HDFCBANKNSEQ4 FY2022April 25, 2022

HDFC Bank Limited

9,699words
63turns
8analyst exchanges
1executives
Management on call
Srinivasan Vaidyanathan
CHIEF FINANCIAL OFFICER – HDFC BANK LIMITED
Key numbers — 40 extracted
50 basis point
C. We also saw the introduction of SDF and the RBI reverting to a pre-pandemic policy corridor of 50 basis points with a lower bound SDF and the upper bound MSF. We are confident that the policy measures are su
234 million
programs under various digital umbrellas over the next few quarters. In Q4 we received a total of 234 million visits on our website averaging 29 million unique customers per month with a year-on-year growth
29 million
r the next few quarters. In Q4 we received a total of 234 million visits on our website averaging 29 million unique customers per month with a year-on-year growth of around 8%. As per the analysis we had 35
8%
ur website averaging 29 million unique customers per month with a year-on-year growth of around 8%. As per the analysis we had 35% to 75% more visits on our website than our public or private sect
35%
on unique customers per month with a year-on-year growth of around 8%. As per the analysis we had 35% to 75% more visits on our website than our public or private sector peers. Close to 57% of the vi
75%
ue customers per month with a year-on-year growth of around 8%. As per the analysis we had 35% to 75% more visits on our website than our public or private sector peers. Close to 57% of the visits we
57%
is we had 35% to 75% more visits on our website than our public or private sector peers. Close to 57% of the visits were through mobile device indicating the mobile simplicity of the footfalls. The
₹ 13,68,821 Crore
egments driven through relationship management and enhanced digital offering. Total advances were ₹ 13,68,821 Crores, which grew by 8.6% sequentially and 20.8% over prior year. This is an addition of approximately
8.6%
p management and enhanced digital offering. Total advances were ₹ 13,68,821 Crores, which grew by 8.6% sequentially and 20.8% over prior year. This is an addition of approximately ₹ 1,08,000 Crores
20.8%
ced digital offering. Total advances were ₹ 13,68,821 Crores, which grew by 8.6% sequentially and 20.8% over prior year. This is an addition of approximately ₹ 1,08,000 Crores during the quarter and ₹
₹ 1,08,000 Crore
, which grew by 8.6% sequentially and 20.8% over prior year. This is an addition of approximately ₹ 1,08,000 Crores during the quarter and ₹ 2,36,000 Crores since prior year. Commercial and rural banking business
₹ 2,36,000 Crore
8% over prior year. This is an addition of approximately ₹ 1,08,000 Crores during the quarter and ₹ 2,36,000 Crores since prior year. Commercial and rural banking businesses grew 10% over the prior quarter and 30
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Guidance — 14 items
Srinivasan V
opening
“With stepped up investments in technology and retail segment continuing to pick up we anticipate the spend levels to increase driven by volumes, sales and promotional activities and discretionary spends.”
Srinivasan V
qa
“Yield on commercial banking will be approximately about 8% or so and you asked about what the agri could be, 9%, 10% or so is the agri yield.”
Rahul Jain
qa
“Two or three questions Srini, first of all on the liquidity coverage ratio dropped quite a bit in this quarter seems like you utilize the excess liquidity that you are sitting on how much more scope is there to rationalize this and if I were to tie it in with the deposit mobilization that you also intend to do in light of the merger what would be the strategy out there, so that is the first question from me?”
Srinivasan V
qa
“Over a longer period of time that is what we should expect that there is enormous opportunity, demand for outstripping supply and credit penetration in the country is low and we are there capturing that.”
Aditya Jain
qa
“I was asking depositor behavior in a rising rate cycle, so existing saving deposits and term deposits would you expect a move of saving deposits to term deposits and what sort of a quantum that would be?”
Manish Shukla
qa
“No, the only reason I am asking repo separately is because the repo is dependent on regulatory action, the T-bill will be market driven, which is why I am more interested in repo separately.”
Srinivasan V
qa
“There were a modest 350 odd branches in FY2021, this year we have taken it to more than 700 and we have a plan to sustain significant amount of branch growth 150 branches are in the pipeline to open anytime soon and so we are going to do that to mobilize the relationship.”
Srinivasan V
qa
“Adarsh Parasrampuria: Referred to the point that you mentioned that cost-to-income we are spending that will go up in preparation for some of this, what is the kind of spike you would expect in the near- term?”
Srinivasan V
qa
“Whether it will go cost-to-income, Adarsh as I told you will go up as we have more retail activity coming, retail lending activity coming, retail liability activity coming in, you will see the cost-to-income go up, but this is we normally as we said we do not give an outlook or a projection of what we will do, but cost-to-income is something that we have consistently said over a period of time, that is while it will go up now.”
Srinivasan V
qa
“We do think in the medium-term in three, five years time it will come down back to mid thirties and that is purely driven through scale and driven through various digital initiatives that we are running, so while it will go up it will come back down due to the scale operating on that.”
Risks & concerns — 7 flagged
Further looking through another loans our NII to credit RWA credit risk weighted assets has improved over 3 Crores to COVID levels by approximately 20 basis points and is currently around 7% representing our optimized pricing for higher rated segment volumes.
— Srinivasan V
Banks retail franchise delivered well on fees and commission income commensurate with the healthy assets growth registered during the quarter fees on payment products remain subdued due to lower risk related fees, over limit fees, late payment fees, etc., reflective of our cautious approach to card based lending as well as customer preferences.
— Srinivasan V
However card sales and interchange have come out robustly in all beside an impact of about 4% on fees.
— Srinivasan V
The total annualized credit cost for the quarter was at 96 basis points which includes an impact of contingent provision of approximately 30 basis points, prior year was at 1.64% and prior quarter was at 0.94%.
— Srinivasan V
This includes an impact of 1.27% on account of new RBI guidelines issued in November 2021.
— Srinivasan V
Henceforth the focus will continue to be on in minus credit cost is that the right way to look at it because if the macro remains volatile then the risk off could continue longer, correct?
— Mahrukh Adajania
You do not take any risk, you will earn for that, but still, you optimize for the return on asset, return on equity at the end.
— Srinivasan V
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Q&A — 8 exchanges
Q
I had two questions, my first question is on margin, in the second quarter or so in the earnings call we had outlined that there could be margin improvements with a lag once retail loans pickup and that could happen over six months, three to four quarters maybe and now in the fourth quarter margins have declined further, so is the margin expansion on track, how do we view margins from here on, that is my first question and also connected to margin if you could just give a rough indication of the commercial banking yield, ex agriculture?
Srinivasan V
I think I mentioned it a few minutes ago when I was presenting our asset mix has shifted, it shifted significantly from unsecured to higher rated segments and it has come all through the pandemic we saw that the retail was going down in the rate of growth and it was picking up in wholesale and in commercial rural. If you go back to pre-pandemic, go back to three years 2019 if you look at it the Basel disclosures that we do I am doing that Basel because we show that assets by type wholesale was 45, retail was close to 55. Now things have reversed now retail is 45 and the whole sale is 55, in fa
Q
Two or three questions Srini, first of all on the liquidity coverage ratio dropped quite a bit in this quarter seems like you utilize the excess liquidity that you are sitting on how much more scope is there to rationalize this and if I were to tie it in with the deposit mobilization that you also intend to do in light of the merger what would be the strategy out there, so that is the first question from me?
Srinivasan V
Yes, we are continuously optimized on the liquidity available as you know and the context for this quarter if you see we had loans growing, in this quarter loans growing 108000 Crores in one quarter we had that kind of a growth ₹ 1,08,000 Crores and in this quarter the deposits also grew ₹ 1,13,000 Crores so we did consume, the deposit growth from an amount point of view exceeds the loan from how we have deployed, but from an LCR value point of view it will come down because there are certain things that you will have to have the liquidity assumptions, the rundown assumptions and so on and so
Q
On the branch vintage slide which you have provided some time back and just recently on the links between the historical deposit productivity and branch vintage in the chart, could it be different now versus the historical experience given that the earliest branches would have been in the larger cities, subsequent ones would have gone into smaller locations aggressively, so the multiplier effects that you are seeing would it be lower and your sense on how much would that be with the historical experience?
Srinivasan V
If I understand your question, historical location of the branches versus the current location of the branches, does it give the same kind of a branch maturity model, branch productivity model that is the question. I assume that is what you are asking. The answer is yes, in the current model this is how we test and this is how we establish what is the best in class and we drive the branches to those best in class and that is part of the current model that we have. I was asking depositor behavior in a rising rate cycle, so existing saving deposits and term deposits would you expect a move of sa
Q
Could you give us some color about the wholesale growth during the quarter in terms of PSU versus private mix or short-term versus long-term lending, the incremental lending done during the March quarter?
Srinivasan V
It is all of the above. For example, if you see the sectors, telecom sectors are there, there was a loan demand in the quarter, PSUs were there where it is, there are some manufacturing, we saw, picking up, but not a big thing and some NBFCs also came in, so these three, four things that came in to give. From a utilization, see what has happened is, we had a tremendous amount of prepayment happening at the beginning of the financial year corporates were prepaying, the prepayment in this financial year was to the order of about 60,000, 65,000 Crores or so prepayment happened, pay downs happened
Q
My question is regarding the treasury income. As I could see quarter-on-quarter and year- on-year, the treasury segment income has reduced, I understand that it might be due to the bond yield, etc., but could you us give any view on that, that how it would go going ahead?
Srinivasan V
See you are talking about the trading income, right? Yes. Last year same quarter was about ₹ 655 Crores, last quarter was little more than ₹ 1,000 Crores and this quarter was close to nothing or actually negative 40 Crores so that is what you are talking about, I guess. As I alluded to several minutes ago, those were more opportunistic gains that we harvested from whatever was possible, the timing and so on whatever we could we harvested, and in this quarter when the rates are rising, we have not harvested and the opportunities to harvest is also less in a rising scenario. So going forward how
Q
Couple of good points you are raising but it is very important we address it, so you can think about it. It is not about preparing or merger or anything but what is our normal strategy that is a good thing to keep a note of. We do want to ramp up branches, we do want to bring in new liability relationships, we do want to give the branch productivity from a deposit gathering point of view to be the best in class and as I mentioned to you 250 Crores per branch is the best in class and we are trying to deepen even further from a productivity point of view on that, so we will keep going on that, t
Srinivasan V
Whether it will go cost-to-income, Adarsh as I told you will go up as we have more retail activity coming, retail lending activity coming, retail liability activity coming in, you will see the cost-to-income go up, but this is we normally as we said we do not give an outlook or a projection of what we will do, but cost-to-income is something that we have consistently said over a period of time, that is while it will go up now. We do think in the medium-term in three, five years time it will come down back to mid thirties and that is purely driven through scale and driven through various digita
Q
My question is on credit card, so one is when do you expect your market share to come back to your earlier 30% levels. It has been seven months since the ban has gone so what is your outlook on that and second is how much is your revolve rate now versus pre-pandemic levels?
Srinivasan V
You are talking about the market share means you are talking about the change in market share. I do want to tell you one thing that as a target we do not have a market share because market share does not mean anything. Particularly spend market share does not do anything from a profitability and return point of view, so that is one thing because if you are looking at it, I would urge you to look at the retail spends versus commercial card spend. If bifurcate and look at retail, commercial. We like retail, we are okay with commercial, but it is a retail why the propensity for the customer to do
Q
Thank you. Thank you all for joining us today, we appreciate your time and we had a good conversation. If anything, more that you have you can connect with Ajit Shetty in Investor Relations; we shall be happy to engage with you. Thank you.
Management
Speaking time
Srinivasan V
26
Moderator
10
Rahul Jain
6
Manish Shukla
6
Mahrukh Adajania
5
Aditya Jain
4
Sagar Doshi
3
Saurabh
3
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Opening remarks
Srinivasan V
Okay. Thank you Rutuja. Good evening and a warm welcome to all the participants. Let us start by the Covid current state without the mention the start. The saga if it permits we can say it is hopefully behind us at least for now. We cannot forget the beats of the people who dedicated their lives in the service of the banks during the year and thousands of others who single-mindedly were in the service of the customers through all this. Same time last year we were in unimaginable crisis, most if not all of the restrictions are behind. Thanks to our team and equally important thanks to you all for being with us through this to get us here. Let us start with providing the context on the environmental policies during the quarter, which are manifesting signs of speedy recovery. We will jump over these basic details of GST collections, PMI, etc., etc., that shows full term growth. Around the mid part of the recent quarter, geopolitical tensions raised across the world, which have given rise
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