HDFC Bank Limited Q3 FY23 Earnings Conference Call Insights

Key highlights from HDFC Bank Limited (HDFCBANK) Q3 FY23 Earnings Concall

Management Update:

• [00:06:00] HDFCBANK expects loan demands from NBFC, telecom, PSUs, retail and infrastructure sectors to sustain going forward.

Q&A Highlights:

• [00:18:59] Kunal Shah from ICICI Securities asked about the employee cost, if there was any extraordinary items, where the sequential and YoY growth was higher. Srinivasan V CFO replied that 3Q is generally seasonal and in people cost the additional item was a tranche of ESOP and RSUs, which is about INR250-300 crores.

• [00:20:43] Kunal Shah of ICICI Securities also asked what the INR 800 crore other interest income refer to, which is driving the NII. Srinivasan V CFO answered that it could be income that comes from non-lending; income from RIDF deposits. And the second one is interest on tax refunds.

• [00:22:00] Suresh Ganapathy from Macquarie Capital asked about the deposit accretion target of INR1 trillion, if it’s on track. Srinivasan V CFO said the goal was to take the INR600 billion to INR1 trillion. In 3Q23, retail came in close to INR67,000 crores. HDFC is on track to grow it sequentially up.

• [00:26:59] Suresh Ganapathy of Macquarie Capital enquired about the status on the statutory relaxations sought from RBI by HDFC. Srinivasan V CFO said the bank hasn’t heard from RBI on it yet and there is not particular timeframe. The merger process is progressing and NCLT final hearing is at this month end. So in the interim period it’s expected.

• [00:30:49] Mahrukh Adajania with Nuvama asked about HDFC’s sector growth assumption for FY24 considering the growth forecast being downgraded for India. Srinivasan V CFO replied that the bank is seeing good demand for loans. The bank is also seeing good demand in NBFC, PSU, retail and infra segments, with entry into new product lines in future.

• [00:32:50] Saurabh Kumar from JPMorgan queried about the revolve rate on the card business. Srinivasan V CFO replied that the revolve rate is still at 65-70% of pre-COVID levels and has not seen any pickup. In 3Q23, it was down by a percentage point or so.

• [00:36:48] Rahul from Goldman Sachs asked if the banks should touch on the savings rate to push up the deposit mobilization. Srinivasan V CFO replied that it has remained in the small range for long. The increase is not something that has generally happened.

• [00:39:04] Rahul from Goldman Sachs enquired about cost; how many more branches the bank will open in 4Q23 and the cost involved. Srinivasan V CFO answered that HDFCBANK has about 600 odd branches in the pipeline. And the costs involved will come in the following quarter and probably flow to following year.

• [00:43:42] Rahul from Goldman Sachs asked about consumer behavior trend going forward. Srinivasan V CFO replied that the company is still seeing a good retail card spend growth of 27%. Also the acquiring business spend is in the 20s and enough liquidity seems to be there with the bank’s customer base. HDFCBANK expects good amount of spend happening going forward.

• [00:46:22] Nitin Aggarwal from Motilal Oswal enquired about the strategy to acquire 1 million cards per month and the timeline. Srinivasan V CFO clarified that the bank didn’t say 1 million per month. The company did about 1.2 million in 3Q23 and 2Q23 was just under 1 million.

• [00:50:04] Kunal Thanvi from Banyan Tree asked about the breakup of employee addition between branch related and others. Srinivasan V CFO said that most of the staff additions will be in front line. 84% or so are in the customer facing role.

• [00:51:41] Kunal Thanvi from Banyan Tree queried about contribution of fee and payments and its outlook. Srinivasan V CFO replied that the payment business was 32% of the total fees in 2Q and 33% in 3Q. The outlook is a function of customer behavior so a definite number cannot be given.