Lower Provisions, Improving Asset Quality helps HDFC Bank to post 18% rise in profit after tax | HDFC Bank Q3FY22 Conference Call Highlights

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Economic and Business Outlook:

  • Effects of the Third wave covid wave is not yet clear. Bank is cautious regarding the Macro factors and is on watchout for next few weeks regarding any uncertainty.
  • Bank is confident of coming out of this strongly on the back of healthy Balance Sheet, robust management team and by applying the learnings from past events.
  • Growth is accelerating by leveraging on people product distribution and technology.
  • Economic Outlook remained robust in the early parts of Q3 driven by strong high-frequency indicators and a better than expected festive season.
  • Good festive season, 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 density reach.
  • Overall auto loan disbursements recorded quite a growth at 8% YoY value wise, Growth was contributed by 2W, PV and CV. However, Tractor sales were stronger In the quarter. Robust monsoon and Festive season to be the enabler for growth in this sector.
  • Loan Against Property achieved a growth of 16% Y-o-Y.
  • 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 the cloud by using hybrid multi-cloud strategy. This will help bank to enable highly scalable platforms.
  • Bank has initiated a streamlined modern customer experience of allowing access to customers to content across channels.
  • Fully revamped payment offering app to be soon introduced to the customers.
  • Capacity for UPI Transactions has been tripled.
  • Net banking and mobile banking app has been developed to handle 90,000 customers at a time.
  • 4 data centers are been introduced in Bangalore and Mumbai.
  • VR automation implementation is undergoing,
  • 80% of new loans go through digital scorecards and are handled digitally.
  • Website traffic visit was 245 million in the quarter of Q3 FY2022. Over 60% of the visits were through mobile devices. 31 million unique customers per month of average on the company’s website.

Balance sheet highlights:

  • Bank’s Balance sheet remains resilient. Liquidity remains strong with Average Liquidity Coverage Ratio at 123% in Q3 FY22.
  • While Capital Adequacy Ratio was at 19.5%, against RBI’s Regulatory Minimum Level of 11.075%. Also, CET1 Ratio at 17.4% and TI ratio at 17.10%.
  • 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. 
  • Return on Assets at 2.24% in the December 2021 quarter.
  • 93 new branches has been opened in the last quarter, 525 branches were added in the past 21 months.


  • During Q3 FY22, Bank opened around all time high of 24 Lakh new Liability relationship accounts, 64 lakh new liability relationships in the 9 months FY 2022. increase of 29% over prior year.
  • Total deposits grew by 3% Q-o-Q and 14%Y-o-Y led by strong momentum in CASA deposits. CASA deposits grew by 25% YoY.
  • 14.46L crores of total deposits as at the end of Dec 2021 quarter.
  • 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.
  • Capital Adequacy ratio at 19.5%. CET 1 ratio at 17.1% as at the end of dec 2021 quarter.
  • LCR strong at 123% In the quarter.


  • Bank raised 1.87 lakh crores in the bond market in the quarter.
  • Able to Maintain the rank in the top 3 ranking in the bond market.


  • Total Advances grew sequentially by 5%.Q-o-Q and 16% Y-o-Y with substantial upswing in retail and Commercial and rural assets.
  • 62,000 crores of net growth In Advances in the quarter Sequentially and 1,79,000 crores YoY.
  • Retail assets degrew by 10%YoY and wholesale advances grew by 45%YoY.

Retail Assets:

  • Momentum picked up during Q2 and will continue its pace in Q3 and Q4 as well. Demand resolutions was at 98% in Dec 21 quarter, almost back to pre covid levels of 98%.
  • Retail asset book 5% growth Q-o-Q and around 10% degrowth compared to 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.
  • 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.

Commercial and Rural Business:

  • Commercial and Rural Assets Registered a sequential growth of 6.1% Q-o-Q and 29.4% 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 acquisitions 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.
  • 9.5 lakhs credit cards has been issued in the quarter. And expect the momentum to sustain the same growth over the second half of the year.13.7 lakhs cards has been issued since August 2021, time when ban was been lifted.
  • 24% Y-o-Y growth has been recorded in credit card spend and Debit cards spend growth of 14%YoY.  Banks customers contributed to almost 55% of the total credit card spending.
  • MOU has been signed with two large payments bank for distributing certain products to help reach more places in semi urban and rural areas.
  • Consumer finance business has one lakh plus active customer base.
  • 5Mn Easy EMI Loan Customers.
  • Bank has 2.85 million acceptance points as at the end of December  2021, Registering a Y-o-Y growth of 35%. 300 million transactions has been process per month.

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.
  • The Bank held floating provisions of 1,451 crore and contingent provisions of 8,636 crore as on December 31, 2021. Total provisions (comprising specific, floating, contingent and general provisions) were 172% of the gross non-performing loans as on December 31, 2021.
    • GNPA ratio was at 1.26% of gross advances in Q3 FY22 compared to 1.38% Y-o-Y and 1.35% in Q2 FY22.
    • NNPA at 0.37% of Net advances.
    • Provision coverage ratio was 74% in Sep-21.
    • Pre-Provisioning Operating profit at 16,776 crores up 10% Y-o-Y. at 15,186 crores in Q3 FY21
    • Cost to Income ratio was at 37% in Dec 21 quarter.
  • The Restructuring under the RBI resolution framework for COVID-19 was approximately 137 basis points as at Dec 2021. 40% of the restructured are secured and with good CIBIL score. Amongst unsecured, 2/3 are salaried customers.
  • Most of the customers to resume their payments in the upcoming months and improving the asset quality of the banks. Impact of restructuring on GNPA is 10 to 20 basis points.
  • Core specific loan loss provisions for the quarter 1,821 crores against 2,486 crores YoY. Total provisions reported were 2,994crores. Additional contingent provisions of across 900 crores in current quarter. Specific PCR as 71%. No technical write offs.
  • Contingent provisions towards loans were 8600 crores at the end of the quarter.
  • Provisions and contingencies for the quarter ended December 31, 2021 were ₹ 2,994.0 crore (consisting of specific loan loss provisions of ₹ 1,820.6 crore and general and other provisions of ₹ 1,173.4 crore) as against total provisions of ₹ 3,414.1 crore for the quarter ended December 31, 2020. Total provisions for the current quarter included contingent provisions of approximately ₹ 900 crore.
  • Credit cost at 0.94 for the quarter vs 1.30% Y-o-Y. Annualised credit cost of 94Bps which includes impact of contingent  provisions of 30 Basis points.
  • Loan loss ratio is at 57 basis points for the quarter vs 76 basis points QoQ.
  • Agri slippages contributed approx. 1,000 crores in absolute basis.
  • Recoveries and upgrades were about 2400 crores or 25Bps.
  • Write offs during the quarter are 2,200 crores or 23bps.
  • Cheque bounce rate improved in December across most of the retail products. Back to better than pre pandemic levels. January data shows continuous improvements.
  • Demand resolution at 97-98% for most of the products back to pre covid levels.
  • Based on the current situation of the third 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 itself. As on December 31, 2021, HDBFSL had 1,328 branches across 965 cities / towns.
  • Loan Book of 60,478 crores as at the end of Dec 2021 quarter. 74% of the loan book is secured lending.
  • Gross Stage 3 stood at 6.05% of Gross loans in Dec-21. 80% of the stage 3 book is secured of which Provision Coverage Ratio is 41% as at Dec 2021 end. 20% of the unsecured book had a PCR of 84%.
  • Capital Adequacy Ratio at 20.3%.
  • Net Revenues were at 1,982 crores a growth of 15%
  • HDB Financial Services has adequate liquidity. LCR is at 222% and is able to borrow at attractive rates, cost of funds at 5.90%, coupled with strong capital position of 20.3%, and are well positioned for market opportunity.
  • Profit After Tax at 304 crores in Q3 FY22 compared to a loss of 146 crores YoY and a profit of 192 crores in Q2 FY22.
  • Company is on path of healthy growth in upcoming quarters subject to any unexpected Covid Wave.

HDFC Securities

  • 213 branches across 147 cities and towns.
  • Revenue of 536 crores, 58% growth Y-o-Y. It was 339 crores in Q3 FY21.
  • PAT 258 crores, 58% growth Y-o-Y.
  • Client base of 3.4mn customers as at the end of Dec 2021 year an increase of 30% YoY.

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