HDFC Bank Limited

Good evening and welcome to HDFC Bank Limited Q2 FY24 earnings conference call on the financial results presented by the management of HDFC Bank. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Srinivasan Vaidyanathan, Chief Financial Officer, HDFC Bank. Thank you and over to you, sir.

Okay, thank you. Thank you, Nirav. Good evening and a warm welcome to all the participants. Our MD and CEO, Mr. Sashi Jagdishan has joined us today to provide an overview of the business before we get into the quarterly results. Sashini, over to you to get started, please.

Thank you, Srini. Thank you for allowing me to steal your talk time. I'll keep it as brief as possible. This being the first results post the merger, I thought of sharing my thoughts. It's such a pleasure to connect with you all after a very long time. As you know, we just consummated one of the largest mergers in recent times with seamless integration of people, process and systems. And that too, without any external help, this showcases the power of our execution. The day one merged balance sheet was audited by the 31st of August, and the team disclosed this to the world at large around mid-September. The presentation, which they did to the analysts, brought out some of the one-offs on account of the debt-funded liquid assets to meet the liquidity coverage ratio, the LCR, as per banking norms. As you know, sometimes the assumptions and cash flows that an NBFC does is different from what a bank would do. And so, therefore, there was some amount of build-up of liquidity to be to meet those liquidity coverage ratio norms, and also provide an extra cushion to take care of contingencies. You know, as luck would have it, there was an incremental CRR, which was announced, and this cushion came in extremely handy. Obviously, it came with a cost, which is approximately 25 basis points between the liquidity buildup and the ICRR impact. I think Srini will talk about it more in detail in his call. The presentation also brought about the day one adjustments to equity, which was one of the ask of all you of this fraternity to say what will be the day one equity and with all the adjustments that one would do on merger. I think a lot of people probably mistook some of them to be destroying of value the equity, but it's not. If you look at it deeply, and I'm sure most of you would realize that these are all accounting and timing differences, which means that these benefits will accrue over time from here on. A lot has been spoken about the non-retail book of erstwhile HDFC Ltd. Surely there was a bit of an incremental spike in NPA in an account, which was standard but had to be restructured. And as for the norms, when you restructure, even if it's a performing asset, it gets tagged as an NPA. Yes, there could be some tail remaining from this book, which could slip into substandard in the future, but the impact... to the overall bank's gross NPA will not be significant at all. In fact, I can categorically say that the bank will not incur any incremental costs or losses on account of this book into our P&L going forward. And this is something, because of the realizable value of security, the provisions that we have made is going to be adequate enough to cover some of the exposures that we have inherited. A lot of questions and question marks have come about what are we planning to do on the construction finance. It is going to be extremely important. It's going to be an important part of our mortgage business. We have just absorbed the contours of this book. You will now start to see the construction finance book growing steadily from here on. And that will sort of help in building not only the top line but also some of the margins If you've seen the results, which has been released a couple of hours ago, I think it showcases the execution capability, which is what we're known for, which is what we have constantly spoken about as well, and even demonstrated. Let's look at some of the key metrics. Look at the deposit accretion of 1.1 lakh crores. You know, that translates on an apple-to-apple basis of a sequential growth of 5.3%, which if you analyze it, it's upwards of 20-21%. And mind you, this is almost 83-85% of that is retail. Now, one would wonder, and probably one of the questions that you may have is, what happened in June? You know, which is... I think we may have explained, but let me articulate it slightly better, is that when the liquidity cushion was being built on the other side, that is in HDFC Limited, we decided that we will not roll over some of the large ticket deposits even for a few basis points as well. So we let some of them grow, and that has marked these outflows significantly. in the larger ticket deposits or the non-retail deposits mask the outflow or the core momentum of the retail ones. So we are very sanguine and very confident that funding is never going to be an issue and you will see the kind of execution that we are capable of going forward as well. Look at the loan growth. We've also accreted on an apple-to-apple basis, one point lakh crore during this quarter. These are high-quality assets, whether it is corporate, whether it is CRP, the commercial rule of the MSME book, or the retail book. These are extremely high-quality books where we are extremely comfortable from the quality of the book now and into the future. But look at the kind of sequential apple-to-apple growth rate. At 4.9%, it's an annualized growth rate of 19.6%. So when you look at these two metrics, it's a very strong, very healthy numbers, which is what we have mentioned several times over, that even on such a large scale, that the banks will have the energy to continue to grow at a pace that we have done in the past, even on such a larger book. The NIMS, you know, I think the presentation in the mid-September called out that there will be a kind of an impact because of the liquidity cushion and the incremental CRR impact of about 25 basis points. We had said that we will, the core margins on a total asset basis on a pure arithmetic should be somewhere between 3.7 to 3.8%. So when you adjust to this 25 basis points, we are at the lower band of the 3.65. That's all right. I mean, that's something that I'm sure with time, we will recoup some of the margins as we substitute the high-cost bonds with deposits and the changing mix of our business loans mix more and more towards retail. Look at the return on assets. Despite that, I think the company maintained the return on assets around the 2% mark and the ROE at the 16.2% mark. So the top line growth and the profitability has been intact and it is something that will only improve going forward. This being the first quarter, we wanted to ensure that the fabric of HTFC Limited's profits on mortgages is maintained, especially on the retail mortgages. We wanted the teams to settle down and we wanted them to slowly but surely start to energize themselves and galvanize the home loan retail disbursal momentum. We have mentioned in the early release that They did the highest ever retail mortgage loans of 170,000 in numbers and a 40,000 crores of this burst was the highest ever. This demonstrates that this is the start. This is the tip of the iceberg. It's just now a matter of time where we now will start to sweat the franchise, both the distribution and the customer franchise to take this forward. But what is going to be exciting is when we launch our digital journeys for bundling products during this quarter. That will be incremental in terms of icing on the cake. So the innate strength of the institution to galvanize energy, to execute consistently even on a larger base is what we have demonstrated year after year for 28 plus years. As one can see in the recent results, The bank is poised to silently deliver the core growth that you have just seen in this quarter, and I'm very confident and sanguine that it will continue to do so quarter after quarter, even on a larger scale. Maintain the profitability in the range of 1.9% to 2.1% as in the past. So without much ado, I just wanted to tell you that we are extremely excited about this merger, and we will continue slowly but surely demonstrate to the world that how we will execute the way we have done in the past. So over to you, Srini. Thank you so much.

Okay. Thank you. Thank you, Sashi, for those opening remarks. Now let's get on to the name. I want to start with the macro content context provided. that it provided a good, healthy tailwind in the quarter. We continue to see good domestic demand conditions and push from government through CapEx. You know well that the GST collections were healthy in manufacturing services, PMI, and expansionary zone. The key logistics indicators were quite healthy and good. RBA KetKets rate changed at 6.5. And as we look ahead, we see the environment is good for robust growth. Our estimate of the GDP growth for this year is 6.3%, which will demonstrate that it's one of the fastest-growing economies in the world. Now, if you look at some of the key factors in the bank's growth journey, on the distribution footprint expansion, the branch network stands at 7,945 branches as of September 30. Overall, there has been an increase of 1,446 branches. over the last 12 months, including 85 branches in the quota. In addition, we are operating over 400 branches of branches under the bank banner now, and they're progressively developing other banking product capabilities as we go through the year. Payment acceptance points are currently at 4.9 million, and year-on-year growth of 43% as adoption of the APAR app builds momentum there. which runs the SME businesses, the rural business reach expanded to 1.85 lakh villages, and it's on track to go to the objectives of over 2 lakh villages in the near term. Gold loan processing, you know that we started this vehemently a few quarters ago, is now offered in 4,544 branches, an increase of 53% over prior years. In the customer franchise building, we added 2.7 million new liability relationships during the quarter. Our customer base stands at 91 million, including those added on the merger. This provides the opportunity to further engage and deepen the customer relationships. In order to position this for greater engagement with those customers, we've added 16,000 people during the quarter. On cards, we issued 1.7 million cards in the quarter. taking the total base to 18.8 million. The granularity on the deposit focus continues with total deposits currently at 21.7 lakh crores, grew by 1.1 lakh crore in the quarter on a comparable basis, 5.3% sequentially. Some deposits have been the bedrock of this growth given the interest rate scenario and the customer preferences, aggregated to 13.6 lakh crores, which is to be healthy growth of 7.8% sequentially. Savings account deposit stands at 5.7 lakh crores and grew by 9,000 crores or 2% sequentially. Current account stands at 2.5 lakh crores and that's 18,000 crores over prior years. Retail office current account constitutes 72% and grew by 3% sequentially. So we are focusing more and more on the retail current account as we go along because as the corporate or as the wholesale current account gets managed professionally through various treasuries, the retail current account also has the biggest opportunity there. Overall, CASA deposits ended the quarter at 8.2 lakh crores, resulting in a CASA ratio of 37.6. This is after the impact coming from the merger, which came from HDFC Limited, the time deposits that got added into our base. On the advances side, the growth advances at 23.5 lakh crores reflects a sequential momentum of about 4.9%. Retail advances grew 3.1% sequentially. CRB advances grew 9.7% sequentially. The wholesale segment grew 2%. including the non-individual loans of HDFC Limited grew 5.8%, and the non-individual loans of the HDFC Limited is now at 1.03 lakh crores compared to 1.09 as of the beginning of the quarter. We continue to pursue the technology and digital kind of a foray. PaysApp 2.0 currently has 3 million registered users, and handles the daily volume of 2.5 lakh transactions. Smarter BFR platform handles monthly transactions of Rs. 19,000 crores and provides monthly results of Rs. 750 crores. Express car loans brings in contributes almost 30% of our car volumes. SCLC bank on the customer service hub, the AI-driven channel platform serving contact centers nationwide, serving 40 million engagements as interactions with 15 million customers monthly through email, social care, WhatsApp, and chat banking and phone banking services. Balance sheet remains resilient. Wealth share for the quarter was 121% after absorbing the 4-plus percentage points coming from the ITRR. Capital adequacy ratio is at 19.5%, with CET1 at 17.3%. Let's get to the net revenues for the quarter, which were at 38,093 crores grew by 33% over prior years. Net interest income for the quarter at 27,385 crores, which is 72% of net revenues, grew by 30% over the prior year. The core net interest margin for the quarter was at 3.65 on total assets and 3.85 on interest-earning assets after absorbing the debt-funded cost for additional liquidity and merger management. The reported net interest margin for the quarter was 3.4 on total assets and 3.6 on interest-earning assets. Getting to the details of other incomes. Total other income was 10,708 crores. Peace and commission that constitutes two-thirds or 65% of other income was at 6,936 crores and grew by 99.5% over the prior year. Retail constitutes 92% of peace and commission, demonstrating the granularity of the peace and commission income. Ethics and derivatives income at 1,221 crores was higher by 12.8% compared to prior year. Net trading and market-to-market income was 1,041 crores for the quarter. Tri-quarter was 552 crores, and prior year was a negative 387 crores. Other miscellaneous income of 1,510 crores includes recoveries from return of accounts and dividends from subsidies. On the operating expenses for the quarter, which were at 15,399 crores, represents the cost-to-income for the quarter at 40.4%. Our pre-provision operating profit was at 22,694 crores and represents around eight times of the total provision from a coverage point of view. Coming to the asset quality, the GNPA ratio was at 1.34% as compared to 1.41% on a procoma as of July 1 that we mentioned. And last year, as you know, was 1.23%. Out of the 1.34% as of this quarter end, we have about 22 basis points which are related to restructured accounts, which are restructured accounts in erstwhile non-retail HDFC Limited, which are current and performing, but have been classified as NPA according to the external guidelines. Net NPA ratio was at 0.35%. The tip-in ratio for the current quarter is at 32 basis points, about 7,800 crores. During the quarter, we had recoveries and upgrades that were 4,500 crores at 22 basis points. Right-offs in the quarter was about 3,250 crores, approximately 17 basis points. There was no sale of empty accounts during the quarter. On the promotions side, the total promotions reported were around 2,900 crores, against 2,850 crores during the prior quarter and 3,250 crores in the prior year. The core specific loan loss provision was around 2,500 crores against 2,700 crores in prior quarter. The provision coverage ratio was at 74%. At the end of current quarter, contingent and floating provisions were approximately 15,600 crores. General provisions were 10,100 crores. Total provisions comprising specific floating contingent and general provisions were about 156% of gross non-performing loans. This is in addition to securities held as collateral in several of the cases. Clothing contingent and general provisions were about 1.09% of gross advances as of September end. Now, coming to credit cost ratios, total annualized credit cost ratio for the quarter was 49 basis points, prior quarter was 70 basis points, and prior year was 87 basis points. Recoveries which are recorded as miscellaneous amount to 16 basis points of gross advances for the quarter, at against 19 for the prior quarter. The total credit cost ratio net of recoveries was at 34 basis points in the current quarter, compared to 51 basis points in the prior quarter, and 64 basis points in prior year. The profit before tax was to be 19,790 crores, and grew by 39% over prior year. After the 1000 crores, write-back of tax provisions no longer required, consequently favorable appellate orders. Net profit after tax for the quarter was 15,976 crores, grew by 50% over the prior year. Now, a few sentences on our subsidies before we get to the summary. FSB, HDB, FS, this is on the NDIS basis, disbursements at 14,150 crores were higher by 43% over the prior year. Loan book at 78,000 crores, grew 5.8% sequentially. Customer franchise grew to 13.6 million customers with 6.3% additions during the quarter. Quality of the book continues to see sustained improvement with growth stage 3 at 2.38% as of September against 4.88 prior year. The promotion coverage of stage 3 books stood at 68%. The profit after tax for the quarter was 601 crores compared to 471 crores for prior year. The ROA and ROE annualized in the quarter was 3.2% and 19.6% respectively. The earnings per share in the quarter in HDB was 7.59 rupees, and the book value per share in HDB is at 158 rupees. Now getting to a few other subsidies, HDFP lies on an IGAP basis. The process of tax for the quarter ended September increased to 377 crores, compared to 326 crores in the prior year. In the HDFC AMC, again, this one on India's basis, profit after tax for the quarter amounted to 438 crores, registering a year-on-year growth of 20%. In HDFC Ergo, this gets on an IGAP basis because there are different standards. Profit after tax for the quarter ended at, for the September quarter, increased to 236 crores compared to 177 crores in the prior year. registering a growth of 33%. Securities, HSL, has a network of 203 branches, and the net profit after tax was 214 crores, as against 191 crores for same time last year. Now, I want to take the opportunity to provide a quick update on ESG. We further strengthened the integration of ESG and climate change risk assessment into our critical crisis process for caucus borrowers. We also have finalized a sustainable finance framework to classify loans and advances as green, social, and sustainable in alignment with international capital market association principles. Now, getting to a summary, our results reflect robustness and growth after consummating the merger, 5.3% sequential momentum and deposit growth, 5.7% sequential momentum and retail deposit growth, and advances growth of a sequential increase of 4.9%. Profit after tax for the quarter, at 15,976 crores, increased by 50% of its prior year. The consolidated profit after tax for the quarter is at 16,811 crores, delivering the return on assets in the quarter of about 2% and return on equity of about 16.2%. Earnings per share in the quarter is, on a standalone basis, is 21.1%. It is 21.1%. And at a consolidated bank level, it is 22.2%. The book value per share on a standalone bank level is at 534, and at a consolidated bank level, it's at 553. With that, may I request the operator to open up the line for questions, please?

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Maruka Jania from Nuwama. Please go ahead.

Yeah, hello. Hi. My first question is on margins. So, of course, you've explained that it's the ICRR and the excess liquidity on limited books. But would there be any other adjustments in the NII while, you know, moving from AS to INGAP? for HDFC? Like for instance, HDFC's NII in Q2 FY23 was around 45, 46 billion, right? So would that be restated significantly under IndyGap?

Maruk, maybe we will have a session about what the IndyGap and IndyAS would be. There are several differences that happen. I'll give you, for example, one important. There are several of them. On the non-performing loan, in India, you accrue for interest, and I guess you don't accrue for interest if the loan is non-performing. Here's an example. So there are several differences that happen, and the time has elapsed, and the profile of the balance sheet, including the interest rate structure of the balance sheet, is different now versus what it was at that time. So they're not comparable as such.

There are different regulatory regimes, different accounting standards, different regulatory regimes. And the composition of the balance sheet is different.

Correct, but most of the margin decline from proforma 3.7 to 3.4 is largely excess liquidity and ICRR?

The way you think about it is that the balance sheet is funded with the debt, right? There is a level of additional borrowing that has been exercised, and that is debt borrowing that has come up. And debt borrowing comes in at a cost that is not of 8% or so. So that's part of how there is a transition post the merger. As part of the merger management, we carry the additional. One way to describe this is additional liquidity. But if you think about what is there, where does it reflect? It reflects in the cost of funds. So that's where the cost of funds is higher. Got it.

Makes sense. So my next question is on the tax rate. So given that there were favorable decisions and that's why the tax rate fell, does it normalize to 25% next quarter?

Yes. Yes, there is this one-time effect if you take it out, whatever is the normal tax rate.

If you look at last quarter or the past year, we've been around that 35%, 34.9, 35, thereabouts, that's where we have been. So there's no difference from that, yeah.

Okay. And so just one last question. So do you see margins, how long would it take for margins to come back up to 3.6, 3.65, like two to three quarters? Would the exit margin for FY24 be at that level or would it take longer?

I think Sashi alluded to say that there are a few things, right? One is The utilization of this to a better mix of loan originations, particularly focused on the retail shift, is something that would bring this to a normal level over a period of time. Then there are other choices to make, but given that this funding is a longer-term funding that we've chosen, part of the merger management, we need to get through building assets which are of a better use.

Got it. Thanks. Thank you. Thank you.

Thank you. Next question is from the line of Kunal Shah from Citigroup. Please go ahead.

Yeah. Thanks for taking the questions. So firstly, maybe what Sasha highlighted earlier that in terms of the rundown in the wholesale portfolio of erstwhile NFC, is it more or less done or should we see it getting towards... Kunal, if I request you to slightly come closer to mic and speak up, I can hear, but not as good.

Yes.

Yeah, sorry. Now, if it's better. So I was just saying whether this rundown in wholesale portfolio, is it largely done? Because earlier we thought that it can come down to 80, 90 or 1000 crores from one letter. But I think in the opening remarks, he said like it should largely be done. And now we should see the growth coming through in the construction finance portfolio.

That is the kind of a direction. If you think about it, it has got three components. One component is to do with the construction finance. which from a bank positioning and strategic, strategically to feed into the retail, we want to grow this portfolio, right? We have the risk assessment framework. We want to grow within that framework that we have. The second component of the book is the Elabi book. That book is also a growth-oriented book. and will be assessed and grown. The third component is the small component of a corporate loan book that will be assessed as part of the overall exposure to various corporates that we have, and we'll get a decision about what is the overall exposure. Yes, the direction, what Sashi alluded to, is from the construction finance, and it equally applies to LRG2, but all of this in the context of overall exposure to corporates that we have.

Sure, got that. And secondly, in terms of other income, was there any one-off maybe pertaining to IGAP transitioning for HDFC or this is like now the overall fee income trajectory which we should see and there is no one-off in this line item now?

So the fee income that you saw, which is 6,936 crores, Yes, that is a normal level of fee. And if you look at how we have in the past seen the fee, which is 65% of the other income is the fee. And this fee line has got multiple, from asset origination fees to liability product fees to payment transaction type fees to wholesale banking fees to third-party distribution fees. There are seasonalities up and down. It happens because there are certain quotas where you see for various considerations, it could be tax considerations or for origination consideration, it goes up or down. But when you look at it over a period of time, historically, this has been in the mid to high teens, right? That's where the fee component has moved. And that's where I will tell you to look at it. If you look historically, that's the range of which, right? If this quota was 19 odd percent, again, quarter to quarter, there's seasonality, but when you look at a year, two years, In the past, it's mid to high teams.

Thank you. Kunal Shah, sorry to interrupt you. Yeah, sure. Thank you. A request to all the participants. Please listen to two questions per participant. Next question is from the line of Parag Thakkar from Annual Wealth.

Please go ahead. Hello, I'm Adivin.

Yes.

Yes, Parag, yes. Yes, yes. So first of all, I would like to congratulate the entire team for bringing up the deposit number to such a good number, about 1 lakh crores. I think it required a lot of efforts and you all did it brilliantly, especially in a quarter where it was a merger quarter. And we had this one-time ICRR hit, plus the liquidity hit. So I am very, very happy with the performance. First of all, I would like to congratulate you all. And second, let me say that 1.9 to 2.1% error is possible. The growth rate about 15% or 17, 18% of the merged entities is also possible, right?

First, we thank you. Thank you for the recognition and we appreciate. These are the things that keeps us charged and ensures that we drive to the best potential both the market has to offer and the people here are capable of delivering. Thank you. Thank you for those compliments. Now, getting to the question that you asked in terms of the growth rate, see, more than thinking about the forward-looking growth rate, the growth rate is underpinned on two things. One, market rate of growth. Typically, in their past, they've seen the market rate of growth anywhere from 10% to 12%. Depending on the year, you will see that the nominal rate of GDP times 1 or 1.1, 10% to 12% is what you will see. And what we have always endeavored, and that is what historically we have delivered, is a premium on that, right, a 5%, 6%. Thereabouts, the premium on the market rate of growth is what we deliver. That is where the market share gain comes from, that additional growth rate over the market that we do. And so now take this to what is the kind of a market share gain. If you see over a period of five years, if you see, it's about 400 basis points of thereabouts market share gain. Either side of the balance sheet, that's a similar type of market share gain. And when you gain that, currently, if you look at the recent times, the share in the market share gain is faster than what it was five years ago, meaning the larger distribution and the bigger the scale, the opportunity space for gaining more market share is available, and that is what in the recent times that we have done. So I want to leave the thought process there. This is how we think, and that's how we are capacitous to drive.

We have opened around 2,220 in the last two years. So when they start showing productivity, your OPEX to asset ratio should come down, right? Logically, because they will become more productive now in terms of gathering deposits as well as advances.

Yes, sir. It will come over time, but as we keep adding more and more new branches, one way is the other. But if you look at two years ago branches, very important that you touched upon, if you look at what we opened about two years ago, and look at that cohort, and when we look at that cohort of branches about how they are performing, our model shows that it should break even in two years' time. And about 90 plus percent, slightly above 90 percent of the branches have broken even in about 20, 21 months. We have another 10 percent of the branches to break even. And when that does, that's the average of call it 22 to 24 months break even. So they are all following a scripted model in terms of how they deliver. We are confident that all of them starts to pay back sooner. But we continue to add branches, right? That's why when you see part of the cost is in the opportunity, as you heard, it's at about 49 basis points. And if you look back, what is the, how does, where does it revert to mean? At what level does it revert to mean at some point in time? Call it 80, 90 basis points, or in the pre-Modgett book, we would have said that it is 90, 100 basis points is the mean. where it can revert over a period of time whenever it normalizes, benign conditions normalize. Maybe with the mod version, it is more closer to the ED basis point or something reversion to mean. But the point I mentioned to you is that for every 10 basis points of credit cost opportunity that you take from a timing point of view, within the return framework or a framework, you take this opportunity on a timing to invest, it's about 1% to 2% of cost to income that gets invested there. And so that is what, and we are trying to say, as we make those investments, we should start to pay back. So we can now look at those ones which are more than two years old, and those cohorts are performing well. And we are now starting to look at the last 12 months' cohorts, and we will keep tracking them as we go.

Just one last question, because everybody is concerned. Now that you have added the position of mobile one-deck crawl, I think that concern is gone, but... In last quarter, everybody was concerned about how we will fund. And as Mr. Sashi rightly pointed out in the beginning that we are not concerned about the funding part now. But going ahead, so for example, we have credit laws, we have state and HVB financial services. Anyway, I think we are mandated to list right by FY25. And that will also unlock some value. And of course, that is why there's some funding also. So, can you just throw some light on direction of monetizing the space in various entities which we have in order to fund our growth? Because that much pressure will be lesser on the deposit engine, right?

Your points are well taken and appropriate timing will be considered for either. But of course, at the right kind of value. Your thought process is right and... from a timing point of view and from a consideration point of view, will all depend upon the appropriate valuation.

Thank you.

Thanks, thanks. Thank you, thank you.

A request to all the participants, please restrict to two questions per participant. If time permits, please come back in the question queue for a follow-up question. Next question is from the line of Atul Mehra from Motilal Oswal, please go ahead.

Yeah, hi, good evening and thanks for the opportunity. I have just one simple question. In terms of the non-retail NPA for HDFC Limited, how much of this was unanticipated at the time of the merger and how much of it is in terms of already anticipated and bid fall in the swap ratio that we had? Maybe you can throw some color on that. Thank you, sir.

OK. Yeah. If you look at the book,

and look at this book over a period of six quarters at least now, it has been on a decline, which is this book has been assessed from a bank risk assessment perspective, and there has been a degrowth that has been happening. So go back to the June 22 quarter, it was flat, and then from then on there was a decline. minus four or a five percent, then a minus six percent, then a minus seven percent, and so on. And the recent quarter is a minus six percent. So the risk assessment, we want that book. As you mentioned it, we want to grow that book. But before you grow the book, you have to assess in terms of the exposure per kind of facility and so on, so that you're balancing the risk over a period of time. And that's what has happened. And we are at a stage where we feel comfortable with the quality of the book as we see now, with the provisions of approximately, what did we describe, the provision coverage ratio of 24, or the contingent provisions we have, 66 basis points, and these are all post-mergers, so not just pre-mergers, in conquest wealth. And we are looking at a book that is strongly positioned.

All right. Got it, sir. Just one clarification on the same point. Did any of, in terms of the incremental stress, come as a surprise to the internal management, like to the bank management, or this was something that you had already anticipated while you had worked out the numbers at the time of the merger?

The risk assessment, you know, is a dynamic risk assessment. That is why on every quarter basis, you see certain things lift and certain things recover and upgrade. And it is a continuous process. What is true at a point in time is not true at every point in time. It keeps changing.

Right. Got it, sir. Thank you and all the best. Thanks. Thank you.

Thank you. Next question is from the line of Suresh Ganapati from my query. Please go ahead.

Yeah, hi. Just two questions. One is... Sashi said 83% to 85% of that 1.1 trillion is retail deposits, right? So it's about 85,000 crores is what you have mobilized out of 1.1 trillion. Is that right?

That is right.

83% is retail, yeah. Yeah, so seeing it is 85,000 crores, which is the effective number absolute, what would be the Basel III LCR quarter-on-quarter addition? The reason why I'm asking is last quarter it was 66,000 crores. I want a night-for-night quarter-on-quarter addition for the Basel III retail deposit because this number seems to be way different from this 85,000 crores. Is it possible to share that number?

I don't have it offhand. We'll look at it and share. But Suresh, just to say that the the Basel classification is different, right? And there are different factors that apply in that classification. So there is no one-for-one mapping. The point I'm trying to say is that the retail, which is the branch-managed deposits that we have, is not one-for-one retail definition as per Basel. Okay, fine.

And last question is on, you know, the synergy itself, right? I mean, of course, these are very early days. We have seen slight pickup in mortgage growth and also what your subsidiary reported numbers and apparently the counter share has gone to 70% in your bank branches, HDFC Life. So just wanted to understand on a qualitative aspect, what are the things which we have already started seeing? So not in terms of price, I said quantifiable, but better traction. You know, it could be anything like cross-selling of loans or products, anything that you can give us would be great.

Suresh, we are focused on a few things, right? One, they are our subsidiaries and we work very closely at the engagement level as a gone up significantly before the merger and certainly after the merger. And one is about the sales process itself, right, in terms of, so if a customer comes in into a branch and works with an RM or an RM visits a customer for various sales processes, the sales support has significantly enhanced, right, in terms of making the product features and the product kind of a dynamics much more articulated to the customer. So that is the process. And not only when you go into one of the metro regions, you'll find that it is at the top notch. But the process has to be broad-based across the country, which has begun very well. That's one, right, in terms of getting that. The second is also closing it out from an immediate turnaround time front of you. That has also been a great deal of a focus to ensure that a customer doesn't need to wait to get the product consummated, you're able to turn around quite fast. That gives enormous confidence to the R&D to pitch a product to a customer because you know that if you get the turnaround time is pretty soon, pretty fast, and the product will be in the hands of the customer that we could consume it. So there have been some of these qualitative or kind of a relationship process that has been enhanced and it will pay results as you go along. Okay, thank you. Thank you.

Thank you. Next question is from the line of Abhishek from HSBC. Please go ahead.

Good evening. Thanks for taking my question. So the first one is, can you just quantify the LCR now on a merged basis?

And also, how much of the HDFC limited deposits were retail as per the LCR's classification? If you can share that number, it will be useful. Yes.

I did hear the LCR was at an average of 121% after absorbing the IPRR for most of the quarter. Your second aspect of the question was to do with the retail component of the HDFC Limited deposits that came in.

Yes.

I think the retail conference was slightly above because it merged into the total organization. There is no particular special tracking that we look at to say, this is HDFC Limited and this is HDFC Bank kind of thing. It's all part of one. Got it. And in terms of conversion of HDFC Limited loans, you know, from the current PLR to RepoLink, what percentage has been done and just what's the progress on that? Abhishek, all of that has been done, right? And it's available for the customers who are in the bank. Already a bank customer could view it in the system on the screen. When you log in, you will see. But yes, it has been done. So I think we had a December deadline for it, right? So we should be, like the entire book would be on repo now or by December anyway it would be on repo? The December deadline is for various customer communication and customer assertion and so on and so forth, which we are working through various alternatives to accomplish. Okay.

And Srinivas, finally, as outside observers... May I request to join with you again for a follow-up question, please? Okay, sure. Thank you. A request to all the participants, please restrict to two questions per participant. The next question is from the line of Rajiv Pathak from GC Holdings. Please go ahead.

Yeah, hi. So I think in the opening remarks, you alluded to like a 25-dibs hit on the margins because of the ICRR and the excess liquidity. So you would have taken approximately, say, 1,900 crores a quarter of this hit. So now this will, from next quarter, start getting normalized, right? So next quarter should be trackings a median of 385 and then maybe inch up to 4% over the next 3-4 quarters? And on the loan growth, do you think a 4.5-5% quarterly rent rate is possible going forward?

Rajiv, we don't give forward-looking guidance in terms of what we will grow, but we can point to past and give the kind of how we have done and how we are capacitated to repeat what we have done. But in terms of the margin that you talked about, we did allude to that there is an impact due to the margin management and thereby funding certain liquidity requirements to transition and come. And it has been debt funded. And so it's not a short-term debt funded to enter and exit. And so it will take some time. And even Sashi alluded to that in terms of how we go into it in the form of better mix higher yielding retail products to grow. And I also mentioned about that and which is how we will approach to get that.

Okay.

Thank you. Thank you.

Next question is from the line of Saurabh Kumar from JP Morgan. Please go ahead.

Hi, Saurabh. Good evening. Sir, just on this LCR. So the excess liquidity that you are addressing... Saurabh, sorry to interrupt you.

Your voice is not coming clear.

Is it better now?

No, it's still the same. Can you please speak a little louder?

Yeah, sir. So the excess liquidity that you're referring to, sir, this will be the difference.

Sorry, we again lost your audio.

Will that be the excess liquidity you're referring to?

Sir, we lost you, man. If you come back again, we'll hear you.

Hello? Ladies and gentlemen, audio issue. We'll move on to the next question. The next question is from Lionel Perrin, engineer from CLSA. Please go ahead.

Yeah, hi. Good evening and thanks for taking my question. So firstly, could you quantify what your SLR ratio is as of quarter end? What is it? We don't say what it is, but we can tell you we carry more than what is required. So that is a mandatory SLR of 18%. We carry more than that. That's part of the... It's not something that we talk about Okay, fair enough. And sir, just actually on the branch opening, just wanted to understand, last two quarters have been a bit weaker than expected. Why is it that branch opening is always back-ended? Very important and good. See, what happens in the branch process, so it's very important, you asked a very important thing, right? For opening of a branch, there are a few things that go into it. One is our marketing team. Second is our credit analytics team scans the geography in the country to determine our presence and some other banks' presence in the vicinity and maps it with the potential. Potential not just of deposits, but potential of even advances. There is a third. Marketing looks at what is our market share. That means you look at our distribution market share is about 4.5%, which means our branches are 4.5% of countries' branches. getting to be close to 5% to 4.5% of countries' branches, and our deposit market share is slightly above 10%. So we have a 2x of distribution to deposit market share. So we look at to see where we are more, where we are less, and what is the vicinity of the catchment area where we can gets the deposit concentration into our bank. So this analysis is done, and then there are two other constituents that enter at this stage. One is our infrastructure team that tries to scout around to see, is there a property available? Our credit analytics, both from liability and asset analytics, are given something. Our marketing is proposing a particular location to go for it. infrastructure team will come and say whether they can get it or not get it because that's the availability space which is the biggest constraint. So I'm able to articulate that. It is not about we know where we want to open the branches. It is the right kind of property or the branch space that is availability that is a constraint. Now once that is done in terms of legal to ensure that The landlord who's leasing the property to us has got the title and it's appropriately there so that we keep up our image that it's a property that somebody is appropriately owning and we are able to lease it. So these are several of these that go in, and when we go through this process and get there, it gets to bunch up in the second half, and the first half, that's what we have seen over the last two years that you have seen too. As much as you would like it to be even through the year, there are other constraints of availability, and that makes it tough for us to get there. And this is a machine, as you know, that's right, it's opening, not... 100 to 100 is a machine that needs done. And so when you're opening a 500 branches in a quarter, the preparation and the legwork for that is a pretty long lead into getting there. Okay, okay. Thanks for the elaborate answer. Just lastly, in terms of personal loans, last couple of quarters, especially this quarter has been a slowdown. Just wanted to understand how much of it is deliberate versus, you know, market-led competition. Yes. I believe the market is quite good and under-connected. We have enormous, I think, the pre-approved base. We published that in the May month also, where our pre-approved personal loan base is pretty high. And the demand is quite good. So no question about that. In terms of the growth rate, we have about 15, 15.5% year-on-year growth rate. we expect that it has been in the, sometimes it's been in the 20s, sometimes it's been in the high teens, but in the recent times it has been in that 15-16% range. But we are confident that this is a strategic growth area for us and the more customers we bring in and more they go through the seasoning process and monitoring process, we get the canvas even more opened up for an opportunity on personal loan. Got it, got it. Okay, thank you so, so much and wish you all the best. Thank you very much. Appreciate it.

Thank you. Next question is from the line of Manish Shukla from Access Capital. Please go ahead.

Yeah, good evening and thank you for the opportunity. Shini, you acquired about 6.35 lakh crore of liabilities from HDFC Limited. What would be the average cost of those liabilities?

That includes the borrowing you're talking about.

Yeah, borrowing plus the politics is about 6.35 lakh crores.

Manish, I will direct you to what we have published. The cost of funds is up by about 80 basis points at an aggregate level. Most of that is driven through the incoming. You'll be able to see that. We'll be able to deduce and work it out. We'll publish the cost of funds at an aggregate level.

Understood. And of these liabilities, roughly, if you can give an approximation of the maturity over either next six months or 12 months, if you have it, what proportion of these liabilities will mature?

That also I think ACS Limited has published as of May or June. As of March.

So they have as of March, but during June they have... No, no, we have it as of March, but during June quarter they added a significant amount of liabilities, which is why I wanted to know as of June. We have the data for March.

Longer term, Manish.

Okay, understood.

All right, those are my questions. Thank you. Thank you very much, Manish.

Thank you very much. Ladies and gentlemen, we have come to an end of the time allotted for the call. I would now like to hand the conference over to Mr. Vaidyanathan for closing comments. Over to you, sir.

Okay. Thank you. Thank you. We appreciate all the participants dialing in today and spending time with us. We are available through the week or through the next week whenever you all need or any other clarifications we can provide, we'd be happy to do. You know the contacts of our investor relations team, please stay in touch and get to us whenever you need. Thank you.

Thank you very much. On behalf of HDFC Bank Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.