HDFC Bank's deposit growth outpaces credit in Q2, helping meet target

Country's largest private sector has indicated that it would grow its advances at a slower pace than deposits

HDFC Bank, country's largest private sector lender, has mobilised over Rs 1.2 trillion in deposits in the quarter ending September 2024 (Q2FY25), according to the bank's exchange filing on Friday.

According to the bank's quarterly update, deposits growth in the second quarter of the financial year (Q2 FY25) outpaced that in credit on a sequential basis. Deposits grew by 5.1 per cent and gross advances by 1.3 per cent compared to Q1. 

The bank's deposit base in Q2FY25 stood at Rs 25 trillion, up 15.1 per cent on a year-on- year (YoY) basis.  And, gross advances stood at Rs 25.19 trillion, up 7 per cent YoY. 

 

“HDFC Bank, in its Q2FY25 pre-quarter update, reported deposit growth that was higher than our estimates, at 5 per cent quarter-on-quarter (Q-o-Q), a net sequential increase of Rs 1.2 trillion versus our expectations of Rs 80,000 crore. This was driven by strong growth in term deposits, up 6.7 per cent Q-o-Q”, said Macquarie Research in a report.

“If one assumes a Rs 1.2 trillion deposit accretion in Q3, followed by Rs 1.6 trillion in Q4, the numbers imply a 17 per cent Y-o-Y deposit growth, which would be a good outcome compared to our system deposit growth expectation of 11 per cent. Deposit growth on a Y-o-Y basis was around 15 per cent compared to current system deposit growth of 11.5 per cent,” it said.

HDFC Bank had earlier indicated that it would grow advances at a slower pace than deposits, seeking to reduce its elevated loan-to-deposit ratio (LDR) to levels before mortgage financier HDFC merged with the bank effective July 1, 2023.

In Q2 FY25, the bank securitised Rs 19,200 crore of loans as a strategic initiative to lower its high LDR (securitisation is selling assets to generate liquidity). A recent Macquarie Research report indicated that HDFC Bank's LDR has declined to 103.5 per cent from 110 per cent,.

HDFC Bank’s current account savings deposits stood at Rs 8.83 trillion in Q2 FY25, up around 8 per cent Y-o-Y. Such deposits are up 2.3 per cent compared to Q1 FY25. Its time deposits stood at Rs 16.16 trillion in Q2 FY25, 19.3 per cent higher than the same period last year, and 6.7 per cent higher than the previous quarter, reflecting customer preference for time deposits during this stage of the rate cycle.

The bank said that its advances under management stood at Rs 26.33 trillion in Q2 FY25, up 8 per cent Y-o-Y and 2.3 per cent sequentially. Retail loans grew by around Rs 33,800 crore in the quarter; commercial and rural banking loans grew by around Rs 38,000 crore; and corporate and other wholesale loans were lower by Rs 13,300 crore compared to Q1 FY25.

“Loan growth stood at 7 per cent Y-o-Y, lower than our expectations of 8 per cent Y-o-Y. This was driven by decline in corporate loans. We had highlighted earlier that the bank was looking to sell down some of its corporate loans as part of the consolidation strategy, which in our view has led to the slowdown in corporate growth,” said Macquarie Research.