Key insights from HDFC bank's Q2FY24 earnings conference call

NIM Impact and Recovery: HDFC Bank acknowledged the impact on Net Interest Margins (NIMs) due to certain one-offs for added liquidity and merger management. The bank expects to recover some lost NIMs as high-cost bonds are replaced with deposits and the loan mix changes.


eHDFC Restructuring: Non-individual loans from eHDFC are now classified as wholesale loans. Some restructured non-individual eHDFC accounts, though current, are classified as NPA. The bank anticipates minimal incremental issues from this book.


Construction Finance: The introduction of a construction finance book is expected to boost top-line and NIMs.


Net-Worth Adjustments: Adjustments to net-worth, primarily due to timing differences, will accrue over time.


Funding Confidence: The bank is confident about funding availability, with a focus on execution. A significant portion of deposits this quarter is retail, and credit growth remains strong.


Synergy Benefits: The bank considers the merger's synergy benefits as a starting point. Digital initiatives are set to enhance the realization of these benefits.


Business Momentum: The merger quarter witnessed strong business momentum with record logins and disbursements reaching INR 480 billion.


Deposit Growth Focus: HDFC Bank emphasizes deposit growth through branch-led and relationship-based strategies, with a focus on retail current accounts.


Loan Growth: The bank reported a 4.9% QoQ loan growth, driven by retail, commercial & rural banking, and corporate lending.


NIMs: Core NIMs for the quarter were reported at 3.65% on total assets and 3.85% on interest-earning assets. Reported NIMs, after accounting for debt-funded costs and merger management, stood at 3.4% and 3.6%, respectively.



Asset Quality:

GNPL Movements: Slippages amounted to INR 78 billion, with INR 45 billion in recoveries/upgrades and INR 32.5 billion in write-offs. No sale to Asset Reconstruction Companies (ARCs) occurred.


Provisions: Loan loss provisions during the quarter reached INR 25 billion, with a credit cost of 49bps. Contingent and floating provisions now stand at INR 156 billion, while general provisions are at INR 101 billion.



HDB Financial Performance:

Loan Momentum: HDB Financial continued its loan momentum, seeing a 6% QoQ and 23% YoY growth. Disbursements across all three business segments demonstrated robust growth of over 40%.


Distribution Network: The company expanded its distribution network by adding 21 branches during the quarter.


Asset Quality: Stage-3 (NPA) stood at 2.38% versus 2.48% QoQ.



Other Highlights:

Stable Fee Income: Fee income in Q2FY24 post-merger showed no significant one-offs and is expected to sustain.


Liquidity Coverage Ratio (LCR): The merged entity's average LCR stood at around 121%, adjusting for ICRR.

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