The Winner Takes All
It’s a cut above the rest; and HDFC Bank is repositioning itself for tomorrow
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For HDFC Bank, winning accolades is not new; the bank is said to bag nearly 30 awards every year from all around the world. It is the only bank, which has, year after year, been on the podium in the BW Businessworld Best Banks Survey with PwC’s knowledge support. But even by its exalted standards, it has gone one better this year — it is the ‘Best Large Bank’, ‘Fastest Growing Large Bank’, and its managing director Aditya Puri has won the Lifetime Achievement for banking.
“We have one of the best brands. We are the only Indian brand in the Top 70 in the Millward Brown survey,” says HDFC Bank’s managing director Aditya Puri. “Our balance sheet is not under stress in any way. We went into semi-urban and rural India well before anybody else and we are very proud of the fact that by March or June, we will be among the leaders in digital banking globally,” adds Puri.
Growth and a Tight Leash on the Dud
At end-March 2017, balance sheet growth stood at 16.6 per cent at Rs 8,63,840 crore. Advances were up 19.4 per cent to Rs 5,54,568 crore while deposits were up 17.8 per cent at Rs 6,43,640 crore. Profit before tax grew 18.8 per cent to Rs 22,139 crore; net profit was up 18.3 per cent at Rs 14,549.7 crore. The return on average net worth was 18 per cent while the basic earnings per share was up at Rs 57.2 (Rs 48.80).
The metric that best captures performance is the bank’s domestic loan growth which stood at about 23.7 per cent against the overall banking system loan growth of around 5 per cent. It also maintained a tight leash on dud loans at a time when many banks saw their books bleed.
Total provisions and contingencies were at Rs 3,593.3 crore compared to Rs 2,725.6 crore. HDFC Bank follows a tighter provisioning policy, more stringent than Mint Road’s norms. The bank on a prudential basis makes provisions on advances or exposures which are not non-performing assets (NPAs), but has reasons to fear a possible slippage. The coverage ratio based on specific provisions alone (excluding write-offs) stood at around 69 per cent; if we were to include general and floating provisions, it is around 130 per cent. Gross NPAs stood at 1.05 per cent (0.94 per cent) with net-NPAs at 0.33 per cent (0.28 per cent).
Banking on Tomorrow
Technology and emerging business do pose a threat to banks as we know of them now. Puri sees an opportunity; he doesn’t see them as threats if you can embrace the change which is in the works.
“You look at the Top 10 companies in the US today, or in the world, such as Amazon, Google, Facebook or Apple, these are all products of technology that delivered products that are suitable to the market. My only worry is when will a Google come into financial services. That’s why I am trying to put my service standards at the Google or Amazon levels,” says Puri. (Read interview: ‘You Need to be Paranoid in Today’s World’).
Puri is not the one to buy the bogey of fintechs as is presented in popular discourse. “Fintechs will realise after making a lot of noise that the way forward — as they are not going to replace a bank — is to get into partnerships. So, whether it is a Chillr, Payzapp, or somebody saying he will originate and you give the loan; whether it is a Google or an Amazon working with us, these partnerships are developing,” adds Puri.
Way to go, HDFC Bank!