Hdfc Bank Ltd (HDB) Q3 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to HDFC Bank Limited Q3-FI26 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. And now in the conference over to Mr. Srinivasan Vedinathan, Chief Financial Officer, HVFC Thank you. And over to Mr. Vedinathan.

Thank you. Thank you, Nirav. Good evening and a warm welcome to all the participants. At the outset, I know that it's 6.15, 15 minutes behind schedule. We had another meeting. We had to conclude and come. Apologies for that, but we will take as many questions and possible and extend where required. With that, without much ado, we straight go into the opening remarks by our CEO and MD and then we have our DMD Kaizad, any comments we'll take and we'll go straight to Q&A after Sashi, over to you first and then we'll take it from there.

Good evening, friends. Thank you very much for joining in on a Saturday evening. I know it's rather late, but always appreciate your being here on a Saturday evening. I think we've just sort of declared the results, and you probably would have seen the financial numbers. We're reasonably sanguine and happy about the outcome that has happened. It's in line with our expectations. Looking back, I think the credit growth buildup has been extremely encouraging. We set our sights on a very balanced credit across customer segments. The easing rate cycle and the benign credit has provided catalysts for the credit growth. The CRR release enabled credit deployment slightly ahead of our expectations. As regards funding, the funding through deposits, we continue to maintain rate discipline, and that has been extremely key. Core individual retail customer segments were seen to be quite strong. For both current and savings, having focused on granular segments have given us encouraging outcomes, and more of this I'm sure Srini will sort of give the numbers. We did, however, fall short of our strong ambitions, but we are confident that continued focus on our strengths will bring the expected outcomes. On the growth, profitable growth, as mentioned earlier, cost of funds has moved down, reflecting the tailwind effects. CASA growth has been positive. Costs have been under control as productivity improvements have brought in efficiencies. Credit, which has always been our USP, remains best in class, allowing us to deliver stable returns as we pivot to the next stage of growth. Looking ahead, the regulator and government continues to be focused on supporting economic and credit growth. At the same time, optimally managing external factors. During the quarter, availability of liquidity was impacted due to some of these. We saw enhanced activity in open market operations and FX swaps to combat some of these challenges. India has demonstrated stable political conditions and consistent policy regime. This has led to being one of the fastest growing major economies in the world. Growth with subdued inflation management was at the top of the order, and hence we believe and we are very optimistic about outpacing loan growth in the coming year in FI27, as we had sort of mentioned to you all along for the last 18 months. Liquidity and benign credit costs provides us a lot of runway to grow. Overall, liquidity in the country is expected to stabilize post-trade deals. The foundations are in place to build deposits to fund loan growth. We continue to expand our customer base. We are now intensifying customer engagement, primarily and largely focused on granular mobilizations. We are aligning pricing with segmented approach, and we shall see that in the coming quarters as well. There's been a lot of talk on the CD ratio. We did sort of drop our CD ratio to significantly since the merger to March 25. As you know, the kind of indicator is not necessarily on the radar from a regulatory perspective. Having said that, we believe that our glide path to lowering of CD ratio will continue. It's an important focus for sustainable profitability, I completely acknowledge. The cycle, the easing cycle with credit growth focus in the country surely needs our participation. So the speed of CD ratio movement depends on how we are able to provide funding in the system at rational rate. But having said that, we're very confident that whatever we seem to have committed in the last two years, I think by March, I think we should see, and by March 27, 26, and 27, we should sort of achieve all the most of the committed matrices that we have laid out form. I would like to say that under the current scenario we don't think that we shall be constrained by the CD ratio. To reiterate, we're confident that it will be on a downward glide path. I would also like to reiterate that we shall meet the glide path that we had indicated earlier in terms of the growth, our top-line growth, which is in line with the system this financial year and faster than the system in the next financial year. In summary, I have a great appreciation for our customers for partnering with us and we I have the greatest gratitude to all our two hundred thousand staff what pillars making this place work successfully we're confident of the path forward that we have set for ourselves thank you very much and we have all of us here Kaiser Srini and the team here to take on any questions that you may have thank you thank you very much we now begin with the question and answer session.

Anyone who wishes to ask a question may press star and one on their touch on telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from line of Marokadjanya, an analyst, please go ahead.

Hello, hi, so my first question is on the LDR, you did allude to it, but when do you think now you would reach an LDR, say close to 90 or below 90, like any time frame? So that's my first question. And my second question really is on agri-compliance, so two large banks have have been asked by RBI to make provisions on a certain agri portfolio because of non-compliance issues provisions of 12 to 13 billion so as we stand today in terms of your agri portfolio do you think there is full compliance or there could be some issues somewhere given that it's It's a large portfolio, it's spread out across the country. And do you think you would be liable to such provisions in the future?

Okay. Thank you, Mauritka. If I take that, the first thing you touched upon is the LDR from a timing point of view. I think Sashio alluded to that we are committed on the glide path of taking it towards the downward glide path and we continue to be in that. But on a quarter to quarter basis, it is slightly different. And that's because of the seasonality and the opportunity. And you know that in the recent time period, the further opportunity was also provided with the easing cycle and the credit growth focus in the industry as well as the CRR release, which provided that ample opportunity to do that. So, given that, we do expect that over the next one year to two years, we would be getting down further into the levels that we previously been there, the college, the 90s or low 90s and so on. And that's the level of confidence we have and the pillars that are required to drive that are in place to do that, that's one. The second one is in terms of the agree that you asked about where the regulatory kind of impact if any, our regulatory inspection is also complete and whatever according required according to the regulatory requirement, there was about 5 billion or so thereabouts which have been taken in the overall context of our overall context of our book and our results they have been absolved within that and there is no special and we have had certain other things that were there. And so in future, we need to operate in a model that is acceptable with the regulatory so that whatever is that, that is an ongoing process of what we do. Any one time is already subsumed and then it is not there. And as far as the calibration that we need to do on the agree, consequent to those kind of thing, recalibration of our book due to the scale of finance. So that what is indeed an agree and what is outside of the scale of finance, scale of finance is the one that determines how much is required for the farm and how much of that is over and above the farm requirement by the farmer, those evaluations we will take and go through that process to calibrate that, that's in terms of the future impact on that.

But did the 5 billion come this quarter only then?

Yeah, it is already subsumed in December.

In December, okay and what would be the size of the portfolio, any such indication you could give?

Our Agri portfolio is published, you will be able to see the… No, the size of the portfolio on which the provision was taken. No, that's it's not something that's not consequent to this at all because it depends on loan item and what is the scale of finance on each one and so on, but at an aggregate level that's the kind of thing.

Okay, thank you so much.

Thank you.

Next question is from Man of Kunal Shah from Citigroup, please go ahead. yeah so again getting on to the question on LDR and deposit growth in particular so if you want to get the LDRs down and still want to grow loans above the industry average comfortably then we need to see the acceleration in the deposit growth and you said like pillars which are required are very much in place so any any reason maybe for a slightly slower deposit growth this quarter otherwise we will need like almost 500 600 basis points higher than the industry average deposit group now to get the LDRs down and any any rundown

in the bulk deposits which have been there in this quarter and if you can quantify that see let me take this and maybe Srini and Kiza can add into this if required Kunal if you recall we gave a broad range number one is there is no regulatory, what shall I say, benchmark or a requirement to meet a loan deposit ratio. Was it there as a bit of a nudge when the outlook was negative or when the system outlook was a little tight, liquidity was tight in the period when inflation was moving up and rates were moving up and there was a little bit of a concern on the credit quality of the system. There were certain preventive measures that the regulator had said that try and ensure that you bring down the LDR or maintain a certain stability in LDR. That will be at that point in time. Whether there is a number that you need to meet, I don't think there is any compulsion. But in our own interest, we had given a kind of a glide path wherein we had said that we will come to a certain number in FI 25, which we achieved. We said we will try and be in a range of somewhere between 90 to 96 in the year FI 26, which is what we will be, is what we are very confident about. And then maybe by a 527, by the natural growth, and even with the growth in the way we are expecting in terms of faster growth rate, I think we should land somewhere around the 85 to 90 for a 527.

We continue to believe that this is going to be there.

It's not an easy thing, as we have said, of course. But we know what are the strategies we need to do. There were certain tactical measures we could have taken in the third quarter. We chose not to, but that's all right. I mean, these are sometimes learnings we probably may have missed, but we know what are the things to be done to bring about these kind of meeting up like parts that we have committed in the broader sense of a medium to longer term basis. So as regards the kind of deposit growth that is required, I think the pace at which we are growing deposit in line with the top line growth that is more or less matching 11 point plus percentage in this year should probably slightly faster, which is what we normally do in the fourth quarter, like what we have done in the past, should lead us to the kind of range that we have committed to. And we are very confident that once we have a clear-cut, you know, as I said, all things remaining same with whatever we are seeing in the macro, So we should believe that the growth runway opportunities of growth and hence in the deposit requirements, other than certain events that may happen, which you and I would not be able to predict now, we are reasonably confident that we will land. And as Shreeney mentioned, don't look at quarter-to-quarter movements. We are on a, you know, you look at on an annual basis or on a medium to long-term basis, the trends will be in that kind of period. So I think the inflection has started. You know, we had to contain ourselves in FI25 for all the right reasons. I think now we're opening up, the engine is opening up, and you will start to see this kind of consistency in the trajectory that we have laid out for ourselves.

Thank you, Sushu. Sure and anything on bulk deposits rundown, quantification if possible.

More than quantification I mean Kunal that's part of the business there are certain segments that we patronize I think Sashi mentioned about where rate discipline has been the key and to some extent we participate for relationships in certain extent we don't need it we don't But on the whole, if you look at the retail or non-retail, retail, there are individuals in retail, which have been phenomenally growing and growing. There are certain non-individuals in retail, which is branch related, it could be institutions, trust, some examples of some non-individuals, but branch related, where we have had some And there are certain other customer segments which we have seen particularly capital market segments where it has been low, where we have not paid rates as much as what the market has demanded or what the competition is offered. And that is what you see that is reflected in our cost of funds. If you look at our cost of funds is down by about 10 basis points, 11 basis points or so in the quarter. So, we're trying to manage it growth with the profitability and that is what you're seeing, right? So, segment to segment, time to time, it changes, but at least you got a color of how we operated in the recent time period.

So you're right, Kunal, just to supplement what Sweeney is saying, the focus, the good part is retail has grown very steadily and very, and all these are the granular ones.

Very happy with that. if the non retail tactically we did not sort of offer the kind of market rates that were there and I we said it's all right because we did sort of know for the kind of growth that we needed that is good enough got it and one last question on labor code so the impact of almost eight odd billion looking at our employee cost then comparing maybe the labor code impact with the employee cost for other for us it seems to be relatively on the higher side more than 10% of the employee cost not so much for the other banks so is

this more of an estimation which has been done and what would be the recurring impact which would be there on the cost as such good point you know thanks for raising that, one it is estimate given whatever information that we have and that estimate is driven through an actuarial process, right. So you go through the normal process of how you do and that there is an actuarial valuation and determination of how do you do, again there is some science in that, but is then based on certain assumptions that come, that's the second thing. The third thing is that variables, when you look at these variables, the definition of what this wage, what are what are determined to be wage inclusion exclusion, the rule making on that is pending, you know that, right, so that there are some assumptions that go for one of the variables that go into those assumptions. And that is not based on determined rules that is based on some assumed. So that's the second third thing. The next item is the, you know that individual organizations can be very different. Because of the longevity of the staff that you see there, so that determines on how long and what is the kind of tenure and so on and so forth, both historical and anticipated. And so many other factors like that go into play. So at this time, I would just ask you to take it as a higher estimate based on best available information and through a scientific actuarial process that has come. And as and when the rulemaking evolves, as and when more information is available, this will be evolved. And again, we can, I can't venture to come out with a forward looking or what impact on an ongoing business, cannot do at this time. And the reason being that we need to have all of these in place before we can get there. And that is why this is not determined at an employee level to say next month when somebody this is the kind of amount that it can come or what will be the amount to determine for a crowd and funds and so on and so forth, it cannot be determined at this stage. This is a really high level based on best estimate.

Got it. Thanks and all the best.

Thank you very much. Next question is from Autonomous. Please go ahead.

Good evening. May I get into the LDR again, please? So, Sashi, please, did I hear you correctly when you said 85% to 90% by FY27? That seems to be aggressive to me, you know, if I look at consensus numbers, it's expecting 13% loan growth and 93% ODR. If you are going to achieve kind of the 90 in the next fiscal year, that suggests a very strong deposit growth number. And I know you've kind of said that you want to prioritize growth now. So it's it's not telling us if you could help.

Shantan, thanks for asking. Maybe then let me I've given you a broad range because I don't want to box myself with a narrow range. But having said that, you know, we have been operating in a range of around the 8788 in the pre-merger levels three years before the merger. And so when I say 90, of course, I would have meant somewhere around the plus or minus in that particular range of 90 maybe around the 88 89 etc or it could be in 90 to 91 as well but why I mentioned this at least you know the trend lines that we are saying you know if it's if it can be 96 for a 526 or a 95 we are all right you know at least the direction is what we're looking at for we just give a broad one so that we know what if it if we are lucky to really step up growth or the liquidity changes and we have more benign liquidity and no effects operations or effects swaps or open market operations maybe then it will be wonderful so that is why i'm saying since i do not know what's going to be the liquidity condition in this therefore i give a broad range but even if i achieve these kind of directions directionally going there that that's something that we can achieve as I said there is no regulatory number to comply to it is just a direction that I think we need to achieve for ourselves let alone the regulator asking us to do it is something that we believe just by doing what we're supposed to do will lead us to that kind of thing I don't have to do anything extra to measure that metric it will happen so when we did sort of forecast a faster growth rate in the system for ourselves than the system we also as we have seen we have been having deposit growth rates in line with normally the top-line growth slightly faster than the loan growth so estimating that is what we believe where we will land for FI 26 and 27. So don't take a literally that we may be on the lower end of that range. It could be anywhere in that range. You know, practically speaking, it'll be somewhere at the, you know, if it's 90 is that range, then somewhere around the 90 is something that we'll be happy with. Similarly, somewhere around the 95 is something that we'll be happy with for FI 26.

Appreciate that. I mean, if you're trading off EPS growth for slightly slower ROI improvement that's fine I mean that's not the issue especially if the opportunity is there in the market. So but I just wanted to make sure because you know we have an occupational hazard to kind of do our due diligence in our model so I just wanted to get that flexibility that you have highlighted now. The second question was around asset quality could you you know you've got a unique vantage point second largest banking in India, could you give us some idea about, you know, any pickup in growth momentum, any pickup, any issues in asset quality, particularly due to US tariffs or in the MSI area? So it's a combination of, you know, is growth improving and are there any asset quality concerns more broadly, if not in your book?

So if I got the question right, you know, you want to know the trend for asset quality and how it is looking, you know. So, across segments and even first at a sectorial, you're well aware that, you know, the banking industry right now, to borrow a term, is going through, you know, a Cinderella phrase where you've got very strong balance sheets when I refer to that from an asset quality point You have the lowest accretion of gross NPAs and net NPAs are at decadent lows. mirroring this trend has also been you know reflective on our books we have seen you know very low accretion to gross NPAs and none of the particular portfolios have indicated any stress building up so I think the economic environment with the kind of GDP growth that one has seen the kind of consumption growth that one is seeing, as well as the wage increases that one has seen on one hand and on the other, the lowering of the interest rates and affordability therefore going up, including the fiscal benefits that were given, to not take up much time, I would say the asset quality continues at the bank to be pristine and as of as we see it there is no particular segment which is showing any major signs of concern Srini would you like to?

Perfectly good, there will be seasonality in aggregate. That is a separate. Every segment including the segment period to period if you see is lower, both from a leading delinquency and into the slippages which are for lower and then from there going into loss given default is also lower you are seeing that the recoveries wherever that is also. Absolutely. on an absolute level, good level, Chilton hope that gives you a perspective on both sides.

Yeah, thank you and just on growth momentum, are you seeing things improve generally in the economy?

In the economy the growth momentum, yes, if you look at some of those indicators that you have seen the take the crop cycle itself very improved the the sowing cycle is improved over prior year, very healthy water reservoir levels have aided that. The manufacturing PMI continues to be in the expansionary zone with many programs that are coming in. Pervesis sector doing very well on the consumption demand side. If you look at the recent time period for car spend, which is important for you to look at the overall car spend up 15 percent, 3.4 percent sequentially, within the car spend when we look at the discretionary category of car spends, the discretionary categories spends have grown 21 percent year on year, the non-discretionary, which is the bread and butter normal activity is about 13 percent up, so that indicates that when the kind of If a discretionary spend goes up, people do go and indulge, that is what you are seeing On the other side, we do see revolver rates not picking up, which means people are spending to pay down. So there are certain other segments of the society, which is what is spending. So on an overall level, I would say that similarly, you have seen the auto and the tractors and so on. Two-wheeler has been somewhat less than expected, but then the four-wheeler autos and the tractors type have done exceedingly well and you are seeing some of that reflected in the aggregate level GDP output that gets reported too.

That's interesting.

Thank you. Thank you. Next question is from Nitinagarwal from Motilal Oswal, please go.

I have a question on the branch productivity and deposits now that we are so hopeful about the deposits pickup and targeting it close to 90 kind of a number. So like if you look back as to what kind of experiences that we used to have in terms of the branch vintage and the deposit built-up, is that kind of sustaining in the recent years because the deposit to this is just not thinking about the system level and that is a key constraint across banks with LDRs, the number that we are seeing across many banks. And related to this, owned branch over the years has been like coming up from pretty high number now to every successive year we are opening broad branches. So do we… Sorry, Nathan, repeat that.

Nathan, repeat that. We could not hear you. Sorry.

So I was also saying that related to this, If you look at the branch expansion run rate, every successive year, we are now opening up lower number of branches, like FI 23 versus 24 to 25. Every year we are going down in terms of branch expansion. So how do you look at this corollary between the branch vintage and the deposit built up? Do you think that the current pace of expansion be sufficient for us to sustain that above industry growth rate over the next three, four, five years? So just some thoughts around this.

Okay, so I'll get started with the last one first, which is to do with the branches. You can't look at one year branch, but you have to look at a trend of what was the trade. For that, if you go back to you look at the five year branch trend, I'll give you round numbers of the branch trend. We opened about 250 branches in 2020, 350 in 21, 750 in 22, 1500 in 23, 900 in 24, 725. So, if you look at this 250, 350, 750, 1500, 900, the opportunity space that it provided, We took that and accelerated all within the overall returns framework, right all through this time period if you look at our returns between 1.9 to 2 right in that period. So there there was we accelerated and we don't need to do 1500 or 900 and so on, we can be more modest, but still add to the branches. It is important to add to the branches because currently we have little more than 6% of the country's branch network with us. So that means our branches 9600 plus is about little more than 6% of the systems branch. So we have and we have more than 11% of the market share of deposits. So that's one in terms of we have more room to run and more share to gain through that Next is productivity. If you look at the per branch productivity, we are now at about 305 crores or thereabouts on a per branch at an aggregate level. Despite all of these additions that I talked to about, if you go back where we I just mentioned to you about how we were doing per branch. If you go to 23 or 19 to 23, that time period 4 by time period about 237 crores per branch right at that time. And I told you when 237 crores per branch before I started to talk about those acceleration of the branches right. Now with all of those acceleration, we are at a 305 crores per branch. So at every incremental branch when we add, it is also at an aggregate level added. But this is at an aggregate level, then that takes to the next one that you talked about at the micro level right. Aggregate level is one, let us talk about micro level in terms of where it starts to to have the pivoting point for further scale, first is the breakeven is about 2 years or When you look at the breakeven branches that are in the metro and urban area typically breaks even in about 22 months. Branches that are in the semi urban and rural area takes about 27 months thereabouts. On an average about 2 years it breaks even. So that is one and these models are in consonance with our legacy branch models which means That's number one. Number two, the pivoting point where four or five years ago where we analyzed what does the branch do in five years, five to 10 years and 10 to 15 years and so on when you look at it, where the scaling factor is about the fifth year mark to the 10th year mark it moves and it moves about, it moves about three times between five to 10 years it goes about three And then once it goes into 10 to 15 years, 10 times up. So that is very important and that scaling factor continues to operate now. Now what is more interesting and important than that is currently if you look at the branches that are in the bucket 5 to 10 years bucket, which are doing 3x than what they we were doing 5 years ago, 1,232 branches out of the 9600, 1,232 branches are in that And if you look at the branches before that, the 3 to 5 year bucket, 3 to 5 year bucket we have 1,300 branches. So we are entering into the pivoting point where the cohorts that are entering into the 5 plus bucket is more than the cohorts that are going to exit from 5 to 10. So, that is again similarly, when you when you look at the 10 to 15 year bucket, it got 2499 branches and then the 5 to 10 year branches are going to go into both cohorts. And so, that almost 43 percent of our branches are young vintage branches, less than 5 years. So, this is the cohort that needs to move through the pipe and get there and so, we are quite that is point I think we said that we are positioned well with good expectations coming out of that and that's again aided by seven factors that go.

Okay.

Incrementally, another data point, so she was just reminding me when we reviewed it with him, on an incremental basis when you look at it, these new branches contribute slightly north of 20% of the overall incremental that comes, deposits that comes, which is It's very important, right, that these things keep adding, accreting as we go along. That's something I wanted to be able to ask.

Right. See, the reason to ask this is also because while advances side is still in our control, we can maneuver the advances growth and choose the business segments you want to underwrite. But deposits, if we compare across the best-run private banks also, typically the growth kind of has its own saturation point. And if you look as to how HDFC bank has done last year and versus the current year, probably we will be closer to in terms of deposit rate versus what we were last year on a good case So, for us to talk about that LDR can come so sharply next year, do we look at this deposit growth run rate break out from as to how the trends have been in the recent years? Can this really happen with the kind of vintage games that we talk about?

These get benchmarked by district, by our presence in those districts, that's how we benchmark and that's how we work our marketing and product teams, work with our distribution channels where we present to orchestrate and move this, right. So two things I want to mention, one is new account acquisition is an important element. We are at about 100 million customers, last quarter we added about 1.5 million new liability relationships. It is important to get that new account value because that is how you keep building and the change in balances. So that means existing customers adding, increasing has been lower in the recent time periods when some kind of a choices into various other financialization they take. So, some of that has been slower, but again you beat that by getting more presence and more customer and have diversified product asset product because you know that in the last two years our retail asset products were slow then where we are now trying to accelerate and move for every asset product that you have again cards I think not in the last quarter but maybe a few quarters ago we have spoken cards for card customers spending on their card account and having a hundred outstanding at the aggregate level in the bank we see almost north of five five point five times deposit balances from the customers so what does it mean we want more of our customers to have cards and same with mortgages which I think last time we spoke 99% today we have penetration that means we are not selling a mortgage product we want to get the customer relationship when we are giving a mortgage product we get this We get the savings account, and the savings account gets funded approximately today at initiation at about 35,000 rupees, and then when you look at a 12 month, 18 month on books, which is the kind of vintage we can measure today and see, we are seeing that it is growing through 12 and a half times. But historical, some of those category customers that we have seen, it has got the propensity to have five times more than a customer who does not have a mortgage. So, some liabilities don't come only purely on on on just an engagement and asking it also comes by multiple products that get sold.

Okay, sure. Thanks Shini. Thanks for putting that Kara. Wish you all the best. Thank you.

Next question is from Nanav Suresh Ganapati from Macquarie Capital, please go ahead.

Yeah, so first question is on LCR, what would be this quarter and would how it would move whether it will move up, move down.

LCR we reported 116 in this quarter and post the new guidelines. No, the new guidelines that we we don't expect any material change that can impact.

Okay and just a question on margins itself you know it's been almost 9th quarter since your margins are not gone anywhere, in fact it is even lower than what you had reported at 3.4 percent. I know there are several moving parts. Are you really confident that you can get this up in the next 2-3 years?

Suresh, if you think about the margin, the most important lever on the margin is the cost of funds which at various points we have mentioned and within the cost of funds there are a few. One is the time deposit repricing which has a lag effect, we have changed time deposit rates in line with the policy rate change, but not fully, but maybe two thirds, two thirds way, we have changed 125 basis point is what the policy has changed, we have done about two thirds into that, we need to see what more, and again that works competitively priced So, we will not disadvantage anywhere there and that takes almost five quarters to flow in part of that this quarter you have seen 10 11 basis points change in cost of funds that is the lag effects of that flowing through then that that continues so that is one element and the second element is the borrowing quarter to quarter is remain static at about 13 percent But again, more than a quarter, if you look at a year, we were at about 7 percent. Broadly, the industry is at about 6-7 percent, so there is a opportunity space to beat that to keep coming down. That is another important lever that provides the cost of funds change. And the third one is the CASA, which again is a customer on the other side more than we creating any action, where we need to work through to bring us a stilling within a new customers and better engagement, more products, more retail products, that that's the kind of process we need to take through to get to that industry average and beat that industry average over time. Yes, there is a line of sight and these are some of those elements we work through.

Okay, thank you. Thank you.

Thank you. Prakash Sharma from Jefferies India, please go ahead.

Thank you everyone and congratulations on the results. I just wanted to delve on this deposit growth part, you know, it was an interesting color that you said that the granular retail has grown, but slightly bulkier retail hasn't. Is there any sort of a data point that you can share in terms of the growth or the mix in the two? And one alternative is can we use the LCR deposit number and the growth there as a reference point to just get some comfort on, you know, what's the range of growth there? Because 4Q onward, you know, it gets aggressive on pricing, so if you can share some colors that will be right.

The second aspect of the question I didn't get, probably you will see, but as far as the rate of growth is concerned that you asked about the categories, certain other categories that you wanted. Yes. Yes, I mean, if you look at the institutional types, they were in the mid single digits, Right, the institutional type of deposits mid single digits that is what we have seen. And within the retail branch the non-individuals were much more modest, I think it was again little more higher single digit and the individual individual within the branch is where in the solid double digit. Sorry, the individual at the branch was at?

No, I did not give you a number, I said it is a good double digit and everything else Okay, and is there a way to just give a context of you know within your total deposits, 83 percent is classified as retail, how much would be the granular retail and how much would be the quasi-institutional retail?

I don't think they published that, but yes, when we say that is branch driven deposits where there are R&s engaged with either individual or that individuals organizations and institutions that is what.

Thank you so much and good wishes.

Next question is from Nairav Abhishek Ngarhka from HSBC, please go ahead.

Hi, good evening. So, really going back to the branch addition question and thanks for giving so much color, But just net-net, are you still looking to grow or add about 5-7 percent branches this year and in FY27 or what are your near term plans? I understand the whole, you know, picture you painted about the scale up of old branches and how that will accelerate deposits. I just want to know your next one year plans in terms of branch addition.

Yeah, you know, to answer in short, 5-7 percent implies 500-700 branches annual. I don't believe that that kind of branch in the near future we will evaluate as we go through the annual planning process and come back at some point in time but it will be of a good order.

Abhishek just to add to what Srini is saying you know if you've seen the last cohort of what he just said in terms of the 4800 odd branches over the last five years today it is contributing, as he mentioned, somewhere around the 20 plus percentage points in terms of the incremental liabilities of the deposits that we are mobilizing. As this cohort starts to, which we are seeing delivering and getting to a substantial number, then we know that we have the confidence to start to step up our, the next phase of of launching new distribution points. Obviously we want to wait and watch. We are not saying we will not add any branches as he mentioned, we will add branches, but these are probably in normally in suburbs where there is a kind of an opportunity. That is what we are now focusing on. But we want to ensure and stabilize the last cohort of the 4,800 branches stabilized and start to get to a certain level of maturity and level of contribution which is substantial then it will we know that that will be on an autopilot and then we can start to see the next phase of introduction and obviously at that point in time we will have to rethink in terms of we would have probably moved far beyond in terms of our branch transformation and automation so there will be some new thought processes in terms of what we how we need to add or how we need to sort of expand our distribution it's not that it's going to be different but maybe there will be some amount of recalibration that we will do in the next phase of branch Sure.

So, Sashi, as I understand that's a great point for making that point. So, today about 50% of branches which is this 4800 is contributing around 20% of incremental deposits. Is it correct to think that when this starts contributing maybe 40-50% of incremental deposits, that is when you start thinking about future expansion? Is that the right way to think about it?

Whether it's 40, 50, 60, we will keep on recalibrating because there are a lot of things that we are trying to do. Obviously, we also, you know, if you really look at it, we stepped up our distribution the moment we knew that we announced our merger. And we knew that we needed to, you know, fund not just at that point in time, the future of – in the future. So all this is going to add to incremental deposits in a substantial way into the future. But so there will be a lot more dimensions that we will examine, not just the extent of contribution, but probably, you know, certain events that we may have or certain other dimensions that we may look at before we start to step up the pedal on the new phase of incremental. And, you know, you look at it even over our 30-year period, there have been these phases of, you know, right from 2009 onwards to 2013-14, we stepped up our distribution. Then we had a little bit of a pause. Then we started off again. So, you know, we – this recalibration and doing it in phases is something that we've been doing. It's not a new thing. We've been doing this for right through our 30 years journey. And I think we will continue to do. Obviously, the dimensions keep changing in terms of what we need to look at as we move ahead because the world is changing very fast. The kind of technology implementations that we are doing, you know, as we unveil, you know, we probably may need different thought processes as well. So, let me pause out here and probably you probably will get the drift.

Sure, thank you for that and the second thing is on credit costs. Now, if I look at your next net slippages, X of the agri part, but let's say look at the net slippages in the nine months or last few quarters, around 30-35 basis points. Write-offs are holding steady at 3,200 crores roughly a quarter. So, why is the, you know, underlying credit costs at around 55 bits and not coming off? I mean, don't you think that should also start coming off at some point?

If this kind of change comes in.

I will say a couple of things. One is the slippages. If you are looking at excluding agree slippages, it's 24 bits in the quarter. Prior quarter was 23 bits. Prior year was 26 bits. So, order of magnitude, call it 25 basis points, that is the kind of a slippage in a quarter, That is what you see. So, not the 35 or something that you are talking about, that is one. The second thing is that credit costs, you know, also you have to look at it including the recoveries because when you write off certain loans as it progresses through some of the delinquency buckets, then you get it in the form of recoveries and net of recoveries If you see we are at about 37 basis points or thereabouts and when you look at again last quarter last year order of magnitude very similar within a few basis points by basis points. So, it's not just about the 55 basis point it is also about the net of the recoveries which comes in quite handy and it's a function of how fast you write off and how you recover.

Sure that's what that's what I was referring to so net of your recoveries etcetera it should I mean it's improving, the book is growing and your absolute is pretty much stable. So, you're seeing very good asset quality trends and I was sort of wondering why the credit cost is not coming off.

So, why will it see when in a growing book if the slippage is steady, the losses are steady, recoveries are steady, I don't know what you're expecting.

So, 50-85 is more or less BAU is what you are saying? No, GMPA. No, no, no, no, no. No, no, no, no, no, no credit card. Okay I'll take this off never mind probably not trained myself clearly, no problem. Finally just one question on cards, you know overall card receivables are pretty stable if I look at it you know the data that comes out in RBI the spend market share for you is doing well, SIF market shares doing well. So why is it not reflecting in the receivables? Is it just transactions running down or is it something else?

So actually, you know, great question Abhishek. I think if you really look at it, the segment that we are patronizing is more the middle and upper middle segment. Therefore, So, slightly higher-end cards is what is in our portfolio. The proportion of that is large. And a large part of that, you know, over a period of time, we have been, I mean, as you know, you know, the card, credit card, what shall I say? The behavior has also changed over a period of time. Today, we look at it not as net receivable from a revolve perspective, from an asset perspective and an earnings perspective. We are looking at it as an enabler for our liabilities or deposits. Srini has mentioned in the past, and that is something that we are extremely proud of, the spend of the cards actually provide a significant portion of our deposit momentum. Today, 20 to 25, maybe in the mid of 20 to 25, I can say, is the range at which out of the total deposit basket, the kind of momentum that you're seeing, whether it's on the healthy balances and what it contributes to total, it's somewhere around that 20 to 25. So, the credit card focus today is more not from a net receivable basis, but from a transactor basis and, you know, as I said, I mean, whether it's a lot of you on the call or people in this room that we are, we all pay, you know, on a planning instruction basis on due dates. So this is something that we are very happy with, and so this is the kind of a new strategy that we are evolving. Obviously, we are also recalibrating some of the business model and cards. We have been doing that and we probably have come out with something which is very encouraging and something that the organization will really benefit from our card strategy.

Thank you so much. I want to add one thing in the cards, particularly the card revolving aspect. If you go back to 2020 or before and compare it to today's revolvers, they are, they stand slightly under two-thirds level, right, slightly under two-thirds level. So that means that of the pre-2020 levels, right, and so the profile of the customers and that is why you see the deposit balances of those customers, which is little more than five, five and a half times, was slightly under four times at that time. So, the profile of those customers are also different where they do transact, they do keep balances and the revolver balances also and we are not liberally offered the credit line increases and made more and more revolvers to tip them off into delinquency we've been called credit has been cautious.

Got it. Thank you so much for answering all those questions and all the best.

Thank you very much. Next question is from Jayant Korday from Access Capital, please go ahead.

Thanks for the opportunity. So, one question is on your loan growth broad guidance of above system next year. Sir, just wanted to understand when we are saying we will grow above the system. What is our range of assumption for system growth because we are seeing some acceleration in the system growth itself where we are moving from this 11 to 13 band to maybe closer to If we were to move in that band, would we have accounted for that kind of system growth and we said we can grow all that?

So our understanding as of now is next year we expect system growth to be between 12 to 13%. When you look at nominal GDP and the credit growth that's required to support nominal GDP. So, if you're talking about, you know, 12 to 13%, we are talking about a couple of percentage points above that going into the next year. We see distribution on the retail side, you've been seeing, you know, over the last two quarters coming up, our positioning also in the MSME space, you know, given our geographic coverage as well as a suite of products that we have out over there and you know the wholesale piece which you would have seen in this quarter you know again coming back we do believe that we have the we have the customer segmentation to be able to grow at a couple of hundred basis points over system growth next year.

Great sir, I think this answers you are working with the 12 to 13 trains at least. Second part is a broader three year or four year question, we have seen products like mortgage getting a lot of competitive intensity, PSA banks being well capitalized are you know probably being more aggressive in vehicle increasingly, auto, do you see this competitive the larger players over the next probably 3 years and not a 6 month or 12 month question.

Yes, we are addressing competition only through relationship and not through pricing. Mortgage products as you see you seen that in the last 12 months, we are not leading through a mortgage product. We are leading through a relationships where the mortgage product could be a fulcrum around which we can operate. Same with auto. I do want to let you know that our auto loans are almost little more than 80% self-funded, which means the customers when they take auto loan, we want their liability accounts, we want them to have balances in that and the loan self-fund itself for most part within the balance sheet. So, it is about relationship offering and that is part of the engagement of the branch and it's not just a product and a loan balance sheet building approach.

Having said that, Shini, absolutely in order, I think, you know, we do continue to be the largest financers in the auto loan space in the country, not only in terms of the disperses, but also the book size, as well as, you know, if you see a year on year growth in the entire automobile space, I think, you know, that is reflective of what our position is and the target market that we will have. So it is relationship. It is also ensuring that we have the right pricing for the product based on the customer segmentation. And we don't feel any need to, you know, Now, do business at price points which don't make economic sense.

And your market reading is now we are not in that situation where aggression is eroding margins for the broader system, at least in auto.

I'm sorry, I didn't catch your question, can you repeat it please?

So, not for HDFC, but probably for broader system.

Are you seeing that aggression in auto segments from the public sector or maybe the broader system aggravating in the last couple of quarters yes we've seen it not only in auto but also in the home loan product so you know these are two products where we have certainly seen you know some amount of if I may say a bit of irrational pricing but you know irrational pricing has never sustained you know it will you know play itself out and bury itself in a couple of quarters on the outer side if not earlier great this is very helpful thank you and all the best

thank you ladies and gentlemen we have come to the end of the allotted time for the call I would now like to end the conference to Mr. Vidyanathan for closing comments okay thank you Neera and thanks to all the participants for taking the time to attend � said to be there further questions anymore comments the administration will be on standby to perhaps and help and explain or clarify everything you need, today or of the weekend or next week whenever you desire we are. With that we'll sign off for today have a great weekend bye-bye Thank you very much.

Thank you. Thank you.

Thank you all. Thank you very much.

On behalf of HTC Bank Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.