HDFC Bank Limited

Ladies and gentlemen, good day and welcome to HDFC Bank Limited's Q3-FI24 earnings conference call on the financial results presented by the management of HDFC Bank Limited. 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, Neeraj. Good evening and a warm welcome to all the participants. There is an OMI presentation that's published on our website. Please refer to it as appropriate. As we get to it, in the meantime, let's cover a brief on the macroeconomic environment that operated during the quarter before we review the OMI. We continue to see healthy domestic activity, economic activity driven by robust common spending, primarily in capital expenditure. improvement in domestic manufacturing, and resilient services sector performance. As you know, the GST collections grew 13% year-on-year. Manufacturing and services PMI continue to remain in the expansionary zone, and the consumption side improved consumer demand driven by festive spending resulted in robust growth across various sectors. RBI takes its rate and change at 6.5% and retained its stance and changed its withdrawal of accommodation and modestly reduced its inflation forecast in the second half of the year. As we look ahead, the economic environment is poised for strong growth. India's year-on-year GDP growth for financial year 24 is estimated at about 7%. And for financial year 2025, GDP growth rate is expected to be around 6.5%, continuing to be one of the fastest growing major economies in the world. Let's go through the key factors to the bank's growth journey. Advances can be referred to in page 7 and 8. Growth advances are at at least 24.7 trillion as of end December, reflecting a sequential momentum of at least 1.1 trillion or 4.9%. Retail advances grew 3.3% quarter-on-quarter, primarily driven by strong performance in the mortgage business. Retail mortgage disbursements of $460 billion during the quarter grew 18% over prior years. In the CRB business, it continued its strong momentum, resisting quarter-on-quarter growth of 6.7%. Wholesale segments excluding non-individual loans of EHTFC grew 1.9% sequentially. Non-individual loans of EHTFC aggregated to 0.99 trillion as compared to 1.03 trillion as of last quarter end. Focus on the granular deposit continues, looking at pages 7 and 9. Total deposits as of December end amounted to 22.1 trillion, primarily comprising of retail deposits, which is at 84% of total deposits. Retail deposits, which are the bedrock of the franchise, grew by over Rs. 530 billion or 2.9% during the quarter, while non-retail deposits reduced by Rs. 118 billion quarter-on-quarter, resulting in total deposit growth of Rs. 411 billion or 1.9% during the quarter. Current account deposits ended the quarter at Rs. 2.6 trillion, registering the growth of Rs. 80 billion or 3.2% sequentially. or it is $280 billion, 10.3% over prior year. Savings deposits as of December end at $5.8 trillion grew to $99 billion, or 1.7% sequentially, and over $440 billion, or 8.3% year-on-year. Overall CASA deposits ended the quarter at $8.4 trillion, resulting in a CASA ratio of 37.7%. Term deposits aggregated to be 13.8 trillion as of December end and grew by at least 232 billion or 1.7% during the quarter. On the distribution footprint expansion, referring to page 10, it reflects our branch network. It stood at 8,091 outlets as of December end. Overall, there has been an increase of 908 branches over the last 12 months. During the quarter, we added 146 branches. which is at the rate of 1.6 branches per day. Payment acceptance points are at 4.8 million and year-on-year growth of 25% as adoption of the APAR app builds momentum. In CRD, our rural business reach expanded to 210,000 villages, a growth of 50,000 villages over last year. In the customer franchise building, we added 2.2 million new customer liability relationships to real Dakota and around 7.4 million relationships so far in the current fiscal year, Our customer base stands at 93 million customers. This provides an opportunity to further engage and deepen our relationships. In order to position us for greater engagement, we have added 51,000 employees over the last 12 months and 10,000 during the quarter. On cards, we issued 1.6 million new cards in the quarter. Total cost base stands at 19.9 million. You see on page 11, balance sheet remains resilient. LCR for the quarter was 110%. Capital adequacy ratio was at 18.4%. Tier 1 ratio at 16.8%. Let's start with net revenues on pages 12 and 13. Net revenues for the quarter were at 396 billion, grew by 25.8% over the prior year. Net interest income for the quarter, which is 72% of net revenues, and is at and is at $285 billion, grew by 23.9% over the prior year. The core net interest margin for the quarter was at 3.4%, and on an interest-earning asset basis, net interest margin for the quarter was at 3.6%, both slashed prior quarter. Getting to the details of other income on page 15, total other income was at $111 billion. Chief and commission income, which is almost close to two-thirds of the other income, was at $15. $69 billion and grew by 15% over the prior year. Retail constitutes approximately 94% of recent commissions. Perfection derivatives income, at which it is $12 billion, was higher by 12% compared to the prior year of $11 billion. Net trading and market market income were at $15 billion for the quarter. Prior quarter was at about $10 billion. Other miscellaneous income, of which it is $15 billion, includes recoveries from return of accounts and dividends from subsidies. Referring to page 16 on operating expenses for the quarter, which were at $160 billion, an increase of 28% over the prior year. Cost-to-income ratio for the quarter was at 40.3%. Cost-to-assets was at 1.9%. Coming to asset quality, on pages 17 to 19, the GNPA ratio was at 1.26% compared to 1.34% in prior courses and 1.23% prior years. Out of the 1.26%, about 15 basis points are standard, but the core GNPA ratio is at 1.11. However, these are included by us in NPA as one of the other facilities of the borrower is in NPA. Net NPA ratio for the quarter was 0.31%. Prior quarter was at 0.35%. The slippage ratio for the current quarter is up. Slippage for the current quarter is at about $70 billion at 26 basis points. Last quarter was at about $78 billion. During the quarter, recovery is an upgrade where it is $45 billion. Write-offs in the quarter were at about $31 billion. No sale of entry accounts during the quarter. On the provisions side, total provisions reported were around $42 billion, and excluding the contingent provisions, it was $30 billion, as against $29 billion during prior quarter, and $28 billion for the prior year. As I just mentioned, the total provisions in the current quarter included additional contingent provisions of approximately $12 billion, and it is pertaining to investments in AIS, on a prudent basis. The fair value of the AIS is up by at least 5 billion, but 100% provisions are being taken at book value. The core specific loan loss provision for the quarter was around 26 billion, as it is 25 billion in the prior quarter. The provision coverage ratio was at 75%. At the end of current quarter, contingent provisions and floating provisions were approximately $154 billion. General provisions were $105 billion. The total provisions comprising specific floating contingent and general were about 159% of gross non-performing loans. This is in addition to security held as collateral in several of the cases. In addition, the bank holds contingent provisions of at least $12 billion on a prudent basis to AAF, as I just mentioned. Shorting contingent and general provisions, excluding the contingent provisions on AAF, were about 105 basis points of growth advances as of December end. Coming to credit cost ratio, the total annual credit cost ratio for the quarter, excluding the contingent provisions I just referred, was at 49 basis points. Prior quarter was also at 49 basis points. recoveries which are recorded as miscellaneous income amongst the 13 basis points of gross advances for the quarter, as against 16 basis points for the prior quarter. The total credit cost ratio net of recoveries was at 35 basis points in the current quarter, as compared to 34 basis points in the prior quarter. The profit before tax was at $194 billion, grew by 19.8% over the prior year. After the increase, $15 billion of tax provisions no longer required, consequent to the favorable orders received. Net profits after tax for the quarter was at $164 billion, grew by 33.5% over the prior year. Summaries of subsidies can be seen on pages 21 to 26 on HDB. The quality of the book continues to see sustained improvement with a growth stage 3 at 2.25 percent as of December against 3.73 percent as of prior year end. Proceeding coverage on stage 3 books stood at 68 percent. Profit tax for the quarter ended December increased to 6.4 billion against 6 billion for the quarter ended September 30th. ROA and ROE annualized for the quarter of December stood at 3.1% and 19.9% respectively. Earnings per share for the quarter was at 8.04 and book value per share stands at 164.6. Now getting to HTLC Lite, on an IGAP basis. The profit after tax for the quarter ended December was at at least 3.7 billion, grew 15% year-on-year. India ended its value at at least 451 billion, improved 20% compared to prior year. On ANC, quarterly average AEM growth is 5.5 million, grew 24% year-on-year. Profit-to-tax for the quarter amounted to at least 4.9 billion, with a year-on-year growth of 33%. Earnings per share for the quarter was at least 22.9. STFC Ergo, on an IGAP basis, Profit after tax for the quarter into December was at $1.3 billion, which is a growth of 6% year-on-year. Solvency ratio at 187% at the end of December. HSL, our securities company, the total reported revenue for the quarter, the total reported net profits for the quarter after tax was $2.3 billion, as against $2 billion in Q2 2023. Earnings per share in the quarter was $244 billion. and book value per share stands at Rs. 1,253. On ESG, keeping up with our CSR commitment, the bank has undertaken multiple projects across India with the aim to address critical development issues such as sustainable livelihood, education, soil and water conservation, and key ratings and awards are on page 27 for reference. In summary, our results reflect robustness in growth across various parameters driven by employees passionately working with their customers to execute the business model. This has resulted in advances growth to frequency of 4.9% and 2.9% sequential momentum in retail deposit growth. Profit tax for the quarter increased by 33% versus prior year. in the quarter of about 2% and return on equity of about 15.8%. Earnings per share reported in the quarter is at 21.6 on a standalone bank level and it is 22.7 at the consolidated bank level. Book value per share on a standalone basis is at 556 and on a consolidated basis it is at 576. 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 the attached on 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 Nuama. Please go ahead.