth after a strong 4Q coupled with slower credit growth and possibly higher slippages could lead to some softness in the stock after a sharp run-up recently,' said Anand Dama, head BFSI · Emkay Global Financial Services Ltd.  

Bank Blues

Other banks, too, have reported muted business updates. Bandhan Bank saw a 1.5% sequential decline in deposits to ₹1.3 trillion and 0.72% decline in advances to ₹1.25 trillion. CASA ratio also was down to 33.4% at the end of the June quarter compared to 37.1% in the previous quarter. 

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RBL Bank also saw a 2% sequential decline in deposits to ₹1 trillion while it saw a 3% sequential growth in advances to ₹88,455 crore at the end of June 2024. CASA ratio improved to 37.3% at the end of June 2024 compared to 35.2% in the previous quarter. 

Federal Bank, however, was an outlier with advances growing 5.4% sequentially to ₹2.24 trillion and deposits growing 5.4% to ₹2.66 trillion at the end of June 2024. CASA ratio, however, declined to 29.28% compared to 29.38% in the previous quarter.

According to Suresh Ganapathy, head of financial services research, Macquarie Capital, first quarter is expected to see weak deposit growth after a strong fourth quarter. Net interest margins and credit costs are also expected to remain flat. 

The banking sector rose 19.2% in the two weeks to 14 June from a year earlier, while deposits rose 12.6%, according to Reserve Bank of India's weekly statistical supplement. Bank deposits also fell ₹1.84 trillion to ₹209.03 trillion in the two weeks to 14 June.