Tag: hdfc bank

HDFC Bank hopes to return with a ‘bang’ and regain lost market share

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Laying out future plans, once the embargo is lifted, he said the bank had a much more wholesome strategy.

HDFC Bank expects to regain the lost market share and make a strong comeback once the regulator lifts the embargo on issuing new credit cards, Parag Rao- head of consumer finance, digital banking and information technology said on Wednesday.

Without sharing details over when he expected the ban to be lifted, Rao said within three-four months of the ban getting lifted, one should expect incremental market share back to the pre-ban levels. The bank has been in constant discussion with RBI ever since the ban was imposed, and has upgraded its systems as per the indications from the regulator, Rao said. He added that it had now presented a plan that focuses on the immediate, short-term, mid-term and long-term to the central bank.

According to the RBI data, in the period between December 2020 and April 2021, HDFC Bank’s credit card base contracted by 3.89 lakh. While ICICI Bank’s credit card portfolio increased by 8.15 lakh, SBI Card and Axis Bank added 4.37 lakh and 3.29 lakh cards, respectively. However, HDFC Bank continues to have the largest customer base in the segment with 1.49 crore outstanding credit cards as on April 30, 2021.

In December, RBI a had stopped HDFC Bank from issuing fresh credit cards and announcing new digital initiatives following multiple outages the bank witnessed over the past few years. The regulator also called for a third-party audit of the bank’s IT infrastructure.

“We have used the last six month period since December to introspect, reinvigorate and re-engineer for the future. We will use tech and digital to help us continue being dominant in the space and will get back to the market with a bang. We have the entire system ready and charged up,” said Parag Rao, group head – payments, consumer finance, digital banking and IT, HDFC Bank.

Laying out future plans, once the embargo is lifted, he said the bank had a much more wholesome strategy. “It is not only to regain our (credit cards) number and value market share but also to forge new partnerships, build more scale, introduce newer products and services and continue on our journey of being the dominant payments bank player in the space,” he said.

Rao said the bank had been using the six-month period to work on its technology and digital processes and also had a base of pre-approved customers, who will be offered credit cards when the embargo is lifted.

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HDFC Bank, BFSI News, ET BFSI

Banking & Finance

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The RBI‘s ban on selling new credit cards has impacted market share on an incremental basis, HDFC Bank said on Wednesday, promising to get back to the market “with a bang” once the “temporal” embargo is lifted and recoup the losses. The bank’s head of consumer finance, digital banking and information technology, Parag Rao, said that it has used the last six months to “introspect, re-engineer and innovate” about the cards business, where it has 15.5 million customers.

The bank has lost its market share by a couple of percentage points because of the ban, but the actions taken internally have ensured that it continues to hold on to market share by spends, he said.

In December, the RBI acted against repeated technological outages at HDFC Bank over two years by slapping unprecedented penalties, which included a ban on any new credit card issuance and also prohibition on launching new digital initiatives.

“We have got very aggressive plans to get back in the market with a big bang… You will rapidly see HDFC Bank not just regaining market share but also significantly increasing our spend market share,” Rao said.

Without sharing any details over when he expects the ban to be lifted, Rao said within 3-4 months of the ban getting lifted, one should expect a correction in the incremental market share back to the pre-ban levels, launch of new products and features and also partnerships which have been forged during this period.

“We were very clear that this is at best a temporal situation. During the six months when we were not issuing new credit cards, we increased our merchant acceptance base, our liability franchise increased and today we are sitting on a large base of already analytically data mined customers who have already kept ready and pre-approved,” he said.

The “large sales force” has been trained, re-skilled and primed for the aggressive play ahead and backend processes for them have also been made more streamlined, Rao said.

He admitted that rivals have seized up on the opportunity once HDFC Bank stopped issuing the cards, amidst reports on how ICICI Bank and SBI, among others have grown. It can be noted that HDFC Bank’s credit card customers decreased by 4.67 lakh between December and April, when they stood at 14.9 million, while SBI has gained over 6 lakh new cards and ICICI gained 10 lakh.

The bank has been in constant discussion with RBI ever since the ban was imposed and has upgraded its systems as per the indications from the regulator, Rao said, adding that it has now presented a plan which focuses on the immediate, short term, mid-term and long term plan to the central bank.

“We are awaiting the comments from the RBI. We are hopeful that RBI will be satisfied with the plan which we had submitted,” he said.

Rao said the bank’s investments in technology were already at par with global standards, but the recent regulatory action will see higher spends on technology over the next two or three years.

Reiterating its focus outlined earlier, he said outages do happen and they happen with rivals as well, but the important aspect will be how it manages its way out of a crisis.

The bank’s shares were trading 0.17 per cent down at Rs 1,499 apiece on the BSE at 1344 hrs, as against gains of 0.28 per cent on the benchmark. AA MKJ



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Post lifting of embargo, HDFC Bank ready to return with a bang in cards segment

Banking & Finance

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Private sector lender HDFC Bank, which is under an embargo by the Reserve Bank of India for credit card acquisitions and digital launches, is hoping to return with a “bang” and regain its incremental market share in cards.

“We have used the last six month period since December to introspect, reinvigorate and re-engineer for the future. We will use tech and digital to help us continue being dominant in the space and will get back to the market with a bang. We have the entire system ready and charged up,” said Parag Rao, Group Head – Payments, Consumer Finance, Digital Banking and IT, HDFC Bank.

Also read: Standard Life sells ₹6,783 cr worth shares of HDFC Life

He expressed hope that the embargo on the bank would be lifted by the RBI soon and said the lender has been in continuous dialogue with the regulator.

“We have very aggressive plans to get back to the market with a big bang. You will see a significant correction in the incremental marketshare,” Rao told reporters at a virtual press conference.

Laying out future plans for when the embargo will be lifted, he said the bank has a much more wholesome strategy.

“It is not only to regain our (credit cards) number and value market share but also to forge new partnerships, build more scale, introduce newer products and services and continue on our journey of being the dominant payments bank player in the space,” he said.

Also read: HDFC Bank acquires 7.4% stake in Virtuoso Infotech

RBI data reveals that lenders such as ICICI Bank and State Bank of India have seen a sharp rise in acquisition of credit card customers since the embargo on HDFC Bank.

ICICI Bank added over 8.15 lakh new credit card customers between January and April this year.

However, HDFC Bank continues to have the largest credit card customer base with 1.49 crore outstanding credit cards as on April 30, 2021.

Rao said the bank has been using the six month period to work on its technology and digital processes and also has a base of pre-approved customers, who will be offered credit cards when the embargo is lifted.

“Our growth on the liability and asset side has continued. We have acquired a significant number on liability and asset side. Our strategy of 75 per cent to 80 per cent internal customer for card base still continues. We have a large database of customers who have one relationship with the bank. We have pre-approved them, we have primed our channels and have set milestones,” he said.

Also read: Focus is to strengthen internal checks and balances: HDFC Bank MD & CEO

In the interim, HDFC Bank has been working with its existing card customers and engaging them in deeper relationships.

“We saw very good results by refocussing on our customer base. We have a far more engaged portfolio, significant increase in activation,” he said, adding that the lender has also broadened the skills of its sales force and reskilled it.

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Global banks announce bumper dividends, but Indian peers face a cap, BFSI News, ET BFSI

Banking & Finance

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Global wall street banks are hiking dividend payouts after US Federal Reserve gave them go-ahead last week after annual stress test results. However, the Indian bank shareholders have to wait has curbed banks’ dividend-paying ability in the financial year 2020-21 citing the impact of an ongoing second wave of coronavirus.

Morgan Stanley, JPMorgan, Bank of America, Goldman Sachs and Wells Fargo said on Monday they were hiking their capital payouts after the US Federal Reserve gave them a clean bill of health following their annual “stress tests”.

Analysts and investors had expected the country’s largest lenders to start issuing as much as $130 billion in dividends and stock buybacks from next month after the Fed last week ended emergency pandemic-era restrictions on how much capital they could give back to investors.

Morgan Stanley

Morgan Stanley delivered the biggest surprise to investors, saying it would double its dividend to 70 cents a share in the third quarter of 2021.

The Wall Street giant also said it would increase spending on share repurchases.

Morgan Stanley CEO James Gorman said in the announcement that the bank could return so much capital because of the excess it has accumulated over several years. The action, he said, “reflects a decision to reset our capital base consistent with the needs we have for our transformed business model.”

Bank of America

Bank of America Corp said it will hike its dividend by 17% to 21 cents a share beginning in the third quarter of 2021, and JPMorgan Chase & Co said it will go to $1.00 a share from 90 cents for the third quarter.

Goldman Sachs Group said it planned to increase its common stock dividend to $2 per share from $1.25.

Wells Fargo

Wells Fargo & Co, which has built up capital more rapidly than rivals due in part to a Fed-imposed cap on its balance sheet, said it plans to repurchase $18 billion of stock over the four quarters beginning in September.

The repurchase target amounts to nearly 10% of its stock market value and is line with expectations from analysts.

Wells Fargo, which for years has been trying to move past a series of costly mis-selling scandals, said it was doubling its quarterly dividend to 20 cents a share, consistent with analyst expectations.

“Since the COVID-19 pandemic began, we have built our financial strength … as well as continuing to remediate our legacy issues,” CEO Charlie Scharf said in a statement.

“We will continue to do so as we return a significant amount of capital to our shareholders,” Scharf added.

Citigroup

Citigroup, meanwhile, confirmed analysts’ estimates that a key part of its required capital ratios had increased under the stress test results to 3.0% from 2.5%.

A hike of that size will limit Citigroup’s share buybacks, versus its peers, a report from analyst Vivek Juneja of JPMorgan shows. Juneja expects Citigroup will have the lowest capital return of big banks he covers.

Citigroup CEO Jane Fraser said the bank will continue its “planned capital actions, including common dividends of at least $0.51 per share” and buying back shares in the market.

In India

The Reserve Bank of India has curbed banks’ dividend-paying ability in the financial year 2020-21 citing an ongoing second wave of coronavirus that comes with an economic cost.

“In view of the continuing uncertainty caused by the ongoing second wave of Covid-19 in the country, it is crucial that banks remain resilient and proactively raise and conserve capital as a bulwark against unexpected losses, the Reserve Bank of India said in April.

“Banks may pay dividend on equity shares from the profits for the financial year ended March 31, 2021, subject to the quantum of dividend being not more than fifty percent of the amount determined as per the dividend payout ratio prescribed,” it said.

Private lender HDFC Bank has announced that the board has declared a dividend of Rs 6.50 per share for the year ended 31 March 2021.



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In Covid year, banking sector sees record profit of Rs 1 lakh crore, BFSI News, ET BFSI

Banking & Finance

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Mumbai: The banking sector has recorded its highest ever profits of Rs 1,02,252 crore in FY21, a year when the economy was battered by the pandemic. This is a significant turnaround compared to a net loss of nearly Rs 5,000 crore for the industry in FY19.

Two banks — HDFC Bank and SBI — contributed half of the industry’s profits. Of the total profits, HDFC Bank at Rs 31,116 crore accounted for 30%, an 18% increase over the previous year. The country’s largest lender SBI accounted for another 20% at Rs 20,410 crore. The third-highest was ICICI Bank, which earned Rs 16,192 crore, more than double what it earned in the previous year. Private banks also gained market share as public sector banks (PSBs) went slow in lending.

The biggest turnaround was among PSBs which reported a collective net profit for the first time in five years. Only two of the 12 PSU banks — Punjab & Sind Bank and Central Bank of India — reported a net loss for the year. In the private sector, Yes Bank remained in the red with a net loss of Rs 3,462 crore as it continued to make provisions. However, for banks in the red, the losses were lesser than what they reported in the previous year.

The single biggest reason for PSBs to post such a Rs 57,832-crore turnaround was the end of their legacy bad loan problem. This burden reached a peak after the RBI forced banks to classify 12 large defaulting accounts, followed by another 40 accounts, as non-performing assets and initiate bankruptcy proceedings. Given the size of these exposures, the move resulted in loans worth Rs 4 lakh crore turning bad. By March 2020, banks had completed making provisions for most of these loans. Additional provisions were offset by large recoveries from earlier written-off accounts, and banks stopped bleeding.

According to rating agency ICRA, the profits for the current year were the windfall gains on bond portfolios of public banks account, which contributed two-thirds of their profits before tax in FY21. The rating agency added that barring SBI, profit from the sale of bonds exceeded the pre-tax profits of all other public banks. The profit from bond sales was higher than the Rs 20,000-crore capital infused by the government in FY21.

The value of government bonds rises when interest rates fall. The RBI’s aggressive move to keep rates low has reduced interest income but provided huge gains in treasury income. The year 2020-21 was also a year of consolidation for the 10 public sector banks that merged into four. Last year, the merging entities recorded huge losses in the fourth quarter before the merger, which contributed to the Rs 26,015-crore loss among PSU banks in FY20. This year, the acquiring banks made profits with Indian Bank topping the list at Rs 3,004 crore followed by Union Bank at Rs 2,905 crore.



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HDFC Bank CEO Sashidhar Jagdishan identifies 5 key businesses for future growth

Banking & Finance

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In December, RBI a had stopped HDFC Bank from issuing fresh credit cards and announcing new digital initiatives following multiple outages the bank witnessed over the past few years. The regulator also called for a third-party audit of the bank’s IT infrastructure.

HDFC Bank’s CEO Sashidhar Jagdishan said that bank was betting big on five key businesses, even as he acknowledged technical glitches that have impacted consumers.

In the annual report for the financial year 2021, Jagdishan said that the bank had identified corporate banking, lending to micro, small and medium enterprises (MSME), government banking, retail assets and payments as key focus areas going ahead and the growth strategy would be aided by digital channels. He also said that the last 28 months, the bank has been in the spotlight for the wrong reasons when it comes to technology. “As a bank we are certainly sorry for what has happened. And have taken this as an opportunity to improve and redouble our efforts to fix this problem for good,” Jagdishan said in a message to shareholders.

The bank is awaiting directions from the regulator on the temporary halt on sourcing of new credit card customers and digital launches. In an interaction with media on June 17, chief information officer of the bank, Ramesh Lakshminarayanan, had said that the lender was hopeful of coming out of the restrictions imposed by the regulator soon.

In December, RBI a had stopped HDFC Bank from issuing fresh credit cards and announcing new digital initiatives following multiple outages the bank witnessed over the past few years. The regulator also called for a third-party audit of the bank’s IT infrastructure.

In the annual report, HDFC Bank CEO confirmed that audit was over and the report has been submitted to the regulator.

Alluding to the issue of GPS device bundling with auto loans, HDFC Bank’s chief executive Sashidhar Jagdishan said unscrupulous practices of a few people have made everyone resolve for far greater process controls. “I am personally determined to fix this,” he said, while assuring shareholders in the annual report.

On May 28, RBI had a imposed a penalty of Rs 10 crore on HDFC Bank due to deficiencies in regulatory compliance in the GPS case. The case pertains to marketing and sale of third-party non-financial products along with auto loan to bank customers.

During FY21, the net profit of the bank increased by 18.5% year-on-year (y-o-y) to Rs 31,116.5 crore and balance sheet size grew by 14.1% y-o-y to Rs 1,746,871 crore. Gross NPAs, however, increased to 1.32% in FY21 from 1.26% in the previous year (FY20).

Net interest income (NII), an indication of the difference between interest earned and interest paid. grew by 15.5% year-on-year to Rs 64,879.6 crore in FY21.

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Focus is to strengthen internal checks and balances: HDFC Bank MD & CEO

Banking & Finance

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Taking cognizance of the recent issue of mis-selling of GPS products along with car loans, HDFC Bank is working on more controls to ensure such problems do not recur.

“I am personally determined to fix this. At an organisational level there is a greater focus on the role of Credit, Risk, Compliance, Audit and other enabling functions so that our checks and balances get strengthened,” said Sashidhar Jagdishan, Managing Director and CEO, HDFC Bank.

In his message to shareholders in the bank’s Annual Report 2020-21, Jagdishan said the lender has over the last year put in place a systemic way of measuring customer experience by adopting the Net Promoter System. This would enable it to get customer feedback post transactions.

The Reserve Bank of India had on May 28 imposed a monetary penalty of ₹10 crore on the private sector lender.

HDFC Bank has also said it will be refunding the GPS device commission to auto loan customers who availed of the devices as a part of the auto loan funding during fiscal years 2013-14 to fiscal year 2019-20.

Jagdishan said that for many years the bank had been bundling the financing of GPS systems and cars. “The teams believed this was a routine lending activity. Also, a particular vendor had entered into an arrangement with us directly,” he said.

After the whistleblower complaint, the bank conducted an enquiry and basis the findings took necessary actions against the involved employees including termination of their services and also terminated the arrangement with the vendor.

“Reinforcing the three Cs: Culture, Conscience and Customers across the organisation is a clear focus area for both me and the Bank,” Jagdishan stressed.

Highlighting his other focus areas, he said HDFC Bank is working to augment its digital capacities post outages in its mobile and net banking services.

“The regulator also appointed a third party audit of our IT systems. This audit is now over and the report has been submitted to the regulator. We now await the decision from the RBI,” he said.

Strategy

In terms of the expansion strategy, Jagdishan said the bank has created a new business segment of Commercial (MSME) and Rural Banking to capture the next wave of growth.

“We will continue to strengthen our leadership position in the payments business and retail assets business and have added Wealth Management and Private Banking as a core focus area for us,” he said, adding that it will also focus on the Corporate Cluster and Government Business to increase penetration.

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HDFC Bank looks to grow investment banking business

Banking & Finance

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Private sector lender HDFC Bank is looking to grow its investment banking business and possibly double it over the next two years.

“We are investing in the business. Organically, we are growing and inorganically also we are happy to look at options of partnership and ways to grow this business,” said Rakesh Singh, Group Head – Investment Banking, Private Banking, Marketing and Products, HDFC Bank.

The focus will be more on the equity side as the bank has been doing well on the debt side. In an interaction with BusinessLine, Singh said the lender is hiring people and strengthening its teams in divisions including equity research and sales investment banking.

Also read: HDFC Bank creates Digital and Enterprise factories to roll-out new digital products

“The business will grow a couple of times. We hope it will double in two years,” he said. Singh said the bank will also be keen on working on government PSU disinvestment issues.

When asked about corporate credit demand, Singh said that there are signs of revival in the infrastructure sector. “We are seeing some levels of usual growth linked to newer infra in the market. Roads and highways, transmission, warehousing, renewable energy, solar, city gas distribution, oil and gas, ports are witnessing demand for credit,” he said.

Equity markets

Meanwhile, when asked about the bullishness of the equity markets, he said that it is reflecting the potential of the country in the medium term. “I don’t think stock markets are running far ahead of fundamentals,” Singh said, adding that there is enough economic momentum for the country to come out of the Covid-induced economic slowdown. This could however, take a slightly longer period of time of two to three years, he added.

“Macro numbers are just an aberration because of the Covid-19 pandemic. The underlying goods and services tax collections are very strong and show the robustness of the economy. A one time event driven fiscal pressure does not reflect poor economic fundamentals of the country,” he said.

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HDFC Bank to enhance digital banking experience with Digital & Enterprise Factory, BFSI News, ET BFSI

Banking & Finance

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To roll out its new digital products and services in the future and augment its IT Infrastructure, HDFC Bank has launched a Digital Factory and an Enterprise Factory. The dual approach of building the Digital Factory along with an Enterprise Factory is part of the bank’s technology transformation agenda to run and transform the bank. The factories will be pivoted on APIs, data and cloud.

The bank proposes to strengthen capabilities for the Digital and Enterprise Factories by hiring up to 500 people over the next two years, from diverse backgrounds such as data analytics, AI, ML, Design Thinking, Cloud and DevOps.

“The Digital and Enterprise Factories will help us realise the strategy of ‘running’ the bank, while ‘building’ the bank for the future.” said Parag Rao, Group Head – Payments, Consumer Finance, Digital Banking & IT, HDFC Bank. “Since inception, we have led the digital transformation of the Indian financial services sector and continue to invest in technologies to improve customer experience and enhance efficiencies. This is changing the paradigm by redefining financial services and designing products and services by always keeping the customer at the centre.’’ he added.

The Enterprise Factory will upgrade legacy infrastructure, decouple existing systems and build its own capabilities by embracing open-source to build resilience and scale. The bank is also developing future-ready IP technologies and moving to a native cloud architecture in collaboration with fintech, niche technology and large IT companies.



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HDFC Bank creates Digital and Enterprise factories to roll-out new digital products

Banking & Finance

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Private sector lender HDFC Bank on Tuesday announced that it is setting up a Digital Factory and an Enterprise Factory to roll-out new digital products and services in the future and augment its IT Infrastructure.

The Digital and Enterprise factories will be pivoted on APIs (Application Programming Interface), data and cloud.

Tech transform agenda

The dual approach of building the Digital Factory along with an Enterprise Factory is part of the bank’s technology transformation agenda to run and transform the bank, it said in an official release. The bank has faced multiple outages in its mobile and net banking services over the past couple of years.

The bank is planning to hire up to 500 people over the next two years from diverse backgrounds such as data analytics, AI, ML, Design Thinking, Cloud and DevOps in a bid to strengthen capabilities for the Digital and the Enterprise Factories.

The Digital Factory will build new business and new solutions leveraging new tech stacks/applications and high resiliency and monitoring capabilities. This will be backed by the ability to support large volume growth and plan for upgrading technologies.

It is also developing future-ready IP technologies and shifting to a native cloud architecture in collaboration with niche technology companies, fintech and large IT companies.

“Ensuring reliability, availability, scalability and security will be at the core of the Digital Factory’s endeavours,” it said.

The Enterprise Factory will upgrade its legacy infrastructure, decouple existing systems and build its own capabilities, leveraging open-source for resilience and scale.

“The Digital and Enterprise Factories will help us realise the strategy of ‘running’ the bank, while ‘building’ the bank for the future,” said Parag Rao, Group Head – Payments, Consumer Finance, Digital Banking & IT, HDFC Bank.

“We are poised to capitalize on opportunities that higher digital adoption will bring in India.

Our endeavour is to provide seamless experience to our customers across all platforms, on the back of resilient infrastructure. This is changing the paradigm by redefining financial services and designing products and services by always keeping the customer at the centre,” added Rao.

The bank has been working on a Technology Transformation Agenda for its customers.

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