Ladies and gentlemen, good day and welcome to HDFC Bank Limited Q4 FY 2022 earnings conference call on the financial results presented by the management of HDFC Bank. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after a brief commentary by the management. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Srinivasan Vaidyanathan, Chief Financial Officer, HDFC Bank. Thank you, and over to you, sir. Okay. Thank you, Rutuja. Good evening, and a warm welcome to all the participants. Let's start by the current state results to mention as we start. The saga, if it permits, we can say is hopefully behind us, at least for now. We cannot forget the deeds of the people who dedicated their lives in the service of the bank during the year, and thousands of others who single-mindedly were in the service of the customers through all this. Same time last year, we were in unimaginable crisis. Most, if not all, of the restrictions are behind. Thanks to our team, and equally important, thanks to you all for being with us through this to get us here. Let's start with providing the context on the environment and policies during the quarter, which are manifesting signs of speedy recovery. We'll jump over the basic details of GST collections, PMI, et cetera, et cetera, that shows growth, trend growth. Around the mid- part of the current quarter, the recent quarter, geopolitical tensions raised across the world, which have given rise to global uncertainties. This has impacted the global economies profoundly, which is evident from the surge in crude oil price, major commodity prices, and then further global supply chain disruptions in recent weeks. CPI inflation is on rising trend due to higher food, crude oil, and LPG prices. The RBI kept its monetary stance unchanged. However, it is expected that this accommodative stance shall be switched to a neutral stance in the next MPC. We also saw the introduction of SDF and the RBI reverting to a pre-pandemic policy corridor of 50 basis points with a lower bound SDF and upper bound MSF. We are confident that the policy measures are supportive and at this time provides impetus for continued growth. Let's go through four key themes at a high level. First theme is about the investment in capital, investment in human capital branches, aided with the best-in-class technology. During the quarter, we added 7,167 people. For the year, we added 21,486 people, which is an all-time high to get the people ahead on the productivity curve as economy accelerates. During the quarter, we added 563 branches. For the year, we have added 734 branches, which is about two branch per day. Further, about 150 branches are in the pipeline to open within a short period of time. The bank is accelerating the technology and digital transformation agenda. We continue to stay invested in creating seamless customer experience across digital touch points. Significant inroads are being made through initiatives such as customer experience hub, PayZapp, which is a revamped payment and wallet experience and refreshed offerings for MSME and wealth management customer base. Our focused digital and enterprise factory approach is enabling the building of our own capabilities to create, to co-create tech IP. Initiatives such as DR resiliency and our hybrid cloud strategy continue to fortify our IT infrastructure and architecture backbone. Our progress over the past year has resulted in lifting of the restrictions on the new card acquisitions in August 2021, followed by the removal of the embargo on Digital 2.0 program in March 2022. We have taken multiple steps to ensure a robust, scalable, and secure technology setup is strengthened even further. We continue to aggressively monitor the progress and are now fully geared up to launch the programs under various digital umbrellas over the next few quarters. In Q4, we received a total of 234 million visits on our website, averaging 29 million unique customers per month with a year-on-year growth of around 8%. As per analysis, we had 35%-75% more visits on our website than a public or private sector peer. Close to 67% of the visits were through mobile device, indicating the mobile-centricity of the footfalls. The second theme, let's talk about the business growth that continues to gain momentum across various products and segments driven through relationship management and enhanced digital offering. Total advances were INR 13,68,821 crore, which grew by 8.6% sequentially and 20.8% over prior year. This is an addition of approximately INR 1,08,000 crore during the quarter and INR 2,36,000 crore since prior year. Commercial and rural banking businesses grew 10% over the prior quarter and 30% over prior year. As you know, this segment is a significant contributor of PSL assets. On retail, we witnessed a healthy growth in disbursements across products, resulting in asset growth of 5% over prior quarter and 15% over prior year. This segment is gaining momentum. It could have done even better if the vehicle segment was not impacted due to supply chain issues. Wholesale business too showed a sharp rebound across sectors, growing 11.6% over prior quarter and 17.4% over prior year. Franchise building continues to remain robust with our persistent focus on granular deposits and bringing in new customer relationships, thereby further centering our position to gain market share. We opened about 2.4 million new liability relationships during the quarter and 8.7 million new liability relationships during the year, exhibiting a phenomenal growth of 25% over prior year, thus enabling the broad basing and deepening relationships. Total deposits amounted to INR 15, 59,000 crore, which is up 16.8% over prior year. This is an addition of approximately INR 1,13,000 crore in the quarter and INR 2,24,000 crore since prior year. CASA deposits recorded a strong growth of 22% year-on-year, ending the quarter at INR 7,51,000 crore with a CASA ratio of 38%. Retail constituted over 80% of total deposits. The bank had 16.5 million cards as of March 2022. During the quarter, we have issued 8.2 lakh cards. Further, we have issued 21.8 lakh cards since lifting of the embargo in the seven months of this financial year. Card spends have grown by 28% over prior year. The bank has 3 million acceptance points as of March, with a year-on-year growth of 37%. Acquiring business volumes, including UPI and direct pay, grew 30% over prior year. Now let's get on to the third one about the market share. Our market share in advances has improved from 10% to 11% during the year. Our incremental share of credit growth in the economy was at 24%. We have demonstrated in the past that our rate of growth is not inhibited by our market share. To further illustrate, over the past five years, despite the market share improving from 7% to 11%, we have sustained our advances growth to around an annual 20% rate. In deposit mobilization, our market share improved from 8.8% to 9.5% during the year. On the fourth item, relating to the strong balance sheet and set for capitalizing on market opportunities for growth. The balance sheet remains resilient. Capital adequacy ratio is at 18.9%, with the CET1 at 16.7%. Liquidity is consistently strong. LCR average for the quarter was 112%. GNPA ratio is at 1.17%. We continue to originate loans in conformity with our proven credit models. Floating and contingent provisions aggregating to INR 11,000 crore helps in de-risking the balance sheet and positioning it for growth. Let's start with net revenues. Net revenues at INR 26,510 crore. Net revenues excluding trading income grew by 10.4% over prior year and 3.8% over prior quarter, driven by an advances growth of 20.8% and deposits growth of 16.8%. Net interest income for the quarter at INR 18,873 crore, which is at 71% of net revenues, grew by 10.2% over prior year and 2.3% over prior quarter. For the quarter, the core net interest margin was at 4%. Based on interest- earning assets, the NIM was at 4.2%. For the full year, core net interest margin was at 4.1% and based on interest- earning assets, it was at 4.3%. Our asset mix has shifted towards higher- rated segments during the COVID period, albeit at lower yields. As a result, NII growth has been lower, but with a corresponding offset in credit costs, which are lower than the historical average. Further, looking through another lens, our NII to credit RWA, credit-risk-weighted asset, has improved over pre-COVID levels by approximately 20 basis points and is currently around 7%, representing our optimized pricing for higher rated segment volumes. Moving on to details of other income. Total other income was at INR 7,637 crores. Excluding trading income, total other income grew by 10.6% over prior year and by 7.6% over prior quarter. Fees and commission income constituting 3/4 of other income was at INR 5,630 crore and grew by 12.1% over prior year and 10.9% over prior quarter. Retail constitutes approximately 94% of fees. Bank's retail franchise delivered well on fees and commission income commensurate with the healthy assets growth registered during the quarter. Fees on payment products remain subdued due to lower risk-related fees, over-limit fees, late payment fees, et cetera, reflective of our cautious approach to card-based lending as well as customer preferences. However, card sales and interchange have come out robustly. In all, this had an impact of about 4% on fees. The fixed and derivatives income was at INR 892 crore, was higher by 1% compared to prior year of INR 879 crore. Trading was at -INR 40 crore for the quarter. Prior year was at INR 655 crore and prior quarter was at INR 1,046 crore, which were opportunistic gains from our investment portfolio. Other miscellaneous income of INR 1,155 crore includes recoveries from written-off accounts and dividends from subsidiaries. Moving on to operating expenses for the quarter were at INR 10,153 crore, an increase of 10.6% over prior year. During the quarter, I mentioned about the 563 branches that were added, and for the year, 734 branches and 2,043 ATMs, taking the total network strength to 6,342 branches, 18,130 ATMs, and 15,046 business correspondents manage the common service centers. We are further expanding our distribution network through partnership with Airtel Payments Bank, India Post Payments Bank, and Manipal Business Solutions, who have approximately 60 million, 50 million, 13 million customers under their ambit respectively and can provide access to that. Cost- to- income ratio for the quarter was at 38%. With stepped up investments in technology and retail segment continuing to pick up, we anticipate the spend levels to increase driven by volumes, sales and promotional activities and discretionary spends. Moving on to PPOP, the pre-provision operating profit was at INR 16,357 crore. Excluding trading income, PPOP grew by 10.2% year-on-year and 4.2% sequentially. Coming to the asset quality, the GNPA ratio was at 1.17% as compared to 1.26% in the prior quarter, and 1.32% prior year. It is pertinent to note that this of this, about 19 basis points are standard. These are included by us in NPA, but one of the other facility of the borrower is NPA. Net NPA ratio was at 0.32, preceding quarter was at 0.37. The annualized slippage ratio for the current quarter is at approximately 1.3%, about INR 4,000 crore as against 1.6% in the prior quarter. During the quarter, recoveries and upgrades were INR 2,100 crore or approximately 18 basis points. Write-offs in the quarter were 1,700 crore or approximately 16 basis points. These basis points I mentioned are annualized basis points. The restructuring under the RBI resolution framework for COVID-19 as of March end stands at 114 basis points or INR 15,700 crore. This is at a borrower level and includes approximately 17 basis points of facilities of the same borrower, which are not restructured but included here. Of the total COVID restructured standard book, approximately 37% pertains to customers who have chosen to restructure only one of their facility. Of the remaining 63%, 41% is secured and 59% is unsecured. Of the unsecured portion, 84% have good CIBIL score or were non-delinquent at the time of restructuring. This leaves us within manageable range with a maximum potential impact on our GNPA ratio of 10-20 basis points in any given quarter, as we have mentioned it previously. Provisions. The core specific loan loss provision for the quarter were at INR 1,778 crores as against INR 1,821 crores during the prior quarter and INR 3,153 crores for the prior year. Total provisions reported were INR 3,312 crores as against INR 2,994 crores during the prior quarter and INR 4,694 crores for the prior year. Total provisions in the current quarter included additional contingent provision of approximately INR 1,000 crore. The specific provision coverage ratio was at 73%. There are no technical write-offs. Our head office and branch books are fully integrated. At the end of current quarter, contingent provisions towards loans were approximately INR 9,700 crore. The bank's floating provisions remained at INR 1,450 crore, and general provisions were at INR 6,600 crore. As on March end, total provisions comprising specific, floating, contingent and general provisions were 182% of gross non-performing loans. This is in addition to security held as collateral in several of the cases. Looking at through another lens, floating and contingent and general provisions were 1.28% of gross advances as of March quarter end. Now, coming to credit cost ratios, the core credit cost ratio, that is the specific loan loss ratio, is at 52 basis points for the quarter, as against 57 basis points for prior quarter and 110 basis points for prior year. Recoveries which are recorded as miscellaneous income amount to 26 basis points of gross advances for the quarter, as against 25 basis points for both prior quarter and prior year. The total annualized credit cost for the quarter was at 96 basis points, which includes an impact of contingent provision of approximately 30 basis points. Prior year was at 1.164% and prior quarter was at 0.94%. The reported profit before tax at INR 13,045 crore grew by 20.3% over prior year. Net profit for the quarter at INR 10,055 crores grew by 22.8% over prior year. Net profit for the year ended March 2022 was at INR 36,961 crores, up 18.8% over prior year. Now on to some highlights of HDBFS. This is on an India basis. The total advances were INR 61,326 crores, of which 76% were secured. Disbursements have picked up in Q4, growing 11% quarter-on-quarter basis and 7% year-on-year basis. For the quarter ended March 31, HDBFSL net revenues were at INR 2,141 crores, a growth of 8%. Provisions and contingencies for the quarter were at INR 422 crore, including INR 223 crore of management overlay, as against INR 429 crore for the quarter ended March 2021, and INR 540 crore, including INR 98 crore of contingent management overlay in the prior quarter in the sequential quarter. Gross Stage 3 stood at 4.99%, down from 6.05% from the sequential quarter comparison. This includes an impact of 1.27% on account of new RBI guidelines issued on November 2021. 80% of the Stage 3 book is secured, carrying provision coverage of 44% as of March 31, 2022 and is fully collateralized. 20% of Stage 3 book, which is unsecured, had a provision coverage of 87%. Above all, HDB remains well capitalized with total capital adequacy ratio at 20.2% and Tier 1 capital adequacy at 15.2%. LCR was at 102%. Profit after tax for the quarter ended March 2022 was INR 427 crore. Earnings per share in the quarter was 5.41, INR 5.41 and book value per share was at INR 120.69. As of March 2022, HDBFSL had 1,374 branches across 989 cities and towns. Now on to HSL. HDFC Securities has a wide network presence of 216 branches across 147 cities and towns. There has been a significant increase in its overall client base to over 3.8 million customers as of March end, an increase of 40% over prior year. 86% of HSL's revenues come from transactions done by customers on its digital properties. HSL's revenue aggregated to INR 510 crore for Q4 2022, an increase of 16% over corresponding period a year ago. Net profit after tax was at INR 236 crore for the quarter. Earnings per share in the quarter was INR 148.84, and book value per share was at 1,050. In summary, we remain committed in offering our customers with comprehensive range of products and services while capitalizing on growth opportunities. We have delivered consistent performance for years together and remain pledged towards a culture of excellence. Thus the quarter results reflect advances growth of 21%, deposits growth of 17%, profit after tax increased by 23%, delivering a consistent profit growth rate and return on assets of over 2%, and ROE of over 17%. Earnings per share in the quarter of INR 18.1. Book value per share increased in the quarter by INR 18.6 to 433. The economy is growing, businesses are robust, credit demand is high, savings growth is strong, customers have cash to spend and are spending. We are here to serve. With that, may I request the operator, please open up the line for questions. Thank you. Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Participants are requested to limit their questions up to two per participant. If time permits, you may join the queue for any follow-up. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mahrukh Adajania from Edelweiss. Please go ahead. Yeah, h ello. Please go ahead, ma'am. Your line is unmuted. Please go ahead. Yes. I had two questions. My first question is on margins. In the second quarter or so, in the earnings call, we had outlined that there could be margin improvements with a lag once retail loans pick up, and that could happen over six months, three to four quarters, maybe. Is that and now in the fourth quarter, margins have declined further. Is the margin expansion on track? How do we view margins from here on? That's my first question. Also connected to margins, if you could just give a rough indication of the commercial banking yield ex agriculture. Okay. Let's take these questions. On the margins. Yeah, I think I mentioned it a few minutes ago when I was presenting. Our asset mix has shifted, right? It's shifted significantly from unsecured to higher- rated segments, right? It has come all through the pandemic. We saw that the retail was going down in the rate of growth, and it was picking up in wholesale and in commercial borrowing, right? If you go back to pre-pandemic, three years, 2019, right? If you look at it, the Basel disclosures that we do, I'm saying that Basel because we show that assets by type. Wholesale was 45%, retail was close to 55%. Now things have reversed, right? Now, retail is 45% and wholesale is 55%. In fact, in this quarter, the rate of growth in wholesale was far even more, 10% sequential, 11% sequential growth in wholesale in this quarter, right? Retail also grew very well at 5%, 5.1%. That's an annualized rate of little more than 20.5% on retail. Retail has grown well, but except that the wholesale has grown much faster, right? That's one from a mix point of view. What does this mix do, right? What has happened is that the highe- rated segments tend to be low- yielding. Basically, what has happened is we've traded off NIM to operating costs and credit costs, okay? T o deliver sustained profitability on our... That is what has happened in this scenario. You will appreciate that NII or NIM is a function of risk, right? You've got to connect it with the credit, too. We chose to be risk off all through the pandemic. It is not something that. That's why we told you last time that it could take three, four quarters, six quarters to come back, right? Retail is coming back, but wholesale has not relented, right? We need to get that opportunity to the extent that this opportunity comes at a good quality. We are okay with that to the extent that it delivers the profitability that is required, right? Which is what is happening. Both the top line in the form of volumes and the bottom line in terms of the returns that it provides. Because when that high-rated things come, as I said, it comes with lower cost and lower credit. Right? So something I want to emphasize on that. One other thing I want to mention is that if you look at something I mentioned about the credit RWA, right? One other way to look at the margin is are you pricing for your credit, right? So if you use credit RWA as a denominator, it is 7% now, and it's 20 basis points more than what it was pre-pandemic. Okay? Essentially, trying to say that we have optimized, we are optimizing on the margin. Okay? That's one way to look at it. Another way to look at it is, you look at net credit margin, which is, net interest margin, minus cost of credit, represented by specific credit cost, right? If you do that, we are at 3.5% in this quarter, which means net interest margin less cost of credit, 3.5%. The same time last year, if you see it is 3.1%. Right? It again tries to show you that, it is about pricing for the risk. The same we can think about full year, right? One quarter doesn't make a. It cannot set you a trend or show you something that is, consistently there. Let's I'll give you the same thing, net credit margin for the full year. Right? Full year 2022, 3.3%, right? Which means, including that high credit cost quarter that we had in Q1, include that too, right? Net interest margin less specific credit cost, right, is 3.3%. The same metric last year, full year last year, FY 2021, 3.1%. Again, tries to tell you that we are pricing well for what we need. It is about the bottom. If you look at the ROA, any time period, you can. This quarter is a little more than 2.1%. If you look at the full year, it is 2%. Last year, 2%. The year before, 2%. ROA, right? If you look at ROE, same around 17% or so return. What is this telling you, right? Margin is one of the metric, and it is an important metric. To the extent that the margin is reflecting the risk that you are taking and it is borne out in the credit ratios, and that provides the right kind of a cover for you to give the returns that are required for shareholders. I hope that answers in terms of what we're trying to give you on that. Sure. Henceforth, the focus will continue to be on NIM minus credit cost. Is that the right way to look at it? Because if the macro remains volatile, then the risk-off could continue longer, correct? Yeah, the retail growth, if you see, is at 5%, 5.1% growth sequentially, right? On a year-on-year basis, if you see retail, it is about 15% odd It is lagging. That means, the quarter growth is more than the year-on-year growth because it was on a sliding scale. More paydowns were happening than bookings in the past several quarters around the COVID time period, and now the sequential is leading, right? You're seeing that it is beginning to go on an up curve. The year-on-year will come and catch up soon, right? That is one on retail. You need that to power. When retail powers, I do want to mention to you, it does not come free. It comes with enormous cost. You can see the cost- to- income. The full year cost- to- income is at about 37% or so. The quarter cost to income is 38.3% to be more precise, right? It comes with cost. When the retail portion to 6% and 7% and so on, you will see that the cost to income also goes up. Again, on the credit cost I'm talking about, that also goes up because retail comes with a higher credit cost, right, compared to wholesale. At the end of the day, it is about getting the returns that you need. That is why I tried to focus and I gave you the numbers on the return on assets, on the return on equity, which is what gives the shareholders value or at least returns above the cost of capital. Right? If you think about what the cost of capital is, whether there is it is either any of these mix, whatever happens on the individual lines. Is your top line growing? Is your customer franchise growing? Shown you how the retail, wholesale, and the commercial is growing. 5% on retail, 10% on commercial, 11% on wholesale. Right? That is the top line customer franchise growth that you are seeing. Right? And what is it translating into the bottom line? Good returns, 18%-20% PBT or PAT with a 2% ROA, 17% ROE. That's what at the top line and the bottom line from the franchise growth point of view gives you. In between, that is the optimization tools that we deploy to get that. Got it, sir. Sir, any rough range you can give on yield on commercial banking loans? The yield on commercial banking will be approximately about 8% or so. You asked about what the agri could be? 9%-10% or so is the agri yield. Okay, sir. Now moving on to the next question. What is the accounting policy associated with RSUs in terms of upfront cost and amortization? Okay. See, first, accounting policy on RSUs. First let us take what is RSU, right? That you'll see whether it is any different from ESOPs or not from that cost point of view. RSU, you can think about it as similar to ESOPs except that it is at a deep discount. Okay. Right? That's one thing. That's at an exercise price is one. However, the way to understand this is, the number of RSUs would result in no different impact had the bank chosen to grant ESOPs. No different. What does that mean? For instance, if the bank was to grant three ESOPs worth a fair value of 500 each, right? It will grant one RSU. Right? That's all. That means fair value of INR 500, you grant three, an employee gets INR 1,500. Now, when you grant RSU, you just grant one RSU. What does it do? That the total compensation is remaining at that INR 1,500 or so, and it avoids the shareholder dilution to some extent, right? It mitigates the shareholder dilution. What is it that we are trying to do with the RSUs? One, it is intended to be extended to mid and junior management, right? Far deeper in the organization. For the staff up to 10 levels below the Managing Director. That's one thing now, right? This will be part of the overall compensation structure. You know, this is whatever is the compensation structure, this is part of that overall structure. 75% of the RSUs are intended for personnel in level six to 10 below the CEO, right? 75% is intended for them. What is it going to do? It is going to lower the attrition significantly. It's going to bring up enormous amount of productivity at those levels. This is something that we thought about it and we wanted to make a difference to those employees and make them shareowners and get them this so that they can participate in these things, right? Just so that you have a context of what this will mean. Another thing that you need to think about RSUs, right? It is granted that whatever approval we have sought from shareholders is expected to be granted over the next four years. Right? It's not a one-year grant or something. Expected to be done over a four-year period. The second, which is what normally we do, even ESOPs we take approvals, that is expected to be at a four- or five-year period or something. Then the next thing on the RSU, the vesting period is five years, so which means, four years to grant, right? Every year one, year two, year three, year four. Five years to vest. This can go all the way to nine years from now, right? Whatever cost needs to go in the P&L will go over that longer period of time. That's one thing. The second thing that you touched upon, what is the accounting, right? The current accounting is like it was for the ESOPs, which is it doesn't need to go through P&L other than for material risk-takers and executive directors and CEOs and so on, right? ESOP, we as a bank chose to have that on the P&L for all of them, right? We have that. And for RSUs, we will decide what we need to do, whether it is from a shareholder point of view, it mitigates the dilution. That's what I want to leave you there, compared to ESOP. It doesn't change anything different. That means, as the example I gave you, an employee got three ESOPs and the equivalent compensation of three ESOPs was INR 1,500, he'll get one RSU for the same compensation value of INR 1,500. Got it, sir. Thank you so much. Thanks a lot. Thank you. Thank you. The next question is from the line of Rahul Jain from Goldman Sachs. Please go ahead. Yeah. Hi, good evening, Srini. Am I audible? Yes, Rahul, good evening. Great. Thanks. Two or three questions, Srini. First of all, on the liquidity coverage ratio, dropped quite a bit in this quarter. Seems like you utilized the excess liquidity that you were sitting on. How long, I mean, how much more scope is there to rationalize this? And if I were to tie it in with the deposit mobilization, you know, that you also intend to do in light of the merger, what would be the strategy out there? That is the first question for me. Okay. Let's get on to that one. The first thing is, as it relates to the... Yes, we have continuously optimized on the liquidity available, as you know. The context for this quarter, if you see, we had loans growing. In this quarter, loans growing INR 1,08,000 crore. Right? In one quarter we had that kind of a growth, right? INR 1,08,000 crore. In this quarter, the deposits also grew INR 1,13,000 crore. Right? We did consume, since the deposit growth from an amount point of view exceeds the loan from how we have deployed. From an LCR value point of view, it'll come down because there are certain things that you will have to have, the liquidity assumptions, the rundown assumptions, and so on and so forth. We have used that. And how much more can we optimize this? I don't think we can optimize this any further, right? We have come to 112 probably. See, we run it with a floor of about 110, right? That's the kind of a floor we think that we will run. At 110, we will get on to doing certain things in terms of mobilizing more. We'd love to run it between 110 and 115, optimized. I do expect, I think in some other context, we did talk about the branch vintage model and the deposits that it should generate. Right? Think about the branches that we have opened. The zero- to three-year vintage branches, call it, provides a value of X. And that branch, those branches migrate to three to five years and five to 10 years, give you a value which is 3X and 5X from a branch productivity point of view. The branch productivity that we have as a bank is INR 250 crores per branch, right? That's the productivity that we have. And that's one of the best in class in the industry, right? If you look at certain branches that are new vintage branches, they are progressing towards that high productivity. That's, I think some of the context, some may be published in terms of what the branch productivity model is and how the branches are progressing through that vintage model. Right? That's one that will bring the deposits more. The deposits gathering is less about the merger combination or whatever we talked about, right? That's something that we need to work on and think about to fund. That's part of various branches that we are opening anyway. We opened 563 branches in this quarter, 700 more branches. We have said that we want to open order of magnitude of 700-1,000 branches. During the COVID period also, last year, we opened 353 branches, FY 2021. We continue to do this because we believe that the radius around which the customers can be serviced, currently I call it 4 km-5 km radius, needs to come down to 1 km-2 km radius from where a branch in the catchment area can effectively manage the customer's relationship better. Right? The part of that we open, and it is also about getting the sales force to sit in those branches and do. Essentially, yes, deposits gathering is the prime kind of an activity. Branch opening is that. Branch vintage model monitoring and driving through that is another kind of a dimension to look at it. Yes, we'll keep driving that. Correct. Srini, just one more question on retail. Sure. Various segments in retail have shown now continued momentum. Fair to assume that, you know, all the credit filters are normalized and this can be sustained over the next few quarters, few years? You mean the retail lending, retail loans? Lending growth. Yes, yes. Yes, yes. Like the credit cards, PL, et cetera, picked up. Yeah. Yes, we believe so, right? See, even in this quarter, if you look at it, the retail grew by about 5% or so sequentially, right? That's the kind of growth. Now, supply chain issues were impacting the vehicle type of businesses. That grew lower than the average. The payments business, I alluded to the card spending growing at about 28% or so. But the payment business grew, the cards business on the loan side is about 14% or so, and sequentially slightly under 5%, rounds to 5%, right? Under 5%. Slightly under the average. Now, if you look at the total outside of the vehicle segment and the cards, the retail currently is powering at about the sequential momentum of about 6% or so, right? We do believe that the vehicle should come back once the supply constraints abate, which is, for a good part, it is slowly coming back. The rate of growth this quarter we had on vehicles was better than the last quarter, coming back. Same with payments, too, right? Last quarter, we had a credit card spend of 24% and a loan growth of 9%. This quarter, credit card spend is growing at 28% and the loan growth of 14%. This is all year-on-year numbers, right? You're seeing the momentum also picking up there, right? That's something I want to bring your attention to. That's over a longer period of time. That's what we should expect, that there is enormous opportunity, demand far outstripping supply, and the credit penetration in the country is low, and we are there, capturing that. Srini, can I just squeeze in one small question on the fee income as well? It picked up, you know, this quarter nicely, 12% year-over-year. Can you just, you know, break it down between payments and the other usual fee income that you earn, how the momentum has been there in those segments? Okay. Thank you. That is it from us. Thanks. Okay. Got it. Yeah. See, the 12% is partly aided by the payments doing a little better also. Still, payments is not at the business- as- usual type of growth that we have seen in the past, right? It is not that. From a mix point of view, if you see what the mix is, the total 12%, the payment is 10%, 11% or so now. It was a very small single digit last quarter. Excluding the payments, we are at about 14%, 15% or so on the fees, right? If you think about the mix that you asked about, the retail, the assets and the liabilities on the retail, that's call it about, say, 40%. You should look at an annual rather than quarter, because quarter- to- quarter there will be variation. Some point in time you will see some third- party products, customer preference, and some point in time you will see some festival spend and other things happening. Quarter- to- quarter variations. If you look at the mix of various fees over a year kind of a time period, retail assets and liabilities, about 40% of the total, about 20/20 each. If you look at the third party product, you can call it close to a quarter of the total fees. Card, call it about under a third, call it 30% or so, right? The wholesale is anywhere between 5%-7% of that. That's the kind of how the fee stacks up in terms of what are the contributing factors, what are the products that contribute into the fee mix. Got it. The payment grew 10%-11% YoY in this quarter. Just want to clarify that. That is correct, yeah. Still it is lagging what it used to. Yeah. Got it. Thank you so much, Srini. I really appreciate this. Thank you. Thank you. The next question is from the line of Aditya Jain from Citigroup. Please go ahead. Hi, thank you. On the branch vintage slide, which you uploaded some time back and you alluded to recently. This is cuts on the link between the historical deposit productivity and branch vintage, as it's in the chart. Could it be different now versus the historical experience, given that the earliest branches would have been in the larger cities and the recent ones that have gone into smaller locations progressively? The multiplier effect that you are seeing, could it be lower? It depends on, you know, how much would that impact be on those particular fees? Yes. Okay, Aditya, if I understand your question, historical location of the branches versus the current location of the branches, does it give the same kind of a branch maturity model, branch productivity model? If that is the question, I assume that's what you're asking. The answer is yes, right? Even the current model, that this is how we test and this is how we establish what is a best in class, and we drive the branches to those best in class. That's part of the current model that we have. Okay. Understood. Secondly, on the view on depositor behavior, based on experience in past rate cycles. One, as term deposit rates rise, do you expect some idle amount in savings deposits to start getting deployed in term deposits? You know, would that be a material amount? Second, behavior- Aditya, if I ask your pardon, as you were talking, there's a lot of background noise that was coming. If you can patiently repeat, I'll appreciate it. Okay. Let me try again. Sorry. I was asking depositor behavior in a rising rate cycle. Existing savings deposits and term deposits, would you expect a move of savings deposits to term deposits? And you know, how, you know, what sort of a quantum that would be? Is there a way to look at that? Secondly, your experience on, how often or, with what proportion of term deposits investors would, do an early break of their term deposit to get into higher rate deposits as rates rise? I don't know if that is easy to answer this, but just behaviorally from your observation, if you could give us a sense. Okay. A couple of questions you have. One is, what will happen to the mix of products between savings and time deposit as the rate starts to go up, right? See, if you think about our historical mix of CASA ratio, currently at 48%. 48% is high. Last quarter was 46%, right? If you look at over a longer period of time, the CASA ratio, anywhere between 40%-42%, that is the kind of rate at which you will see that. We are not shy of that. I’ll tell you this. The time deposit penetration in our customer base is at just high teens. We would expect the time deposit penetration in our customer base to be in the eighties and nineties, because as part of the customer's asset allocation, you would expect every customer would be having some amount in some liquid funds, some in savings, some in time deposit and so on and so forth, right? You would expect that the customer would have. Our penetration, we have a long way to go to get the penetration up, right? That's one thing, and we are not shy of that. That's part of the narrative our RMs have conversations in the relationship management with the customer is to engage, to deepen that relationship. If it is time deposit deepening, so be it, right? Over a longer period, if you go back three years ago, five years ago, 40%-42%, that's the kind of range that we have, right? In recent times it has gone up. Even now, a rational customer will go to time deposit if required, right? If he wants 50 basis points more, the customer will go to time deposit. As the rate starts to go up, may go, and we are okay with that, because that's how you price the assets too, right? You price the assets also. As the rates go up, time deposit goes up, asset price also will be repriced up. There could be some more movement towards time deposit. The second part of my question, if you could touch upon that, you know, behavior of time depositors, would they, you know, start sort of breaking current deposits in a higher rate term deposits? It depends on the customer at what rate. It depends customer to customer. It depends. I'm sure there is a break-even analysis that everybody does in terms of when you break a time deposit and you pay the breakage fee and because there is a penalty for prepayment. When you do and pay the prepayment penalty and you book it into the new rate. What is the yield pickup that you get and over what tenure? There is a math to be done, and I'm sure the customers do. But we don't see that as a rampant issue that it is not something that bothers, right? There's always somebody who may have booked it at very low rate who wants to come and change it. Good. Thank you. Thank you. The next question is from the line of Manish Shukla from Axis Capital. Please go ahead. Hi, Manish. Good evening. Thank you for the opportunity. Srini, could you give some color about the wholesale growth during the quarter in terms of PSU versus private mix or short-term versus long-term lending, the incremental lending done during the March quarter? Okay. See, it is all of the above. For example, if you see there are the sectors, telecom sectors are there, where there was a loan demand in the quarter. PSUs were there, where it is. There was some manufacturing we saw picking up, but not a big thing. And some NBFCs also came in, right? So these are, I would say the three, four things that came in today. From a utilization, see, what has happened is we had a tremendous amount of prepayments happening at the beginning of the financial year, right? Corporates were prepaying. The prepayment in this financial year was to the order of about call it INR 60,000 crores, INR 65,000 crores or so prepayment happened. Paydowns happened. Then this quarter we did not see as much of prepayments or paydowns happening. This quarter was something different. We didn't see it, right? The two things contributed. Some new demand, I gave you some sectors that there was some credit demand. The other thing is that the prepayment didn't happen as it was seen in the prior quarter. These two contributed to higher wholesale, and we're pretty okay because we are very interested in a relationship. We don't measure the profitability only on the loans, which again, by the way, the cost- to- income on the corporate side is in single- digits. The cost- to- income is single- digit. The expected credit loss is virtually nothing, right? That's so highly profitable or equally profitable as any other product that you would imagine. We're quite comfortable with that. Apart from that, it provides the kind of entry to deepen our relationship on the retail side through the salary relationships and the products that we do on the retail side with them. Sure. In terms of overall wholesale mix, how would the PSU mix today versus, let's say, a year or two back? Share of PSU in overall wholesale. We've not put the PSU out. We are not separately called out for PSU, but if you look at the sectoral deployment, I think we publish that periodically. You'll see that somewhere if it's so far not published. It will publish later today, I think. The sectoral deployment. Okay. Sure. Last question, in terms of your overall loan book, how much is floating rate? Within that, how much is linked to repo? Floating rate and fixed rate is, call it. Okay. 46% is fixed, 54% is floating. Okay. Repo link would be? Repo link is about. You have to look at repo along with the T-bill. Repo and T-bill about 38% or so. No, the only reason I'm asking repo separately is because repo is dependent on regulatory action. The T-bill will be market-driven, which is why I'm more interested in repo separately. Yeah. I think it was about 29%, 30% was the repo, about 10% was T-bill. Sure. Thank you. Thank you very much. Thank you. The next question is from the line of Sagar Doshi, an Individual Investor. Please go ahead. Sagar Doshi, please go ahead with your question. Hello, sir. Hello? Yeah. Hello. Yeah. Srini, my question is regarding the treasury income. As I could see quarter-on-quarter and year-on-year, your treasury segment income has reduced. I understand that it might be due to the bond yields, et cetera, but could you give any view on that how it would go going ahead? Okay. See, on the, you're talking about the trading income, right? Right. That I alluded to. Okay. The last year same quarter was about INR 655 crore. Last quarter was little more than INR 1,000 crore, and this quarter was close to nothing or actually negative INR 40 crore, right? Yes. That's what you're talking about, I guess, right? Those were, as I alluded to, several minutes ago, those were more opportunistic gains that we harvested from whatever was possible, the timing and so on, whatever we could, we harvested. In this quarter, now when the rates are rising, we haven't harvested and the opportunities to harvest is also less, right? In a rising scenario, rate scenario. Going forward, how you should think about it? You should think about it that it is minimalistic. The second thing also you need to think about it is, when we have excess liquidity, too much of excess liquidity, we do have always excess liquidity. When we have too much of that, we deploy it in such a way that we don't mind harvesting gains on those excess, right? So that the drag that can come from securities at a lower kind of a coupon is offset in some other form. That is. But we are at an LCR of 112, call it around between 100-115, kind of a range. You should not expect the treasury trading income to sustain at any big levels for the time being. Okay. Got it. Thank you. Thank you. The next question is from the line of Adarsh Parasrampuria from CLSA. Please go ahead. Hi, Srini and team. I had a couple of questions. One is, from a li- Sorry to interrupt you, Mr. Adarsh, but your voice is breaking. Can you please check? Yeah, let me try again. From a next 12- to 18-month perspective, how do you prepare the balance sheet for the, you know, you're already ramping up on branches and deposit mobilization. What's the implication, both from how the balance sheet liability side would look? Would you bloat it up a little bit as you get closer to the merger? From an OpEx perspective, because you ramp up distribution a little more front-ended, does that cause a drag on P&L for the next 12-18 months till the merger? Okay. Good, good. A couple of good points you're raising, but it is very important we address it, so you can think about it. It is not about preparing or merger or anything, but what is our normal strategy, right? That's a good thing to keep a note of. We do want to ramp up branches. We do want to bring in new liability relationships. We do want to get the branch productivity from a deposit gathering point of view to be the best in class, right? As I mentioned to you earlier, 50% of our branches are best in class, and we are trying to deepen even further from a productivity point of view on that. We'll keep going on that. That's one. Irrespective of what it is we do, and that is part of what the branch growth that we have embarked on, right? There was a modest 350-odd branches in FY 2021. This year we have taken it to more than 700, and we have a plan to sustain a significant amount of branch growth, right? 150 branches are in the pipeline to open anytime soon. We are going to do that to mobilize the relationship. The reason for the deposit is we have equally from an asset appetite point of view, if you look at the last five years, right? We have grown assets CAGR, call it 20%+. That's what historically. I cannot give you an outlook of how asset growth, what is the asset growth we are doing, but I can only point you to the past to say, if you look at any kind of a two blocks of five-year period or something, think about five, the 2017 to 2022 or 2016 to 2021 or 2011 to 2016, whatever kind of a time period if you see, high teens to 20, right? That's the kind of rate of growth at which we have gone. We have done that irrespective of the, what the market share at the respective time periods were, right? The market share is 6%, 7% or 11%, whatever it is, that is the kind of rate of growth we have. The machinery is tuned at that kind of speed and that kind of infrastructure that we have set for growth. We do need more liabilities to support this. Now, if we'll have excess liabilities, it is quite possible that we could have, and we have had it over the last two, three years, I f we'll have it in future, it's quite possible. The last aspect of your question is what is even more important. The liability, excess liability not necessarily translate into kind of a inhibiting growth rate or drag on anything. If you get a deposit and put it in a security at the current yield curve, you still have an opportunity to make a 2% ROA. Right? You need to get the right mix of deposits between CASA and time deposits, and you need to have them at the right quality, granularly here. You'll have an opportunity to invest in any kind of security and provide returns equal to the average of what the bank does. Right? That's how I would urge to think about. Again, if you think about margin, if you have high deposits, will you have a margin impact? Of course. Because you have a zero risk-weighted assets. If you have excess deposits and put in securities with zero risk-weighted assets, you earn for the risk that you take. You don't take any risk, you earn for that, right? But still, you optimize for the return on asset, return on equity at the end. That's how I'll urge you to think that if we do get more deposits because we are ramping it up, but it is supposed to provide good returns. Srini, you know, refer to the point that you mentioned that cost-to-income, your spending that will go up, in preparation for some of this, like, what's the kind of spike you would expect in the near term? Cost to income, Adarsh, as I told you, will go up as we have more retail activity coming, retail lending activity coming, retail liability activities coming in. You will see the cost to income go up. This is, we normally, as we said, we don't give an outlook or a projection of what we will do. Cost- to- income is something that we have consistently said over a period of time. That is, while it will go up now, we do think in the medium term, three to five years' time, it will come down back to mid-30s%. That is purely driven through scale and driven through various digital initiatives that we are running, right? While it will go up, it will come back down due to the scale operating on that. Absolutely. One more thing, just to follow up on the margin queries that were there earlier. Just from the perspective that given that you did have a mix change over the last couple of years where retail activity was a little slower through COVID, we did have a material drop in margins from the peak. Given that things are opening up and everything, and given that you'll get to a normal mix, normal activity, is it safe to say that margins are now stabilized to start going up? Because you know, in a normal circumstance, one would think that the corporate growth now shouldn't like materially keep exceeding retail and SME growth for very long periods of time. You know, as I said, I don't want to project the future. We don't give an outlook of what the growth can be or how it will be. I can tell you what we drive to. Our strategic drive is retail back on the drive. That means, we are back to the pre-COVID level in terms of the credit policy, opening up the business across product lines, right? Other than the supply chain issues that we have had in vehicles. The third is the customer behavior, right? Spends are happening. Customer behavior will have to catch up. Other than that, we are in that, right? In this quarter, we did see higher demand on wholesale, and we entertained that because it provides good returns. Makes sense, Srini. This is it from my side. Thanks for all your answers. Thank you, Adarsh. Thank you. The next question is from the line of Saurabh from JPMorgan. Please go ahead. Hi, Srini. My question is on credit card. One is, when do you expect your market share, you know, to come back to your earlier 30% levels? It's been seven months since the ban has gone, so what's your outlook on that? Second is, how much are your revolve rates now, you know, versus pre-pandemic levels? Thank you. Okay. You're talking about the market share. S pend market share. Spending. Spend market share. Okay. Yeah. I do want to tell you one thing that we don't have a market share at the target because market share doesn't mean anything. Particularly, spend market share doesn't do anything from a profitability and returns point of view. Right? That's one thing. Because if you are looking at it, I would urge you to look at the retail spends versus commercial card spends. Right? If you look at it, bifurcate and look at retail, commercial. We like retail. We are okay with commercial, but it's the retail. Why? The propensity for the customer to do the other things, right, both from a relationship value as well as from a card product value itself, is much more on retail, so that's where we'll focus, right? Chasing market share on the spend is not a target that we have. I would not be able to tell you how much it will grow. It's a function of optimization of the P&L, optimization of the customer relationship and the product that we are able to do with the customer. The second part of your question was in terms of the revolve. We are still at about 70%-80% of the pre-COVID levels on revolve rate. Last quarter I mentioned that. Last quarter to this quarter, marginal improvement, 1 percentage point improvement in revolve. That's also part of what you're seeing in the card balances, going from year-on-year growth 9% to 14%, is going in the right direction. That has to do that magic of paying interest, right, as that starts to go up. It's a question of customer behavior. It follows with a lag. Got you. Spend happens, and you're seeing the spend happening. The buildup on the ENR must happen. You're seeing that the buildup on ENR is slowly coming. The third aspect of this is when the buildup of ENR happening, the customer needs to start to revolve. I can see that it is turning the corner, one percentage point better, but some way to go. Got it, Srini. Just one final question. When is PayZapp launching? Thanks. PayZapp launch is probably a quarter away, I would say. We have several plans on that, from a closed user group to marketing to selective customers and then getting to broad base. Maybe a quarter away, I would say. Thank you. Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Vaidyanathan for closing comments. Okay, thank you. Thank you all for joining us today. We appreciate your time, and we had a good conversation. If anything more that you have, you can connect with Ajit Shetty in Investor Relations. We shall be happy to engage with you. Thank you. Thank you. On behalf of HDFC Bank Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.