HDFC Bank Limited Q4 FY22 Earnings Conference Call Summary

Key highlights from HDFC Bank Limited (HDFCBANK) Q4 FY22 Earnings Concall

Q&A Highlights:

• Mahrukh Adajania from Edelweiss asked about the yield on commercial banking loan. Srinivasan Vaidyanathan CFO replied that the yield on commercial banking will be approximately about 8% or so. And 9%-10% assortment offers the agri yield.

• Mahrukh Adajania from Edelweiss also asked about the accounting policy associated with RSUs in terms of upfront cost and amortization. Srinivasan Vaidyanathan CFO answered that for RSUs, the bank will decide what it needs to do whether it is from a shareholder point of view, it mitigates the dilution compared to ESOPs.

• Rahul Jain with Goldman Sachs enquired about the reason for liquidity coverage ratio dropping in 4Q22. Srinivasan Vaidyanathan CFO replied that the deposit growth from an amount point of view exceeded the loan in the quarter. But from an LCR value point of view, it will come down because there are certain things that need to have liquidity and run down assumptions etc.

• Rahul Jain with Goldman Sachs asked about various segments in retail showing momentum. Srinivasan Vaidyanathan CFO answered that it was because in 4Q22 retail grew by about 5% sequentially and the payments business (card spending) grew about 28% or so, while the cards business on the loan side was about 14%. The growth in 4Q on vehicles was better than the last quarter.

• Rahul Jain with Goldman Sachs queried about fee income picking up 12% YoY. Srinivasan Vaidyanathan CFO replied that the 12% growth was partly aided by the payment doing a little better. However, the bank added that payment still is not at the business-as-usual type of growth seen in the past.

• Aditya Jain from Citigroup asked if the historical location of branches vs. current location gives same kind of branch maturity model. Srinivasan Vaidyanathan CFO replied that it gives the same kind of maturity model. And the bank drives the branches to those best-in-class, and that’s part of the current model the bank has.

• Manish Shukla from Axis Capital queried that in terms of the overall loan book, how much is floating rate and, within that, how much is linked to repo.  Srinivasan Vaidyanathan CFO said that 46% is fixed and 54% is floating. Repo standalone was 29-30% and T-bill was about 10%.

• Sagar Doshi asked about the treasury income reducing QonQ and YonY and the outlook of it. Srinivasan Vaidyanathan CFO replied that in 4Q21 it was about INR655 crores; 3Q22 was little more than INR1,000 crores; and 4Q22 was close to nothing or negative INR40 crores. All these were opportunistic gains. Going forward it will be minimalistic and also said one should not expect the treasury trading income to sustain at any big levels for the time being.

• Adarsh Parasrampuria of CLSA asked about the cost to income spike expected in the near term. Srinivasan Vaidyanathan CFO replied that it expects cost to income to go up as the bank has more retail lending and liability activity coming in. However in the medium term (3-5) year’s time, the bank expects it to come down back to mid 30s.

• Saurabh from JPMorgan asked that when does the bank expects its market share on credit card to come back the earlier 30% levels. Srinivasan Vaidyanathan CFO said that as a target, the bank doesn’t have a market share specifically with regards to spend. Therefore, the company added it’s difficult to tell how much it will go.

• Saurabh from JPMorgan also asked about the bank’s revolve rates now vs. pre-pandemic. Srinivasan Vaidyanathan CFO replied that the bank is still at about 70-80% of the pre-COVID  levels on revolve rate. From 3Q22 to 4Q22, there was marginal improvement of around 1 percentage point.

• Saurabh from JPMorgan asked about when PayZapp would be launched. Srinivasan Vaidyanathan CFO answered that it’s probably a quarter away. The bank added that it has several [clients] on that from a close user group to making to selective customers and then getting to broad base.