HDFC Bank Ltd (HDB) Q1 2026 Earnings Call Highlights: Strong Deposit Growth and Strategic Moves ...
Average Advances Growth: Slowed to 7% last year, improved to 8% in the recent quarter.
Credit Deposit Ratio: Reduced from 110% to 95% post-merger.
Interim Dividend: INR5 per share announced.
Bonus Share Issue: First ever, in the ratio of one is to one.
Warning! GuruFocus has detected 3 Warning Signs with HDB.
Release Date: July 19, 2025
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 growth in average deposits at a pace of 16% year on year, continuing to gain market share.
The bank successfully reduced its credit deposit ratio from 110% to about 95%, aligning with strategic objectives.
Asset quality remains strong, positioning the bank well for growth in both assets and deposits.
The bank announced an interim dividend of INR5 per share and recommended a bonus share issue in the ratio of one is to one.
HDFC Bank Ltd (NYSE:HDB) is optimistic about growth prospects, with expectations of improved loan growth driven by domestic demand and policy support.
Negative Points
The bank experienced a slowdown in average advances growth to about 7% last year, reflecting a cautious approach.
Margins are under pressure due to the lead-lag impact of policy rate changes, with deposits taking longer to reprice compared to loans.
The bank's CASA ratio saw a decline post-merger with HDFC Limited, impacting the low-cost deposit franchise.
Credit costs have increased slightly from 29 to 41 basis points, with expectations of normalization over time.
Fee income was subdued in the quarter, particularly in third-party distribution fees, impacting overall revenue growth.
Q & A Highlights
Q: Can you explain the impact of rate cuts on your EBLR book and what will trigger growth from current levels? A: The repricing of the EBLR book takes 1 to 3 months, with some loans resetting monthly and others quarterly. Growth is expected to be driven by monetary and fiscal policy support, low inflation, and the upcoming festive season, which should boost consumption demand in both urban and rural areas. (Srinivasan Vaidyanathan, CFO)
Q: How are the portfolios allocated to different business heads after the CRB loan classification regrouping? A: The respective product heads remain the same, reporting into a different hierarchy. The reclassification involves moving some portfolios like the small and mid-market to corporate, and some agribook and SLA to retail. (Srinivasan Vaidyanathan, CFO)
Q: What is the outlook on CASA deposits and potential conflicts with HDB's customer base? A: CASA deposits were impacted by the merger with HDFC Limited and the focus on reducing the credit deposit ratio. Going forward, the bank aims to enhance customer engagement and experience to regain CASA growth. HDB caters to a different customer segment, minimizing overlap with HDFC Bank's customer base. (Sashidhar Jagdishan, CEO)
Q: Can you provide insights on the increase in employee numbers and the focus on specific growth segments? A: The increase in employees is due to branch openings and strengthening the sales force. Growth is expected in rural segments, MSME, corporate, and urban consumption, especially with the festive season approaching. (Sashidhar Jagdishan, CEO)
Q: What is the strategy for managing credit costs and asset quality? A: Credit costs remain benign, with no immediate stress visible. The bank maintains a strong asset quality, with retail segment NPAs stable at 82 basis points. The focus is on building resilience for the future through contingent provisions. (Srinivasan Vaidyanathan, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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