HDFC Bank Limited Q3 FY24 Earnings Conference Call Insights

Key highlights from HDFC Bank Limited (HDFCBANK) Q3 FY24 Earnings Concall

• Healthy Domestic Economic Activity
  • Domestic activity driven by robust consumer spending, capital expenditure, manufacturing, and services sector.
  • GST collections grew 13% year-over-year.
  • Manufacturing and services PMI in expansionary zone.
  • Consumer demand improved due to festive spending.
  • GDP growth estimate 7% for FY 2024 and 6.5% for FY 2025.
• Deposit Growth
  • Total deposits at INR 22.1 trillion, 84% retail deposits.
  • Retail deposits grew 2.9% quarter-over-quarter.
  • Current account deposits grew 3.2% sequentially.
  • Savings deposits grew 1.7% sequentially.
  • CASA ratio at 37.7%.
  • Term deposits grew 1.7% during the quarter
• Asset Quality
  • GNPA ratio at 1.26% vs 1.34% last quarter.
  • Core GNPA ratio at 1.11%, while net NPA ratio at 0.31% vs 0.35% last quarter.
  • Quarterly slippage ratio at 26 bps and recoveries and upgrades at INR 45 billion.
  • Provision coverage ratio at 75%.
  • HDBFS Gross stage 3 loans down to 2.25% from 3.73% last year.
  • Stage 3 provision coverage increased to 68% for HDBFS.
  • HDBFS’s quarterly profit after tax up to INR 6.4 billion.
• Subsidiaries Growth
  • HDFC Life profit grew 16% year-over-year.
  • HDFC AMC quarterly AUM up 24% to INR 5.5 trillion.
  • HDFC AMC profit grew 33% year-over-year.
  • HDFC ERGO profit grew 6% year-over-year.
• Profitability
  • Quarterly profit before tax up 19.8%.
  • Quarterly net profit up 33.5% year-over-year.
  • Return on assets about 2% and Return on equity 15.8%.
  • Earnings per share INR 21.6 standalone, INR 22.7 consolidated.
• Deposit Growth Constraints
  • System liquidity turned negative for the first time in 3 years.
  • Retail deposits grew 2.9% but non-retail declined 3.3%.
  • Bank chose not to participate in higher deposit pricing war.
  • Lack of liquidity and high sensitivity to rates constrained growth.
• Liquidity and CD Ratio Management
  • Funded INR1.15 trillion loans through lower investments and cash.
  • Loan-to-deposit ratio increased to over 110%.
  • Current and savings account growth reasonably healthy.
  • Need more customer acquisitions to drive deposit growth.
  • Target LCR between 110-120%, currently at 110%.
  • LDR elevated due to merger, target to reduce over time.
• Margin Expansion Plans
  • Enhance retail loan mix which has higher margins.
  • Accelerate growth in personal loans and mortgages.
  • Improve CASA ratio from current 37.7% to historical 42-43%.
  • Replace some borrowings with retail deposits over time.
• Cost Efficiency Roadmap
  • Target to reduce cost-to-income ratio from 40% to mid-30s.
  • Drive efficiency through technology and digital initiatives.
  • Grow revenue faster than costs to improve ratio.
  • Maintaining transparency on ask rates for next quarter.
• Scaling Distribution Network
  • Added 290 branches year-to-date, will likely fall short of 1,500 target.
  • Have over 500 branches in pipeline to end year with 800-1,000.
  • Long term goal remains 13,000-14,000 branches for coverage.