HDFC Bank’s mortgage head Arvind Kapil resigns to lead Poonawalla Fincorp, brokerages flag attrition risk

HDFC Bank’s mortgage business head Arvind Kapil is leaving the bank to head Pune-headquartered non-bank lender Poonawalla Fincorp, the country’s largest private lender said on March 18.

In an exchange filing, Poonawalla Fincorp said its board had approved the appointment of Kapil as the MD and CEO of the non-banking financial corporation (NBFC) effective June 24, 2024 for a five-year period.

Kapil currently heads the mortgage business at HDFC Bank where he manages a book size of ₹7.4 trillion, constituting nearly 30% of the bank’s total loan portfolio.

While there have been over a dozen exits from HDFC Bank since its long-time CEO Aditya Puri moved on in 2020, including some due to retirement, Kapil’s is the first major exit from HDFC Bank under CEO Sashidhar Jagdishan.

Before Kapil, Santosh Nair, then CEO of HDFC Sales (a subsidiary of HDFC Bank, the distribution arm of the bank) quit to join Bandhan Bank as the head of consumer lending and mortgages in February this year.

As per CNBC-TV18’s sources within HDFC Bank, Kapil’s exit was linked to his desire for growth in his role, and no other significant reasons. “Everyone wants a better position, growth in career..He has played a big role in HDFC Bank and we appreciate that,” said a person familiar with the matter who did not wish to be quoted.

“In our view, Arvind is in his early 50s and now gets to be the CEO…not sure whether he would have got that opportunity in the bank...he gets to be the CEO now…Also one could argue that earlier he was managing entire retail portfolio and the recent shuffle he was given mortgages and retail assets (excl mortgages) went to Arvind Vohra who earlier was the head of branch banking (basically liabilities head),” Suresh Ganapathy, the head of financials research at Macquarie Capital Securities said in a note.

Kapil is an HDFC Bank veteran as he has been with the lender for over 25 years since his joining in December 1998. He took over the mortgage business, including Home Loan, Loans Against Property, and HDFC Sales in October last year, in a mega-rejig announced by the bank following its merger with the parent company Housing Development Finance Corporation (HDFC) Limited.

]Prior to this, Kapil headed the retail assets segment for the bank, which is now being handled by Arvind Vohra (ex mortgages).

It is unclear who the bank will name as Kapil’s successor to lead the large mortgage business.

Several brokerages believe that this senior level exit may signify an attrition risk at HDFC Bank.

Macquarie said, “Given the sheer size of the mortgage portfolio and the material importance of distribution, we believe there is key managerial personnel (KMP) risk. We continue to monitor any further senior management/business head resignations.”

“This is tad negative given his (Arvind Kapil’s) seniority, some recent exits at HDFCB to join Bandhan Bk & risk of attrition of teams. So, retention & smooth transition will be key, bank's strong talent base is a comfort,” equity research firm Jefferies said in a note.

However, others like Nomura said the move will not have a material impact on the lender’s business as it has significant depth in its senior management.

“HDFC Bank has a significant depth in senior management, which it has demonstrated in the past as well. We do not expect any material impact on the business owing to this change in senior management. However, we believe any similar churn at the senior management level over the near-to-medium term will be a key monitorable,” Nomura said.