Tag: Industry

The lifting of the regulatory embargo on issuance of new credit cards by HDFC Bank will offer some relief to the lender ahead of the festive season. At the same time, the continuing bar on fresh digital launches and the ban on three-card networks may pose difficulties for the bank.

In a letter to HDFC Bank’s employees on Wednesday, managing director and CEO Sashidhar Jagdishan is understood to have said that the ‘rap on the knuckles’ from the regulator has made the bank reimagine its IT systems and processes and turbo-charge the speed of technology transformation.

“On Digital 2.0, the restrictions will continue till further review by the regulator. We shall continue to engage and ensure full compliance as we move forward,” Jagdishan said, adding that HDFC Bank will regain and grow its credit card customer market share and revenue market share in the time to come.

Analysts viewed the development as a positive for the bank. Motilal Oswal Financial Services (MOFSL) said in a report on Wednesday: “HDFC Bank typically adopts an aggressive stance during the festive season and offers various discounts on consumer durable products to drive spends and accelerated growth in consumer durable financing.” Therefore, the lifting of RBI restrictions before the festive season augurs well and the bank is likely to turn more aggressive on credit cards over the next few months.

In his letter to his colleagues, Jagdishan said in the coming months, HDFC Bank will aggressively go to the market with not just its existing suite of credit cards but also new offerings in the form of co-brands and partnerships.

As per the MOFSL report, HDFC Bank has lost nearly 0.6 million cards since the date of the embargo in December 2020. On the other hand, ICICI Bank, SBI Card and Axis Bank added around 1.3 million, 0.75 million and 0.3 million new cards respectively over the same period. “Therefore, other players such as ICICI Bank/ SBI Card have sharply ramped up their incremental market share at ~49%/~28% during this period,” MOFSL said.

On June 30, HDFC Bank had said it had acquired a significant number of customers on the liabilities and assets sides. It planned to continue with the strategy to target 75-80% of internal customers for the card base. These customers had been pre-approved and the lender had observed their behaviour for six months. Now that the ban on issuances has been lifted, these customers are likely to be issued new cards.

However, the Reserve Bank of India’s (RBI) ban on new card issuances by three-card networks may pose another challenge for HDFC Bank. A Nomura report dated July 15 said HDFC Bank has 60% of its card schemes tied to Mastercard, American Express and Diners Club International. The lender’s Millennia Prepaid Card, Regalia ForexPlus Card and ISIC Student ForexPlus Card were on the MasterCard network and fresh issuances in these categories may be affected.

Chennai-based public sector lender Indian Bank on Monday reported a 220% jump in its net profit to Rs 1,182 crore in the first quarter of FY22, against Rs 369 crore in the corresponding quarter last fiscal. Total income stood at Rs 11,500 crore in Q1, registering a flat growth over Rs 11,447 crore in the year-ago period. The bank has attributed the stellar growth in bottomline to increase in non-interest income, decrease in interest expenditure and higher operational efficiencies.

Padmaja Chunduru, MD & CEO, Indian Bank, told mediapersons that after successfully completing the amalgamation of Allahabad Bank during the previous year, the bank is now reaping the synergy benefits. With the vaccination programme picking up and the economy expected to open up in the coming quarter, the bank is well-positioned to leverage the growth opportunities.

“The capital adequacy ratio of the bank was at 15.92 % giving comfort to bank in ramping up the business. Oversubscription of QIP in June adding Rs 1,650 crore to equity, was another testimony to ever increasing market trust in the strong fundamentals of the bank,” she said.

Net interest margin (NIM) improved by 51 basis points (bps) on quarter-on-quarter (QoQ) sequential basis. It stood at 2.85% for Q1FY22, against2.83% for Q1FY21. Non- interest income was up by 41% y-o-y and 8% QoQ. It stood at Rs 1,877 crore, against Rs 1,327 crore in Q1FY21, on account of higher recovery in bad debts and rise in forex income.

The bank has made improvement on asset quality by bringing down gross non-performing assets (GNPA) by 121 bps to 9.69% from 10.9%. The net NPA ratio also declined by 29 bps to 3.47% from 3.76% in June 2020 ended quarter.

The capital adequacy (CRAR) of the bank stood at 15.92% with 247 bps y-o-y increase. On a sequential quarter basis, it increased by 21 bps from 15.71% in Q4FY21. The tier-I CRAR was at 12.22% in June 21, against 10.47%, up by 175bps y-o-y. On a sequential quarter basis, it rose by 28 bps from 11.94% in Q4FY21. Domestic CASA deposits of the bank grew by 9% y-o-y while moderated by 3% QoQ and touched Rs 2,20,874 crore in Q1FY22. Share of CASA to total deposits was at 41% in Q1FY22, against 42% a year ago. Current account deposits grew by 18% and savings account deposits by 8% y-o-y.