BackHDFC Bank planning thousands of hires to boost lending
HDFC is looking at increasing workers across its businesses in the current year, said deputy MD Paresh Sukthankar
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Mumbai: HDFC Bank Ltd, India’s biggest lender by market value, will add thousands of employees and open hundreds of new branches this year to boost lending that’s already growing at twice the national rate.
The Mumbai-based bank, which added 10,000 employees in the year to March after holding back on hiring for about two years, is looking at increasing workers across its businesses in the current year, deputy managing director Paresh Sukthankar said in an interview.
The lowest nonperforming-loan ratio among the nation’s biggest lenders has allowed HDFC Bank to invest in its business and extend more loans, rather than focus on steps to combat soured debt, as State Bank of India and ICICI Bank Ltd have done. State Bank’s employee numbers have fallen by 7% in the past two years as the company awaited signs of an improving business outlook.
“In the base-case scenario, we probably will add a few thousand employees this year and will add a few hundred branches with an even break-up between the urban and rural areas," HDFC Bank’s Sukthankar said in his Mumbai office on 17 June, without elaborating.
The firm had 4,014 branches, with 78,000 employees at the end of March, compared with State Bank’s 16,333 outlets. The government lender’s employee numbers fell by 16,000 to 213,000 in the two years through March as it held off replacing workers who retired, exchange filings show.
Profit growth
Led by managing director Aditya Puri, HDFC Bank boosted loans by 20.6% in the year to March, compared with about 10% for the industry. The company has managed to increase profit by at least 20% every year since 1998, a feat unmatched by any of the world’s 200 biggest lenders, data compiled by Bloomberg shows.
That growth has given HDFC Bank scope to step up hiring at a time when peers around the world are cutting jobs to bolster profitability. Since January, HSBC Holdings Plc, Europe’s largest bank, and Standard Chartered Plc have revealed plans to cut more than 25,000 jobs in total in coming years.
HDFC Bank’s shares climbed 803% in the past decade, almost double the S&P BSE India Bankex Index’s 430% increase. The stock trades at 4.2 times its book value, versus 2.4 for the 10-member Bankex. State Bank, the nation’s biggest lender by assets, trades at 1.2 times its book value.
“Considering the size it has grown to, and increasing competition from rivals, HDFC Bank may find it harder to maintain the profit growth that they delivered over the years," said P. Karthikeyan, a Chennai-based banking analyst at Cholamandalam Securities Ltd. “There is limited room for the bank to improve" on costs and asset quality, said the analyst, who has a hold rating on the bank’s stock.
Analyst ratings
Karthikeyan is in the minority: 54 of 60 analysts tracked by Bloomberg who follow HDFC Bank recommend investors purchase the stock. The lender had a consensus analyst rating of 4.62 out of 5, compared with 4.5 at ICICI Bank and 4.43 at State Bank, data compiled by Bloomberg show. Five denotes a buy and 1 a sell.
HDFC Bank’s stressed-asset ratio was at 1.03% as of March, compared with 10.9% for the country’s banking system. State Bank’s ratio was 8.43%.
India has 27 state-run banks accounting for 73% of loans outstanding as of 2013. The country’s 20 private lenders, led by ICICI Bank, held more than 21%, while 43 foreign banks including HSBC accounted for the rest, Reserve Bank of India (RBI) data show.
Private sector banks’ share of the country’s banking assets is expected to reach 32% by 2025 from 12.3% as of 2000, a central bank-appointed committee said in a report in May 2014. HDFC Bank, started in 1994, currently has a market share of about 4%, Sukthankar said.
“Our growth is based not just on what the industry and economy do, but also on our ability to gain market share by offering better products and service at a faster pace," Sukthankar said. “There is an opportunity for us." Bloomberg
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