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.