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HDFC Bank sees decline in deposits and advances growth in Q1

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In Short:

HDFC Bank reported a decline in advances and deposits for the first quarter of the year, mainly due to shedding of low-yielding corporate books. Despite this, year-on-year growth was positive. Other banks like Bandhan Bank and RBL Bank also saw declines in deposits but Federal Bank saw growth. Overall, the banking sector is expected to see weak deposit growth in the first quarter.

The Human Side of Banking: HDFC Bank’s Quarterly Update

Imagine this – you’re sitting down, going through your banking app, and you notice something a little different. That’s exactly what happened for HDFC Bank Ltd at the end of the first quarter. According to their pre-quarter update released on Thursday, there was a slight dip in both advances and deposit growth. Let’s break it down.

Advances and Deposits: The Numbers Game

Advances growth took a slight hit, declining by 0.8% quarter on quarter to **₹24.87 trillion** by the end of June 2024, compared to **₹25.1 trillion** in March 2024. The decrease in the loan book can be attributed to the shedding of low-yielding corporate book, including that of erstwhile HDFC Ltd. On the other hand, deposits growth also saw a decrease of 0.03% quarter on quarter, landing at **₹23.79 trillion** by June 2024.

Year-on-Year Comparison

Looking at the bigger picture, on a year-on-year basis, advances grew impressively by 52.6% and deposits showed a healthy growth of 24.4%.

Financial Indicators

The bank’s low cost deposits current and savings accounts (CASA) ratio showed a decline to 36.3% by the end of June 2024, down from 38.2% in March 2024. However, the liquidity coverage ratio improved to 123% for the quarter, a positive sign.

Market Reactions and Analyst Insights

Despite the dip in numbers, the bank’s shares fell by 2% to **₹1,726.60** during Thursday’s trade. Analysts like Anand Dama from Emkay Global Financial Services Ltd. pointed out concerns of flattish deposit growth and slower credit growth impacting the stock’s performance.

Banking Blues Across the Board

It’s not just HDFC Bank feeling the pressure. Other banks like Bandhan Bank and RBL Bank also reported muted business updates. Bandhan Bank saw declines in both deposits and advances, while RBL Bank witnessed mixed results with a decline in deposits and growth in advances.

A standout performer, Federal Bank, bucked the trend with impressive growth in advances and deposits at the end of June 2024.

According to Suresh Ganapathy from Macquarie Capital, the first quarter is expected to show weak deposit growth, with net interest margins and credit costs remaining flat.

Trends in the Banking Sector

The banking sector as a whole saw a rise in deposits and advances, according to the Reserve Bank of India’s weekly statistical supplement. However, bank deposits did experience a decline in a short period.

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