HDFC Bank’s share price rose over 2 percent to ₹1413.30 in intra-day deals on Thursday, February 15 after the largest private sector lender informed in a press release that has witnessed healthy growth in its Home Loan Business post its merger with HDFC.
The lender announced that its home loan business experienced a stable and healthy double-digit YoY growth for two quarters, ending December 31, 2023. The growth in sales turnover has come on the back of a wider distribution network with a 3.6 percent sequential growth as of December 2023, the highest amongst peers in home loans.
It also added that the turnaround time has been reduced to one-third post-merger and savings accounts for incremental disbursals have moved to 80 percent from 35 percent. This sets the foundation for a stronger digital connection with incremental customers. Furthermore, the Bank’s market share has grown approximately by 18 percent to 20 percent on incremental disbursals, post the merger, stated the lender.
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“The Bank’s fundamental strategy has been to improve the turnaround time of processing at the front end. Post-merger turnaround time has been reduced to almost one-third. This coupled with the erstwhile HDFC Ltd.’s strength of connecting with customers in person is a potential game changer in terms of both sales turnover and cross-selling. Added to this strategy is a renewed focus on the self-employed segment which will further increase opportunity size. Post-merger, the Bank has already launched and expanded its product basket through banking surrogates as well as GST programs for better assessment of such profiles,” highlighted the lender.
Despite today’s rise, the stock is still around 20 percent away from its 52-week high of ₹1,757.80, hit on July 3, 2023, and had hit its 52-week low of ₹1,363.45 in the previous session, February 15.
The lender has been under strong selling pressure and has lost over 17 percent in the last 1 year as well as in 2024 YTD. Most of this loss occurred after the lender’s December quarter earnings. It shed 3.4 percent in February so far after a 14.4 percent decline in January.
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India’s largest private sector lender reported a net profit growth of 33 percent year-on-year (YoY) to ₹16,372 crore in the third quarter of FY24. The bank’s net interest income (NII) in Q3FY24 rose 24 percent YoY to ₹28,470 crore.
Going ahead, the lender informed that by mid-March, the Bank will be launching a seamless straight-through journey for Home Refurbishment Loans which can become a strong product offering for customers. Also, by April 2024, the Bank proposes to launch a Home Saver product. This will lay a robust foundation for a lucrative offering to the existing and prospective home buyers. Despite a substantially larger book than peers, the Bank’s model is generating huge benefits on a monthly basis and its differentiated strengths are expected to generate substantial value for customers and the Bank in the future, mentioned the press release.
“One of the biggest opportunities was to generate CASA and initial signs are encouraging. Pre-merger about 30 percent to 35 percent of incremental disbursals were to customers with an HDFC Bank savings account. This has reached about 80 percent of incremental disbursals, post-merger. The Home Loan Business for the Bank has become both an asset and liability generator and is growing sizeably. This leads to a higher stickiness quotient and a stronger customer connect with the Bank for a longer duration,” said Arvind Kapil, Country Head – Mortgage Banking, Home Loan, LAP, HDFC Bank.
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The release further stated that all this has been done without compromising on the Bank’s traditional underwriting standards. The foundation is now in place and the Home Loan Business is on its way to becoming a springboard for larger customer engagements. Current trends indicate interesting and encouraging signs that the Bank seems to be emerging as a preferred option for customers with higher credit scores which has exhibited a 10 percent growth, post merger, it added.
On the operational front, the Bank will convert all erstwhile HDFC Ltd.’s service centres to branches in a phased manner and its entire mortgage team will also become relationship managers, informed the lender. The Bank has already commenced cross-selling its products/services. through these service centers from February 01, 2024. As a part of enhancing the cross-sell strategy, home loan customers will be able to avail of a wide range of products/services like Consumer Durable Loans, Credit Cards, Wealth Advisory Products, Unsecured Loans, and Home Refurbishment Loans. Going forward, cross-selling will be a continuing focus for both existing as well as new customers, mentioned the release.
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The Bank believes that structural demand for housing will continue to be strong in the long run in India, due to a conducive environment. India is expected to have the largest working population by 2050, estimated at 900 million which is likely to give a major fillip to urbanisation in the country. This is projected to go up to 40 percent by 2030 from 34 percent today, it further added.
Approximately, 80 million families are likely to move from rural areas to urban centers in the country increasing the need for housing. This is clearly an opportunity for the industry and HDFC Bank is well-positioned to help fulfil the housing dreams of millions.
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