HDFC Bank Limited Q1 FY24 Earnings Conference Call Insights

Key highlights from HDFC Bank Limited (HDFCBANK) Q1 FY24 Earnings Concall

Q&A Highlights:

• [00:19:04] Suresh Ganapathy at Macquarie asked if the company lost a large amount of market share in deposit mobilization this quarter, compared to the overall banking system. Srinivasan V CFO replied that 1Q is typically a slow quarter for banking, with single-digit contribution to overall growth. However, the company is confident that the building blocks for growth are in place and will be realized in the coming quarters.

• [00:23:10] Suresh Ganapathy of Macquarie queried if the company is confident that it can sustain its current levels of ROE on a merged basis when it delivers 2Q24 results. Srinivasan V CFO said the company is confident of delivering ROE in the range of 1.9% to 2.1% for the full year, with some quarter-to-quarter fluctuations due to timing of certain factors.

• [00:24:20] Mahrukh Adajania from Nuvama queried if the company expects standalone opex to grow at 7-8% sequentially in the coming quarters, as it adds more branches. Srinivasan V CFO answered that the company is investing in building branches and distribution capabilities, and as these investments mature, the opex growth will moderate.

• [00:27:01] Mahrukh Adajania with Nuvama asked if HDFCBANK expects loan growth to accelerate in the coming quarters, as it works towards doubling the book by FY24. Srinivasan V CFO clarified that the bank expects loan growth to be in the range of 17-18% for the full year, with some variation QtoQ. However, the company will be selective about the loans it participates in and will only lend at the right price.

• [00:30:25] Kunal Shah at Citi enquired for an estimate of the average quarterly retail deposit accretion over the next 6-8 quarters, given the company’s investment in franchise and capacity building. Srinivasan V CFO said that the company has built the capacity to add INR1 trillion of retail deposits quarterly, but the current quarter is seasonally low. HDFCBANK is confident that it will be able to achieve its target in the coming quarters.

• [00:32:00] Kunal Shah at Citi asked if the company’s target of 17-18% loan growth is sustainable, including IBPC. Srinivasan V CFO answered that IBPC is a transient book that is managed QtoQ. The company’s target of 17-18% loan growth is on a total basis, excluding IBPC.

• [00:32:58] Kunal Shah from Citi queried when the IBPC book is expected to moderate and what the normalized number should be. Srinivasan V CFO answered that the company does not have a target for IBPC, as it is an opportunistic decision based on market demand and priority sector requirements.

• [00:39:13] Rahul Jain from Goldman Sachs asked how long the trend of declining credit costs will continue and whether there is more room for credit costs to fall. Srinivasan V CFO said the company expects the credit cycle to revert to mean in 18 to 24 months, but it will still be profitable by then due to the base effect and maturity cycle.

• [00:43:20] Rahul Jain from Goldman Sachs asked if slowdown in PL growth and the pickup in home loan growth is due to the company’s calibrated risk stance or if it is just a quarterly phenomenon. Srinivasan V CFO said first quarter loan growth is typically slow, but there is good underlying demand. Mortgage logins are up 20% post-merger, suggesting that loan growth will pick up in the coming quarters.

• [00:44:33] Rahul Jain from Goldman Sachs queried if the bank need to buy more RIDF in the current quarter, or is HDFCBANK self-sufficient for the full year. Srinivasan V CFO said the bank is not willing to disclose how much RIDF it will buy in the short term, but it is always looking for opportunities to buy RIDF, IBPC, and securitization certificates to meet its PSL requirements.

• [00:47:31] Abhishek at HSBC queried about the status of the wholesale book of INR1.1 lakh crores, and is the bank looking to build it up or run it down further. Srinivasan V CFO replied that the bank’s wholesale book has declined by 18% in the past 12 months. The bank is evaluating how to grow this book, but it is not yet clear when or how this will happen.

• [00:56:47]Manish Shukla of Axis Capital asked how and when the bank plans to reduce its loan-to-deposit ratio to below 100%, which is currently at 109%. Srinivasan V CFO answered that the bank’s credit-to-deposit ratio is currently 109%, but the bank expects it to fall to 80% over the next 3-4 years as maturing debt is replaced with deposits.