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HDFC Bank’s shares fall by as much as 2.74 per cent after it launched a probe into its auto lending practices following allegations against the conduct of a long-time executive who retired on March 31 this year. Also, HDFC Bank was trading at Rs 1,053.55 down 2.49 per cent from its previous close, while the benchmark index, Sensex was down 1.54 per cent to 36,127.04.
The auto loan book had stood at Rs 83,935 crore as of March 31, 2020, constituting less than a fifth of the overall retail book. The auto loans had grown by only 4.04 per cent in FY2020 as against the 14.61 per cent growth in the overall retail advances. It can be noted that auto sales were also in the slow lane for much of the year.
The allegations pertain largely to the professional conduct which raises issues about possible conflicts of interest, stressing the quality of the bank’s auto loan book is strong.
At the end of the March quarter, HDFC bank had reported a 17.7 per cent rise in net profit to Rs 6,928 crore, against Rs 5,885 crore in the year-ago period. Provisioning rose to Rs 3,784.5 crore against Rs 3,043.6 crore in the previous quarter and Rs 1,889 crore in the year-ago period. The bank had made additional provisions of Rs 1,550 crore because of the COVID-19 impact.
HDFC Bank aims to raise Rs 50,000 crore by way of additional tier 1 and tier 2 bonds besides long-term bonds for financing its infrastructure and the affordable housing business. It also aims to raise another Rs 10,000-13,000 crore by the end of 2020 and is in the process of appointing investment bankers for the same.
