HDFC Bank Ltd (HDFCBANK) Q2FY27 Concall Transcript - Sep-2026 Qtr
Sashidhar Jagdishan (HDFC Bank Ltd): to provide details on the same. Thank you, and over to you, Mr. Srinivasan.
Srinivasan Vaidyanathan (HDFC Bank Ltd): Thank you, Sashi. Good evening to all of you. Welcome to the HDFC Bank earnings call for the quarter and half-year ended September 30th, 2024. Sashi is with us, along with Kaizad, Rahul, Chaman, Arvind, Nirav, Santhosh, and Ajit. It's a full house. I will highlight key aspects of our financial performance, and then we can open it up for questions. Starting with net revenues, it was 36,880 crores, growth of 8.9% over the prior year, core revenues grew by 10.8% year-on-year. Net interest income was at 30,110 crores for the quarter, growth of 10% over the prior year. Core net interest margin for the quarter was at 3.46% on total assets, 3.65% on interest earning assets. The, this quarter had a seasonal negative impact of 3 to 4 basis points on the interest spread, including our, as well as on liquidity placement and some of our capital that went into the subsidiaries. Other non-interest revenues at 6,770 crores, of which fees and commission was at 8,100, was at 8,120 crores, which grew by 11.2% over prior year, and a sequential growth of 14.8%. FX and derivative income was at 1,280 crores, a growth of 11.2% over prior year, and sequential growth of 11%. Trading and mark-to-market loss for the quarter was at 280 crores, and other miscellaneous income, which includes recoveries, dividends from subs, was at 760 crores. Operating expenses for the quarter was at 15,410 crores, in line with prior quarter. We have added 241 branches this quarter, bringing the total branch count to 9,092. Cost-to-income ratio for the quarter was at 41.8%. Core cost-to-income ratio was at 41.5%. PPOP was at 21,470 crores, growing by 9.8% over the prior year. Core PPOP at 21,750 crores, a growth of 12.1% year-on-year. Moving on to asset quality, we have discussed this in the past, that following the merger with HDFC Limited, the pool of non-performing assets had increased, and the corresponding coverage ratio was low on day one. This is in line with standard industry practice and our standard portfolio construct, as secured loans like wholesale loans carry higher collateral coverage. Over the past five quarters, we've increased the coverage ratio on this merged book and this portfolio from early 40s to about 58%, and the coverage ratio for the overall bank is now at 71%, up from 68% in Q1, bringing it closer to the historical levels. Gross NPA was at 1.36%, an improvement of 3 basis points from the prior quarter, which was at 1.39%. This includes 17 basis points of NPA in the agricultural portfolio. Net NPA was at 0.41%, which is 2 basis points lower than prior quarter. In the retail book, ex of agri,
Moderator: Ladies and gentlemen, good day, and welcome to HDFC Bank Limited Q2 FY '27 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. 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. I now hand the conference over to Mr. Srinivasan Vaidyanathan, Chief Financial Officer, HDFC Bank. Thank you, and over to you, Mr. Vaidyanathan.
Srinivasan Vaidyanathan (HDFC Bank Ltd): Okay, thank you, Nirav. Good evening and a warm welcome to all the participants. Today, we have with us, Sashi, Anup and Kaizad. Without much ado, we'll get the meeting started with Sashi for your opening remarks first, please.
Sashidhar Jagdishan (HDFC Bank Ltd): Thank you, Srini, and thank you, everyone. Let me start with economic environment. The GDP growth in Q1 FY '27 has been better than anticipated and high performance indicators, such as industrial production, strong e-way bill, cargo activity, credit growth reflect sustained momentum. Retail consumption growth has also been robust, with passenger vehicles, two-wheeler sales, all growing upwards of 30 plus percentage. Even consumer durables grew at about 11% year-on-year. This all goes very well for the economy, especially with the festive season underway. The broad policy environment has been supportive of economic activity. Alongside this, measures in the form of credit guarantee support to MSMEs have also been effective. RBI's proactive response through measures like the special FCNR(B) swap window, generated record inflows, about $133 billion and helped stabilize the currency. With that background, let's take a quick look at how the business has been shaping up. We continue to strengthen our liabilities franchise and it has been delivering with great vigor. Deposits increased 18.8% year-on-year on a reported basis, including a 4 percentage point lift from special FCNR(B) window. As you will see in our published deck, CASA grew at about 10.8% on an overall basis. And within this, retail CASA grow growth was about 11.2% year-on-year, compared to 9% year ago, reflecting improving momentum. We added about 1.7 million liability relationships in the second quarter, which is 25% higher than Q1 and 33% higher than the fourth quarter of last year. Building on these newly acquired relationships and deeping our existing relationships will enable the liabilities engine to step up further in the coming days, even as we keep adding new relationships at a rapid pace. The asset side of the balance sheet also continued to get stronger. Total AUM grew 15.3% year-on-year, including a 1.9% impact of FCNR(B) leverage, with SME and retail assets leading the charge. The pace of retail disbursements is accelerating and has crossed 90,000 crores during Q2 FY '27, as against 76,000 crores in Q1 of this year. Growth has been balanced across all lines, whether it's personal loans, the wheels business, gold and agri and other MSME business as well. This is also reflected in the rising growth trend in EOP loan loan book, especially for retail assets, ex-agri. September '26 annual growth is about 11.2%, compared to 9.1% as of June '26 and 7.4% as of March '26. New credit card issuances at 1.4 million have grown by nearly 19% quarter-on-quarter, indicating the expansion of the growth runway. On the MSME and mid-market business, growth momentum is also improving
Sashidhar Jagdishan (HDFC Bank Ltd): The September 26 EOP loan growth has grown 23.5% year-on-year compared to 17 to 18% year-on-year growth levels seen in the last few quarters. Of course, this quarter we had the ECLGS 5.0 scheme that also created significant opportunities we successfully leveraged. Our ECLGS disbursements of 41,000 crores were highest across all banks and as of August 26 when the scheme active achieved targeted levels. What's driving this momentum? Since May of 2026, the entire retail and MSME business and channel supervisory architecture across the country have been focusing on daily operating rigor across front line, credit and operations, and service verticals. All working from one view across products and across all channels to ensure same day same time resolution of delivery of products and services, queries, and complaints as well. The focus has been on digital adoption and straight through processing which is moving up significantly. The turnaround times on product deliveries have come down anywhere between 10 and 15% in a short span of time, while service delivery TATs have come down by 20% during the quarter. Which means the front line can touch more customers within the same work hours. This is reflected in the customer visits per resource per day going up significantly compared to the prior quarter, almost up by about 50%. This has This will have an impact on growth and that's pretty much reflected in the early signs that we've seen on the momentum. For example, the savings accounts per branch per day have gone up by 19% in the in the in the last few months, in between the Q2 and the Q1. Core incremental deposits per branch per day is up 2.3 times from Q1. Sometimes of course, extraordinary one-off outflows may mask this underlying momentum. But at some point in time, this will start to reflect as we move forward. Daily disbursement run rate of key retail and MSME products are up by 10 to 20% versus the prior quarter. Our asset quality remains pristine with GNPA at 1.11%, 13. 13 basis points lower than year-on-year, credit cost remained low at 44 basis points, the risk rates to total assets at 69%. Our industry-leading asset quality met- metrics reflect the top quartile credit quality choices we have consistently made. The bank's well balanced performance translated to ROA of 1.8% and which is being the range that we've been there for a very long time. And quarterly PAT of 19.5 billion, which is a growth of 12.5% 12.7% approximately, if you exclude the trading gains. We have a solid platform to reap the Sorry. On technology, I would like to spend some time. HDFC Bank has always incorporated cutting-edge technologies into its operations, and we are now bringing AI into the heart of how the bank operates. In the quarter gone by, we introduced applications and apps and features in various areas that will help enhance customer experience and protection. In the area of digital safety for customers, we introduced EdSecurities. Very mindful of the fact that a lot of our citizens in the country are being subjected to digital frauds, I think this is going to be a game-changer in terms of cutting-edge tech- technology that we can offer to customers. A unified protection stack and tools like Kavach and Secure Lock. We launched several apps to increase customer convenience including product journeys, AI conversational banking, and AI collections bot that helps customers stay repayment ready. We also strengthened our real-time fraud prevention capabilities as well. As my long innings at HDFC Bank come to an end, I would like to say that it has been an absolute privilege to lead this organization that brings together some of the most brilliant minds and over 200,000 extremely committed and focused professionals. A cutting-edge technology, a solid brand that binds the 100 million customers and a collec-
Sashidhar Jagdishan (HDFC Bank Ltd): yield consistently delivered top-class results for all our stakeholders. While leaving this August organization is an emotional moment for me personally, I take comfort the fact that I'm leaving behind a solid platform which has demonstrated strength and resilience to navigate regulatory embargoes, an unprecedented COVID event, a large complex merger when the economic outlook warranted monetary tightening, and other governance matters of the recent past having been settled completely. A platform where we invested over the past few years in re-architecting and reinforcing our technology from the core to AI layer ready to be harnessed in our product and service deliveries. A distribution strength which will deliver as the vintage of branches mature and optimism stemming from the fact the net interest margins which is which in recent times has borne the brunt of faster repricing of assets and a lag in cost of funds in the down-rate cycle is also positioned for a reversal as the upward rate cycle as we enter the upward rate cycle. This will get further enhanced as the proportion of retail and MSME assets outweigh the proportion of corporate and home loans over a period of time. I'm sure that the bank will keep scaling greater heights which will be a matter of immense pride for all of us. I'll also leave behind the hands of an able team spread across various levels in the organization throughout the country led by a new and an able leader and I welcome Anup at this juncture heartily to the institution as well. I'm Thank you for all the support over all these years. And I wish you and families a very happy Dussehra and festivities. And I'm sure you will continue to provide the same kind of support and affection that all of you have showered on us over these 30 years to the new leadership team and you know, and take it to its rightful glory over a period of time. Thank you so much.
Srinivasan Vaidyanathan (HDFC Bank Ltd): Thank you. Thank you Sashi for that very passionate and and a good recount of the recent and decades that you served the bank. Thank you very much for all of that. Now, we have with us today, Anup. We're delighted to have you, sir, here with us. Welcome, and over to you for for a few sentences that you want to share.
Anup Bagchi (HDFC Bank Ltd): Thank you. Thank you Sashi. Thank you Srini and with that, I'm really grateful to the board for the trust placed in me as MD and CEO. I look forward to working with the board, Chairman, leadership team, and colleagues across the bank and the group to build on the group's very strong foundation. It is indeed a privilege and a responsibility I hold with deep respect. The group's rich legacy, market leadership, and reputation within India's financial ecosystem are exceptional. I thank Sashi for his impactful six-year leadership, successfully navigating the post-pandemic phase, completing the landmark HDFC Limited merger, scaling our branch network, and strengthening the core technology capabilities. The clear long-term goal is to deliver sustainable long-term value for shareholders, employees, and clients. In the near term, I will engage with regulators, customers, shareholders, and other stakeholders to gather insights that will be a key input to our organizational priorities. As macroeconomic dynamics evolve, and AI technology and digital infrastructures accelerate, we'll focus on capturing these opportunities with prudence and discipline. I will soon present a perspective on growth, margins, quality, and productivity built on disciplined capital deployment and a strong execution culture grounded in governance excellence and trust. I look forward to all your support. Over to you, sir.
Srinivasan Vaidyanathan (HDFC Bank Ltd): Thank you thank you, Anup, for that and welcome again hearty welcome again. We look forward to as an organization partnering in delivering all that you drive to. Thank you. With that Neerav let's open it up for question and answers, please.
Moderator: Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone 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 a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. I request to all the participants kindly limit yourself to two questions per participant and rejoin for a follow-up. First question is from the line of Mahrukh Adajania from Nuvama Capital Partners. Please go ahead.
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