HDFC Bank conducted conference call on 16 January 2024 to discuss its quarterly results for the quarter ended December 2023. Srinivasan Vaidyanathan, CFO of the bank addressed the call:

Highlights:

The bank loan book stood at Rs 24.7 lakh crore end December 2023, reflecting the sequential momentum of Rs 1.1 lakh crore or 4.9%.

Retail advances grew 3.3% qoq, primarily driven by strong performance in the mortgage business.

The CRB business continued its strong momentum, registering a qoq growth of 6.7%.

Wholesale segment, excluding non-individual loans of HDFC grew 1.9% sequentially. Non-individual loans of HDFC aggregated to Rs 0.99 lakh crore compared Rs 1.03 lakh crore a quarter ago.

Focus on the primary deposits continued. Deposits amounted to Rs 22.1 lakh crore, primarily comprising of retail deposits at 84% of total deposits.

Retail deposits grew over Rs 53000 crore or 2.9% during the quarter, while non-retail deposits reduced by Rs 11800 crore qoq resulting in total deposit growth of Rs 41100 crore or 1.9% during the quarter.

CASA deposits increased to Rs 8.4 lakh crore, resulting in a CASA ratio of 37.7%.

On the distribution footprint expansion, the bank has added 908 branches in last 12 months and 146 branches in Q3FY2024.

Payment acceptance points increased 25% yoy to 4.8 million.

In CRB, rural business reach expanded to 210,000 villages, a growth of 60,000 villages over last year.

In the customer franchise building, the bank added 2.2 million new customer liability relationships during the quarter and around 7.4 million relationships so far in FY2024. The customer base stands at 93 million customers.

The bank has added 41,000 employees over the last 12 months and 10,000 during the quarter.

On cards, the bank issued 1.6 million new cards in the quarter. Total card base rose to 19.9 million.

LCR was 110%, capital adequacy ratio was at 18.4%, Tier 1 ratio at 16.8% end December 2023.

The core net interest margin for the quarter was at 3.4% in Q3FY2024. The bank is focusing on retail asset growth to support margins.

GNPA ratio declined to 1.26% compared to 1.34% in prior quarter and 1.23% prior year. Out of the 1.26%, about 15 bps is standard as one of the other facilities of the borrower is in NPA.

The slippage ratio for the current quarter is 26 bps or Rs 7000 crore, down from Rs 7800 crore in the previous quarter.

During the quarter, recoveries and upgrades were Rs 4500 crore and write-offs were at about Rs 3100 crore.

There is no sale of NPA accounts during the quarter.

The bank has created additional contingent provisions of Rs 1200 crore pertaining to investments in AIF on a prudential basis. The fair value of AIF is up by Rs 500 crore, but 100% provisions are being taken at book value.

The provision coverage ratio was at 75%.

The total annualized credit cost ratio for the quarter, excluding the contingent provisions was at 49 bps, which is steady from previous quarter.

Loan book of the bank was funded with investments going down by about Rs 48500 crore in Q3FY2024.

The bank has 570 branches in the pipeline. And the bank is targeting too add 800-1000 branches in FY2024.

Prior to merger, the CASA deposit ratio of the bank was 42-43% and the bank is confident of getting the CASA ratio back to these levels.

The cost to income ratio is targeted to be reduced to 35% in next 5 years from existing level of 40%.

Excluding the impact of merger the credit deposit ratio is 89%. For the CD ratio to progressively come down, the deposit rate of growth should be at least 300-400 bps higher than the loan growth.

Over a period of time, the bank aims to raise the branch count to 13000-14000 branches for improving geographical presence to be able to tap into the pockets of both the deposits and lending opportunity.

The bank has raised Rs 7500 crore of funds through infra bonds and it has eligible assets close to Rs 1 lakh crore to further raise funds through infra bond.

The tax rate of the bank was low in Q3FY2024 on account of 2 things - favorable orders received relating to eHDFC past assessment and also due to favorable orders received relating to the bank for the past year.

Bandhan Bank stake sale was done in Q3FY2024, which has added to the treasury gains.

The bank has not booked any gains in Credila as it is awaiting regulatory clearance.

With respects to the risk weight rise, the bank looks at the profitability.

The deposit market share stands at 10.5%, while an incremental deposit market share is higher at 18% to 20%.

HDB book continues to see sustained improvement with a gross stage 3 of 2.25% as of December against 3.73% a year ago. Provision coverage on Stage 3 book stood at 68%.