HDFC Bank Ltd (HDB) Q2 2025 Earnings Call Highlights: Strong Profit Growth Amidst Competitive ...

GuruFocus News
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In This Article:

  • Deposit Growth: Approximately 15% year-on-year growth.

  • Retail Branch Contribution to Deposits: 84% of total deposits.

  • Advances Under Management Growth: 10.2% year-on-year growth.

  • Net Interest Margin (NIM): Stable at 3.46%.

  • Gross NPA: Stable at 1.4%.

  • Gross Slippages: 1.2%, improved from the previous year.

  • Profit After Tax: INR 16,800 crores, with an adjusted growth rate of 17%.

Release Date: October 19, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • HDFC Bank Ltd (NYSE:HDB) reported a healthy deposit growth of around 15% year on year, with retail branches contributing 84% of total deposits.

  • The bank's gross NPA remained stable at about 1.4%, with gross slippages improving to 1.2% compared to the previous year.

  • Profit after tax grew by an adjusted rate of 17%, reflecting strong financial performance after accounting for bond gains and tax adjustments.

  • The bank's fee income grew by 17% year on year, driven by strong growth in third-party and distribution products.

  • HDFC Bank Ltd (NYSE:HDB) is strategically positioning itself to capture future growth opportunities by accelerating the reduction of its loan-to-deposit ratio.

Negative Points

  • Deposit rates remain elevated and sticky, posing a challenge in the current competitive environment.

  • The bank's credit growth is expected to be slower than the system in FY25, potentially impacting its market position.

  • There is uncertainty regarding the impact of RBI's draft circular on lending overlaps with group entities, which could affect HDB Financial's listing plans.

  • The liquidity coverage ratio has increased to 128%, which may temporarily depress margins due to higher high-quality liquid assets.

  • The bank faces challenges in pricing larger ticket-sized loans due to stubbornly low credit spreads, affecting its loan growth strategy.

Q & A Highlights

Q: Can you explain the strong fee growth and the impact of securitization on fees? Also, what about the movement of contingent provisions? A: Fees grew by 17% year on year, driven by strong growth in third-party and distribution products. Securitization does not impact fees as the excess spread is amortized over the life of the loan. Regarding contingent provisions, there was a release due to regulatory clarifications on AIF provisions, which allowed for a reduction in the required reserve.

Q: How will the RBI's draft circular on lending with group entities impact HDB Financial, and will it affect its listing plans? A: The draft circular is still under review, with comments due by November 20. HDB Financial operates under RBI regulations and follows similar policies to the bank, ensuring no arbitrage. The IPO process for HDB Financial has begun, with a listing required by September 2025, but specifics cannot be discussed due to publicity guidelines.

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