Ladies and gentlemen, good evening, and welcome to the HDFC Bank Limited Q3 FY 2023 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 touchtone 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, Tanvi. Good evening. Welcome to all the participants. Greetings of the new year. Let's start with some context on the environment that we operated in the quarter that gives a background of how we operated. High, high-frequency indicators suggest that the domestic economic activity held up in Q3. GST collections continued to be robust, remained above INR 1.4 lakh crore since May 2022. December, GST collections stood at INR 1.5 lakh crore compared to INR 1.3 lakh crore in the prior year December. Manufacturing PMI has remained in the express-expansionary zone and is at 57.8 as of December, also the services PMI is at a six-month high of 58.5 in December. Healthy trend in government capital spending also bodes well for industrial activity. Spent almost 60% of budget estimates during April to November versus 49% in the prior year. On the consumption side, we had our cards issuing spend growing at the rate of 27% year-on-year, reflecting good consumer demand. Rabi crop sowing looks encouraging, up 4.5% above last year's level. As you know, the RBI raised the policy rate by 35 basis points to 6.25 and kept the policy stance unchanged at withdrawal of accommodation. There are risks stemming from the possibility of global slowdown, reopening in China amidst rising COVID cases in many parts of the world and continued geopolitical tensions. Strong consumer demand boosted by fiscal spends and higher agri produce from rabi crop are likely to keep the Indian economy stimulated. We estimate the GDP growth to be around 7% for the full year, financial year 2023. Let's go through certain themes at a high level. The distribution, we added 684 branches during the quarter, taking the total to 841 branches in the year so far. Gold loan processing are now offered in 3,938 branches, an increase of 978 branches in the current quarter and up 3x over March 2022. Payment acceptance points growth has picked up pace as a smarter platform builds momentum, taking the total to 3.99 million, year-on-year growth of 45%. Wealth management is now offered in 691 locations. Hub-and-spoke model, we have expanded by 189 locations in the quarter. The CRB side, our SME businesses are present in more than 90% of the districts. Rural business reach expanded by, expanded to 1.51 lakh villages and is on track to reach the objective of 2 lakh villages. In the customer franchise building process, during the quarter we added 5,863 people and 32,478 people over the year. Our people have acquired 2.6 million new liability customer relationships, exhibiting a healthy growth of 12% over prior year. On cards, we issued 1.2 million cards during the quarter. Total card base is now 17 million. We progressed in our pursuit to focus on granular deposits. The deposits total amounted to INR 1,733,000 crore, an increase of 3.6% over prior quarter and up 19.9% over prior year. In retail deposits, we added INR 67,000 crores during the quarter and INR 258,000 crores since prior year. Retail now constitutes about 84% of our total deposits and have been the anchor of our deposit growth. CASA deposits recorded a strong growth of 12% year-on-year, ending the quarter at INR 762,000 crores with a CASA ratio of 44%. Retail CASA grew by 14%, and retail total deposits grew by 22% year-on-year. Retail current account, which constitutes 70% of our current account deposits, grew by 14% year-on-year, while our wholesale current account de-grew by 4% year-on-year. Time deposit registered a robust growth of 27% over the prior year, ending the quarter at INR 970,000 crore. On the advances, it ended the quarter at INR 15,06,000 crore, grew by 1.8% sequentially and 19.5% over prior year. This is a net addition of approximately INR 27,000 crore during the quarter and INR 2,46,000 crore since prior year. Gross of sell downs, IBPC, we grew advances by 23.6% year-on-year and 3.3% quarter-on-quarter. Our retail advances growth was robust. Domestic retail grew by 21.4% year-on-year and 4.7% quarter-on-quarter. CRB, which drives our MSME and PSL book for most part, continued its momentum with a year-on-year growth of 30% and quarter-on-quarter growth of over 5%. Wholesale segment witnessed a strong year-on-year growth of 20%. Corporate bank initiatives across new to bank, PLI, MNC, and supply chain finance continue to be a focus, allowing to diversify revenue pools from new customers, products, and sectors. We expect demand from loans from NBFC, telecom, PSUs, retail, and infra sector sectors to sustain. On the digital front, the bank continued its momentum on the technology and digital transformation agenda to provide greater customer experience through our digital and enterprise factory. Progress on the key digital initiatives in the quarter, SmartHub Vyapar, our one-stop merchant solutions app has further enhanced with the addition of new features in the current quarter, such as instant QR, a revamp of ETB journeys, and enabling onboarding of new-to-bank customers digitally. As of December end, over 1.9 million small businesses are on SmartHub platform. The platform is adding more than 80,000 merchants per month. HDFC Bank One, the customer experience hub, the solution which transformed our on-premises contact center into a singular centralized service platform, has now been further expanded across more locations in India now at seven locations. It enhances our customer relationship management process using AI, ML, and conversational bot, enabling round-the-clock self-service. With the rollout of HDFC Bank One, we have witnessed significant improvements in our customer engagement, such as 39% reduction in case resolution time and a 64% reduction in turnaround time and an average reduction of 324 seconds in handling time in our contact centers. Xpress Car Loans is the first of its kind end-to-end digital service enabling instant and hassle-free car dispersals. This channel contributes now 17% of our new car loan volumes. PayZapp. In the previous quarter, we launched PayZapp 2.0 to a closed user group, as we mentioned before. In this quarter, this was made available across the bank personnel as well as app stores for early adopters. We have received encouraging response from the users of PayZapp 2.0. The existing 31 million registered users on the erstwhile PayZapp will be progressively transitioned to the new app. In Q3, we received a total of 315 million visits on our website, over 100 million unique visitors over the quarter at a year-on-year growth of around 30%, reflecting enhanced engagement in our digital properties. Our continued investments in expanding our distribution network by adding people and branches combined with our focused digital offering and relationship management to fuel growth. Balance sheet remains resilient. LCR for the quarter was at 113%. Capital adequacy ratio is at 19.4% with the CET1 at 16.4%, including profits for the nine months ended 31st December 2022. On the revenues, which ended the quarter at INR 31,488 crore on a reported basis grew 18.3% year-on-year. Core net revenues were at INR 31,226 crore, excluding net trading and mark-to-market income grew by 22% over prior year and 8.2% over prior quarter, driven by an advances growth of 19.5% and deposits growth of 19.9%. Net interest income for the quarter at INR 22,988 crore, which is at 73% of net revenues, grew by 24.6% over prior year. The core net interest margin for the quarter was at 4.1%. This excludes one-off interest income on income tax refund of about 5-6 basis points. Prior year and prior quarter were also at 4.1%. On interest earning asset basis, which appears to be industry norm, the core net interest margin was at 4.3%, again, at the similar levels to prior quarter. Moving on to details of other income. Fees and commission income constitutes about 3/4 of the other income, was at INR 6,053 crore, grew by 19% over prior year and 4% over prior quarter. Retail constitutes approximately 93% of fees. FX and derivatives income at INR 1,074 crore was higher by 13% compared to prior year of INR 949 crore. Net trading and mark-to-market income were positive INR 261 crore. The mark-to-market gains are mainly from AFS investments. Prior quarter was a negative INR 253 crore, and prior year was a gain of INR 1,046 crore, which were then opportunistic from our investments portfolio. Other miscellaneous income of INR 1,112 crore includes recoveries from written-off accounts and dividends from subsidiaries. Excluding net trading and mark-to-market income, total other income at INR 8,238 crore grew by 15% over prior year. Operating expenses for the quarter were at INR 12,464 crore, an increase of 26.5% over prior year. We added 1,404 branches and 1,769 ATMs since last year. As I said, we added 684 branches during the quarter, 841 branches during the year, taking the total network strength to 7,183 branches. Cost to income for the quarter was at 39.6%. Moving on to PPOP. Our core PPOP grew by 19% year-on-year. Our pre-provision operating profit was at INR 19,024. Pre-provision operating profit for the quarter is 6.78 x the total provisions. Coming to the asset quality, the GNPA ratio was at 1.23% compared to 1.26% in prior year on 1.23% in prior quarter. Out of the 1.23%, about 17 basis points are standard, thus the core GNPA is at 1.06%. These are included by us in NPA as one of the other facilities of the borrower is in NPA. GNPA ratio excluding NPAs in agricultural segment was about 100 basis points. Prior year was at 104 basis points, and prior quarter was at 103 basis points. Net NPA ratio was at 33 basis points. Prior year was at 37 basis points, and preceding quarter was also at 33 basis points. The slippage ratio for the current quarter is at 42 basis points or about INR 6,600 crore. The slippage ratio for the current quarter excluding Agri, which is the seasonal December quarter impact, was at 35 basis points or about INR 5,300 crore. During the quarter, recoveries and upgrades were INR 3,100 crore or approximately 21 basis points. Write-offs in the quarter was INR 3,100 crore or approximately 21 basis points. Sale of NPA of about INR 200 crore in the quarter. Going to the restructuring, the restructuring on the RBI resolution framework for COVID-19 as of December end stands at 42 basis points, about INR 6,400 crore. In addition, certain facilities of the same borrower, which are not restructured, is approximately 8 basis points or INR 1,100 crore. This totals to 50 basis points. The COVID restructuring in the prior quarter was at 62 basis points. Moving to the provisions. The total provisions reported were INR 2,800 crore, as against INR 3,000 crore in the prior year and INR 3,200 crore in the prior quarter. The provision coverage ratio is at 73%. At the end of current quarter, contingent provisions and floating provisions were close to prior quarter level at INR 10,800 crore after utilization of approximately INR 200 crore. General provisions were INR 6,600 crore. Contingent provisions were INR 3,400 crore. Floating provisions were INR 1,451 crore. Total provisions comprising specific floating contingent in general were about 166% of gross non-performing loans. This is in addition to the security held as collateral in several of the cases. Floating contingent and general provisions were about 1.15% of gross advances as of December end. Coming to the credit cost ratios, the total annualized credit cost for the quarter was at 74 basis points. Prior year was at 94 basis points. Prior quarter was at 87 basis points. Recoveries which are recorded as miscellaneous income amount to 21 basis points of gross advances for the quarter, as against 25 basis points for prior year and 22 basis points for prior quarter. The total credit cost ratio, net of recoveries, was at 52 basis points in the current quarter, as compared to 69 basis points in prior year and 64 basis points in prior quarter. The profit before tax was at INR 612 crores. The net profit after tax for the quarter was at INR 10,260 crores, grew by 18.5% over prior year. Some highlights on HDB Financial Services. This is on Ind AS basis. The momentum in disbursements continued across all business segments, all three business segments during the quarter, registering a healthy growth of 41% year-on-year, 18% sequentially. Customer franchise grew to 11.2 million customers, adding 2.6 million over last year. HDBFS has started to augment the distribution network and opened 14 branches in the current quarter, aggregating to 1,421 branches spread across 1,020 cities and towns. The loan book as on December end stood at INR 65,100 crores, with the secured loan comprising 73% of total loan book. Net revenue for the quarter was INR 2,233 crores, growth of 12.7% over prior year. Provisions and contingencies for the quarter were INR 313 crores compared to INR 540 crores for prior year and INR 351 crores for prior quarter. Credit costs for the quarter were at 195 basis points, as against 358 basis points for prior year and 225 basis points for prior quarter. Quality of the book continues to see sustained improvement. Stage 3 as at December end saw a significant improvement and stood at 3.73% as against 4.88% in the prior quarter, reflecting sustained healthy collections. Provision coverage on Stage 3 books stood at 57%. The PCR on the secured and unsecured book stood at 54% and 85%. Profit after tax for the quarter was INR 501 crores against INR 304 crores for the prior year and INR 471 crores for the prior quarter. HDBFS ROA stood at 3.12% and ROE stood at 18.8%. Earnings per share in HDBFS for the quarter was at INR 6.34 and book value per share as of quarter end was INR 137.52. HDBFS remains well capitalized with a total capital adequacy ratio at 20.5% and continues to step up disbursements leveraging strong distribution spread across 1,400+ branches. Now coming to HDFC Securities. See, HDFC Securities Limited added nearly 0.9 million new clients in 12 months to December, taking the client base to 4.3 million. HSL has a network of 210 branches spread across 147 cities. Digital offerings continue to enjoy good traction in the market, which around 93% of active clients utilize the services using the digital platforms of the company. The total reported revenue for the quarter was INR 505 crores for HSL against INR 536 crores in the prior year. Net profit after tax was INR 203 crores as against INR 258 crores in prior year. Earnings per share in the quarter was INR 128.1 in HSL, and book value per share is at INR 1,114. Now in summary, tailwinds from the economic momentum, fiscal and monetary policies have provided conducive environment for growth by delivery of our full suite of products and services. Our results reflect robustness across various parameters, continued momentum in deposits growth at about 19.9% and retail deposits growth of 21.6%, advances growth of 20%, 19.5%, core operating profit growth net of trading and mark-to-market income was 19%. Profit after tax increased 18 and a half percent, delivering the return on assets of about 2.2% and return on equity of over 18%. Bank's earnings per share reported in the quarter is at INR 22. The book value per share stands at INR 479.80. With that, may I request the operator to 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 their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to limit their questions up to two per participant. If time permits, you may join the question queue back for any follow-up. The first question is from the line of Kunal Shah from ICICI Securities. Please go ahead. Yeah. Hi. thanks for taking the question. firstly, Kunal, one thing. Kunal, just one second. The team told me that as I was that I had to correct two things. I think I was referring to the profit before tax is INR 16,218 crore. I think I was referring somewhere. The contingent provisions, I said INR 3,400 or something. It is INR 9,400. Yeah. That's all. I just want to... because I was referring wrong places. Go ahead please, Kunal. Sure. Yeah. Firstly on OpEx and particularly the employee cost side, no doubt we have added quite a lot of employees over the last couple of quarters. Was there any other extraordinary within that wherein maybe the sequential growth was also quite high and both as well as year-on-year? If you can highlight on that part, yeah. One is that normally the third quarter is a seasonal, right, with a lot of activity in that time period. That's number one. Number two, on the people cost, apart from adding of people, both for business growth and branches, there is also another tranche of ESOP and RSU that would come in. That's about, I think, INR 250 crore-INR 300 crore approximately, that would come in, right? That's part of, part of that. It's a business as usual. It's, I wouldn't call it a one-timer. That's part of the business which is embedded there. Which would be up, compared to prior year and even prior quarter because the ESOPs were effective October and the RSUs were also effective about end October or something. Those part of, part of the cost which is there. 250 crore-300 crore odd? Correct. Yeah. Sure. Secondly, in terms of the other interest income, particularly around about, say, INR 800 odd crores, what does that actually pertain to? I think that's what is driving the NII. Otherwise, broadly, when we look at it in terms of the advances, investments and the expenses, NII growth seems to be around about 22 odd%. Yeah. See, the other interest income, if you look at the clause 41 or something, that has got certain income that comes from non-lending. It could be income on RIDF deposits kind of thing will be there. That's one. The other one I think I called out, which is about 6 basis points, is the interest on tax refunds. Interest on? Tax refunds. IT, income tax refunds. Okay. Yeah, tax refund. Okay. Okay. That quantum would be around about 300, 400 or, so six odd basis points is what you highlighted. Okay, got that. About 300, yeah. Yeah. Okay. Thank you. Thanks a lot. Yeah. Thank you. Thank you, Kunal. The next question is from the line of Suresh Ganapathy from Macquarie Capital Securities. Please go ahead. Srini. Two questions. you know, one is on deposit accretion itself. you know, if you look at QOQ, the deposit accretion is INR 600 billion, or if you look at pure in retail deposits, it's INR 670, and the previous quarter was INR 680 on overall deposits. you know, the initial guidance was that eventually you want to take it to INR 1 trillion with every quarter showing an improvement. That has not happened in 3 Q. In fact, 3 Q has shown a decline over 2 Q in terms of absolute accretion of deposits. What's happening here? Are we on track to get that INR 1 trillion accretion? you know, any color on that would be great, Srini. Okay. Good. Thank you. Good, good point, Suresh. Yes, indeed. Our objective was to take that INR 60,000 crores to INR 68,000 crores- INR 80,000 crores- INR 100,000 crores as we go. Yes, this quarter, if you look at retail came in with INR 67,000 crores, right? The retail came in quite well. Yes. It didn't come in as much as what we thought. We had expected that it would be INR 80,000 crores or above, north of INR 80,000 crores or above. Mm-hmm. it came in at INR 67,000. Okay. Within the kind of, right away, we did put in an audacious goal and in terms of how we want to get there and achieve, and it came in at 67. We are still the mindset and the drive and the distribution network and leveraging of our existing relationships are in full force. We believe that in this quarter, more consumer spending has happened broadly in the country, right? We see that in our own customer base too. If you look at our cards, as an example, card spend, the retail card spend growth 27%. People are spending in other things that they want to do. That's part of what has happened. We are still getting on track to be growing that sequentially up. The next two questions is first on margins. You know, your margins are flat, QOQ or YOY also for that matter, whether you look at repo on assets or on interest earning assets. My point here is, Srini, bulk of the deposit rate hikes have actually happened between September to December. You can see actually all banks, even Post, SBI and even you, yourselves included, have hiked deposit rates quite aggressively. If you have not seen a margin expansion this quarter, especially when deposit rate hikes are yet to flow through, what happens next quarter when some of these deposit repricing or at least the incremental flow will be at a higher rate? Do you think you can sustain the current level of margins or there could be any margin pressure? Okay. again, very nice and very correctly, you, you are asking that. It is correct that to expect that the deposit pricing, factoring in, as we go along would be start to increase because as the prices have started and it'll have a full quarter impact and if there is one more rate hike then there will be further coming in on the deposit cost. Along with that, the loan pricing also happens, right? Our position more or less is kind of a balance. When the deposit pricing goes up, we also get up on the pricing on the assets. If you look at some of our, MCLR is a good indication to see why that not all loans are there. You know, an enormous amount of retail loans go off MCLR and then there are certain other SME type loans that also base off the MCLR. If you look at that, we have enhanced that more than the deposit front end too. That means we are catching up on the asset yield also along with that. That's, that's the second thing to keep in mind. The third thing, the margin pickup, I think over a period of last 4-5 quarters, we have been saying that the margin is a function of a mix of products, right? To the extent deposit goes up, the asset yield goes up to keep the margin constant or thereabouts within a small range. The margin going into the middle to the higher end of the 4 point... 4%, 4.5% is a function of the mix of wholesale and retail. Still, despite retail growing 5% up sequentially, the mix is still 45% retail, 55% wholesale. The Basel classification is still at 45%, 55%, right? Couple of few years ago, before COVID, few years ago, it was 53% to 55% retail, right? It's that mix needs to change for the margin to move up. The other question that you asked, is the margin under pressure? Yes, we are cognizant that we need to keep up on the yield to keep pace with the deposit cost that goes up. Okay. Lastly, anything you have heard from RBI with respect to any of the statutory relaxations or any other relaxations that you have sought? If not, then what do you think could be the timeline to hear something on that front? Yeah. Not yet. Suresh has not heard yet. You know, we would expect it within the next month to... I mean, there's no particular timeframe, right? This is not a particular schedule. For context is that the merger process is progressing. The NCLT final hearing is on 27th January, right? Thereupon, once it's adjudicated, then there are certain other processes, regulatory processes to go through. We do have some time that this would take. We are hoping that in this interim period, there will be something. Okay. Thanks, Sreenivasan. Thank you. Thank you. The next question is from the line of Mahrukh Adajania from Nuvama Wealth Management Ltd. Please go ahead. Yeah. Hi, Sri. Hi. I had a question, partly linked to Suresh. Your asset growth for the quarter was just 3% QOQ, whereas, you know, at the time of the merger or the analyst day, the guidance was achieving 18% YOY even on a merged balance sheet basis. Does that stay? Were there corporate loan exits at the end of the quarter? Okay. See, there are two aspects. You touched upon how to think about the loan growth. You talked about the wholesale growth at the end of the quarter. See, the way you think about the loan is not quarter to quarter, right? That is why we give kind of a indication to look back to see how the bank has grown the loan book over a period of time, right? You can look at a three year block or a two year block or a five year or a 10-year block. Whichever blocks you look at, it would be, call it, 2.2 to three. Every five years, 2.2 x or 2.3 x or thereabout, right? That is that eighteen to twenty, that is what I think, your memory says because that is the historical thing. Quarter to quarter there can be variations, but in this quarter if you see, still it is 19.9, 19.5%. The growth of the IBPCs, the loan grew 23.5%, right? 23.6% I think it was. There are, the loan growth can come and, it's a question of, on the wholesale that you touched upon, it's a matter of, how we prioritize in terms of what we want and at what price. If you look at the wholesale, the spreads are such, right? If you think about the bond spreads, in the quarter, the bond spreads widened in the quarter. Whereas the loan has to come and catch up over time. You know, we took a stand saying that, from a pricing point of view, we'll wait for the price to come up, right? We don't need to. The wholesale was -1%, right? The bond spreads went up anywhere from 30 basis points -60 basis points, the market bond spreads widened. We, we do have to wait and see how the loan starts to catch up on the yield from an opportunity point of view, where the other banks in the country or the financial market participants would appropriately start to price in looking at how the bond spreads are moving. We, it's a question of a quarter to quarter timings will be there. Okay. My broader question was that if you see some of the economies have already downgraded growth forecast for India, do you see what is your sector growth assumption for FY 2024? Then, of course, you would go grow above the sector to justify your 17%-18% year-on-year growth for the next year and then maybe for the next two to three years. Is it just a tactical call based on pricing, or you say, and you think there is adequate growth to grow 18%, with quarterly variation? Is that a fair assumption? It is a fair assumption. It is a tactical thing. We see good demand for loans, right? More than over INR 30,000- INR 40,000 crores of loans, we did not go through. We didn't want to go because the price has to catch up with what we have, we are seeing on the bond market and it didn't catch up, so we let go, right? We do see good demand in the NBFC segment, in the PSU or in the retail and infra segment. We do see good amount of demand coming. We are also getting on to the new product lines that I, that I mentioned too. Again, even through through PLI or other aspects, we are also into those. Would you have a call on the sector growth rate for FY 2024? I mean, any such. No. Loan growth? Okay. Sorry, just one follow-up. basically the, what would be the quantum of tax difference, INR 350 crore, what would it be? What is the- Interest on tax. Interest on tax. Oh, interest. Yeah, 6 basis points would be approximately INR 300 crores, yeah. Okay. Thank you. Thank you. That is it. It is not tax, sir. It's an interest on tax. Yes. Got that. Okay. Okay, got it. Thank you. you. The next question is from the line of Saurabh Kumar from JPMorgan. Please go ahead. Hi, Srini. Good evening. three questions. One is could you comment on what's the revolve rate on the cards business? The expense have gone up. I just want to see what the revolve rates are. The second is what will be the LCR both for the average and the period end. Lastly, just coming back to this NIM. This cycle HDFC Bank has shown lower NIM sensitivity versus if I look at your private sector, you know, peer group. Will it be fair to say as rates, if they were to go down maybe in second half of the year, we should again see lower sensitivity on NIMs to rates? It will be appreciated. Thank you, sir. Thank you, Saurabh, for asking. On the revolve rate, we haven't seen any pickup in revolve rates. They are still at 60%-70% of the pre-COVID levels. We don't see pickup in revolve rates. Actually, this quarter is slightly down by a percentage point or so. Understand the third quarter normally goes down because you see higher levels of spend, card spends that happen due to various festivals and events. You'll see that there are more transactors into that mix. One percentage point change doesn't make, but we are not seeing the trick in the revolve, pickup in the revolve rate. That is still far lower than what it used to be in the past. That's one on the revolve rate. Yes, we do. We are confident that the industry will come back. The revolve segment will come back. Again, we analyze that between what we call the occasional revolver who revolves between 1-3 months and 4-6 months and 6+ months and so on. The cream of that would be somebody who revolves 6+ months. Actually, that is not moving at all, right? It is not. You'll see that somebody 1-3 months going up or down a bit, but that is again more temporary that happens and it's not revolving happen. We're not seeing that yet. The second aspect that you touched upon is the LCR. I think we, I did allude to 113% LCR in the quarter, right? That's close to average EOP, whatever you call it, 113% is the LCR. You asked about the net interest margin in the context of in the second half, what happens when the rate moves. See, you can think about our net interest margin over the last three years, right? Go back to before the rates started to go down, and during the kind of a COVID period or in the current period, last year to year and a half period. If you look at it operates normally between the 3.94% to 4.4%, 4.5%. And the function of the NIM going up or down is about the mix of products. More retail composition in the portfolio gets you higher NIM and comes with higher cost and also comes with higher credit cost. The credit cost can come with a slight lag, right? That's the model in which it operates. Otherwise, if the cost of funds or the yield other than the lead and lag effect will move more or less, right? Quarter to quarter some variation because of the lead and lag effect. Otherwise it is pretty tight from a matched book point of view. When the, if the rates were to go down in the second half, and it would be we still will continue to manage the net interest margin in a stable manner around that historical range. Okay. bye Srini. Thank you. Thank you. The next question is from the line of Hardik Shah from Goldman Sachs. Please go ahead. Yeah, Srini. Hi, this is Rahul Yeah. Hi, Rahul. Good. Yes, please go ahead. Yeah. Hi. thanks. Srini, two, three questions. Number one, again, coming back to deposit growth. I mean, for the whole industry itself, the growth is not really showing any acceleration. Banks and all have kind of increased the rates. There is clearly pressure from alternate channels. Do you want to hazard a guess as to will banks need to touch the savings rate also in this, in the next couple of months, to push up the deposit mobilization? I certainly don't want to take a guess, but that is, you know, that has been something that over a longer period of time has remained more or less within a small range, right? That's not something that generally has happened. Again, the way is that we don't lead with it, but we'll follow the leader on that front. Still, you know that we price slightly above than the largest bank player in the country on the savings. I mean, what measures, you know, can banks take or, you know, eventually the growth will have to take a knock, the loan growth will have to take a knock because the CD ratio are... I mean, don't have much of a scope. I mean, it can still go up by a couple of%, but, how will you all kind of, you know, manage the whole growth versus deposit, dynamics? The growth of deposits, one, of course, the market itself grows at certain rate, right? The goal is to grow faster than the market to gain the share. Like for example, our share is slightly under 10% and grows at, call it, 80- 100 basis points in the last year. Similarly, over a five year period, you'll see that it's about 400+ basis points market share gain. So that's. We strive to get that by expanding our distribution to get closer to the customer with a better relationship. So that's. It is all about getting the customer in and deepening that relationship. It takes 21-24 months for the customer maturity cycle to peak. You want to get the customer in and work with the customer to get that, the maturity to be peaking, right? That's the only thing. With the market share slightly under 10%, it's a long runway to go and get that. Understood. The second question is on the cost side. You opened about, close to, let's say, 700 branches in this quarter. How many more you would want to open, let's say, in this quarter? Whatever costs are there to accrue with regards to branch expansion, has that already reflected in the numbers? There'll be some, you know, spillover into the fourth quarter as well, plus of course, whatever you'll open up in this quarter in terms of branches. Yes. The branches that we intended to open, call it 1,500-2,000 branches, we probably will open. We, in the pipeline, we have at least another 600 odd branches in the pipeline to go, right? We keep adding into that. Again, it's not a function of whether we know which locations and how many we want to open. It's a question of getting the lease consummated in an appropriate manner and getting the fitment done on time. It's a function of that. Yes, we are pursuing that branch build strategy, and we have a little more than 600 in the pipeline to go. In the shorter time period, it will come. From a cost point of view, those costs will mostly come in the following quarter. To the extent that it goes into later part of the quarter, then it'll, the cost will mostly spill into the, into the following year itself, right? Because, the cost may be a month or less than a month type of cost, and then it goes through. From a cost point of view, it also depends on the timing on that. Understood. Yes, just maybe, one more. On the priority sector, did we do any buyouts in this quarter? I mean, how are we placed on that front? Because the growth is strong, remaining strong. Any updates from RBI on the exemptions, potential exemptions that they applied for the mergers? No, we haven't heard. As I was saying that, we would expect at some point in time, maybe, there is the 27th NCLT meeting, from then on, there are a few other regulatory things to go through, before the effective date and maybe in the interim period there, we may hear, right? There is no target date or a, or a time frame set on that, we hope to hear, as soon as possible on that. But on the other question that you asked in terms of the priority sector, yes. You know, we do buy in the market, different products. One is to do with the, with the core growth, which is a significant push. The core PSL growth is about 35% up year on year. That means you know that the total loan is about 19.5% year on year. The core PSL, which means the on-books PSL that we originate and keep, grows at the rate of 35%, right? Has grown at the rate of 35% so far. That's one tool. That means, it gives good ROA and that is the priority and that is the push, right? There are other opportunities that we go and tap to, which is the PSLC or the IBPC or the RIDF, which is again, that's a continuous evaluation that happens between the alternative costs of various such strategies, that is how we use that. Do we have any significant shortfall out there or we are okay, I mean, with growth picking up in the core PSL book? The shortfall or excess gets determined, more at the end of the year in terms of how we do and that is where. Sure. It comes, right? But if you look at what we have done over the past several years, typically the overall PSL-It's 40%, right? That's, we are always there, and even now we are there, right? In the mid-40s+. It's a question of how do we get to the right kind of a composition on the agricultural and the micro, these are the two things that you focus to get there. Which we always endeavor and look for organic growth because it is tough to get organic growth. Then where we can't get, we go to the market to see how we can get PSLC or IBPC. Even if that doesn't work, we evaluate whether RIDF is another choice onto that, right? All of these, gets work, and normally it is an annual, type of a target and goal. Got it. Very, very helpful. Can I squeeze in one more small question, if you don't mind? I mean, on consumer behavior, on lending has been strong, the personal lending, you know, personal loans, you know, growth has been strong quarter on quarter, but we see that inflation continues to remain high, the EMIs have gone up. How do you think about, you know, this portfolio shaping up over the next couple of quarters? Asset quality seems to be strong, but do you think growth may take some knocks because of, you know, these factors? Or we are seeing some revolver shifting to the EMI loans which may be getting clubbed here. Just wanted to understand, you know, how this piece is gonna evolve over the next couple of quarters. we still see quite an amount of, that's part of the retail, spend if you see retail, card spend if you see, almost, 27% retail card spend growth, right, which is quite good. Similarly, if you look at the acquiring business spend, that is also, in the 20s, good, robust acquiring spend. You are seeing, people are spending. I'm talking about this quarter, right? That is happening. Another thing, if you see, there is, enough liquidity also there with the kind of a customer. I'm talking about our customer base. If you take our card customer base, I think last time I learned it too, and it is true now too, which is, the card customers' liability balances in the bank is over 5x. That means if there is 100 of a card receivable balance at an aggregate level, the deposits from that bunch of customers is like 5 x that, right? That, that means, Pre-COVID, I think it was, we said it is less than four, three and a half or 4 x. It is, people have built up liquidity and it seems to be there in, among our customer base. Mm-hmm. We do see good amount of spend happening. That should continue, even the personal loan book should continue to grow, is what I understand. Yeah. You've seen the personal loan book in the quarter grow. Yeah. close to mid-20s, say 24% or something we are seeing growing. Similarly, even the sequential growth, you're seeing good amount of sequential growth even on the personal. Yeah. 6% sequential, 23% year-on-year on the personal loan. We're seeing that growth. Understood. Got it. Srini, that's very helpful. Thank you so much, and wish you good luck for the coming quarter. Thank you. Thank you, Rahul. Thank you. The next question is from the line of Nitin Agarwal from Motilal Oswal. Please go ahead. Yeah. Hi, Srini. I have two, three questions. Firstly, if you can provide some color on the credit card acquisition strategy. We recently talked about like doing 1 million cards per month. How are you planning to achieve this, and the timeline for it? One, we acquired 1.2 million cards in the quarter. I don't think we have said 1 million per month. If anything, that's more of a strategic call. I can tell you that we are at about 1.2 million in this quarter, and the prior quarter was slightly under 1 million for the quarter. That's the kind of rate at which we are acquiring cards. Okay. This was there in the media very recently, I thought of sharing this, and, no worries. Secondly, like, this quarter we have consumed small amount of contingent provisions. What will be your approach to utilization of these provisions going ahead? See, the point. See, this every quarter, as we have said in the past, we evaluate what to do, and if there is a kind of a minor release, it happens and, or a build that happens. Broadly, if you think about how to think about it, which is also I think one of the notes we have given, the COVID, one of the important kind of drive that we built the results, and even before COVID, we built on certain other economic considerations. I wouldn't say that it's all behind us. If you look at certain markets in the east of the country or in the west of the country, the COVID cases are far higher, right? Far higher, and it's spiking. I'm not wishing that we follow what we followed last time with a lag of three or four months. I'm not wishing, but we got to be watchful to see how that turns out. We keep evaluating how this turns out, and that's how we keep the provisions on books. Right. Lastly, on the liabilities, this quarter we have reported like a pretty strong TD growth, almost 6% Q on Q. Can you share some color as to what has been the mix of savings deposits which has, which have moved to TDs? Or alternately, when you talk about INR 67,000 crore of retail deposits sold during the quarter, what will be the mix of SA and term in these incremental deposits? I think mix of both. Given you the savings account growth, I think it's about 13 odd% in the quarter. Time deposit growth is about 27% or so. The current account growth year-on-year is 8%. However, I did mention that the current retail current account, which is the granular current account, which is a big focus for us, is a 14% year-on-year growth. However, the wholesale current account, it de-grew by 4% in the quarter. From a, the CASA ratio is 44, right? The long-term CASA is about 40 or 39, 40 in the long term. If you think about the time deposit last year, FY 2022, the whole year, the time deposit grew by only 7%. It's a question of the customer preference and the rate cycle that happened and, that's all the growth. I gave you the rate of growth across each one of these products. Sure, Sunny. I will work that out. Thanks. Thanks so much. Thank you. The next question is from the line of Kunal Thanvi from Banyan Tree Advisors Private Limited. Please go ahead. Hi, thanks for the opportunity. I had two questions. One was the employee addition. Can you throw some light on, you know, the breakup of employee addition in terms of, you know, branch related and others, and within others, what are the areas where we are adding employees? Because last, nine months we have added around 25,000 employees. How much were to do with, you know, new branches and how much is non-branch? Okay. See, the most of the branch, most of the staff additions, will be in frontline. Frontline means either they are in asset sales, retail asset sales, which entails, you know, because you know that after a couple of years of a slowdown, we did pick up. Retail asset sales. Branches also adds in. Out of the 30 odd thousand, more than, call it, 60 odd percent would be simply directly branches. And then they, when I say assets, it is both cards and the retail assets. Both of them would also be there as part of the growth. Yes, we have about, call it, 84% or so of our people, in the customer-facing role, right? That's where most of the. In some manner or the other, I gave you two, three examples of liability branch product or a, or a asset sales product or a card sales type of product. That's the kind of growth where in the frontline handling the customer, in some manner or the other, either in relationship management or in sales. That's where dominant growth comes from. Sure. The second question was on, if you look at Fee income, the share of credit cards and payment products have, again, gone to 34% for this quarter. Can you throw some light on, you know, how the contribution of fee and payments have been improving and what is the outlook there? What is that sustainable number one should look at? Again, it depends on, yes, the payment business, was 32% of the total fees last quarter, 33% in this quarter, right. It is, more or less in that kind. I mean, normally in the third quarter you would expect that it contributes slightly higher than, what it used to contribute historically. Last year, third quarter was an aberration because of certain other things I alluded to at that time. From coming off the restructuring, a lot of these, risk-related type of fees, right, where people, check bounce fees or the late payment fees or the, over credit limit fees, et cetera, et cetera, they all came down because they are all risk-related fees. With the curtailment of all of those last year in the COVID period, they were down. Otherwise, there's no particular outlook I can give. It's a function of the customer behavior on these fees. Yes, it has gone up from 32% composition to 33% here. Again, depends on the seasonality and the promotions we run, period to period. Sure. Thank you so much. All the best. Thank you. Thank you. Before we proceed to the next question, I would request all the participants to please limit their questions to one per participant. The next question is from the line of M. B. Mahesh from Kotak Securities. Please go ahead. Hey. Hi, Sunny. If I will just ask one clarification. What is the accounting treatment of IBPC? When HDFC mortgage book customers were to come down to your bank, how does the pricing of those loans move? Because they have a different interest rate regime and banks have a different interest rate regime. Yeah. Okay. On the accounting literature, I think it's in a public document somewhere in terms of what that is. We can take it offline or one of our finance team can talk to you. Sure. show you where it is. Right. That's a very simple thing, you'll see. No, in the sense, in the sense do they have to move to EBLR or do they have a choice to continue where they are? This is on the mortgage you're talking about, right? Absolutely. Absolutely. Your second aspect of the question in terms of the mortgage, right? There will be a one-time change, right, that we will do when the migration happens, right? We are working through that integration process. Once it's integrated, we'll exactly communicate with the customer how that will move. Then of course, at any point in time, customers have a choice, right? Even today they have, and in future they will have a choice to pick the external benchmark, whatever they need. Okay. Just on the first question, on the IBPC part, does that increase in sale of loans through IBPC have any impact on the NII or the fee income line? Yeah. There will be NII depending on whether the IBPC is done at a price above the cost of funds or below the cost of funds and so on. Correct. Similarly, there will be some impact on the IBPC, yes. How is it distorted, if I have to ask? IBPC will have some impact. If you look at our loan growth, 19.5%, growth of IBPC, the loan growth is 23.5%, right? No, no. On the NII line, just. On the NII line, there will be some impact, right? At any point in time could be 0-5 basis points or 10 basis points at any time. Okay. Perfect. If you can give a clarification, what is the definition of a retail current account? Retail current account is the customers managed out of the branches, right? A wholesale customer is normally a big corporate or a wholesale customer relationship managed. Whereas in a branch managed, that is what we call the retail. Example, it could be a merchant around the corner somewhere, or it could be certain other institution which the branch is managing and opening and maintaining that account. Okay. Perfect. Thanks a lot. Thank you. The next question is from the line of Pranav Gundlapalle from Bernstein Private Wealth Management. Please go ahead. Hey, thanks for taking my question. Just a quick question on the NIM. You explained how the change in loan mix is driving the change in NIMs, so that's clear. Within a given segment, have you seen a change in your risk profile over the last two, three years which can also explain at least a part of that NIM change? Maybe between personal loans going towards safer segments or within corporate going towards safer segments. Have you seen anything of that sort there? Pranav, your line is echoing. I didn't get it all. I know the question is about the NIM from 2, 3 years and something, but I didn't get it exactly. If you can slowly repeat, I will try to. Pranav, if you're wearing any headphones or earphones, we would request you to speak to the handset directly. Yeah. Sorry. Is it clear now? Not very clear, sir. Okay. Please try it once again. My question was, you explained about how change in loan segment, explain the change in NIM that you're seeing. Is there a change in relative riskier, riskiness within the segment itself? Have you seen a shift towards safer or less risky segments within personal or any particular segment? I got it. You're asking about the relative. Of course, yes. Absolutely. Because the change in our composition that we saw when the wholesale moved from 45%- 55% from a total composition, we did see a significant improvement in the quality of the customer. These were very highly rated corporates, right? Our wholesale customers, wholesale books is at about an average internal rating, call it about 4.3 or so, which is equivalent to a double A rating. Yes, the quality of the book. One other thing is also the, and it comes with the lower risk weights. It comes with lower risk weights anywhere from 20%, 30%. The retail comes with a 100% risk weight. Yes, it comes with a different type of a risk metrics. That is why, when the wholesale comes, it'll come with a lower margin, cost to income which is very low. There's virtually no marginal cost to income. The credit cost, our experience on the credit cost has been that you'll see that hardly any credit cost that we report on that segment. Whereas on the retail, it come with a higher margin, higher cost of origination, higher cost of maintenance, and it'll come with a credit cost. The credit cost can come with a lag too, right? That's part of the part of the model. One thing is from a returns point of view, if you think about the returns, more or less they will be matching, right? From a ROA, you'll see that call it approximately 2%, could be 2.1.9, but approximately 2%. Irrespective of the segment in which we operate, we manage to optimize the ROA, right? Because if the margin is low, cost is low, credit cost is low, and so you get to the margin, you get to the returns that you want to get. That's how we manage that. Over a period of when the shift has happened, you will see that the ROA remains pretty stable. Understood. That's pretty clear. Thanks a lot. Thank you. Here's what I found. Thank you. Ladies and gentlemen, we have come to an end of the time allocated for the call. I would now like to hand the conference over to Mr. Vaidyanathan for closing comments. Okay. thank you, Tanvi, and thank you to all the participants for joining in today. any further questions, comments, or anything, the team is available, and at some point in time we can connect over the next few days. thank you. Have a great weekend. Bye-bye. Thank you very much. On behalf of HDFC Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.