At a time when most lenders are shying away from lending to the corporate sector, private sector lender HDFC Bank grew its wholesale book by 32% in 2018-19. As a result, the wholesale lending book is now 46% of the total book compared with 43% a year ago.
In an interaction with The Hindu , Kaizad Bharucha, executive director of HDFC Bank who heads the wholesale banking portfolio, said growth was spread across different sectors.
Wholesale banking of HDFC Bank broadly comprises three segments viz. the corporate bank (large corporate), the emerging corporate group (mid-corporate) and business banking (MSME).
“The growth that we have seen has come from each of these sectors.
“Of course, the degree of growth has varied among these sectors. You can take a range from 20% to 30-35%,” Mr. Bharucha said.
The corporate bank is the largest contributor within wholesale banking.
But will this kind of loan growth continue given economic activity has been sluggish?
While clarifying that the bank did not provide any guidance, Mr. Bharucha emphasised that the lender was well positioned in each of the business segments.
“We have typically grown about 5-8% above the industry standard. We do not try and target any specific number of growth. So, where we see growth in a particular sector at a point in time, that is meeting our credit standards, that is where we will participate and tend to achieve a little more than the other segments,” he said.
When asked if the bank had gained market share from other banks, he said, “We will not do anything for the sake of gaining market share. Market share is important but not the end objective.”
Margins
Some of the analysts have raised concern over net interest margin compression as the bank’s unsecured lending had slowed down while wholesale segment recorded healthy growth.
Mr. Bharucha said since the bank offered a bouquet of products to a company, the pricing differed which helped them keep the margins intact.
“Composite offering made to the corporates across the breadth of transaction banking and lending and foreign exchange products which therefore ensures a appropriate return for the risk that is been taken,” he said.
HDFC Bank had maintained a net interest margin of 4-4.3% over a long period of time
Bad loans
Asked about bad loans in corporate lending, Mr. Bharucha said that the HDFC Bank had always been in corporate lending though there had been a period when the retail growth had beenhigher.
“We have always been in the corporate space. Given our balance sheet size, it tells you how the wholesale bank has been growing over the years.
“May be retail grew faster for few a years because of the consumption story so it got more limelight but it is not that the wholesale did not grow.”
“The architecture that we have, the target market that we have defined, the right risk-reward equation that we measure, and the ongoing monitoring which is done on the portfolio, place us comfortably to look at these opportunities as they come,” he added.
