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2019-07-22 09:25:01

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In a post-results call with analysts, the HDFC Bank management cautioned about slower retail growth and announced tighter provisioning.

Jul 22, 2019, 11.20 AM IST

BCCL

HDFC Bank’s advances to the vehicle loan segment, where sales volumes have seen some moderation, grew at 8.3 per cent in comparison with a 22 per cent expansion seen in the first quarter of FY19.HDFC Bank, India’s most valuable lender and the Street’s gold standard for prudential lending, has highlighted risks of unsecured loans while flagging retail demand fatigue, which is reflected in muted highfrequency data sets such as auto sales, personal credit off-take and rural consumption.In a post-results call with analysts, the HDFC Bank management cautioned about slower retail growth and announced tighter provisioning, even though the Mumbai-based lender reported a 21 per cent rise in June-quarter earnings.Analysts participating in the interaction said that the bank pointed to stress in the agriculture sector, and specifically mentioned the slowdown in auto loans — a space the lender has dominated over the years.“HDFC Bank is a barometer of the macro-economy and it is reflecting what is happening on the macro side,” said Asutosh Mishra, head of research at Ashika Securities. “There is clear stress building in retail banking which is now showing. Analysts may also have to take this into account in their future projections.”HDFC Bank’s advances to the vehicle loan segment, where sales volumes have seen some moderation, grew at 8.3 per cent in comparison with a 22 per cent expansion seen in the first quarter of FY19.This, coupled with some prestress warning signs in retail loans the bank flagged in the call, has confirmed that demand is moderating.“The bank pointed out that its discussions with credit bureaus indicate there are some warning signals in the retail book, like increase in average ticket size and frequency of borrowing, and over-leveraging of borrowers,” said Rohan Mandora, analyst at Equirus Securities. He participated in the call.Retail loans of the bank climbed 16.5 per cent and wholesale loans 19.6 per cent. The retail segment constitutes 54 per cent of the bank's loan book.To be sure, HDFC Bank still reported a 21 per cent rise in net profit, led by higher net interest income and treasury gains. But analysts said a warning by the most successful consumer bank in the country needs to be taken seriously.“It has also tightened its provisoning norms, and now will write off loans in 150 days instead of 180 days for unsecured retail loans. Although the bank has not seen a significant upside to its bad loans bucket, it has chosen to increase provisions by deploying the gains from treasury toward higher provisions in both retail and corporate books,” said another analyst participating in the interaction.Provisions rose 60 per cent to Rs 2,614 crore in June 2019 from Rs 1,629 crore a year earlier, led by a 68 per cent rise in specific loan loss provisions to Rs 2,414.5 crore from Rs 1,432 crore a year earlier. Gross NPAs for the bank increased to 1.40 per cent of loans from 1.33 per cent of loans a year earlier.Mandora from Equirus said the stress in the unsecured retail segment was reflecting the challenges faced by the self-employed and small businesses, the primary borrowers of unsecured loans.“This segment has still not recovered fully after demonetisation and GST rollout. We expect retail credit growth to moderate this year as lenders will be cautious,” Mandora said.Commenting feature is disabled in your country/region.Browse CompaniesABCDEFGHIJKLMNOPQRSTUVWXYZ|123456789

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