After a stellar Q4FY24 performance, HDFC Bank announced that its employees would get an ex-gratia payout of around Rs 1,500 crore. According to Sashidhar Jagdishan, managing director and chief executive of the biggest private sector lender, the bank made this decision to both combat attrition and show gratitude for the hard work of its staff during the merger with HDFC Ltd.
The lender posted a 37.1% increase in net profit in its January-March earnings announcement on Saturday, which was helped by a one-time gain from selling the majority of its shares in the education lending company HDFC Credila. Simultaneously, the bank chose to make floating provisions of Rs 10,900 crore, negating the gain from the equity sale.
In discussion with an analyst, Jagdishan said, “There was a lot of hard work that happened in the run-up to the merger and subsequent to that on a much larger balance sheet and led by a complex and adverse liquidity situation in the system. I think the team has rallied to adjust to the new norms; they worked hard after being battered from all fronts at the ground level.”
“In the last couple of years, we have had heightened attrition as well. We endeavour to ensure that our large ground workforce, which is 90 per cent of our total manpower, is motivated and this is a way of trying to say thank you to them,” he said.
Jagdishan made it clear that these kinds of costs are not typical in nature. “We have given this as a one-time ex-gratia, and why not? It’s a great way to inspire the younger workforce and provide a one-time gain.”
The Q4 reversal
The bank, which came under fire from investors for its dismal performance in deposit mobilization following its third-quarter reports, fared far better in the fourth quarter. Between January and March, the bank mobilized a total of Rs 1.66 trillion in deposits, of which Rs 1.29 trillion came from retail accounts. As a result, in the fourth quarter, the bank’s market share in deposits increased.
“Ever since our famous – you may call it infamous – third-quarter results earnings call, we have received a lot of feedback from several of you. With all humility, we have incorporated many of the feedback,” Jagdishan said.
He reminded everyone that deposit flows are normally larger from January to March, and that some of those flows were sporadic and unanticipated during that time. “The mobilization in the fourth quarter is good, but I have to be honest and say that there are some temporary flows that have arrived that exceed our expectations. Retail growth was fairly solid even after accounting for that, he noted.
Will I be able to keep up this pace of progress? A certain percentage of total deposits, perhaps the lowest percentage, arrive in the first quarter when we look at a long-term average of roughly six years. In terms of proportion, the second and third quarters are more comparable, with the fourth quarter accounting for the majority of the proportion, according to Jagdishan.
According to him, the bank must maintain its strong deposit performance by strengthening its customer service. “Our elevated service-first culture and improved customer engagement are the keys to this sustainable momentum,” he stated.
