HDFC Bank Q2 FY22 Conference Call Highlights

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Economic Outlook:

  • Macro Economic Outlook remained robust in the early parts of Q2 driven by strong high frequency indicators and opening up of the partial state wise lockdowns. Consumer durables, production goods reported a healthy growth.
  • Good monsoon, employment back to pre-covid levels, Enquiry for loans is increasing on monthly basis, this shows a positive stance for the overall outlook of the economy.
  • Focus on expanding the geographical and the density reach.
  • Overall auto loan disbursements recorded quite a good growth at 36% YoY value wise, while domestic sales of industry de-grew by 37%  in the month of September 21 Y-o-Y. Growth was contributed by 2W, PV and CV. However, Tractor sales were stronger In the quarter. Robust monsoon and Festive season to drive more growth in this sector in the  second half of the year.
  • Construction and Tractor equipment’s recorded a strong growth of 20% Y-o-Y and 5.6% Q-o-Q.
  • Transport financing achieved a growth of 5.2% Q-o-Q. HDFC bank has a target to have a market share of 25-30% to OEM.
  • Wholesale SME sector recorded a growth of 33% Y-o-Y and 7.5% Q-o-Q. At the start of the financial year the Target was to reach 575 districts, however the same has been achieved in the 6 months only. 50% Y-o-Y growth can be achievable in this segment.
  • Dukandaar program has been launched to provide finance to small shopkeepers and street hawkers.
  • Program of “ Haar Gaon Hamara “ is on track to achieve 1 lakh touchpoints.
  • While the pandemic situation and vaccination drive are expected to be critical factors for economic recovery, it is expected that India will be one of the fastest growing economies in the world in FY22 .

New technological Growth Opportunities

  • Early adopters of analytics to assess risk credit decisions and also the capacity of the borrower.
  • Inhouse model are developed to assess the credit worthiness of the new borrowers.
  • Credit innovation lab has been introduced to test new products, new customers, new delivery channels,  for micro lending,Consumer lending, SME, wholesale lending, for this they have partnered with various technological bankers who are expertise in such fields which will help to pace the growth. Focus will also be to extend credit base to partners customers using these models resulting in increasing the customer base of the bank.
  • First amongst the private sector banks to host applications on cloud by using hybrid multi-cloud strategy. This will help bank to enable highly scalable platforms.
  • Website traffic visit was 82  million in the month of September 2021. Over 60% of the visits were through mobile devices.
  • Balance sheet Highlights:
  • Bank’s Balance sheet remains resilient. Liquidity remains strong with Average Liquidity Coverage Ratio at 123% in Q2.
  • While Capital Adequacy Ratio was at 20%, almost 8.925% more than RBI’s Regulatory Minimum Level of 11.075%. Also, CET1 Ratio at 17.4% and TI ratio at 18.75%.
  • The floating and contingent provisions totalling to Rs.7,700 Cr built, helps in de risking the balance sheet.
  • Bank continues to originate loans in conformity with proven credit models. 
  • 432 new branches has been opened in the last 18 momths and 400 branches are in the pipeline.


  • During Q2 FY22, Bank opened around all time high of 24 Lakh new Liability relationship accounts, increase of 31% over prior year and 45% growth over previous quarter.
  • Total deposits grew by 4.5% Q-o-Q and 14.4%Y-o-Y sequentially led by strong momentum in CASA deposits. CASA deposits grew by 7.6%.
  • 61,000 crores of net growth in deposits.
  • Initiatives like Personalized link for account opening for each corporate, a unique bulk account opening process for large corporates were launched, which make it very easy to open a large number of accounts, thereby reducing manual intervention and offering cost optimization


  • Total Advances grew sequentially by 4.5%.Q-o-Q and 15% Y-o-Y with substantial upswing in retail and Commercial and rural assets.
  • 51,000 crores of net growth In Advances in the quarter.
  • Retail assets grew by 5.4% and Commercial and rural assets grew by 7.4%.

Retail Assets:

  • Momentum picked up during Q2 and will continue its pace in Q3 and Q4 as well. Demand resolutions was at 97.5% in Sept 21 quarter, almost back to pre covid levels of 98%.
  • Retail asset book  4.5% growth Q-o-Q and around 11.5% Y-o-Y.
  • Demand outlook has witnessed steady improvement and demand resolutions is at 97.5% which is almost back to pre covid levels. Demand outlook would be better than pre-covid levels.
  • Bounce resolution is also seeing gradual improvements.
  • Rs.500 Cr of stressed assets were sold during the Sep-21 quarter.Bank does not expect to stop collection efficiency as it did during the second wave as the vaccination drive of its staff is picking up space.
  • Incremental disbursements has seen a growth of 70% Y-o-Y and 51% Q-o-Q sequential growth. 4 wheeler loans and mortgage loans were the major contributors to this incremental disbursements growth

Wholesale Assets:

  • In the wholesale book, one-third is long-term, while two-third is short-term.
  • Wholesale business across Large, Mid and SME performed at pre-COVID level. Segment-wise growth witnessed are:
    • Mid corporates: 29% Y-o-Y and 5.6% Q-o-Q
    • Wholesale SME: Around 33% Y-o-Y and 7.5% Q-o-Q
    • Retail SME : 53% Q-o-Q  
  • Growth in mid-sized corporates and SME was particularly robust, aided by new to bank customer acquisition, deeper geographical penetration, and higher utilization.

Wholesale SME Segment:

  • No Sector with more than 95% Exposure.
    • Wholesale SME segment has seen strong growth across regions and geographies.
    • Moderate capex formation seen in exports, consumer durables, packing and PLI identified sectors.
    • Economic activity has started gaining momentum for large corporates. Infra, pharma, metals commodities, food process, auto etc have seen better activity rates.
  • The bank continued its progress in gaining market share, due to diligent adherence of sales process.

Commercial and Rural Business:

  • Commercial and Rural Assets Registered a sequential growth of 7.4% Q-o-Q and 27.4% growth Y-o-Y.
  • CASA ratio for this segment remained strong at 21% Y-o-Y and 4.6% Q-o-Q.
  • Rural banking business has 12% growth Q-o-Q because of strong customer acqisitions and deeper geographical penetration of 1 lakh villages. Target to reach 1 lakh more villages in the next 18-24 months.
  • Business remains on track to achieve a growth of 20-25% growth for the full year.

ECLGS Portfolio :

Detailed quantitative analysis of the data to assess the potential risk associated with this portfolio group. This assessment has been carried out by considering several parameters like individuals spending patterns, repayment patterns, loan overdue status.

Credit Cards:

  • Bank is continuing investments in cards to enhance the product. Electronics, online spends, groceries focus areas from summer treats spend program.
  • Incremental share was almost 55% in the credit card spend In this quarter.
  • 4,16,000 credit cards has been issued in the last 5 weeks of the quarter. And expect the momentum to sustain the same growth over the second half of the year.
  • 36% Y-o-Y growth has been recorded in credit card spend and sequential quarterly growth of 27%.  Banks customers contributed to almost 55% of the total credit card spending.
  • 3.5Mn Easy EMI Loan Customers.
  • Bank has 2.5 million acceptance points as at the end of September 2021, Registering a Y-o-Y growth of 27%.
  • 42% growth has been seen in the card spending in the early 10 days  of October owing to Festive season.
  • UPI Transaction has sequentially grown by 35% to 89 crores transactions and 2.2 times Y-o-Y growth. P to P transaction market is 10% and P to M transaction market share is 15%.
  • Mobile banking transactions in the first half has seen a growth of 66% growth Y-o-Y.

Asset Quality:

  • The bank has completed the asset classification of borrower accounts as directed by RBI. The Bank had estimated potential NPAs, which were identified and reported during the previous two quarters on a pro forma basis. These pro forma basis NPAs have now being reported as NPAs.
    • bank holds provisions as of March 31, 2021, against the potential impact of COVID-19, based on the information available at this point in time.
  • The core annualized slippage ratio for Q2 FY22 is at 1.80% (Gross slippage at Rs.5,300 Cr) Write-offs were around Rs.2,600 Cr. Sale of NPA was 500 crores.
    • GNPA ratio was at 1.35% of gross advances in Q2 FY22 compared to 1.37% Y-o-Y and 1.47%
    • NNPA at 0.4% of Net advances.
    • Provision coverage ratio was 74% in Sep-21.
    • Pre-Provisioning Operating profit at 15,807 crores up 14% Y-o-Y.
    • Cost to Income ratio was at 37% in Sept 21 quarter.
  • The Restructuring under the RBI resolution framework for COVID-19 was approximately 152 basis points as at Sept 2021.
  • Core specific loan loss provisions for the quarter 2,286 crores. Total provisions reported were 3,925 crores. Additional contingent provisions of across 1,200 in current quarter. Specific PCR as 71%.
  • Contingent provisions towards loans of Rs.7,700 Cr, floating provisions at 1,415 crores and 5,800 towards general provisions. As per the bank, the contingent provisions are precautionary, not anticipatory, given that not enough information is available on the economic impact of the second covid wave.
  • Credit cost at 0.76 for the quarter vs 1.46% Q-o-Q. Annualised credit cost of 1.3% which includes impact of contingent  provisions of 40 Basis points.
  • Based on the current situation of the second covid wave, stress tests are being undertaken. In case of a grave situation, the bank expects assistance from regulators and government as extended last time.

HDB Financial Services:

  • Throughout the past year, HDB Financial Services has made provisions and taken elevated credit costs, while ensuring the new business written was through tighter credit filters.
  • Company’s Business and collection efficiency reach at pre-covid level in Q1FY22.
  • Loan Book of 60,008 crores as at the end of Sept2021 quarter. 70% of the loan book is secured lending.
  • Disbursement in Q2FY22 was 8000 crores, up 93% Q-o-Q and 27% Y-o-Y.
  • Cost to revenue was at 35.4%. PAT was at 192 crores vs 89 crores Q-o-Q.
  • GNPA stood at 6.1% in Sep-21 vs 7.8% in June-21.
  • HDB Financial Services has adequate liquidity. LCR is at 157% and is able to borrow at attractive rates, cost of funds at 5.96%, coupled with strong capital position of 19.8%, and are well positioned for market opportunity.

HDFC Securities

  • 213 branches across 147 cities and towns.
  • Revenue of 489 crores, 42% growth Y-o-Y.
  • PAT 240 crores, 44% growth Y-o-Y.
  • Client base of 3.5mn customers.

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