HDFC Bank Ltd Q3 2025 Earnings Call Transcript

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

Question: Maruka Adajania - Nuvama - Analyst : Yeah. Hi, congratulations. First of all, can you give as much color as possible on how you met PSL on eHDFCs book because your OpEx does not seem to have increased? And then there doesn't seem to be much RIDF for previous shortfalls either. So just as much color as you could give on PSL, that's the first question. And the second question is that if you could separately call out the PCR excluding agri-loans and if there was any tax refund in other income -- other interest income, these are my questions. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 22, 2025 / 12:30PM, HDBK.NS - Q3 2025 HDFC Bank Ltd Earnings Call

Question: Maruka Adajania - Nuvama - Analyst : Sir, just one thing, one clarification. So this time around there was not much PSLC, is that a fair assumption?

Question: Maruka Adajania - Nuvama - Analyst : Sir, what is the agri-reversal?

Question: Maruka Adajania - Nuvama - Analyst : Okay, sir. Thank you. Thank you. Yeah. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 22, 2025 / 12:30PM, HDBK.NS - Q3 2025 HDFC Bank Ltd Earnings Call

Question: Chintan Joshi - Autonomous - Analyst : Hi, good evening. I've got one on liquidity and then one on your contingent provisions. On liquidity, you know, if I think about the last two quarters on average balances, you've added about INR1.2 trillion to INR1.3 trillion of excess deposits over loans and borrowings are only down about INR250 billion. That excess liquidity that you have on balance sheet, at what yield have you packed that liquidity if you can share that with us. And also what is the weighted average cost of borrowing, that is maturing over the next two years? Just trying to understand what the funding synergies will look like over the next 12 to 18 months. And then on contingent provisions, the question is, what is the process of releasing that contingent provision? You release INR3 billion? You obviously have a lot on your balance sheet. Will you be using these provisions to buffer the P&L volatility? And do you kind of need to go to RBI to be able to use this or you can use this with your own discretion? Thank you.

Question: Chintan Joshi - Autonomous - Analyst : And the borrowing cost?

Question: Chintan Joshi - Autonomous - Analyst : The cost of borrowing --?

Question: Chintan Joshi - Autonomous - Analyst : So you released a little bit of contingent provision this quarter. So I was trying to understand what led to that release.

Question: Chintan Joshi - Autonomous - Analyst : Okay. So we should read that as recoveries rather than -- okay, fine. That answers the question. Thank you

Question: Kunal Shah - Citigroup - Analyst : Yes. Thanks. So the first question, again, in terms of the overall provisioning coverage, specific provisioning, no doubt you indicated in terms of -- on agri, it's been flat on a quarter-on-quarter basis. But otherwise, the trajectory has been downward. So maybe -- have we reached the optimal level or should we see further maybe at least managing the provisioning coverage slightly lower considering the behavior of the portfolio that we have? So how should we look at the entire trend because last five quarters has been coming off? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 22, 2025 / 12:30PM, HDBK.NS - Q3 2025 HDFC Bank Ltd Earnings Call

Question: Kunal Shah - Citigroup - Analyst : Okay. Got it. So maybe if you assume that maybe the stress level remains, we are able to manage it well. And should it be managed at the current level or we will see the further decline out there because of this paved the movement which happened in the NPL?

Question: Kunal Shah - Citigroup - Analyst : Sure. And overall, if you can share in terms of the 100% provisioning policy for the unsecured portfolio, when does that kick in and the write-off policy? And any stress in any of the segments? Maybe the overall ex of agri slippages were almost flat in the absolute term. But any segments, which is worrying you? We are seeing a few of the players talking about stress evolving in some of the other segments as well, anything that is worrying you at this point in time?

Question: Kunal Shah - Citigroup - Analyst : Okay. Thanks and all the best.

Question: Suresh Ganapathy - Macquarie Capital - Analyst : Yeah, just two questions. One is on the HDB Financial credit costs having gone up quite sharply QoQ from 1.8% to 2.5%. Can you just give us some color what has contributed to this rise, both the secured, unsecured. So just a little bit color on that. The second thing is on merger synergies itself, right? So the merger happened on July 1 of last year. If I were to take a snapshot of that point in time, your margins were at 3.4% and cost ratio was 40, 40.5. 18 months down the line, the numbers are still the same. So nothing has changed with respect to margin or OpEx. Now when can we start seeing some of these numbers happening? Because it's 18 months already into the merger. When can you see the margins improve, the cost ratio is coming down. Any color on that would be great. Not exactly, I'm asking for the immediate guidance, but it's18 months into the merger. So we thought we should see something on these two ratios. Thank you.

Question: Suresh Ganapathy - Macquarie Capital - Analyst : Thank you so much.

Question: Pranav Gundlapalle - Sanford C. Bernstein (India) Pvt Ltd - Analyst : Hey, good evening. Thanks for taking the question. The first question is on your loan yields. I mean if you look at the bank's loan yields today, it's meaningfully lower than peers, whether it's the long-term history, where -- even if you improve the retail wastages, the loan yields were much higher. Now, if you look forward, let's say, over the next two to three years, do you think the absolute loan yields will converge with peers? Or do you think only the risk-adjusted yields will converge? Or will the lower risk adjusted yields be the price to pay for scale? So where do you see it progressing

Question: Pranav Gundlapalle - Sanford C. Bernstein (India) Pvt Ltd - Analyst : Sorry. So let's say, you see a convergence in the risk density, there's no reason why we will be at a lower yield compared to peers?

Question: Pranav Gundlapalle - Sanford C. Bernstein (India) Pvt Ltd - Analyst : Understood. Thanks. The second question is just on your trading and MTM income. You just had like three, four quarters, three quarters of low gains from securities, et cetera. Is that a one-off or is that something that we should expect to continue? How do you see that line going forward?

Question: Pranav Gundlapalle - Sanford C. Bernstein (India) Pvt Ltd - Analyst : Understood. So extra fat, there's nothing that's changed fundamentals. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 22, 2025 / 12:30PM, HDBK.NS - Q3 2025 HDFC Bank Ltd Earnings Call

Question: Pranav Gundlapalle - Sanford C. Bernstein (India) Pvt Ltd - Analyst : Thanks. These are my two questions. Thank you.

Question: Rikin Shah - IIFL - Analyst : Good evening and thanks for the opportunity. The first question is on the employee expense and more specifically--

Question: Rikin Shah - IIFL - Analyst : Is this better?

Question: Rikin Shah - IIFL - Analyst : Yeah. So the first question is on the employee head count. So after dipping in 2Q, the employee head count has again gone back to 2,10,000. And we've seen that some of the peers have been trying to stabilize the head count and letting the natural attrition happen. So how should we think about the employee head count going ahead. That's question number one. And question number two, Sashi did allude to his earlier guidance that this year we should be growing slower than system next year in line and FY27 faster. But in that context, while we are gaining deposit market share at around 16%, that is still inherent macro restrictions and within that construct, the deposit growth can't be significantly higher. So how confident do you feel about growing in line with the system for next year. Can that, does that guidance still hold?

Question: Rikin Shah - IIFL - Analyst : Got it. Thank you.

Question: Nitin Aggarwal - Motilal Oswal - Analyst : Yeah, hi. Good evening Sashi and Srini. Thanks for taking my questions. I have two questions. One is like you alluded to the difficult macro conditions in your opening remarks, but HDFC Bank definitely continues to navigate well through this environment as overall slippage rate remains better versus peers. So how are you looking at the credit environment in respect to unsecured loans and the commercial banking business? Because these are the two segments that we have been still growing and given the vulnerability that you see, how like confident you are to maintain this slippages run rate and the credit cost overall?

Question: Nitin Aggarwal - Motilal Oswal - Analyst : Right. And we really appreciate that. And second question is just a data keeping one on a mix of floating and fixed rate loans. Like how much is repo? How much is NCLR if you can just share that color?

Question: Nitin Aggarwal - Motilal Oswal - Analyst : Right, Srini. Thanks so much. I wish you all the best.

Question: Ravi Purohin - SiMPL - Analyst : Thanks for taking my question. I have two questions. One is the NPEs that we got in from the HDFC wholesale book would have been classified as NPA. They were restructured accounts earlier, and they would have been classified. Now that they would have spent 12 months since then. Do we see a significant reversal of provisions of those that wholesale book in the current provisioning set? And second question is on the wholesale deposits that came in to HDFC Limited book. How many, so we reported 16% growth in our total deposits. But ex of, let's say, would we have let go of the wholesale deposits from HDFC Limited or we would have continued. If you could just give some color ex of that or adjusted for that, what would have been actually deposit growth that we have actually delivered. Those are the two questions. Thank you.

Question: Pranav Gundlapalle - Sanford C. Bernstein (India) Pvt Ltd - Analyst : Okay. Thank you. All the best.

Question: Param Subramanian - Nomura - Analyst : Yeah, hi. Thanks for taking my question. Firstly, going back to priority sector. So last year, we had a shortfall in both SMS and data sections and the one-third requirement from HDFC Limited book. So both of those PSL compliance will be completed by fourth quarter? Is that the way to look at it? And what proportion would roughly be RIDF within that? Yes.

Question: Param Subramanian - Nomura - Analyst : Okay. Got it, Srini. So a percentage point shortfall in both SMF and weakersectors. That's probably that we are currently on the merged book? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 22, 2025 / 12:30PM, HDBK.NS - Q3 2025 HDFC Bank Ltd Earnings Call

Question: Param Subramanian - Nomura - Analyst : Okay, thanks. That's helpful. Secondly, on PCR. How are we looking at PCR, say, relative to our peer group? Because if you look at it at 16%, we are lower than most of the big private banks even compared to where RBI takes the 16% level at 77%. So how are we looking at this going head?

Question: Param Subramanian - Nomura - Analyst : Okay. Thank you so much, Srini.

Question: Pranav Gundlapalle - Sanford C. Bernstein (India) Pvt Ltd - Analyst : Sir, just one question. On your costs, should we expect a broadly similar cost growth for next year because, I mean you've largely done with your branch expansion employees are not growing too much. So should we expect the cost level to be pressed even going ahead?

Question: Pranav Gundlapalle - Sanford C. Bernstein (India) Pvt Ltd - Analyst : Thank you.

Question: Abhishek Murarka - HSBC - Analyst : Am I audible? Sorry about that. Good evening. Thanks for taking my question. Good evening, Srini. So my question is on this emerging corporate group on last four to five quarters, the loan book has been very, very stable, not growing much. Is it that you still see risk there? Is it a function of profitability or why or when do we see some growth coming out of that? But it's some, if you can share some qualitative commentary on that. That would be useful.

Question: Abhishek Murarka - HSBC - Analyst : Okay. So it's more a function of pricing rather than slippage or asset quality or risk?

Question: Abhishek Murarka - HSBC - Analyst : Sure, Sashi, I really appreciate that and actually pretty commendable job there. Just one data keeping question. For the CRP book, what would be the blended field?

Question: Abhishek Murarka - HSBC - Analyst : Would it be higher lower than blended book yield, just a qualitative indication that will also help?

Question: Abhishek Murarka - HSBC - Analyst : Okay. No worries. Thank you so much and all the best. Thank you.

Question: Prakhar Sharma - Jeffries India - Analyst : Thank you and congratulations on managing good results in a tough environment. I had just a few questions on the agri part and you requested to, probably even if you want to give a monosyllable answer that will work. So, first part is, in this quarter, what sort of interest income reversal could have been there? So, has there been a few basis point impact on margins because of the seasonality.

Question: Prakhar Sharma - Jeffries India - Analyst : Got it. And you have, in this quarter versus, I think, even the first quarter, there is a reasonable increase in the agri slippages. So is this also a seasonal pattern that 3Q agri slippages tend to be higher than the 1Q slippages? Or is there a deterioration in the environment? And is it linked to micro finance?

Question: Prakhar Sharma - Jeffries India - Analyst : Awesome. And why do you keep a lower coverage on the agri loans? Because, I thought this is unsecured or difficult market. Is it secured in that sense?

Question: Prakhar Sharma - Jeffries India - Analyst : Is that what you're trying to say? The agri is lower than the rest of the book?

Question: Prakhar Sharma - Jeffries India - Analyst : Got it. And last part is the agri slippages, as you report and the agri loans that you report, are they like-to-like or they are different cuts? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 22, 2025 / 12:30PM, HDBK.NS - Q3 2025 HDFC Bank Ltd Earnings Call

Question: Prakhar Sharma - Jeffries India - Analyst : Okay. Perfect. Thank you so much. Good luck.

Question: Rahul Jain - Goldman Sachs - Analyst : Good evening, everyone. I just had two, three questions. So first is, you've got this business banking portfolio, which is INR3.5-odd. Is it possible to get some more color on this book, what proportion would be to the individuals, what provision would be unsecured or secured in this portfolio?

Question: Rahul Jain - Goldman Sachs - Analyst : Yeah.

Question: Rahul Jain - Goldman Sachs - Analyst : And that's used for the business purposes.

Question: Rahul Jain - Goldman Sachs - Analyst : Self employed. Okay. Fair enough. How much would that be, Sashi? Have you given that number out?

Question: Rahul Jain - Goldman Sachs - Analyst : Fair enough. Alright. Two more questions, real quick. Okay. Got it. Thanks, Sashi. The second was around on, appreciate the feedback on the resoinse you gave, Srini, about the choice of relationship that the business leaders are deciding. But at the same time, this is adding up to the cost of funds. So if you are losing disproportion there, are we able to pass on to the borrowers in the same magnitude. Are we able to protect our spreads for the change of mix that is happening at the deposit level? Because is not specific to HDFC Bank, this is a system-wide phenomena. But this ratio has been continuously under pressure, may not or may take time to bottom out till such time, whatever incremental lending are we doing, are we able to pass on that incremental cost to those borrowers on

Question: Rahul Jain - Goldman Sachs - Analyst : How do we protect the margins on a go-forward basis? How would the margins trend? Of course, I understand the repricing of the HDFC limited borrowing are taking place. But just keeping that aside, what is the drift of spreads or the margins in a declining cost environment from these levels?

Question: Rahul Jain - Goldman Sachs - Analyst : Very helpful. Thank you so much. Just one more question. When you look at the employee headcount that went up for sequentially branches on a Y-o-Y basis, as we said, over 1,000 credit card market share seems to be inching higher. So at what stage, so it seems the bank is getting ready to tap into the growth opportunities and is down to 98. At what stage, Sashi, Srini, would you start to accelerate the federal you'll see that refine is now well within the range that you wanted it to. But sequentially, the growth can start now coming through at what stage can we start the bank to get into the growth path more on a sequential basis,

Question: Rahul Jain - Goldman Sachs - Analyst : Great. Thanks, Sashi. Thank, Srini. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 22, 2025 / 12:30PM, HDBK.NS - Q3 2025 HDFC Bank Ltd Earnings Call