Here’s How HDFC Bank, Bajaj Finance Grew In Second Quarter
Growth recovered for HDFC Bank in quarter ended September. Bajaj Finance’s loans, assets grew at close to long-term average pace.
When an alleged fraud at another Indian bank and struggling non-bank lenders have brought the spotlight back on the nation’s troubled financial services sector, two retail focused private lenders reported strong growth.
In the three months ended September, updates ahead of earnings show that growth recovered for HDFC Bank Ltd., India’s largest bank by market value. Non-bank lender Bajaj Finance Ltd. saw its loans and assets grow at close to the long-term average pace.
The two are among a few thriving lenders that represent an oasis in India’s troubled financial sector that’s battling a bad-loan crisis since 2015. Non-banking companies are now struggling to raise funds as last-year’s defaults by IL&FS increased borrowing costs, stretching balance sheets. Alleged under-reporting of bad loans by Punjab & Maharashtra Co-operative Bank Ltd. only added to concerns about financial stability. And credit flow to the commercial sector collapsed in the six months ended September as the GDP growth fell to its lowest in six years.
HDFC Bank’s Growth Picks Up
HDFC Bank’s loan book rose 19.5 percent year-on-year in the quarter ended September, recovering from the preceding three-month period, according to an updated filed with exchanges ahead of the earnings. Deposits grew 22.5 percent.
Loans grew 8 percent sequentially against 1 percent in the previous quarter. Deposits rose 7 percent quarter-on-quarter against 3.4 percent in the April-June period.
The bank’s current and savings account ratio fell over a year earlier and the preceding quarter to 39.2 percent. But that came as its term deposits rose 8 percent sequentially and 28 percent year-on-year, according to a Morgan Stanley note.
HDFC Bank expected its headline loan growth to pick up to 19 percent through the fiscal, it said, but the lender achieved the target in the second quarter itself.
Estimates For Other Lenders
HDFC Bank’s growth, however, doesn’t represent an industry-wide trend. Barring large private lenders such as Kotak Mahindra bank Ltd. and ICICI Bank Ltd. or a couple of state-run lenders, analysts including from Nomura and Investec don’t expect similar growth in the quarter ended September.
Yes Bank Ltd., IndusInd Bank Ltd. and RBL Bank Ltd. have the highest exposure as a percent of assets to stressed corporates, according to a Jefferies report. RBL Bank had cautioned of stress ahead in corporate banking book while announcing its first-quarter earnings. DCB Bank Ltd. also reported a weak operational performance and asset quality in the quarter ended June.
Ten public sector banks are in the midst of a merger as India decided to combine weaker lenders with larger peers. The credit growth could take a back seat as the merged entities would need to “harmonise” their stressed accounts as well as manage any asset-liability mismatch, India Ratings had said in a September report.
ICRA, too, said in a separate report that while the proposed merger of 10 public sector banks into four will lead to better-capitalised banks with greater solvency and asset quality, their profitability will remain weak in the medium term.
Rajnish Kumar, chairman at the State Bank of India, remains optimistic. Speaking at an event, Kumar said he expected corporate credit growth to revive in six months.
Bajaj Finance
Bajaj Finance Ltd. reported a 38.25 percent growth in its assets under management in the quarter under September, according to its statement. That comes after three consecutive quarters of 40 percent-plus growth.
The consumer financier that provides loans to buy for everything from cars and refrigerators and to even apparel had said in its first-quarter earnings that it tightened underwriting standards in digital product financing in urban and rural business, translating into an about 15-18 percent cut in new disbursements. The non-bank lender tightened credit standards for auto loans and changed norms for small-to-medium enterprises and business-to-consumer segments, causing a 10-12 percent decline in disbursements.
The pace of adding new customer slowed in the quarter ended September. It added 1.9 million against 2.5 million in the preceding three months.
New loans booked in the second quarter stood at 6.6 million against 7.3 million sequentially. The company also said in its release that
Bajaj Finance struck credit-facility agreements with various banks to avail $575-million external commercial borrowing but hasn’t drawn any amount yet, it said.