HDFC Bank Chairman Dr. R.H. Meewakkala and CEO/GM
HDFC Bank – the market leader in housing development finance – has achieved impressive financial results in the first half of 2019. A number of key financial indicators have seen significant growth.
The bank’s net interest income for the period ended June 30th 2019 is Rs. 1.42 billion. This is a 28% increase over the previous year’s figure of Rs. 1.11 billion. The profit before tax also rose sharply, from Rs. 293 million in the first half of 2018 to Rs. 348 million in the corresponding period this year. Total assets grew from Rs. 49.2 billion at end 2018 to Rs. 53.3 billion by the end of June 2019.
HDFC Bank General Manager/CEO Palitha Gamage attributed their success to the prudent financial management and risk mitigation strategies adopted at all levels of the organisation. “We have achieved such growth despite our obligations to serve the housing requirements of society, and despite stiff competition from much larger banks,” he said.
HDFC Bank (Housing Development Finance Corporation Bank) was established under a special act of Parliament, which imposes statutory responsibilities. Its core business is providing housing loans for low and middle income people in the country, with 75% of loans being disbursed for this purpose.
Gamage stated that they are now following a more prudent and conservative impairment policy. He noted that the impairment provision against bad and doubtful debts, which was Rs. 23 million in the first six months of 2018, was increased to Rs. 136 million during the corresponding period this year.
Despite this provisioning, and despite paying higher taxes to the Government, the bank’s after-tax profitability has increased significantly. The post-tax profit, which was Rs.188 million in the first six months of 2018, rose to Rs. 228 million during the corresponding period this year. This positive performance runs counter to the general trend in the banking industry.
HDFC Bank has also contributed significantly to the state coffers. For the first 6 months of this year, it contributed as much as Rs. 350 million. This is a 43% increase over the Rs.244 million for the corresponding period last year.
HDFC Bank Chief Financial Officer D.V. Pathirana stated that the main contributor to the increased profitability was their success in managing the cost of funds. He added that their capital adequacy ratios are also above the banking industry average.
Pathirana further said: “In June this year, we received Rs. 250 million from the government treasury as Basel III compliant additional tier-1 capital, strengthening our balance sheet and enabling us to meet the minimum regulatory core capital requirements.”
HDFC Bank has a public-private partnership structure. The Government holds a 51% controlling stake while private companies and individuals have a 49% share. It was initially a State-run institution, but in 2005 it was listed on the Colombo Stock Exchange, resulting in private sector investment. Today, it benefits from a unique combination – the stability and security provided by the state coupled with private sector efficiency.
The bank currently offers a diverse portfolio of loan and savings products. Its key activities, besides housing finance, are leasing, deposits, business loans, educational loans and pawning. It caters to customers with different financial requirements, including professionals, state sector employees, pensioners and SME entrepreneurs.
HDFC Bank has over three decades of experience in housing development finance. In 2012, it began diversifying the product portfolio and entered new market segments. Among the new areas of business were leasing and SME loans. This diversification strategy proved quite successful. The bank now caters to niche customer segments with innovative products that go beyond the core business of providing housing loans. Its services are delivered through 39 branches located across the country.
Under an energetic management team, HDFC Bank has introduced new processes covering everything from administration to IT. It has adapted to technological advances with great success.
Today, the bank offers digital banking solutions including online payment and e-banking services. The core banking system implemented in 2017 has facilitated the introduction of new diversified products and supported its growth strategy. This system has also greatly enhanced the bank’s efficiency as well as its ability to offer convenience to customers.