The recent liquidity build-up via HDFC balance sheet places the bank well to pursue growth in FY24 without worrying much on the funding side.
Riding on healthy loan growth, HDFC Bank expects to double the balance sheet in about four years, which is close to its historical run rate (FY13-23 CAGR at 21%).
“The recent liquidity build-up (via HDFC Ltd balance sheet) places the bank well to pursue growth in FY24 without worrying much on the funding side. Good momentum in the mortgage business and improved cross-selling will boost growth in retail assets, while stable traction in MSME will help it maintain overall broad-based growth,” according to a report by Motilal Oswal Securites. The rapid branch expansion and a strong thrust on MSME lending should lead to robust growth in this segment. “We estimate loan growth for the merged entity to sustain at 12% over the remaining 9MFY24, while the loan CAGR will recover to 17% over FY24-26E,” the brokerage said.
Deposits will remain the prime focus area as they are the key source of funding while the role of affordable housing and infra bonds will be limited in overall growth.
Branch expansion
HDFCB plans to continue with its aggressive branch expansion run rate of 1,400-1,500 branches in FY24 and aims to increase its total branch count to 13,000-14,000 to sustain the growth trajectory over the medium term. The bank also has 500 branches of HDFC Ltd, which will be scaled up over the year. Most of the branches are opened in the regions where the bank sees healthy liability potential and has limited presence currently. HDFC Bank has one of the highest deposit productivity rates in the industry, and the productivity of new branches is also tracking well with over 90% of branches generating business as per internal projections.
Employee attrition
HDFCB has 13 levels for employees, and the attrition is higher in lower 3 levels at 35% and the bank aims to bring it down to 15%. Above the level 3, attrition is in single digits. “The management team is spearheading a cultural transformation to build a future-ready tech bank by improving employee engagement, visiting the branches and conducting bus tours across far-flung areas. The bank has thus done bus tours in 13 states across India and plans to cover other states over the year. This has helped improve employee connect and sharpen business focus across teams,” the report said. Alongside this, the bank has also strengthened the management bandwidth to drive sustained growth across business verticals. The bank currently has 34 senior management people (which are 1 level below CEO) and this number used to be 13 when Sasidhar Jagdishan took over as CEO. Most of the senior positions are filled by internal employees, which points to improving management bandwidth across all levels.
