Housing Development Finance Corporation Ltd Q4 FY22 Earnings Conference Call Insights

Key highlights from Housing Development Finance Corporation Ltd (HDFC) Q4 FY22 Earnings Concall

Q&A Highlights:

• Suresh Ganapathy from Macquarie asked that ahead of merger, if the bank would like to grow the non-individual book now because it’s shown some traction in the last couple of quarters. Keki Mistry CEO said the bank recognizes that to do retail individual housing loans, and also need to do construction finance loans. So the activity of giving construction finance loans will continue even in the banking structure.

• Suresh Ganapathy from Macquarie also asked about the moral of employees ahead of the merger. Keki Mistry CEO said the HDFC expect the motivation to continue in the current year. So all of HDFC’s employees will be fitted into the bank, will have a major role to play in the bank and the bank wants to drive the mortgage business going forward. So the morale is high.

• Shubhranshu Mishra of Systematix Group asked about the incremental yield on home loans, LAP, LRD and construction finance. Keki Mistry CEO answered that the split of loans is individual loans 79% of total loans, construction finance is 9%, lease rental discounting loans is 7% and corporate loans 5%. On incremental figures, for full year, 88% of loans were for individuals and 12% were for non-individuals.

• Adarsh Parasrampuria with CLSA asked about the driver of momentum on NII. Keki Mistry CEO replied that NII has continued to remain strong. A slight reduction was seen in 3Q, due to higher level of liquidity HDFC was carrying. So because the level of liquidity has gone lower, the NIM has consequently gone higher.

• Shweta Daptardar from Elara Capital queried what percentage of HDFC borrowings are linked to external benchmark rates whether it’s REPO or LIBOR or treasury bills.  Keki Mistry CEO replied that HDFC match its assets and liabilities in a manner in which the liabilities are linked to certain external benchmarks. There are different external benchmarks that are used. This is part of the treasury operations.

• Gurpreet Arora from Aviva Life India queried about the composition of liabilities for the current year. Keki Mistry CEO said that the source of liabilities will keep changing depending on what is the best at that point in time. Looking at the current level of interest rate, on will end up borrowing medium to longer term and then sourcing it back to an appropriate benchmark.

• Kunal Thanvi of Banyan Tree Advisors asked about the loan mix prior to merger.               Keki Mistry CEO replied that corporate book would also continue because the bank also does corporate loans. But it’s not a very large part, it’s just 5% of the total lending, but that would continue because the bank does corporate loans in any case.

• Abhijit Tibrewal with Motilal Oswal asked if the incremental lending that HDFC is doing are happening at rates which are significantly better than the rates of non-individual disbursement. Keki Mistry CEO said that interest rates in the economy by and large have been increasing. As interest rates go up, naturally the lending rate will also go higher. But the increase is from 3.3% to 3.4%, nothing significant.

• Nischint Chawathe from Kotak Securities asked if the liquidity has come down which was higher last quarter which caused pressure on margins. Keki Mistry CEO said that it has come down. Last quarter the excess liquidity was INR55,000 crores and this quarter the avg. is INR46,000 crores.

• Aditya Jain from Citigroup asked that if there is scope for reduction in the average liquidity of INR46,000 crores this quarter. Keki Mistry CEO replied that it’s still higher than what’s required by regulation. HDFC added that technically there is scope to bring it down little further.