HDFC Bank Ltd. Q2 FY2024 earnings call

• Merger Integration: Seamless integration of HDFC Limited, addressing liquidity coverage ratio, CRR impact, and day-one equity adjustments. The merger included building liquidity to meet LCR norms and adjusting for accounting differences.
• Business Metrics: Deposit accretion of INR1.1 lakh crore (5.3% sequential), loan growth of INR1.0 lakh crore (4.9% sequential). NIMs were impacted by liquidity and CRR, but core margins expected to recover. Retail mortgage disbursals reached a record high.
• Distribution and Technology: Branch network at 7,945, with 1,446 new branches in 12 months. Payment acceptance points at 4.9 million, 43% y-o-y growth. CRB rural reach at 1.85 lakh villages. Gold loan processing in 4,544 branches, 53% y-o-y growth.
• Subsidiaries: HDBFS, HDFC Life, HDFC AMC, HDFC ERGO, and HSL reported growth in profits and customer base, with sustained improvement in asset quality and profitability.

Deposits: Total deposits stood at INR21.7 lakh crores, growing by INR1.1 lakh crore in the quarter, a 5.3% sequential increase. Term deposits were INR13.6 lakh crores, with a 7.8% sequential growth. Savings account deposits were INR5.7 lakh crores, up 2% sequentially, and current account deposits were INR2.5 lakh crores, up 3% sequentially. CASA ratio ended at 37.6%. Advances: Gross advances were INR23.5 lakh crores, showing a 4.9% sequential growth. Retail advances grew 3.1% sequentially, while CRB advances grew 9.7% sequentially. Net Revenues: Net revenues were INR38,093 crores, a 33% y-o-y growth. Net interest income was INR27,385 crores, 72% of net revenues, with a 30% y-o-y growth. Other income was INR10,708 crores, with fees and commission at INR6,936 crores, a 19.5% y-o-y growth.

• Expect robust growth to continue, maintaining ROA in the 1.9%-2.1% range.
• Margin recovery anticipated as funding shifts to higher-yielding assets and retail focus.
• Confidence in sustained growth post-merger, with potential for market share gains through broader distribution and customer engagement.

• Temporary NPA spikes in the non-retail book due to restructuring, but overall impact on gross NPA minimal.
• Liquidity and funding risks related to debt-funded liquidity build-up and CRR impact.
• Regulatory and market risks affecting margin and growth dynamics.

Q: On margins, how much of the decline is from excess liquidity and ICRR?

A: Margin decline due to debt-funded liquidity and ICRR, with core margins expected to recover over time as funding mix shifts to higher-yielding assets.

Q: On branch opening and OpEx, when will OpEx to asset ratio improve?

A: OpEx to asset ratio will improve over time as new branches become more productive and start contributing to deposits and advances.

Q: On non-retail NPA, was it anticipated?

A: Risk assessment is dynamic, and the non-retail book's quality is being managed with adequate provisions, with the impact on overall bank metrics minimal.