HDFC Bank Ltd. Q3 FY2024 earnings call

• Macroeconomic Environment: Healthy domestic activity, with GDP growth estimated at 7% for FY '24 and 6.5% for FY '25. RBI rate unchanged at 6.5% with a withdrawal of accommodation stance.
• Bank's Growth Factors: Advances growth, deposit growth, branch network expansion (added 146 branches in the quarter), customer base growth, and ESG initiatives.
• Financial Results: Net revenues were INR 396 billion (+25.8% YoY), net interest income INR 285 billion (+23.9% YoY), other income INR 111 billion, operating expenses INR 160 billion (+28% YoY). Asset quality: GNPA ratio 1.26%, net NPA ratio 0.31%, provisions INR 42 billion.

Advances: Gross advances stood at INR 24.7 trillion as of 31st December, with a sequential growth of INR 1.1 trillion (4.9%). Retail advances grew 3.3% quarter-on-quarter, driven by strong mortgage business; retail mortgage disbursements were INR 460 billion, up 18% year-on-year. CRB business saw a quarter-on-quarter growth of 6.7%. Wholesale segment (excluding non-individual loans of HDFC) grew 1.9% sequentially, with HDFC non-individual loans aggregating to INR 0.99 trillion. Deposits: Total deposits were INR 22.1 trillion, with retail deposits making up 84% of total deposits. Retail deposits grew by INR 530 billion (2.9% QoQ). Current account deposits ended at INR 2.6 trillion, growing INR 80 billion (3.2% QoQ). Savings deposits were INR 5.8 trillion, growing INR 99 billion (1.7% QoQ). CASA ratio was 37.7%. Term deposits aggregated to INR 13.8 trillion, growing INR 232 billion (1.7% QoQ). Branches and Network: Branch network stood at 8,091 outlets, with 908 added in 12 months and 146 added in the quarter. Payment acceptance points were 4.8 million, a 25% year-on-year growth. CRB rural business reached 210,000 villages, a 60,000-village growth year-on-year. Customers: Added 2.2 million new customer liability relationships in the quarter, with a total customer base of 93 million. Subsidiaries: HDB had a gross stage 3 of 2.25% and a provision coverage on Stage 3 book of 68%. HDFC Life had a profit after tax of INR 3.7 billion (+16% YoY). AMC had a quarterly average AUM of INR 5.5 trillion (+24% YoY). HDFC ERGO had a profit after tax of INR 1.3 billion (+6% YoY). HSL had a net profit after tax of INR 2.3 billion.

• Expect deposit growth to outpace loan growth to improve the loan-deposit ratio (LDR).
• Target to reduce the cost-to-income ratio to the mid-30s over 5 years.
• Envisage deposit growth rate to outpace loan growth by 300-400 basis points to improve the CD ratio progressively.

• Liquidity constraints in the system affecting deposit growth.
• Potential impact of risk weight regulations on unsecured loans and NBFC exposure.
• Volatility in deposit rates and uncertainty around borrowing maturities.

Q: On deposit growth and LDR, how to view the current situation?

A: Talks about deposit growth components, with retail deposits growing but non-retail deposits reducing. Mentions liquidity constraints in the system and the need for deposit growth to outpace loan growth.

Q: How to drive margins and manage borrowings?

A: Highlights the need to enhance the retail mix, improve CASA ratio, and optimize the borrowings mix, including leveraging infra bonds for better economics.

Q: On unsecured loans and NBFC exposure, what's the approach?

A: States that unsecured loans are a profitable product with a good delinquency profile, and NBFC exposure is maintained based on profitability despite risk weight regulations.