have over 25 per cent of their loan book under moratorium in Q4. The extension of moratorium till end-August would not only result in lower reported non-performing assets or bad loans, but also partly inflate the outstanding loan amount due to lower repayments.
Kotak Institutional Equities highlights: “There is also an element of capitalisation of interest reflecting in the overall loan growth numbers.” Interest capitalisation is the addition of unpaid interest to the principal loan balance when repayments are deferred.
While the trend in the share of low-cost deposits (CASA ratio) was mixed, banks haven’t shared details on the disbursement and moratorium, which analysts expect to have declined in Q1.
But, here’s a word of caution. A rating agency executive says, given the operational disturbance led by the lockdown in March — a crucial month for banks’ business growth — some loan disbursements could have got pushed to the June quarter, thereby inflating the numbers.
Nitin Aggarwal, analyst at Motilal Oswal Securities, opines that as half the Q1 period was under lockdown, it is more important to see how the moratorium book has panned out in Q1.
Moreover, HDFC Bank’s 21-per cent loan growth in Q1 appears impressive, indicating its strong market position. The succession of its Chief Executive Officer Aditya Puri, who retires in October, however, will be a crucial event for the stock.