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HDFC Bank sees asset a quality worsening marginally after merger

September 20, 2023

HDFC Bank sees asset a quality worsening marginally after merger
India’s largest private bank HDFC Bank Ltd. is likely to see its bad loan ratios worsen marginally, after the merger with Housing Development Finance Corporation Ltd. 

Gross non-performing asset ratio is likely to increase to 1.4% as of July 1, compared to 1.2% as of June 30, Srinivasan Vaidyanathan, chief financial officer of HDFC Bank told sell-side analysts on Monday. In a presentation, the bank also noted that the net NPA ratio will rise to 0.4%, from 0.3% at the end of the first quarter.
 
The rise in bad loans is owing to HDFC’s non-retail housing loan portfolio where the gross bad loans are at 6.7% as of July 1. 
 
“There are certain non-individual accounts that the bank’s risk assessment is not comfortable in holding,” Vaidyanathan said.
 
As of March 31, HDFC’s total loan book stood at over ₹6 lakh crore, which included ₹4.99 lakh crore worth retail loans and ₹1.15 lakh crore worth loans extended to corporate bodies. 
 
The bank holds adequate provisions against such loans, the bank’s CFO said. As of July 1, the provision coverage ratio for the combined entity is at 74%, compared to 75% as of June 30.
 
Currently, the non-individual loan book is reducing and it will be a couple of quarters before the book stabilises, Vaidyanathan told analysts.
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