HDFC Bank Limited (HDB) Earnings

Management highlights

• FY '26 system credit growth was 12% vs estimated 10.5% - 11.5%, deposit growth 14.4% faster than credit growth. Net income and EPS growth noted. NIM drop but return on assets stable due to cost efficiencies. • Substantial investments over past 5 - 6 years in branches, customers, tech. Distribution, customer base, tech investments increased. Merger with HDFC Limited as future investment. • Market leadership in core franchise offerings. Customers at 100 million, acquiring ~6 - 8 million a year. 22% 30 - year - old customers, 42% less than 40. • Focus on technology: digital front and customer experience upgraded, mobile app serves over 60 million registered customers with security features. Built AI - ready engine, strong intelligence layer, unified AI platform with 5 use cases in production and 14 in development. • Addressed matters like resignation of former part - time Chairman and Dubai branch - related matter, legal review in process, NCDRC order noted.

Guidance

• Growth drivers include corporate sector with demand in various sectors like electronics, food processing, auto, etc., and retail growth with step - up in wheels, personal, business loans and mortgage book. • FY '27 growth trajectory expected to have good momentum but need to navigate geopolitical situation. Confident of positivity continuing and focusing on relevant areas. • On deposits, focus on granular time deposits with less than INR 3 crore bucket showing significant growth in net incremental accretion. • On growth, trajectory in right direction, will do responsible growth considering risk and reward. • On NIM, depends on rate cycle and market environment, focus on returns with levers to enhance efficiency.

Segment performance

System credit growth was 12% (up from 5.5% last year). Deposit growth rate was 14.4%. Net income growth was 11%, EPS growth was 10%. Yield on assets had faster transmission than deposits, leading to NIM drop but return on assets stable at 1.9% due to cost efficiencies (cost-to-income declined from 40.5% to 39.5% on core basis) and lower credit costs. Distribution nearly doubled to 9,700 branches. Number of customers nearly doubled to 100 million. Tech investments more than quadrupled to around $1 billion. In various segments: Capital Markets held about 35% - 40% of account settlements; bankruptcy issue held about 40% - 50% of escrow settlement; trade part: ~18% - 20% of country exports and 13% - 15% of imports go through; cards: ~35% - 36% of merchant acquiring, 21% - 22% of credit card issuances, ~26% - 28% of card spends; dominant salary relationship bank in private sector; among top 2 MSME banks and top 2 mortgage banks; top wheels bank. Strong capital position at 19.7%, asset quality extremely healthy at 1.15% gross NPAs. Loan deposit ratio not a constraint. Granular and sustainable deposit franchise: less than INR 3 crore retail liabilities moved from 31% of net total accretion to 47% for the year.

Risks & headwinds

• Geopolitical situation could impact corporate growth. • Rate cycle and geopolitical factors could affect NIM and deposit repricing. • Uncertainty in treasury gains and FX due to volume and spread impacts. • Preference of customers for third - party products could impact related revenue growth.

Analyst Q&A

• Q: About growth drivers next year and growth range, and corporate vs retail growth.

  A: Kaizad Bharucha said corporate growth seen sustaining with demand in various sectors, retail growth stepped up across wheels, personal, business loans and mortgage book.

• Q: On deposit market share and surge in business numbers.

  A: Srinivasan Vaidyanathan said deposit accretion in quarter had market tailwind, composition between retail and wholesale, core retail powering, and surge in business numbers due to market liquidity and stronger corporate relationships.

• Q: On growth guidance and deposits transitory nature.

  A: Sashidhar Jagdishan said growth trajectory in right direction, deposits have focus on granular time deposits with significant increase in less than INR 3 crore bucket.

• Q: On internal performance metric and NIM.

  A: Srinivasan Vaidyanathan said focus on ROA, profit growth, returns and EPS, NIM depends on rate cycle and deposit mix.

• Q: On investments and OpEx, retail loan growth.

  A: Srinivasan Vaidyanathan and Kaizad Bharucha talked about cost - to - income ratio benefits, levers for retail loan growth like distribution, digital channels, customer acquisition, salary accounts, etc.

• Q: On yield on investments, cost of deposit, treasury and FX.

  A: Srinivasan Vaidyanathan explained investment yield, cost of deposit, residual repricing, and treasury and FX impacts.

• Q: On third - party distribution fee and margins.

  A: Srinivasan Vaidyanathan talked about third - party distribution fee growth factors and margin outlook depending on rate cycle and market environment