HDFC Bank Limited

Ladies and gentlemen, good day and welcome to HDFC Bank Limited Q1 FY25 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 brief commentary by the management. Should you need assistance during this conference call, please signal an operator by pressing star and zero on your touch-tone phone. Please note, that this conference is being recorded. I now hand the conference over to Mr. Srinivasan Vedhanathan, Chief Financial Officer, HDFT Bank. Thank you, and over to you, sir.

Okay, thank you, Nirav. Good evening and a warm welcome to all the participants. We have Sashi Jagdish, our MD and CEO, with us today. Without much ado, I'll hand it off to him to get the meeting started, and then we'll take it from there. Sashi, over to you, please.

Thank you, Srini, and good evening to all of you. Yes, sort of engaging with you all after a quarter. Just wanted to recap some of the guidance that we have been giving in the past couple of quarters. You know, one of the things that we have been mentioning is that we would like to desist from providing any guidance of any form as it is providing a distraction from our long-term objectives. So we would like to stay focused. This is a period of transition, post-merger, and we ought to stay focused and ensure stability of some of the key metrics and achieve some of the objectives in the medium to long term. I know that the most important part of our strategy is deposits, and are we happy with the kind of numbers that have come about? Not really. It has fallen short of our expectations, but frankly, if you see this, this is not something new. there is a seasonality in the system and the bank has been tracking this seasonality being a large player in the system. Our net accretion to deposits normally is in the range that is similar to what is there in the system. But this time around, obviously we were a little bit surprised on the period in numbers because of some unexpected flows in the current account which was more than what we had anticipated. Of course, I would like to recap to all of you all that we did sort of give you a heads up during the earnings call out of the fourth quarter that we did sort of see a lot more unanticipated transitory flows in the current account, if you recall, and that is what has gone out. So a combination of this larger outflow, because we do have relatively higher share of the market in current account, and so as the balance sheet has been growing, the velocity of inflows and outflows have also been increasing in current accounts, which is the nature of the beast, because for us, a high economic activity in the current accounts is a sign of good, is how we will achieve more larger transactional balances in the current account balances. But on a period end, you will see this kind of a high velocity. So a combination of outflows in current accounts and a combination of at least 160 billion dollar, sorry, not dollar, 160 billion rupees of an erstwhile HDFC non-retail deposits. Which ran down, has given us a very tempted kind of a net accretion on a period end basis. Now, if you have noticed, you may be surprised that we have started to even in one of the decks, in our investor decks, which probably you may have access to on average deposits as well. You may be wondering why have we done that, and let me be honest as to why we've done it. It's not something to tell you that okay, this is not so, the period end is not good, so try and show something which is very good, not really. I think this is messaging not just for the investor fraternity but also to my people at large because we realize that we want our ground level teams in our large distribution footprint to focus on basics at the ground level on a day-to-day basis. You know, focusing on certain period and numbers is leading to some unintended performance-related pressures, which we want to avoid, and that is the reason why we want to converge the, align or converge or align our internal and external metrics so that there is no unintended pressures that build up in the ecosystem. If you've seen the numbers and once you digest the average numbers on a quarterly basis, which we have given from quarter one of FI22 to quarter one of FI25, that will give you a reasonable amount of comfort that there is steady buildup, a secular trend, upward trend in the momentum, of course, Of course, there is some seasonality in some of the quarters, but that's fine. But largely, the cyclical trend is visible and that's what we want to focus on. So much as all of us are used to looking at the period in numbers, I think looking at a longer trend on the averages seems to suggest that the resiliency of the organization is intact and will continue to be so even in the future. I have mentioned in the annual report recently, which is released to the world at large, that we will be growing slower in our advances as against our deposit growth. This is not something new. If you've seen our track record over a long period of time, this is something that has been there. Probably in the last couple of external forums or the public forums that we have come on, we did sort of, you know, affirm that our focus is going to be on profitable growth and not just on growth. And yes, in the bargain, it is in our interest to bring down the loan deposit ratios much faster than what one would have anticipated. It is in our interest, and I'll explain that to you probably when one of you asks questions. You know, if you see the track record right from the time we merged on first July 2023, there was a starting pro forma the day one financial as one calls it, and probably this is also there and visible to each one of you in the investor deck. If you look at some of the key metrics, whether it's the NIMS, whether it is the CARTA ratios, whether it is the cost to income, whether it's the GNPA, from that starting point to 30th June 2025, It's been range-bound, rather stable and range-bound. For example, the NIMS have been in the range of 3.4 to 3.5 with an increasing bias. The car-fly ratio has been in the range of 36 to 38%. The cost-to-income has been in the range of 40 to 41 with a decreasing bias. The GNPA has been in the range of 1.2 to 1.4. And if you exclude the seasonality of agri, in fact, it's been properly on a declining trend. And the ROAs have been in the region of 1.9 to 2.1. And as you know, it may be, this is not a new number, new metric that we have encountered. We have seen for a long period of time this number of 1.9 in the pre-merger levels as well. So what does it mean? The fact that we maintain stability means that the inherent resilience of both the organizations is intact. So it's a period, despite the kind of change environment in terms of liquidity, in terms of competitive intensity, in terms of the, our, you know, our so-called urge to slow down our loans so that we can get down the CD ratio, the loan deposit ratio, faster than what we had anticipated. Despite that, I think we are maintaining stability in some of the key metrics. I think that's something that I just wanted to reiterate and want you to sort of appreciate. I guess these were some of the things that we wanted to... mentioned as a top of the mind recall. I think would be happy to sort of take questions from any one of you. Over to you.