‘Our franchise is solid; nothing can stop this juggernaut’: Top HDFC Bank sources

“Our franchise is solid, the team is working hard, and our vision is clear,” said one of the top executives to CNBC-TV18. “There will be road bumps, but nothing can stop this juggernaut,” he added, speaking on condition of anonymity.

A key takeaway from these bankers is that margins will be given top priority. They said they may allow some asset sales to substitute the maturing deposits of the old HDFC. One of the bankers we spoke to explained that as the old HDFC borrowings get replaced with bank deposits, margins will rise. “We will give top priority to margins,” he said, importantly adding that they may substitute some of the high-cost borrowing with the asset sale. “Optically, advances may be lower, but I won’t demotivate my team.”

Another top honcho pointed out that the bank still accounts for 19% of incremental deposits created in the banking system as of December end, and this is true for the last nine months and the last few years.

The first banker pointed out that HDFC Bank has had a certain growth trajectory for 20 years, but with the merger on July 1, “it’s a new starting point.” For six lakh crore rupees of assets, the bank had zero CRR (cash reserve ratio). Also, while the erstwhile HDFC Bank had only 8% of its funds in the form of borrowings, with HDFC’s merger, borrowings shot up to 21%, and so the cost of funds rose.

“We are going to reclaim the old pace, but we don’t want to box ourselves into a number,” he said when asked to guide on margins. “But we are sure of the direction: on a secular basis, our margins will rise from 3.4% to 3.5% and so on,” he said.

The bankers also pointed out that, like HDFC Bank’s deposit-creating ability, its ability to create quality is also best in class. “Our USP of credit quality remains and will be visible when the cycle changes,” he said, adding that now all banks show good asset quality because of a goldilocks point in the cycle. “We will stand out when the cycle turns,” he said.

To sum up, HDFC Bank’s 8,000 branches are raring to go to originate loans and liabilities, the bankers said. The India growth story is robust, and like in the last 25 years, in the next 25 too, we will double every four years, short-term gyrations notwithstanding.