Earnings Call Transcript
HDFC BANK LTD (HDB)
Earnings Call Transcript - HDB Q2 2024
Operator, Operator
Ladies and gentlemen, good evening and welcome to HDFC Bank Limited Q2 FY '24 Earnings Conference Call on the financial results presented by the management of HDFC Bank. 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Srinivasan Vaidyanathan, Chief Financial Officer, HDFC Bank. Thank you, and over to you, sir.
Srinivasan Vaidyanathan, CFO
Okay. Thank you, Nirav. Good evening, and a warm welcome to all the participants. Our MD and CEO, Mr. Sashi Jagdishan has joined us today to provide an overview of the business before we get into the quarterly results. Sashi, over to you to get started, please.
Sashi Jagdishan, CEO
Thank you, Srini. I appreciate the opportunity to speak. I'll keep it brief. Since this is our first earnings report after the merger, I wanted to share a few thoughts. It's wonderful to connect with everyone again after quite some time. As you're aware, we just completed one of the largest mergers in recent history, achieving a smooth integration of our teams, processes, and systems without external assistance. This exemplifies our strong execution capabilities. The merged balance sheet was audited by August 31st, and we shared the news publicly around mid-September. The presentation for analysts highlighted some one-off items due to the debt-funded liquid assets put in place to meet the liquidity coverage ratio requirements. The assumptions and cash flows for a non-banking financial company differ from those of a bank, which led to some liquidity provisions to ensure compliance and offer a safety net for unforeseen circumstances. Fortunately, we encountered an additional cash reserve ratio requirement, and this buffer proved beneficial. However, it did come with a cost of about 25 basis points due to the liquidity buildup and the cash reserve ratio impact. Srini will elaborate on this in his upcoming remarks. The presentation also addressed day-one adjustments to equity, which raised concerns about how these adjustments might affect equity value. It's important to note that many may have misunderstood these adjustments as diminishing equity value, but they are actually accounting and timing differences that will bring benefits over time. There has been considerable discussion regarding the non-retail segment of the former HDFC Limited. While there was a minor increase in non-performing assets in an account that was performing but needed restructuring, these restructured assets are classified as NPAs under regulatory guidelines. There may be some lingering accounts that could degrade to substandard status in the future, but this won’t significantly impact the overall NPA ratio of the bank. I can firmly state that this segment will not lead to any additional costs or losses reflected in our profit and loss statement going forward, thanks to the secure realizable value of collateral and adequate provisions for inherited exposures. Many are inquiring about our future plans for construction finance, which will play a crucial role in our mortgage business. We have just begun to analyze this segment, and you will see consistent growth in the construction finance portfolio, contributing to both top-line growth and margins. Our recent results, released a few hours ago, showcase our execution capabilities, reflecting what we've consistently stated and demonstrated. Now, let’s review some key metrics. Our deposit growth reached INR 1.1 lakh crore, indicating a sequential increase of 5.3%, which annualizes to over 20%-21%. Notably, nearly 83% to 85% of this was from retail deposits. You might wonder about June’s performance. We opted not to renew some large deposits for minimal basis points, leading to noticeable outflows in larger non-retail deposits. We are confident that funding will not be an issue moving forward, as our execution capabilities will become clear. Our loan growth was also impressive, with an addition of INR 1.0 lakh crore this quarter, comprising high-quality assets across various segments including corporate, commercial, rural, MSME, and retail sectors. We are quite comfortable with the quality of our book, both currently and in the future. The sequential growth rate stands at 4.9%, translating to an annualized growth rate of 19.6%. These figures indicate robust and healthy performance. We have repeatedly stated that we maintain the energy needed to grow at our historical pace even with an expanded book. Regarding net interest margins, as noted in the mid-September presentation, we anticipated an impact due to the liquidity cushion and the incremental cash reserve ratio of about 25 basis points. We projected the core margins on a total asset basis to be around 3.7% to 3.8%. After adjusting for the 25 basis points, we land at the lower end of 3.65%, but we expect to recover some of these margins over time as we replace high-cost bonds with deposits and shift more towards retail business loans. We maintained our return on assets around 2% and our return on equity at 16.2%. Thus, both top-line growth and profitability remain strong and are expected to improve. In this first quarter, we aimed to uphold the foundation of HDFC Limited’s profits from mortgages, especially retail mortgages. We wanted our teams to acclimate and gradually regain momentum in home loan disbursements. We previously indicated reaching the highest-ever retail mortgage loans, with 170,000 loans and INR 48,000 crores in disbursements. This marks just the beginning; we are now poised to leverage our distribution and customer franchise to advance further. Notably, we plan to launch our digital product bundling initiatives this quarter, which will enhance our offerings. The resilience of our institution to drive performance on a larger scale has been evident over the last 28 years, and the results reflect our readiness to achieve consistent core growth, which I am confident will continue in future quarters while maintaining profitability within the 1.9% to 2.1% range as before. In closing, I want to convey our enthusiasm about this merger and assure you that we will effectively execute as we have in the past. Now, I pass it back to you, Srini. Thank you very much.
Srinivasan Vaidyanathan, CFO
Okay. Thank you, Sashi, for those opening remarks. Now, let's get to the main part. I want to start with the macro context provided that it presented a good healthy tailwind in the quarter. We continued to see good domestic demand conditions and push from government through CapEx. The GST collections were healthy in manufacturing services, PMI, and remained in the expansionary zone. Key logistics indicators were quite healthy. The RBI kept its rates unchanged at 6.5%. As we look ahead, we see the environment is favorable for robust growth. Our estimate of GDP growth for FY '24 is at 6.3%, making it one of the fastest-growing economies in the world. In terms of the bank's growth journey, our branch network stands at 7,945 as of September 30, an increase of 1,446 branches over the last 12 months, including 85 branches in the quarter. Additionally, we are operating over 400 branches of erstwhile HDFC branches under the bank banner now, and we are progressively developing other banking product capabilities as we go through the year. Payment acceptance points currently stand at 4.9 million, showing a year-on-year growth of 43% as adoption of the Vyapar app builds momentum. In CRB, which runs the SME businesses, our rural business reach expanded to 1.85 lakh villages, on track to exceed over 2 lakh villages in the near-term. Gold loan processing, which began a few quarters ago, is now available in 4,544 branches, representing a 53% increase over the previous year. In customer franchise building, we added 2.7 million new liability relationships during the quarter, bringing our total customer base to 91 million, including those added from the merger. This provides an opportunity for further engagement and deepening customer relationships. We added 16,000 people during the quarter to position ourselves for greater engagement with our customers. On cards, we issued 1.7 million in the quarter, increasing the total base to 18.8 million. The granularity on the deposit focus remains, with total deposits currently at INR21.7 lakh crores, which grew by INR1.1 lakh crore in the quarter on a comparable basis—5.3% sequentially. Term deposits, which have been the foundation of this growth due to the interest rate scenario and customer preferences, aggregated to INR13.6 lakh crores, with a healthy growth of 7.8% sequentially. Savings account deposits stand at INR5.7 lakh crores, having grown by INR9,000 crores or 2% sequentially, while the current account stands at INR2.5 lakh crore, which is INR18,000 crores over the prior year. Retail current accounts make up 72% of this and grew by 3% sequentially. Overall, CASA deposits ended the quarter at INR8.2 lakh crores, leading to a CASA ratio of 37.6%. This is after the impact coming from the merger, specifically from HDFC Limited, which added time deposits to our base. On the advances side, gross advances at INR23.5 lakh crores reflect a sequential momentum of about 4.9%. Retail advances grew 3.1% sequentially. CRB advances grew 9.7% sequentially. The wholesale segment, excluding non-individual loans from HDFC Limited, grew 5.8%, while the non-individual loans from HDFC Limited now stand at INR1.03 lakh crores compared to INR1.09 lakh crores at the beginning of the quarter. We continue to pursue technology and a digital strategy, with PayZapp 2.0 having 3 million registered users and handling a daily volume of 2.5 lakh transactions. The SmartHub Vyapar Platform manages monthly transactions of INR19,000 crores and provides monthly disbursals of INR650 crores. Xpress Car Loans accounts for almost 30% of our car volumes. HDFC Bank One, the AI-driven customer service hub, serves contact centers nationwide, handling 30 million engagements and interacting with 15 million customers monthly through various channels such as email, social care, WhatsApp, chat banking, and phone banking services. Our balance sheet remains resilient, with the LCR for the quarter at 121% after absorbing the 4-plus percentage points from the ICRR. The capital adequacy ratio is at 19.5% with CET1 at 17.3%. Let's move to net revenues for the quarter, which were at INR38,093 crores, a 33% growth year-on-year. Our net interest income for the quarter stood at INR27,385 crores, which accounted for 72% of net revenues, reflecting a 30% growth from the prior year. The core net interest margin for the quarter was at 3.65% on total assets and 3.85% on interest-earning assets. After accounting for the debt-funded cost for additional liquidity and merger management, the reported net interest margin for the quarter was 3.4% on total assets and 3.6% on interest-earning assets. Now, looking at other income, total other income amounted to INR10,708 crores. Fees and commissions, which constituted two-thirds or 65% of other income, stood at INR6,936 crores, growing by 19.5% over last year. Retail fees made up 92% of fees and commissions, highlighting the granularity of this income. FX and derivatives income was INR1,221 crores, an increase of 12.8% compared to the prior year. Net trading and mark-to-market income was INR1,041 crores for the quarter compared to INR552 crores in the prior quarter and a negative INR387 crores in the prior year. Other miscellaneous income, amounting to INR1,510 crores, includes recoveries from written-off accounts and dividends from subsidiaries. Our operating expenses for the quarter were INR15,399 crores, resulting in a cost-to-income ratio of 40.4%. Our pre-provision operating profit was INR22,694 crores, indicating a comprehensive coverage perspective after provisions. Regarding asset quality, the GNPA ratio was at 1.34% compared to 1.41% pro forma as of July 1. This compares to 1.23% last year. Out of the 1.34% as of this quarter-end, about 22 basis points are related to restructured accounts, which have been classified as NPAs according to extant guidelines. The net NPA ratio was at 0.35%. The slippage ratio for the current quarter stands at 32 basis points or approximately INR7,800 crores. We recorded recoveries and upgrades amounting to INR4,500 crores at 22 basis points. Write-offs during the quarter were approximately INR3,250 crores, representing roughly 17 basis points. There were no sales of NPA accounts in the quarter. On the provision side, total provisions reported were around INR2,900 crores, compared to INR2,850 crores in the prior quarter and INR3,250 crores in the prior year. The core specific loan loss provision was around INR2,500 crores against INR2,700 crores in the prior quarter. The provision coverage ratio stood at 74%. By the end of the current quarter, contingent and floating provisions totaled approximately INR15,600 crores; general provisions were INR10,100 crores, bringing total provisions comprising specific floating, contingent, and general to about 156% of gross non-performing loans. This is in addition to securities held as collateral in several cases. The floating, contingent, and general provisions accounted for about 1.09% of gross advances as of September-end. Regarding credit cost ratios, the total annualized credit cost ratio for the quarter was 49 basis points, as compared to 70 basis points in the prior quarter and 87 basis points from the previous year. Recoveries recorded as miscellaneous income amounted to 16 basis points of gross advances for the quarter, compared to 19 basis points for the prior quarter. The total credit cost ratio, net of recoveries, was at 34 basis points for the current quarter compared to 51 basis points in the prior quarter and 64 basis points from the previous year. The profit before tax was INR19,790 crores, reflecting a 39% growth year-on-year. After a write-back of INR1,000 crores of tax provisions no longer required due to favorable appellate orders, net profit after tax for the quarter was INR15,976 crores, corresponding to a 50% increase versus the prior year. A few sentences regarding our subsidiaries before getting to the summary. Firstly, HDBFS, reported on an Ind-AS basis, disbursements for the quarter were INR14,150 crores, up 43% year-on-year. The loan book reached INR78,000 crores, growing 5.8% sequentially. The customer franchise grew to 13.6 million customers with 6.3% additions during the quarter. The quality of the book continues to see sustained improvement, with gross stage 3 at 2.38% as of September compared to 4.88% last year. The provision coverage of the stage 3 book stood at 68%. Profit after tax for the quarter was INR601 crores, compared to INR471 crores in the prior year. The ROA and ROE annualized for the quarter were 3.2% and 19.6%, respectively. The earnings per share for HDB was INR7.59, and the book value per share stood at INR158. Regarding other subsidiaries, HDFC Life — based on IGAAP, profit after tax for the quarter ended September increased to INR377 crores from INR326 crores in the previous year. In HDFC AMC, again based on Ind-AS, profit after tax for the quarter amounted to INR438 crores, registering a year-on-year growth of 20%. In HDFC ERGO, based on IGAAP, profit after tax for the quarter increased to INR236 crores compared to INR177 crores last year, a growth of 33%. Securities HSL operates with a network of 203 branches, and the net profit after tax stood at INR214 crores compared to INR191 crores last year. Now, I want to provide a quick update on ESG. We further strengthened the integration of ESG and climate change risk assessments into our credit appraisal process for corporate borrowers. We also finalized a sustainable finance framework to classify loans and advances as green, social, and sustainable, in alignment with International Capital Market Association principles. In summary, our results reflect robustness in growth following the merger, with 5.3% sequential momentum in deposit growth, a 5.7% sequential increase in retail deposit growth, and advances growth of 4.9%. Net profit after tax for the quarter at INR15,976 crores increased by 50% compared to the prior year. The consolidated profit after tax for the quarter stands at INR16,811 crores, delivering a return on assets of about 2% and return on equity of around 16.2%. Earnings per share on a standalone basis for the quarter is INR21.1, while at a consolidated level it is INR22.2. The book value per share on a standalone basis is at INR534, and at a consolidated bank level, it is INR553. With that, may I request the operator to open up the line for questions, please?
Operator, Operator
Thank you very much. We will now begin the question-and-answer session. The first question is from the line of Mahrukh Adajania from Nuvama. Please go ahead.
Mahrukh Adajania, Analyst
Yeah, hello. Hi. My first question is on margins. Of course, you've explained that it's due to the ICRR and the excess liquidity on Limited's book, but would there be any other adjustments in the NII while moving from Ind-AS to Ind-GAAP for HDFC? Like for instance, HDFC's NII in Q2 FY '23 was around INR45 billion, INR46 billion, right? So, would that be restated significantly under Ind-GAAP?
Srinivasan Vaidyanathan, CFO
Mahrukh, perhaps we'll hold a session to discuss what Indian GAAP and Ind-AS entail. There are several differences that occur. For example, one significant difference is in non-performing loans: in Ind-AS, you accrue for interest, while in IGAAP, you don't accrue for interest if the loan is non-performing. Time has elapsed, and the profile of the balance sheet, including the interest rate structure, is different now than it was at that time. Therefore, they are not directly comparable as such; they operate under different regulatory regimes, accounting standards, and have different compositions.
Mahrukh Adajania, Analyst
Correct. But most of the margin decline from pro forma 3.7% to 3.4% is largely attributed to excess liquidity and ICRR?
Srinivasan Vaidyanathan, CFO
The way to think about it is that the balance sheet is funded with debt. There has been a level of additional borrowing that has been exercised and that is standard debt borrowing—that has come at a cost typically above 8%. The transition post-merger involved carrying additional liquidity, which reflects in the cost of funds being higher than usual.
Mahrukh Adajania, Analyst
Got it. Makes sense. And sir, my next question is on the tax rate. Given the favorable decisions, does the tax rate normalize to 25% next quarter?
Srinivasan Vaidyanathan, CFO
Yes, there is a one-time effect you can consider. The normal tax rate has been around 25% in the past few quarters, specifically around 24.9% to 25%.
Mahrukh Adajania, Analyst
Got it. And just one last question. How long do you estimate it will take for margins to return to between 3.6% to 3.65%, say two to three quarters? Will the exit margin for FY '24 be at that level or will it take longer?
Srinivasan Vaidyanathan, CFO
Mahrukh, I think Sashi alluded to several factors. One is the utilization of better mix loan originations focused on retail, which would bring us back to a normal level over time. Then, you are faced with additional choices. Given that the funding is long-term as part of the merger management, we need to build assets that yield better returns.
Mahrukh Adajania, Analyst
Got it. Thanks.
Srinivasan Vaidyanathan, CFO
Thank you.
Operator, Operator
Thank you. Next question is from the line of Kunal Shah from Citigroup. Please go ahead.
Kunal Shah, Analyst
Yeah. Thanks for taking the question. Firstly, in terms of the run down in the wholesale portfolio of erstwhile HDFC, is it more or less done?
Srinivasan Vaidyanathan, CFO
Kunal, could you please come closer to the mic and speak up? I can hear you, but not as clearly.
Kunal Shah, Analyst
Yeah, sorry, is this better?
Srinivasan Vaidyanathan, CFO
Very good.
Kunal Shah, Analyst
So, I was asking whether this rundown in the wholesale portfolio is largely done? Earlier, we thought that it could come down to INR80,000 crores or INR90,000 crores from INR1.03 lakh crores. In the opening remarks, it was said that this should largely be done, and we should expect growth in the construction finance portfolio.
Srinivasan Vaidyanathan, CFO
That’s the outlook. This has three components: one concerns the construction finance that we want to grow strategically in alignment with retail. The second component is the LRD book, which we will also grow. The third component includes a small aspect of the corporate loan book that we will assess going forward. Yes, the direction Sashi mentioned applies to both construction finance and LRD as part of the overall corporate exposure we have.
Kunal Shah, Analyst
Got it. Thanks.
Srinivasan Vaidyanathan, CFO
Thank you.
Operator, Operator
Next question is from the line of Parag Thakkar from Anvil Wealth. Please go ahead.
Parag Thakkar, Analyst
Yeah. Hello. Am I audible?
Srinivasan Vaidyanathan, CFO
Yes.
Parag Thakkar, Analyst
First of all, I would like to congratulate the entire team for achieving such impressive deposit numbers above INR1 lakh crores. I think it requires a lot of effort, and you all did it brilliantly, especially in a quarter marked by a merger and the one-time ICRR hit plus liquidity hit. Overall, I am very, very happy with the performance. I want to congratulate you all. When we say that 1.9% to 2.1% ROA is plausible, a growth rate above 15% to 17% or 18% of the merged entity is also possible, right?
Srinivasan Vaidyanathan, CFO
Parag, firstly, thank you for your recognition. We appreciate that. Such compliments keep us charged to drive to our best potential amidst the market demand. Regarding the growth rate, as much as we strive for forward-looking projections, growth rates hinge on two aspects: market growth rates and historical market share gains, which we've seen ranging between 10% to 12%. Historically, we've delivered premium growth rates over this. The market share gains we've achieved recently provide greater distribution and larger scale, creating more growth opportunities.
Parag Thakkar, Analyst
We opened around 2,200 branches in the last two years. So when they start showing productivity, your OpEx to asset ratio will logically come down, right? Because they will become more productive in terms of gathering deposits as well as advances.
Srinivasan Vaidyanathan, CFO
Yes, it will improve over time. While adding more branches affects the ratio, when we look at branches opened two years ago, our models indicate the breakeven occurs in two years. About 90%-plus of the branches have reached breakeven within approximately 20 to 21 months. We have another 10% yet to achieve breakeven. As they do, we can track the performance to see positive returns on investment.
Parag Thakkar, Analyst
Sir, just one last question, since everybody is concerned. Now that you have gathered deposits exceeding INR1 lakh crores, I think that concern is alleviated. However, up until last quarter, everyone was worried about our funding capabilities. As Mr. Sashi pointed out at the beginning, we are no longer concerned about funding. Moving ahead, for example, we have Credila and our stake in HDB Financial Services, which we are mandated to list by FY '25. This will presumably unlock some value and, of course, provide us with additional funding. Can you elaborate on the direction of monetizing stakes in various entities to support our growth? This strategy could potentially lessen pressure on the deposit engine, right?
Srinivasan Vaidyanathan, CFO
Your points are well taken. The timing for these will be considered on appropriate valuation. Yes, your thought process is correct.
Operator, Operator
Thank you. Next question is from the line of Atul Mehra from Motilal Oswal. Please go ahead.
Atul Mehra, Analyst
Yeah. Hi, good evening and thanks for the opportunity. Sir, I have just one simple question. In terms of the non-retail NPA for HDFC Limited, how much of this was unanticipated at the time of the merger, and how much of it was already anticipated and accounted for in the swap ratio?
Srinivasan Vaidyanathan, CFO
If you look at the book over the last six quarters, it has been on a decline. That book has been assessed from a bank risk assessment perspective. There has been decay occurring. Reflect back to the June '22 quarter; it was flat, then there was a decrease of about 4%, 5%, 6%, and as of the recent quarter, it's down 6%. We believe in quality assurance before pursuing growth in this book. We are at a stage where we feel comfortable with its quality.
Atul Mehra, Analyst
Understood. Just one clarification on the same point. Did any incremental stress come as a surprise to management, or was it generally anticipated during your merger calculations?
Srinivasan Vaidyanathan, CFO
Risk assessment is a dynamic process. What holds true at one point in time may not remain so at another. It changes continuously.
Atul Mehra, Analyst
All right. Thank you, sir. Best wishes.
Srinivasan Vaidyanathan, CFO
Thank you.
Operator, Operator
Thank you. Next question is from the line of Suresh Ganapathy from Macquarie. Please go ahead.
Suresh Ganapathy, Analyst
Yeah, hi. Just two questions. One is, Sashi mentioned earlier that 83% to 85% of the INR1.1 trillion comprises retail deposits, which is about INR85,000 crores mobilized out of INR1.1 trillion, correct?
Srinivasan Vaidyanathan, CFO
That is correct, 83% is retail.
Suresh Ganapathy, Analyst
So, how does the Basel III LCR quarter-on-quarter addition look? Last quarter, it was INR66,000 crores. I require a like-for-like quarter-on-quarter Basel III retail deposits number.
Srinivasan Vaidyanathan, CFO
I don’t have that information readily available. We will look into it and share, but Suresh, just to clarify, the Basel classification is different, meaning there are different factors that apply to that classification. There isn't a one-for-one mapping.
Suresh Ganapathy, Analyst
Okay, fine. And last question regarding the synergy itself. It is early days, of course. We do see a slight pickup in mortgage growth, and your subsidiary reported numbers showcasing an increase in the counter share to 70% in bank branches associated with HDFC Life. I wanted to understand qualitatively what areas you have started seeing improvements—like cross-selling of loans and products, anything else you can elaborate on would be beneficial.
Srinivasan Vaidyanathan, CFO
We’re concentrating on several areas. One is in the sales process itself. For customers approaching a branch or an RM visiting a customer for sales processes, the sales support has significantly increased, enabling better product articulation. When a customer visits the branch or uses digital engagement, they see immediate product features and dynamic offerings. Additionally, we have worked on reducing turnaround times, ensuring that customers don't wait too long to access products, which encourages RMs to pitch them confidently. These qualitative enhancements in relations and processes will yield results as we progress.
Suresh Ganapathy, Analyst
Okay, thank you.
Srinivasan Vaidyanathan, CFO
Thank you.
Operator, Operator
Thank you. Next question is from Abhishek from HSBC. Please go ahead.
Unidentified Analyst, Analyst
Yeah, good evening. Thanks for taking my question. The first one is, can you quantify the LCR now on a merged basis? Also, how much of the HDFC Limited deposits were retail according to LCR classification? If you share that, it would be useful.
Srinivasan Vaidyanathan, CFO
I shared that LCR was at an average of 121% following the ICRR absorption for most of the quarter. Regarding the second question about retail classification from HDFC Limited, that was slightly above two-thirds. However, as it's merged into the total organization, we don’t specifically track HDFC Limited versus HDFC Bank distinctions.
Unidentified Analyst, Analyst
Got it. In terms of the conversion of HDFC Limited loans from the current PLR to repo linked, what percentage has occurred? What's the overall status on that?
Srinivasan Vaidyanathan, CFO
Abhishek, all of that has been completed and is available for the bank's customers to see upon logging in. However, we have a December deadline regarding various customer communications and assertions, which we are working on.
Unidentified Analyst, Analyst
Okay. I believe we set a December deadline for completing this transition. So, by December, the entire mortgage book should be on repo.
Srinivasan Vaidyanathan, CFO
The December deadline pertains to customer communication and the assertion process, and we are working on various strategies to achieve that.
Unidentified Analyst, Analyst
Okay, thanks. We have outside observers with us, just one last follow-up.
Operator, Operator
Abhishek, sorry to interrupt. May I request you to join the queue again for a follow-up question, please?
Unidentified Analyst, Analyst
Okay, sure.
Operator, Operator
Next question is from the line of Rajiv Pathak from GeeCee Holdings. Please go ahead.
Rajiv Pathak, Analyst
Yeah, hi. In the opening remarks, you mentioned a 25 bp hit on margins because of the ICRR and the excess liquidity. Thus, you would have taken around INR1,900 crores a quarter from this impact? Now, this should start normalizing in the next quarter, right? So, the next quarter should be aiming towards a median of around 3.85%, moving up to 4% over the next three to four quarters? Regarding loan growth, do you think a 4.5%, 5% quarterly run rate is achievable moving forward?
Srinivasan Vaidyanathan, CFO
Rajiv, we don’t offer forward-looking guidance regarding growth rates. However, we can refer to historical performance, which showcases our capacity to achieve targets. Regarding the margin discussed, we mentioned that normal statistics were affected due to merger management, and funding certain liquidity requirements. These have been debt-funded which are long-term. Normalization will depend on retaining a better mix of higher-yielding retail products.
Rajiv Pathak, Analyst
Okay, understood. Thank you.
Srinivasan Vaidyanathan, CFO
Thank you, Rajiv.
Operator, Operator
Next question is from the line of Saurabh Kumar from JPMorgan. Please go ahead.
Saurabh Kumar, Analyst
Hi, Srini. Good evening. Regarding the LCR, the excess liquidity you mentioned—will that be a discrepancy between the...
Srinivasan Vaidyanathan, CFO
Saurabh, we lost your audio. Please repeat your question.
Saurabh Kumar, Analyst
Hello?
Operator, Operator
Ladies and gentlemen, due to audio issues, we will move on to the next question. The next question is from Piran Engineer from CLSA. Please go ahead.
Piran Engineer, Analyst
Yeah, hi, good evening, and thanks for taking my question. Firstly, could you quantify what your SLR ratios were as of quarter-end?
Srinivasan Vaidyanathan, CFO
I cannot specify, but we maintain more than the required mandatory SLR of 18%.
Piran Engineer, Analyst
Fair enough. Just one more point on branch openings. I wanted to comprehend why the past two quarters were weaker than expected? Why is it that branch openings tend to be back-ended?
Srinivasan Vaidyanathan, CFO
Branch openings entail several factors. Our marketing and credit analytics teams evaluate the geography, competition, and potential of each location. Infrastructure teams check property availability, and legal teams ensure ownership compliance for confirmed locations. This elaborate process sometimes causes opening delays, and as a result, we usually see a clump of openings in the second half of the fiscal year, as seen in the last two years as well. The extensive nature of preparation and groundwork pertaining to 500 branch openings requires considerable lead time.
Piran Engineer, Analyst
Thanks for the detailed answer. Also, in terms of personal loans, there appears to be a slowdown over a couple of quarters. How much of this is deliberate versus being influenced by market competition?
Srinivasan Vaidyanathan, CFO
The market for personal loans is increasing and remains underpenetrated. We are monitoring our robust pre-approved personal loan base and have previously published it. The demand for personal loans is strong, and we have maintained a year-on-year growth rate of about 15%, with days varying between the 20% and high teens. Personal loans remains a key strategic area, and we expect the canvas for growth to widen as we draw more customers through seasoning and monitoring.
Piran Engineer, Analyst
Got it. Thank you so much, and wish you all the best.
Srinivasan Vaidyanathan, CFO
Thank you very much. Appreciate it.
Operator, Operator
Thank you. Ladies and gentlemen, we have come to the end of the call. I would now like to hand the conference back to Mr. Vaidyanathan for closing comments. Over to you, sir.
Srinivasan Vaidyanathan, CFO
Okay. Thank you, Nirav. We appreciate all participants for joining today and spending time with us. We are available during the week and next week for any clarifications or inquiries. Please reach out to our Investor Relations team, Bhavin Lakhpatwala or others, for assistance. Thank you. Bye-bye.
Operator, Operator
Thank you very much. On behalf of HDFC Bank Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.