管理層發言
Ladies and gentlemen, good day and welcome to HDFC Bank Limited Q2 FY '26 Earnings Conference Call. 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, Mr. Vaidyanathan.
Thank you, Nirav. Good evening, and welcome to all the participants on a very busy day. Without much ado, let me get to our CEO and MD, Sashi Jagdishan, for his opening remarks before we get on. We also have Kaizad Bharucha, our Deputy Managing Director. We will also get him at some point. Yes, please, Sashi over to you.
Good evening, friends. First, let me wish all of you, Shubha Dhanteras and Shubha Deepavali. So first, let me start with the macro. Global outlook remains very volatile, thanks to the uncertainty related to tariffs and immigration policies. However, the domestic economy appears to be getting stronger. The triad of fiscal and monetary measures, whether it is the direct tax reductions, the GST reductions, or the interest rate upfronting of interest rate cuts, I think have galvanized the economic activity in the recent past. The headline inflation has been printing very low, thanks to the low food inflation. This probably gives the monetary policy committee the momentum to maneuver on future interest rate actions. We've had strong rainfall in most parts of the country. The GST rate changes have created a lot of buzz in the market in the later part of September onwards. And coming to the bank, the improvements in economic activity have given us the opportunity to accelerate loan growth. We can see a lot more color as we get into Q&A. We've seen our growth pick up across segments. We continue to see market share gains in deposits, and we are very focused and disciplined on pricing. As expected, due to the front loading of the interest rate cuts on the asset side of the balance sheet, we did see NIM compress by about 8 basis points. We should see over the next 6 to 12 months, the deposit repricing having some amount of tailwind effect in the NIMs. We are managing our expenses in a very tight band, and we should see our investments in distribution and technology creating an operating leverage over the medium to long term. We continue to invest in technology, not just in core platforms and middleware, which will bring about a lot of stability and scalability in availability, resilience, and security, but we are also embarking on creating a platform to undertake certain low-hanging new age experiments such as GenAI. Largely, these are to reengineer our processes and create a great customer experience by reducing turnaround time. It will have a secondary order impact if it becomes successful, which is what we are all working hard towards in the bottom line of the bank. I think our USP, as you have seen in the numbers, continues to be our very healthy asset quality. And we don't see too many issues in that even in our early indicators. Most of our metrics, whether it's NIMs, cost to earnings, and return on assets have been very range-bound, and we should see a fair amount of stability with a positive bias in the medium to long term. So let me pause here and I'm happy to take on any questions. We have our CFO, our DMD, and other colleagues who will collectively be answering to some of your questions. Thank you.
Thank you. Nirav, kindly open it up and kindly get to the queue.
分析師問答
The first question is from Mahrukh Adajania from Nuvama Wealth.
I had a few questions. My first question is on the recoveries in the NPL movement, they look very strong. So is it that the recovery environment has improved substantially? Or is there a one-off there?
Yes. The recoveries, I have a one-off there, where there was an NPA, which performed satisfactorily over 2 years, and appropriate ratings were received and upgraded. And to that extent, yes, it did improve there. What we did is that, that also releases some provisions, as you know. But at an aggregate level, the contingent provisions have been added by about INR 1,600 crores or so. We have created more resiliency and strengthened the position there. So from an overall point of view, the recoveries - more than recovery, the upgrades, I would say that upgrades have contributed to approximately 10 basis points.
Okay. So the one-off would be how much?
Yes, the 10 basis points, 140, 1.4% was the prior quarter NPA. We ended up at 1.24%, about 10 basis points was an upgrade, which I would not say is recurring, yes.
All right. Got it. Makes sense. In terms of margins, we had been guiding that the exit margins will align with last year's fourth quarter exit core margins. Does that guidance still hold? Is the repricing on track for that?
Okay. So let me address that. There are two aspects to consider. The yield on assets has decreased since the start of the rate cycle, as noted in our published statements. Specifically, the yield on assets dropped by 30 basis points this quarter. Over the period from December until now, it has decreased by almost 50 basis points. With the policy rates changing by roughly 100 basis points and about 70% of that being in floating rates, most of the adjustments have already been incorporated, except for a small influence from the latter part of the month or quarter that may affect the upcoming quarter. Regarding the cost of funds, it went from 4.9% to 4.6%, reflecting a decrease of 30 basis points. This adjustment indicates that a little over half of the effect is being seen from the changes in savings deposits. However, the impact from time deposit rate changes, which is between 70 and 80 basis points, typically takes around 6 quarters to fully materialize. We have experienced a little over 1.5 quarters so far. This quarter, the cost of funds improved by about 18 basis points, which aligns with a rounded figure of approximately 20 basis points. There are still about 4 to 5 quarters for further adjustments, meaning that if rates remain stable, we can expect the cost of funds to continue decreasing. If asset levels stabilize, we anticipate an increase in our margins. We remain optimistic that with stable rates, our exit margins will improve from their current position.
Okay. How do you view the deposit growth? This time loan growth was very strong. While deposit growth was also good, the incremental loan-to-deposit ratio did increase. So how should we think about loan-to-deposit ratios moving forward?
Thank you for your question. We began the year with an LDR of approximately 96. Our strategic goal is to align loan growth with market trends this year and exceed market growth by FY '27, assuming the LDR falls below 90, ideally between 85 and 90. This is part of our strategy, and it won't be a straight line. The focus is on reducing the LDR from 96 to below 90, which is crucial. The rate of change can fluctuate each quarter due to seasonal factors. This quarter, we observed good credit demand, and we engaged with our clients when it made sense for our profitability and overall relationships. We will continue to pursue this approach, and we remain committed to achieving loan growth in line with the market this year and surpassing it next year.
Next question is from the line of Chintan from Autonomous.
Happy Diwali to all. Can I start with capital? The recent draft proposal seems to suggest a meaningful reduction in risk-weighted assets. You are already at a very high CET1 ratio. You have got even more contingent provisions now. You chose to put more buffers on. Your loss experiences are not going to be that bad for ECL. What are we going to do with all this extra capital, given that you are able to grow with your retained earnings even when I look out beyond FY '27?
Let me clarify. Recently, there's been a significant increase in capital ratios because the bank decided to slow down in FY '25. Now, we are on an upward path. You are correct that potential regulatory changes could positively impact the capital ratios. However, I'm uncertain about the ECL side. The bank has a solid history and well-established models concerning ECL, which are already known to you, as we've shared U.S. GAAP results. That said, when examining the draft guidelines, there are several requirements which could mean that potential ECL advantages may be negated, and we might need to maintain higher levels of ECL if those draft guidelines are implemented. We'll need to observe how final guidelines emerge. Nevertheless, we believe that the economic cycle change has likely just begun. While we should monitor if this trend continues beyond the festive season, there is optimism that it will be sustained. Once we reach our outlined trajectory in FY '27, we anticipate growing faster than the system and beginning to consume capital. Historically, we've consumed about 60 to 70 basis points of capital annually in a stable scenario, excluding events like mergers. For a large systemically important bank, it's crucial not to fall to the regulatory minimum capital levels. We must allocate capital for unforeseen risks as well. Our capital planning process establishes thresholds that exceed regulatory requirements. So, while it may appear that we have high levels of capital now, I believe we will have enough as we regain our growth trajectory. Based on our history, we typically plan for about 3 to 4 years of growth. Therefore, starting in FY '27, we should have ample capacity and cushion for that growth before exploring additional options.
Yes. I mean the only thing I would say to that is I don't think you're in a place where you consume 60 to 70 bps of capital every year now. Given your size, even if you grow at 17%, 18%, you would be breakeven on the capital you already generate. Am I wrong out there?
See, yes, Srini.
Yes, you're correct that in this quarter, we generated capital at 60 basis points and consumed it at the same rate. The change in the capital ratio from 19.9% to 20% is minimal, at just 0.1. This indicates that our generation and consumption levels are balanced at this point. However, if our growth exceeds the overall system growth, our consumption rate will increase more quickly. Additionally, if our mix shifts more towards retail, consumption will accelerate further. Therefore, it's crucial for us to ensure we maintain enough capital to support these growth opportunities as much as possible.
Having said that, if there are any opportunities that may arise in terms of other options that are available to sort of delight shareholders, we would be more than happy to do so. We will keep on exploring such options.
Yes. And my second question was on margins. On margins, LDR seems to have benefited this quarter. But when I look at cost of funds, it seems like it is not falling as fast as some of the other larger players. Is that just the timing difference in the way you built up your TD book versus the other guys given the merger, and that it should unwind over the next few quarters?
Yes. Our cost of funds decreased by about 18 or 19 basis points this quarter, and the deposit cost of funds dropped by a similar amount. Our savings account rate changes are fully accounted for. However, it takes about six quarters for the changes in our time deposit rates to fully reflect the adjustments that we and many other players have implemented, which are similar in magnitude.
So slightly longer duration, okay.
Yes, that's correct. It's about duration. We usually prefer a slightly longer duration to maintain stability in our balance sheet, particularly on the retail side. Therefore, the tailwinds will be evident for a longer period when it comes to realizing the benefits of repricing.
Okay. And a quick data question. Borrowings from erstwhile limited, how much is left on your books just now?
Yes, annual report reflects the maturity profile of this over the next...
Next question is from the line of Kunal Shah from Citigroup.
So the first question is particularly with respect to deposit market share. So obviously, we would tend to maintain a particular market share on the incremental deposits, which seems to have come off. Is it largely due to the rundown of bulk deposits during the quarter? Now we see some increase in the proportion of retail deposits as well. But the lower deposit growth this quarter, in particular, maybe just 1.2x the industry average, what could be the reason for that? And should we see the uptick going forward?
Yes, regarding deposits, market share is a result of our strategy, which is detailed and extensive through our branch network. That's why around 83% of our deposits come from retail sources. In this quarter, we've observed a slight increase in the percentage of retail deposits, while non-retail deposits decreased. This development in terms of pricing, availability, and client relationships varies over time. We engage in many of these situations, but we will be careful about how much and when we choose to participate.
Kunal, in my opening remarks, I mentioned an aspect of disciplined pricing, which Srini just elaborated on. However, I want to emphasize that while everyone looks at period-end deposits, I have consistently pointed out the importance of also considering averages. In terms of averages, we've performed quite well, showing approximately 15% year-on-year growth. We are very comfortable with our year-on-year performance. Thank you.
Got it. And this increase in contingency provisions. So you indicated that on the recoveries, there was some provisioning release, and that was the reason for contingency or is there anything to do with maybe the ECL buildup, you already carry a very decent level of contingency provisioning and we are adding over and above that. So how should we read it? Maybe is it a particular recovery effect, which is getting nullified and that's the reason it's created?
Yes, that is correct. There is an opportunity for contingency provisions, which are precautionary rather than anticipatory. When available and appropriate, we utilize ECL provisions. Once the draft guidelines are finalized, we can make necessary adjustments. We are comfortable with ECL, both in terms of implementation and provisioning requirements. As you mentioned, this was part of our thought process regarding the contingencies.
Sure. And lastly, on the fee income side, the sequential uptick is more volume related or is there any element of one-off or some particular pickup in these segments, in any of the subsegments which we are seeing during the quarter?
No, the fee has increased by approximately 9%. If you analyze the distribution by various products, it remains fairly consistent. It's important to compare it to the previous year rather than the previous quarter, as there are seasonal variations from one quarter to the next. However, this consistency is part of our regular growth.
Okay. Got it. Some element of wholesale would be there because that proportion is going...
No, not wholesale, not wholesale. Kunal, the fact of the matter is you started to see the asset buildup happening. The disbursals would have started to kick in during this quarter. So there would be definitely better earnings arising out of the asset disbursals as well.
Next question is from the line of Anand Swaminathan from BofA.
I have a couple of questions. One, we have just crossed the 2-year mark post-merger as well. If we can give some key success metrics in terms of synergies and what has worked out the best? And also, if you can highlight what has been lagging versus what we had envisaged 2 years back? And number two, in terms of the line of sight of ROAs, what kind of timeframe are you thinking about now to get back above the 2% ROA mark, which we used to do consistently before?
Let me take a shot at this, and maybe Kaizad or Srini can add later. First, this merger is one of the most complex we've seen in a while. The bank had to accelerate its fundraising efforts significantly to meet new reserve and liquidity requirements and to support the increased needs for priority sector funding which we inherited. Additionally, we recognized a shift in the economic landscape after the merger, prompting us to reassess our strategies. We decided to lower our credit deposit ratio faster than we initially planned, which required a significant increase in deposit growth despite a tight liquidity situation. These challenges were extraordinary for us after the merger, but even while pushing our limits, we have managed to maintain a stable performance in key areas like net interest margins, cost efficiency, asset quality, and return on assets since day one. Over the past two years, we have achieved a commendably stable performance for a large organization. During this time, we also focused on investing in the future through technology, distribution, and resources to capitalize on the merger's potential, rather than solely managing near-term costs. We believe this investment will yield benefits over the next three to five years. In the home loan segment, which is a deeply emotional product, we've improved our long-term relationships and overall impact, outpacing fleeting consumption products. The team has excelled in expanding our home loan distribution and has achieved significant reductions in turnaround times for loan approvals—down to 2 days for individual loans and about 3 days for self-employed ones. We're also working on making the home loan process more seamless by offering bundled products with a one-click experience. I’d like Kaizad to elaborate further, as he is very passionate about this area.
So thank you, Sashi. Without going through all the pointers that Sashi mentioned, I think one of the advantages that we brought apart from changing the turnaround times was opening the segment to the self-employed base, which was not there previously when home loans were being done. And that's opened up a larger segment for us. It's also ensured that we are in a position to upsell far more products, including at the liability side of it. Empirical data has shown that whenever a customer has a home loan and he brings with it the checking account, there is a change in the value of the relationship that follows. So I think we've already been able to start implementing that. We've seen good results over the last year. So with increased distribution, changing our turnaround times, being able to offer home loans and customized products in home loans to different customer segments based on geography and demographics. And in addition to that, the upsell that we have been able to do across a whole range of products, which are the credit cards that go along with it when a person buys a home loan, consumer durable loans that go along with it, as well as being able to offer them brokerage services and insurance. So when you look at the whole gamut of the upsell along with the checking account and an emotional product like a home loan, which is a good duration product, it's already started playing out what we had envisaged as the roadmap, and I would say that we are on track.
I'll add one for Kaizad so that we can keep discussing and tracking the penetration of credit cards when a new mortgage is issued. We have successfully reached a little over 14% in this area. For consumer durable loans, our penetration is in the mid-30s, and for brokerage accounts, we are seeing penetration of over 15%. We are making progress with each of these products according to our targets. Regarding savings accounts, we have nearly reached 98% to 99%.
That's right.
And the end result in terms of the balance buildup in such accounts is far higher than the normal savings account where we don't sort of place in a home loan. But having said that, as we have mentioned in the call, we believe that from FY '27, when we get back to our trajectory, when we start to ensure that all our distribution outlets start to sell home loans, you will start to see the benefits getting more visible over a 3- to 5-year period. And more than that, even the operating leverage on the kind of investments that we have done in both distribution and technology will also start to play. So I see a fair amount of positive bias in the key financial metrics over the next 3 to 5 years.
Any comments on the ROA trajectory? Our intention always was to go back to the upper end of that 1.8% to 2.2% ROA range. Where are we in that journey now? What time frame should we think about?
Yes, Anand, we are currently operating within the 1.8% to 1.95% range for our ROA, which has been consistent over the last eight quarters. The potential for improvement in our ROA primarily stems from our cost of funds. The benefits from the merger mainly impact the profit and loss statement through the cost of funds because we've been adjusting our borrowing strategies and shifting the mix of deposits from time deposits to CASA. Over the past two years, we've seen significant growth in time deposits. These factors are the key levers that remain in place, providing opportunities for us to achieve our goals. Ultimately, it is the cost of funds that influences this trajectory.
Next question is from the line of Rikin Shah from IIFL Capital.
Two questions. First one is on cost of fund improvement in this quarter for us, has been marginally lower than peers. Is that only due to the longer duration of liabilities, which means that it's just a timing problem and a lot of that could be back-ended for us vis-à-vis front-ended for the peers? Or is it due to higher TD mobilization for HDFC in the reset last year and hence, this difference could potentially persist in the near term? Sorry, your voice is coming muffled. Is this better by any chance? Hello?
Yes, Rikin, first regarding the cost of funds. Every balance sheet has a specific structure and duration that influence the mix of time deposits, CASA, and other factors, which in turn affect the cost of funds. A little earlier, we discussed the space within the cost of funds and the time it requires to realize its effects. So, we will need some time for that to become evident. Our main focus is on enhancing the core business of deposit growth and strengthening customer relationships, which will eventually reflect in the cost of funds. That's the first point. The second point you mentioned relates to provisions. As I noted earlier, on Page 19 of the presentation, you will see the provisions include a contingent provision of approximately INR 1,600 crores and general provisions of about INR 600 crores. The general provisions are necessary to support our loan growth and other factors, amounting to roughly 41 basis points of loans, an increase from about 40 basis points. Similarly, the contingent provision has also increased by a basis point or two. Thus, we have made these adjustments.
Next question is from the line of Abhishek Murarka from HSBC.
I have a few questions about the individual loan segments. First, regarding personal loans, do you believe all the parameters are now favorable for acceleration, and is the risk appetite significantly improved compared to earlier? To accelerate, do you need to relax any of the tighter underwriting standards adopted following the November '23 circular, or can you manage to accelerate under the current standards? I'm looking for some insight into your growth and revival strategy. The second question is about home loans. You made strong points about the product's significance for your franchise. However, I notice that your overall growth is still 300 basis points below the industry average. I understand this may have been influenced by previous margin pressures, leading you to make trade-offs. Moving forward, do you anticipate an acceleration in growth that aligns with the industry, while still achieving adequate risk-adjusted returns? Lastly, on gold loans, what are the current yields? You have been growing 5% to 6% quarter-over-quarter for several quarters now. Is this yield still attractive in terms of returns and margins? Are you experiencing any pressure on yields? I would appreciate your thoughts on these three topics.
Sure. Regarding your first question about the unsecured book, we have consistently maintained our credit standards for underwriting, regardless of the current cycle. We focus on growth opportunities within segments we are comfortable with, and in light of the economic environment, we have experienced steady growth in unsecured loans, taking appropriate advantage of the situation. As we move forward, we see favorable trends continuing, and we aim to capture our fair share of the target market without compromising our credit standards. On the mortgage side, last year involved significant corrections in our processes, target markets, and desired yields. We are now increasing our market share and have closed the gap compared to a year or a year and a half ago. Following the RBI's 50 basis point rate cut in June, we observed other players reducing their rates, but we opted not to lower our interest rates significantly unless it made economic sense. We believe we have managed this effectively, as many players have reverted their rates back up. Over the next 18 to 24 months, we expect to remain competitive in the market with our mortgage products, having demonstrated this over recent quarters. However, we will not sacrifice quality just to gain market share, as building lasting customer relationships is essential to us. The last question was regarding gold loans.
Yes. I just had a very quick follow-up here. Is the pragmatism on pricing returning? Or is it just still quite competitive and still not the right time to press the pedal?
It is coming back to some levels of sanity, but I would think it's yet a little distance away because it's quite an uneven market where you see different players come and accelerate their appetite on home loans and therefore, use rates as a strategy to try and meet their objectives. So we will have to see how this unfolds and wouldn't want to jump the gun where that is concerned. Very quickly, in the interest of time, I move to your query on gold loans. Yields have been good. Our experience as we are growing this book in a steady manner has thus far been very helpful. We do see us continuing on that path. We will be watchful as it is, again, a very emotional item with clients and who we deal with and the clarity of the terms on which we deal with them, we will be cautious of. But yields on the gold loan book have been, I would say, pretty rich given that it is a fully collateralized exposure.
Yes. Is the yield here higher than your retail blended yield or at par with just the retail portfolio?
Abhishek, so going into one particular product rate, all I will tell you is that this is incremental to the bank's yield as well as the retail product yield.
Next question is from the line of Jayant from Axis Capital.
Sir, my question is on the credit cards business, when the book has not grown as much this quarter, whereas we do think... Am I audible now?
Yes.
Yes. Question is on credit cards. The cards book has not grown as much in this quarter. However, the card issuances and the spends have been growing very sharply ahead of industry for the past several months. So is there a mismatch? And have we observed any uptick in the post 22nd of September period?
First, regarding overall card growth, we have added 1.5 million new cards in the quarter. We have been cautious in certain spending categories over the last four quarters, managing our approach by restricting some areas while encouraging others. Additionally, we are being careful about increasing credit lines for revolving customers, as the rate of customers who revolve their balances has declined. Overall, we see a substantial number of transactors who spend and pay promptly, particularly in our strategic segments.
I want to emphasize what Kaizad and Srini have mentioned. There will be periods, especially during festivities, when e-commerce platforms will have many offers, resulting in increased spending per card among participants. Industry data shows significant spending coinciding with these festive events on these platforms. We continuously assess whether it makes economic sense for us to engage in these spending opportunities. As per our philosophy, we ensure our involvement is economically viable. It is true that we chose not to engage in some of the significant spending events at the beginning of the festival on e-commerce platforms, which likely explains the modest increase in net receivables on cards this quarter.
Understood. And second question was the mix of the new acquisitions, how much would be existing to bank and new to bank? Is there any change of thought here of targeting new consumer pools through cards, because we're not seeing this kind of aggression from other players right now?
Normally, it has been between 65% to 70%, 75% or so is existing, and that has been the level at which we have operated over time.
There's no change in the last 6 months?
Yes, there's no big change.
Next question is from the line of Ravi Purohit from SiMPL.
Happy Diwali to the entire team of HDFC Bank. So I have 2 questions. Most of the other questions have been answered. One is about 2 quarters back, we had mentioned that from the erstwhile HDFC book, we had about 15 to 20 basis points of stressed assets which are actually performing, but we were still classifying them as NPAs. So can you just kind of update us on the status of those? Have a lot of those gotten upgraded or some of it, if this quarter, one of the, I think, assets that you were saying that got upgraded was probably part of that eHDFC book. And is there more left there? If you could just share some thoughts there? And second is, in our advances book, we have seen healthy growth on the SME side, the medium and mid-corporate side. So if you could just share some thoughts on what we are seeing on the ground on the SME side from loan opportunities? Those are my 2 questions.
The first one is simple, yes, I did mention to Mahrukh and to another person that the 10 basis points upgrade is part of that.
As regards to the SME part of it, I think we have seen at a ground level a fair amount of positivity come back. There is actual credit demand, which one is seeing in that segment. We do believe that with our clientele and our footprint, it gives us an opportunity to continue to participate, keeping the underwriting standards, but also participating out over here. And right now, it is continuing to give us the positivity on that segment. The asset quality in that segment has also held up well. So we continue to mine that space within our parameters going forward.
And sir, in the RBI policy recently, they had mentioned about Indian banks being allowed to participate in cross-border or fund cross-border M&As and also there were a lot of relaxations that have come in. So if you could just share some thoughts as to how does it kind of open up opportunities for larger banks to participate in larger cross-border transactions, which hitherto were not kind of available and most of that money was being raised in the overseas markets.
Yes, I believe this definitely creates opportunities for large banks, and indeed for most banks, to get involved. We will wait for the final guidelines from the regulator as well as the draft guidelines that will be released here. I believe there is a significant market that has been financed offshore or, to some extent, addressed by non-banking financial companies or alternative funds. This market will now be accessible to banks, and we will certainly review and consider participating in it given our customer base and the strength of our balance sheet.
Ladies and gentlemen, we'll take that as the last question. I'll now hand the conference over to Mr. Vaidyanathan for closing comments.
Thank you. Thank you. I want to take this opportune time to wish all of you a very happy festival time with your family and friends. Have a great weekend. Bye-bye. And if you have any more questions or comments and clarifications required, please feel free to reach out to our Investor Relations. We'll be happy to engage. Thank you. Bye-bye.
Thank you very much. On behalf of HDFC Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.