Given the multiple challenges faced by the banking sector during the year, HDFC Bank’s performance has been creditable. Buoyed by 26 per cent growth in its loan book, its profit growth for 2013-14 is a healthy 26 per cent. In the recent March quarter too, profit growth has been good at 23 per cent.

The only concern has been the slowing pace of growth in retail loans.

Thanks to its well spread loan portfolio between retail and corporate loans, HDFC Bank has, in the past, consistently outperformed the industry credit growth by as much as 6-10 percentage points. While the bank outperformed in 2013-14 too, what was missing was the retail flavour. The bank’s high yielding retail loans in 2013-14 grew by 10 per cent, much slower than the 27 per cent growth seen in 2012-13. The moderation was more pronounced in the last three quarters, in contrast to the strong growth in this segment by peers such as Axis Bank.

Home loan dampener

While all banks were impacted by the slowdown in the auto segment and sluggishness in the commercial vehicle and construction equipment segments, HDFC Bank faced another dampener — muted growth in home loans.

HDFC Bank originates home loans for HDFC, and has the option of buying back these loans. In the last two quarters, the bank bought back lesser than the usual amount under this arrangement. The bank’s home loans grew 15 per cent in 2013-14.

HDFC Bank has always traded at a premium to other banks, thanks to its retail segment exposure, better return ratios, comfortable capital cushion and low loan delinquency. Except for the retail segment growth, HDFC Bank scored well on other parameters in 2013-14.

Its net interest margin at 4.4 per cent is still amongst the best in the industry.

The bank has also been able to maintain stable asset quality in challenging times. At 0.98 per cent of loans, its gross non-performing assets (NPAs) are amongst the lowest in the industry.

Also, with 80 per cent of bad loans provided for, the bank’s net NPAs are just 0.3 per cent of loans. Besides, HDFC Bank’s restructured book at just 0.2 per cent of loans is far lower than the 2 per cent of Axis Bank and ICICI Bank.

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