HDFC Bank Ltd Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Mahrukh Adajania - Nuvama Wealth Management Ltd. - Analyst : Yeah. Hi, good evening. My first question is on fee. So it's grown strongly. Is there some securitization and coming fees? And if you could also refresh us with the accounting for any securitization as and where it should come. That's my first question. And my second question is on movement of contingent provision. So what kind or what class of loans would they have been used for because I think the contingent provision look lower QoQ?

Question: Mahrukh Adajania - Nuvama Wealth Management Ltd. - Analyst : Got it. And will the margins optically look higher than in some next quarter given that -- no, not really because they'll be part of investments anyway, right? Yeah, okay. Sorry. And on contingent provisions?

Question: Mahrukh Adajania - Nuvama Wealth Management Ltd. - Analyst : Okay, perfect. Thanks.

Question: Mahrukh Adajania - Nuvama Wealth Management Ltd. - Analyst : Thanks a lot. Thank you.

Question: Kunal Shah - Citi - Analyst : Yeah. Thanks for taking the question. So first question with respect to RBI's traffic circular -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 19, 2024 / 12:30PM, HDBK.NS - Q2 2025 HDFC Bank Ltd Earnings Call

Question: Kunal Shah - Citi - Analyst : Yeah. Is it clear now?

Question: Kunal Shah - Citi - Analyst : Yeah. So the question is on RBI's draft circular in terms of the overlap in lending with group entities. So what do you think should be the impact on HDB financial? And maybe until the time there is the final guidelines, would it and which impact the listing of the HDB financial that is being planned and that is required is for the regulatory requirement?

Question: Kunal Shah - Citi - Analyst : Okay. Okay. Thanks. That's helpful. And second question is on LDR. So you indicated in terms of how we should look at the overall growth compared to that of the system averages. But when we look between our own loan and deposit growth, the way we have been maybe at least contracting the LDR, until what level should we assume that we'll be so aggressive in getting the LDRs down? Would it be like 90%-, 95%-odd level, and then we will get relatively more comfortable? Or would there be any time period maybe that we would have wanted to get it down, or maybe we will see a much higher deposit growth compared to that of loan growth for next two, three quarters? And then maybe both of them should normalize?

Question: Kunal Shah - Citi - Analyst : Yeah. Thank you. Thank you, and all the best.

Question: Gaurav Singhal - Aspex Management - Analyst : Hi, thanks for taking my question. I have a couple of questions. So one --

Question: Gaurav Singhal - Aspex Management - Analyst : Hi. Is this better? Hello?

Question: Gaurav Singhal - Aspex Management - Analyst : Yeah. So I have a couple of questions. So first is on the priority sector loans. Maybe if you can share some more detail on how much are we meeting organically? Because I noticed that in the last few quarters, our other assets as a percentage of total have gone up a lot. Like it used to be 3%, 4% pre-merger; now, it's like almost 6%. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 19, 2024 / 12:30PM, HDBK.NS - Q2 2025 HDFC Bank Ltd Earnings Call But this quarter, it has actually come down QoQ. So I'm just curious if that is because we are making more priority sector requirement organically. So maybe if you can share some thoughts on that? And the second question is about the non-mortgage retail that you mentioned. Do we envisage that reaccelerating this and start gaining market share again? Because a lot of our peers actually are now seeing credit costs go up, and then we are going faster earlier. So do we -- in the next several quarters, do we see us gaining back market share as our peers step back? Thank you.

Question: Pranav Gundlapalle - Bernstein - Analyst : Hi, good evening. Thanks for taking the question. The question is on the loan yields for the bank. I think if you look historically, the bank as well as the pro forma entity has always had a higher yield versus peers. We have a significant gap versus peers. Incrementally, is the bank's loan yields on par with peers? Or are we still seeing a lower yield because of our conservative stance on underwriting?

Question: Pranav Gundlapalle - Bernstein - Analyst : Understood. That's clear. Thank you.

Question: Rahul Jain - Goldman Sachs - Analyst : Yeah, hi. Good evening, Sashi, Srinivasan. Three questions. First is on the trajectory of the liquidity coverage ratio. So I wanted to understand, we have been inching that higher. Clearly, there is a draft regulation out there. So is that something that we are baking into our assumptions and pushing this LCR higher? Or what exactly is the reason? What are you thinking there? So that's question number one.

Question: Rahul Jain - Goldman Sachs - Analyst : So just to simplify, Sri, so LCR, would it further go up, or you would run it down a bit? Because clearly now the mix is also changing, and we would want to push up our margins also because the ROA also could potentially be better. Or you will keep inching this up because there's an impending regulation that is out there or draft regulation that is out there?

Question: Rahul Jain - Goldman Sachs - Analyst : The reason why I ask this question is because in the balance sheet, quarter on quarter, the GX still went up by about INR15,000 crores. LCR also went up. I appreciate the point about the granularity of deposits and therefore, the lower runoff factor. But just wanted to get some directional sense. Fair enough. The other question is on the branch expansion, et cetera. So what are the fresh thoughts out there? How are you all thinking about it?

Question: Rahul Jain - Goldman Sachs - Analyst : All right. I appreciate it. Thanks. Last question is on your latest thoughts on the credit quality because I think you got the cycle again right on the unsecured straight away. Now you're starting to grow that these, while others are having the normalized experiences or elevated credit cost. So what's your latest thoughts on asset quality in general, unsecured, micro finance, any other segment that you are cautious about? Anything that we all would -- should know from your perspective where the credit comes in may be starting to build up?

Question: Rahul Jain - Goldman Sachs - Analyst : Very helpful. Thank you so much, Sashi.

Question: Rikin Shah - IIFL Securities - Analyst : Good evening, everyone. Thanks for the opportunity. Just have one question. With faster normalization in the LDR, we are generating excess liquidity on the balance sheet. So the cash balances have gone up almost by INR750 billion in this quarter. In the past, we have demonstrated to prepay some of the bond borrowings in addition to the scheduled maturity. But this quarter, we didn't see that. So I just wanted to understand, do you still see those prepayment optionalities available in the quarters to come by? Or we could put or see for a few more quarters where this excess liquidity could set on the balance sheet?

Question: Rikin Shah - IIFL Securities - Analyst : All right. Thank you. That's all.

Question: Abhijeet Shitole - AXA Global Business Services - Analyst : Yeah. Thank you for taking my question. Sir, the first question is the other OpEx. Growth is sharply down. What is driving these efficiencies? And what is the trajectory we should expect in the near term?

Question: Abhijeet Shitole - AXA Global Business Services - Analyst : Sure, thank you. And second question is I just want to understand, you have spoken about CBR, the project, et cetera (technical difficulty) --

Question: M. B. Mahesh - Kotak Securities - Analyst : Hi. Just two questions from my end. One is you have started to see a slowdown in the commercial banking space, especially on the emerging profits, if you could just highlight as to what's happened there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 19, 2024 / 12:30PM, HDBK.NS - Q2 2025 HDFC Bank Ltd Earnings Call

Question: M. B. Mahesh - Kotak Securities - Analyst : Sure. Second question is on the deposit side and loan growth. Is there any number in mind when you're looking at below industry average and looking at where the sector is growing in terms of deposits? Or you don't have an opinion about this at all?

Question: M. B. Mahesh - Kotak Securities - Analyst : No, Srini. Deposits at a system level, let's say, is about 15%, and loan growth starts to accelerate for the system. Is there a number in mind as to where you want your loan growth to grow? Or you're going to keep it a very flexible number out here?

Question: M. B. Mahesh - Kotak Securities - Analyst : Okay. Just one clarification, on the savings account balances, if you look at the number of credits that are happening to the account, has there been a slower comp there? Or this is just general transition to term deposits that we are looking at?

Question: M. B. Mahesh - Kotak Securities - Analyst : Perfect. Thank you.

Question: Saurabh Kumar - JPMorgan - Analyst : Sir, just two questions. One is on your slide 36, your RWA to total assets is down quarter on quarter. And your the corporate book and the mortgage book has also gone lower than the overall growth quarter on quarter. So what would explain this lower RWA? And the second is just on the savings account, again. I mean, assuming you get a 50-basis-point rate cut, would you expect savings account or to go up? Or do you think this is more structured this time? Thank you.

Question: Saurabh Kumar - JPMorgan - Analyst : Thank you.

Question: Abhishek Murarka - HSBC - Analyst : Yes. Hi, Sashi, Srini, and Bhavin. Good evening. Two questions. One is a data keeping one. Can you share the loans that are linked to repo, EBLR, MCLR, and fixed rate? And I can come back, circle back for the second question.

Question: Abhishek Murarka - HSBC - Analyst : Srini, this includes MCLR as well? Or this is external entirely LCR?

Question: Abhishek Murarka - HSBC - Analyst : Okay. And the rest is fixed?

Question: Abhishek Murarka - HSBC - Analyst : Okay, thanks. And the second question is on NIM. So it seems if I sort of assimilate all the comments by Sashi during the call, it seems that there are positive factors. There are negative factors as well like liquidity buildup, CD ratio run on. All of that is keeping NIM where it is. Going forward, there will be a repo card at some point, and that will sort of to drag it down. What can you do to offset that? If you want to keep it here or increase, what is now in your hands? What levers are there in your hands to offset that?

Question: Abhishek Murarka - HSBC - Analyst : All right.

Question: Prakhar Sharma - Jefferies India - Analyst : Yeah. Good evening, and congratulations on the results. I just want to ask on the credit cost part. Generally, 1Q tends to be a seasonally heavier quarter from the agri side. So generally, slippages spend come off in second quarter adjusted for the seasonality and same for credit costs. But if I look at the slippage ratio, it's kind of flat QoQ, which I wanted to ask for clarity. And similarly, if I look at the provision number of about INR2,700 crores and add back the reversal that would have been done of the AIF, it will probably go to INR3,300 crores. So can you just explain if there is any other moving part in the credit cost line? Thank you.

Question: Prakhar Sharma - Jefferies India - Analyst : Understood. Thank you so much.

Question: Chintan Joshi - Autonomous Research - Analyst : Hi. Good evening, and thank you for taking my question. Sir, can I come on the balance sheet again. So if I kind of take a few points, you mentioned that there is limited optionality on prepaying the borrowings. You are doing more securitizations, which also reduced our loan growth rate. That excess deposit that you have, so for example, this quarter, it was 700 on average deposits versus 300 on average advances, kind of gets parked in liquidity. How would you optimize this? If you build up too much liquidity, does that give you a little bit of room to grow your loans a little bit for one quarter until the optionality on the borrowing plays out? Is that how we should think about sequentially how you would optimize our balance sheet structure?

Question: Chintan Joshi - Autonomous Research - Analyst : So the bottom line is that if you keep growing deposits faster than loans, you don't have any issues with growing liquidity? Because the point here is to look to this LDR ratio rather than worrying about the NIMs in the short term?

Question: Chintan Joshi - Autonomous Research - Analyst : The second question I have is on asset quality. The one area that has seen a pretty strong growth over the last few years has been CRB, MSME. We're going through cycles in MFI in consumer credit. I'm wondering if there is something that might be in the pipeline in that area, if not for you then more generally for the industry. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 19, 2024 / 12:30PM, HDBK.NS - Q2 2025 HDFC Bank Ltd Earnings Call

Question: Chintan Joshi - Autonomous Research - Analyst : That's good to hear. And it is heartening to see the improvement in the LDR ratio in an accelerated way. So thank you for taking my questions.

Question: Manish Shukla - Axis Capital - Analyst : Good evening and thank you for the opportunity. Srini, just to reconfirm the floating proportion of the book, corporate loans are about 19%. So I'm assuming that would be entirely linked to MCLR, right?

Question: Manish Shukla - Axis Capital - Analyst : And the question is purely on repo. So purely repo-linked book would be what proportion of your overall loan book? Just linked to repo.

Question: Manish Shukla - Axis Capital - Analyst : Okay. And the last question, before merger, HDFC Limited used to carry hedges on the liability side for interest rates. Are you still carrying any of that, or all those have matured?

Question: Manish Shukla - Axis Capital - Analyst : Would you be able to quantify that proportion?

Question: Manish Shukla - Axis Capital - Analyst : All right. Thank you. Those are my questions.