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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.
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