HDFC Bank Sees Robust Deposit Growth Ahead of Credit Expansion

Strategic Insights -

HDFC Bank has shown significant improvement in its deposit growth ahead of its credit expansion, a shift from the previous fiscal year. The bank's provision data revealed that its gross advances increased 7% to Rs 26.53 lakh crore as of the first quarter ended June, a slower pace than the system-level growth of above 9%. However, its year-on-year deposit growth at 16% outpaced its credit growth for the third consecutive quarter, a strong indication of a return to normalcy.

Key Takeaways:

  • HDFC Bank's deposit growth outpaced its credit growth for the third consecutive quarter, with a 16% increase in total deposits to Rs 27.64 lakh crore as of the first quarter ended June.
  • The bank's gross advances increased 7% to Rs 26.53 lakh crore, still slower than the system-level growth of above 9%.
  • HDFC Bank has been aggressive in cutting term deposit rates, bringing it in line with large private peers.
  • The bank has also been reducing its asset book by securitising and assigning debt to other financial institutions to get its credit-deposit ratio in balance.
  • Analysts believe that HDFC Bank will likely match the pace of business expansion for the broader banking industry this fiscal after the merger with HDFC.
  • The bank's average CASA deposits were Rs 8.60 lakh crore as of June, up 6% over Rs 8.10 lakh crore a year ago.
  • Total CASA deposits increased 9% to Rs 9.37 lakh crore as of June, but were lower by around 1% compared to the Rs 9.44 lakh crore reported at the end of March.
  • Total term deposits at Rs 18.27 lakh crore as of June were up 21%.
  • Suresh Ganapathy said that the bank's deposit growth has now outpaced system deposit growth by 500 to 600 basis points, an impressive achievement for a bank of its size.
  • Ganapathy also stated that the bank's loan-to-deposit ratio (LDR) declined from 96.5% in 4QFY25 to 95.1% quarter on quarter, a good 140 basis points reduction.
  • Analyst Rohan Mandora expects HDFC Bank to have lower NIM (net interest margin) compression than larger private banks.

Statistics:

  • HDFC Bank's gross advances: Rs 26.53 lakh crore (7% increase from the previous year).
  • Total deposits: Rs 27.64 lakh crore (16% increase from the previous year).
  • Deposit growth rate: 16% (outpacing credit growth for the third consecutive quarter).
  • CASA deposits: Rs 8.60 lakh crore (average) as of June.
  • Total CASA deposits: Rs 9.37 lakh crore (9% increase from the previous year).
  • Total term deposits: Rs 18.27 lakh crore (21% increase from the previous year).
  • Loan-to-deposit ratio (LDR): 95.1% (declined from 96.5% in 4QFY25).
  • Basis points reduction in LDR: 140 basis points (quarter on quarter).
  • Suresh Ganapathy's basis points estimate: 500 to 600 basis points (bank's deposit growth outpacing system deposit growth).

Sources:

  • HDFC Bank's provisional business data for the first quarter ended June.
  • Rohan Mandora's note at Equirus Securities.
  • Suresh Ganapathy's statement at Macquarie Capital.