HDFC Bank's chief executive and managing director Sashidhar Jagdishan on Friday said the bank is undergoing a period of "adjustment" right now, which may also lead to a slowing down of credit growth, but exuded confidence that it will "break out" on the other side.
Addressing shareholders of the country's largest private sector lender, Jagdishan said that an "adjustment is happening", hinting that it is due to the macro environment and also impact of the merger.
"That adjustment will take a little bit of time before we can sort of break out as we have done in the past," he said.
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It is in the interest of the bank to ensure that the deposit growth is "much greater than the credit growth", he added.
"...even if it means for a period of time we have to slow down the credit growth or bring down the credit deposit ratio, it is in our interest to do it as quickly as possible because post that, post reaching a certain level, I think then we can enjoy the benefits of this cycle moving back upwards," he added.
The bank's credit deposit (CD) ratio stands at 104 per cent, and the lender has in the past spoken about bringing down the ratio. The key ratio is highest among peers because of the merger of HDFC Ltd, the home finance major parent, in July 2023 and lower share of deposits coming in because of the deal.
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Jagdishan said the bank "inherited" certain amount of financials on day one of the merger and the metrics stood at a certain level on July 1, 2023 when the two entities became one.
He also conceded that the macro environment fraught with high inflation and geopolitical risks has resulted in some of the calculations getting impacted due to dramatic changes in the landscape.
Asserting that the bank is not "apologetic" about the decision to merge, the MD said liquidity was very benign on April 4, 2022 when the two institutions made the surprise announcement and added that the expectation of a certain growth rate was factored back then.
"So today, whatever we are, it will be different from what we had anticipated at the time of the announcement of the merger," he said.
Seeking to address shareholder concerns over valuation, Jagdishan said merger impact will not be visible in the short term, and long term shareholder value creation is more important.
The bank's chairman Atanu Charaborty said the merger is one of the largest ones in Indian corporate history and among the most complex in the financial services sector.
"The merger has strengthened the bank's pathways for future growth," he said.
Jagdishan said the bank's attrition has come down to 27 per cent in FY24 from the 34 per cent in FY23.
