HDFC Bank Limited Q2 FY2025 earnings call

Macro Environment

• Liquidity has been gradually improving, but deposit rates remain elevated and sticky. Credit growth outpaces deposit growth in the system, with customers preferring time deposits.

Deposits

• Retail branch continues to contribute around 84% to total deposits, and average deposit growth is around 15% year-on-year.

Credit Growth Strategy

• Plan to bring down the CD ratio faster. FY25 credit growth expected to be slower than the system, FY26 at or around system growth rate, FY27 faster than system growth rate.

Margins

• Margins have been stable in the range of 3.45% to 3.5%, printed at 3.46%.

Asset Quality

• Gross NPA remains stable at about 1.4%, with gross slippages at 1.2% better than the previous year.

Deposits: Retail branch contributes around 84% to total deposits, with an average year-on-year deposit growth of approximately 15%. Advances: Average assets under management grew by about 10.2% year-on-year. Credit growth trajectory: FY25 is expected to grow slower than the system, FY26 at or around the system growth rate, and FY27 faster than the system growth rate. Margins: Stable in the range of 3.45% to 3.5%, printed at 3.46%. Gross NPA: Stable at about 1.4%, with gross slippages at 1.2% which is better than the same time last year. Profit after tax: Grew at about INR16,800 crores, with an optical growth rate of about 5.3%, and an adjusted growth rate of about 17% after accounting for bond gains and tax adjustments.

Credit Growth

• FY25: Expected to grow slower than the system.
• FY26: May be at or around the system growth rate.
• FY27: Should be faster than the system growth rate.

Deposits

• Anticipate healthy deposit growth, with retail branch continuing to contribute significantly.

CD Ratio

• Plan to bring down the CD ratio faster than previously anticipated.

• Deposit rates are elevated and sticky.
• Credit growth continues to outpace deposit growth in the system.
• Uncertainty regarding RBI's draft circular and its impact on HDB Financial and its planned listing.
• Potential impact of regulatory changes on balance sheet and operational strategies.

Q: On the trajectory of the liquidity coverage ratio?

A: The liquidity coverage ratio is at 128. It is driven by getting more granular deposits and calibrating loan growth. It may remain at current levels or increase depending on deposit market and regulatory developments.

Q: On other OpEx growth being sharply down?

A: Total expenses are growing at about 10%, with moderation in headcount and seasonal timing factors affecting expenditure.

Q: On loan yields compared to peers?

A: Need to look by segment. Mortgages have rates similar to private sector peers, but legacy banks have price differentials. Non-mortgage retail has risk-based pricing. Larger ticket side has inhibited pricing due to credit spreads and life cycle credit cost considerations.