HDFC Bank Limited

Ladies and gentlemen, good day and welcome to HDFC Bank Limited Q4 and full year FY2026 earnings conference call on the financial results presented by the management of HDFC Bank. As a reminder, all participant lines will be in the lesson only mode and there will be an option 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 cash to inform. 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 Mr. Vaidyanathan.

Thank you. Thank you, Nirav. Good evening and a warm welcome to all the participants. Today we have with us our Chairman, Mr. Kiki Mistry, our CEO, Mr. Sashi Jagdishan, and our Deputy Managing Director, Mr. Kaisar Porucha. I will hand off for opening remarks to Sashi. Over to you, Sashi. Then we can get on to the other question.

Thank you, Srini, and thank you all. Good afternoon to you, and welcome to the full year FI26 annual results call. Let me dive straight into the key aspects of FI26 performance. We had estimated that system credit growth to be around 10.5% to 11.5%. We did 12% up from 5.5% last year. As you can see, there is positive momentum as we had expected. Deposit growth rate at 14.4% continues to grow faster than the credit growth, which is what we've always been doing. The growth rate is better than the system growth rate yet again. Net income growth clocked at 11%, similar to the last financial year. whilst EPA's growth of 10% versus 3% last year. The yield on assets had a faster transmission as it gains deposits on a full-year basis, leading to a NIM drop. Despite the drop in NIMs, the return on assets continued to be stable at 1.9% due to cost efficiencies with cost to income declining from 40.5% to 39.5% on a core basis, and focus on quality growth reflecting in lower credit costs. I would like to remind the sizable investments we made over the last five to six years, which will bear fruit in the coming years. These investments were despite We're witnessing significant events such as COVID, a complex and one of the largest mergers in corporate history. The distribution nearly doubled to 9,700 branches. The number of customers nearly doubled to 100 million customers. Our tech investments more than quadrupled to around a billion dollars. The merger with mortgage company HTC Limited, too, is an investment for the future. The bank navigated the same in a stable manner over the last three years, despite changing economic outlook and regulatory stones. The above is going to provide a huge operating leverage in the future. Sometimes all of us have short memories and forget the core business foundation which remains our moat and strength. Customers at 100 million, we continue to acquire about 6 to 8 million customers a year. This will be the funnel for future growth. 22% of our customers are actually 30 years of age. 42% are less than 40 years of age. This enables us an opportunity to engage through their life cycle, which would be the future engine of growth. We continue to be market leaders in our core franchise offerings, such as cash management, In the capital market segment, we continue to hold about 35% to 40% of the account settlement. In the bankruptcy issue, we hold about 40% to 50% of the export settlement. In the trade part of the business, almost 18% to 20% of the country exports go through us. In the imports, 13% to 15% of the country's exports go through us. In the card merchant acquiring, almost about 35% to 36% of acquiring comes through the bank. On the issuance of credit cards, 21% to 22% of issuance is all the system is from us. In the spends, almost 26% to 28% of the card spends in the market is through our cards. We are a dominant salary relationship bank in the private sector. We are amongst the top two MSME banks in the country. so as in the mortgages. We are among the top two mortgage banks in the country. In the wheels business, whether it's auto or transportation, we are the top wheels bank in the country. The above, despite intense competitive environment, reflects the excellence and execution capability of the bank. Our financial parameters reflect strength and resilience of the bank. We have a strong capital position at 19.7%. Our asset quality is extremely healthy at 1.15% growth MTAs. This has been tested across three decades of business cycles. The bank has created a large provisioning buffer of almost 125 basis points to absorb any shock in the future. This is obviously contingent upon any future events that may occur in the future. We don't have any stress in our portfolio as we speak. Our focus is on profitability while pursuing growth opportunities. The loan deposit ratio is not a constraint. The regulator has come out and talked about it. We have demonstrated our ability to gain market share on deposits every year, almost around 30 to 50 basis points over the last five years. Hence, it's no longer a binding constraint. We have been building granular and sustainable deposit franchise, which is reflected thus. In the less than 3 crore retail liabilities, we have moved up from 31% of the net total accretion to about 47% of the total net deposit accretion for the year. This reflects the focus on granular and sustainable deposits. Having said that, the bank will continue to improve its quality of deposit franchise over the years to come. The bank witnessed an unprecedented event recently, but its strength and resilience were seen with stable and strong deposit flows. I would like to take this opportunity to thank the Government of India, the Reserve Bank of India, and SEBI for their unequivocal support during that period. However, the most important strength will be our leadership in the technology space. Over the past few years, we have focused on strengthening the banks long-term competitive position anchored heavily in our technology architecture to operate as a technology-first institution. A large share of our investment has gone towards improving the digital front-end customer experience. We have been upgrading our interfaces, simplifying acquisition and service journeys, and modernizing our digital platform. We launched in the year our new net banking, mobile banking, and also our payment platform, which we probably did it about a couple of years ago. All of them are at a population scale. Today, our mobile app serves over 16 million registered customer offerings. The features, the USP of our build focuses on security. We have an OTP-less authentication. We have a lock, which is for alarm security. And we have a full-stack UPI-enabled wallet, which we call the ZAP account. Accommodation of the above will make it extremely secure and probably one of the most secure offerings in the country today. The efforts have increased digital adoption to 97% for payments and service transactions and 92% for acquisition journeys. Our goal remains simple. Offer customers a seamless, reliable, friction-free experience across all touchpoints. The next layer after the customer layer is the intelligence layer. This is principally to build an AI-ready engine. We have built a strong intelligence layer that brings automation and analytics to the core of our operations. By decoupling our front-end and back-end through a modern API gateway and orchestration layer, we now have a strong foundation for the emerging agent-driven AI models. Strengthening. AI is only as strong as its data. We have built a robust data foundation anchored by a customer level, enterprise level, single source of growth from a customer perspective. We went live with our lake house architecture, a centralized, scalable data lake, reusable, enriched data marge. While not always visible externally, this work is essential to our long-term scalability and AI aspirations. But the big story is how we created in-house the unified AI platform, which is going to be the center that spans across the entire organization. It allows us to deploy AI agents quickly without building custom interfaces between systems. The platform brings together enterprise search, document extraction, voice-based agents, a full AI development lifecycle. It supports multi-foundational and open models and includes a unified evaluation model for strong governance, compliance, and security. We have an independent unit in the risk team that adds a second-line safeguard. The key components includes the model context protocol, or the agentic studio and agentic mesh. This will enable us to deploy AI agents to scale, placing us amongst a small group of Indian and global banks with such advanced in-house capabilities. We already have five use cases in production and 14 more in development, improving turnaround times, first-time ride outcomes, and freeing mid-office and back-office capacity for customer-facing roles. The above leadership position will enable us to harness efficiencies across organizations and will be a key driver to enhance return on assets over the next one, two, three years. The guiding principle is return on assets, loan growth, and deposit growth, and quality of the balance sheet from a risk standpoint. All of it should culminate in a consistent EPS growth. Let me also take on the subject matter relating to some of the matters that we witnessed during the quarter, including the resignation of the former part-time chairman and the Dubai branch-related matter. I and the members of the board did provide statements post the 18th March 2026 event. The Government of India, the Reserve Bank of India, and SEBI came out with statements in favor of the bank. The V2 review, which is what we had committed at the time when we went to the press is in process. As and when this happens, we shall provide a summary of the same. The audited financial statements of the bank for the year ended March 26th carry notes which are self-explanatory. On the Dubai branch related matter, the same has been covered in the notes to accounts as well. There is also an NCDRC order which came out on the 23rd of March which highlights that the complainants are not retail in nature or are not uninformed investors, and they had a clear intent to pursue high-yield, high-risk investment products. So we do not have anything incremental other than the above, so we would like to pause out here and probably take on questions from here.