ANNUAL REPORT 2000-2001
Seventh Annual General Meeting of HDFC Bank Limited
Esteemed Members of HDFC Bank
Ladies & Gentlemen,
It gives me immense pleasure to welcome you to this, the Seventh Annual
General meeting of the shareholders of HDFC Bank.
Before I commence today's proceedings I, for myself and on behalf of the
Board of Directors like to place on record the invaluable contribution made
by Mr. S. S. Thakur during the bank's initial formative years until his
retirement. I sincerely hope that our efforts to appoint an eminent
personality of his stature and experience are successful to help the bank
continue its growth in future.
With your permission, I would like to update you on the progress your bank
has made in the financial year ended 31st March, 2001 and also to share
with you the outlook for the current financial year.
Financial Highlights - 2000-01:
The financial year ended March 31, 2001 represented the first full year of
your bank's operations after the Times Bank merger. The financial
performance in terms of both business volumes and revenues was extremely
strong. The bank's total deposits increased by 38% from Rs.8428 crores to
Rs.11658 crores. Most significantly, the stable, low cost savings account
deposits which reflect the strength of your bank's retail franchise
increased by 69% from Rs.1125 crores to Rs.1903 crores; On the assets side
also, there was an impressive growth with advances up 34% from Rs.3462
crores to Rs.4637 crores. As a result of the strong balance sheet and
overall business growth, total net revenues increased by 60.4% from Rs.431
crores to Rs.691 crores. Net profit after tax also registered a healthy
growth of 75% from Rs.120 crores to Rs.210 crores.
Consistent with the bank's track record of maintaining a steady increase in
dividends, your Directors have recommended a dividend of 20% for the year
ended March 31, 2001 as against 16% for the previous financial year. The
increase in dividend reflects a balance between the desire to reward
shareholders on the one hand and the need for healthy retention to meet the
bank's growing investment and capital adequacy needs on the other.
To support your bank's growth plans and in view of the more stringent
regulatory guidelines relating to capital adequacy expected in the near
future, your bank would require to raise capital in the current financial
year. The Board of Directors is currently considering an offering of
depository receipts in the international markets as one of the option for
raising capital. Your approval in this regard is being sought.
As of March 31, 2001, your bank had a network of 131 branches and extension
counters and 207 ATMs up from 111 outlets and 111 ATMs as of March 31,
2000. In the current financial year also, the bank has an aggressive branch
expansion plan. As of today, the bank has 134 outlets and hopes to expand
the network to about 160 branches by March 2002. The wider branch network
would enable the bank to strengthen its position, not only in the retail,
but also the cash management and other corporate banking businesses. The
growing network together with the alternative channels like phonebanking,
mobile banking and netbanking will also help sustain a continued deposit
and loan growth.
I am happy to inform you that your bank continues to experience healthy
growth across various business areas. In the Corporate Banking business,
despite the sluggish macro economic environment, your bank has been able to
grow its loan book and increase its trade and cash management volumes. On
the Treasury front, in the foreign exchange business in particular, the
bank's focus on customer related transaction flows and on expanding its
product range have enabled it to achieve a healthy growth in revenues. The
local currency debt securities business remained focussed on optimizing the
returns and market risk on the government securities portfolio which is
required to be held for statutory liquidity ratio (SLR) requirements.
On the Retail Banking side, significant franchise expansion has been
achieved in terms of both deposits and loans. The total number of retail
accounts increased from 0.8 million in March 2000 to over 1.4 million in
March 2001. On the retail loan side, your bank now offers a wide product
range including car loans, personal loans secured by shares and loans for
consumer durables. Your bank is the largest issuer of debit cards in the
country. It also remains a leader in providing cash settlement services to
stock exchanges and depository participant (DP) services to retail
Asset Quality and Risk Management:
Notwithstanding the volatile and difficult macro economic environment, the
quality of your bank's credit portfolio continues to remain healthy. As at
March 31, 2001 your bank's net non-performing assets were 0.45% of
advances, which I believe is amongst the best in the Indian banking
industry. As a prudent policy your bank has maintained a highly diversified
portfolio and has also made general loan loss provisions for standard
assets which are well over the minimum levels prescribed by Reserve Bank of
Business Prospects and Growth Strategy:
As you are aware, the current economic environment is challenging, with
persistent sluggishness in industrial production and an overall dampening
of business confidence. The rapid dismantling of trade barriers, decline in
several international commodity prices and intensifying global competition
have exposed the Indian corporate sector to greater risk. The volatility in
domestic and international stock markets has also caused its share of
uncertainty. In such an environment, your bank's growth would have to be
driven by enhanced customer acquisition, geographic expansion, new product
introductions as well as increased penetration of the existing customer
base without compromising on portfolio quality. I believe, your bank is
well positioned in this respect and should be able to achieve healthy
growth in terms of both business volumes and profitability.
In conclusion, I would like to state that over the last six years your bank
has built a solid foundation based on strong parentage, technological
superiority, multiple product franchises and prudent risk management.
Having successfully integrated the Times Bank, having almost one and a half
million banking accounts and with a balance sheet size of over Rs.15,000
crores, your bank has moved from being a fledging new entrant to a
meaningful and highly respected player in the Indian banking industry.
Looking ahead I view your bank's future with continued optimism and am
confident that all the bank's stakeholders, including its shareholders,
customers and employees would benefit from the expected growth in the
bank's business and earnings in the coming years.
I would like to take this opportunity to the all of you as part of the
family of almost 300,000 shareholders, as well as our customers, the
Reserve Bank of India, our promoters HDFC and our strategic business
collaborators Chase for all the help and encouragement they have extended
to the bank. I look forward to their continued support. Finally, l would
like to compliment our staff at all levels for their dedicated efforts in
making the bank what it is today.
D. M. Satwalekar
1st June, 2001.