MUMBAI: HDFC Bank, India’s most valuable lender, let go of nearly 4,500 employees in the October-December quarter as earnings growth fell to an 18-year low and costs became a big focus area.
The employee reduction is probably the largest by the bank in a single quarter and is likely to continue if the economic recovery does not quicken, say analysts. The bank indicated that future hiring pace could slow as it focusses on productivity through various measures including accelerated automation.
“The drop in headcount has primarily been a result of combination of natural attrition and a hiring at a clip lower than normal made possible by achieving higher productivity and efficiencies over the last few months,” HDFC Bank said in an email response to ET’s queries.
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Total employees of the bank fell to 90,421 in December 2016, down 5% from 95,002 in September 2016, data from the bank showed. Some of the drop could also be attributed to natural attrition.
“These jobs are mostly linked to the bank’s asset creation in retail. Attrition is a part of any business, but I do not recall the cuts being so big in a single quarter for the bank at any point in time,” said Punit Srivastava, head of research at Daiwa Capital Markets.
Regular bank exercise
On Tuesday, HDFC Bank said net profit grew 15% to Rs 3,865 crore from Rs 3,357 crore a year earlier, the slowest profit growth since June 1998. Pre-tax profit in trading of bonds and currencies fell to Rs 253 crore, from Rs 513 crore a year earlier, while fee income grew just 9.4% year-on-year as some streams of the bank’s fee line were hit due to demonetisation.
In a conference call with analysts post the results, deputy managing director Paresh Sukthankar said the staff cuts were part of a regular bank exercise to improve efficiency and productivity of employees.
Results released on Tuesday showed operating expenses of the bank dropped marginally by 0.55% to Rs 4,843 crore in the quarter ended December, down from Rs 4,870 crore in September. Other operating expenses dropped 1.83% to Rs 3,154 crore from Rs 3,213 crore in September. However, employee costs increased 1.93% to Rs 1,689 crore from Rs 1,657 crore. “It is likely that these cuts were done to squeeze out costs at a time when growth was a challenge in the quarter. We could see some of these benefits also seep through in the next quarter,” said Sri Karthik Velamakanni analyst at Investec Securities.
Analysts said the job cuts gave no indication of any change in fortunes of the bank.
“I won’t read too much into that employee reduction…clearly they are trying to extract more productivity benefits…increasingly the digital channel penetration is also necessitating lower workforce, lesser touch points etc…much of the reductions have happened on the sales front (feet on street) where increasing digital sourcing has helped,” Suresh Ganapathy, analyst at Macquarie Capital Securities said in a note on Wednesday.
Ganapathy said that with the bank likely to add less than 500 branches this fiscal, the need for physical presence is reducing.