Kunal Shah

Kunal Shah questioned the credit card portfolio's flat growth since June, noting this trend is unusual for festive periods, and asked if specific cohorts or transactor proportions were responsible. He also asked about significant quarter-on-quarter action on the corporate side, particularly if the increase in BBB proportion indicates a larger part of corporate growth coming from this segment. Finally, he inquired about the OpEx growth nearing 30%, asking if there are other contributing elements beyond compliance costs and if cost containment levers are available.

Answer

Anindya Banerjee, CFO of ICICI Bank, stated that the transactor portion has increased across most players, and the Q3 credit card decline was an offset to unusually strong Q2 growth, expecting gradual improvement. For corporate growth, he noted that the settling of external benchmark linked rates provides confidence for pricing and lending, and the bank is comfortable with A-family and above ratings, managing BBB exposure within internal limits. Regarding OpEx, Mr. Banerjee indicated that sequential costs (excluding labor code impact) marginally decreased in Q3, and while the labor code will marginally increase recurring costs, the bank aims to maximize PPOP rather than cutting costs per se.

Kunal Shah inquired about the credit card portfolio remaining flat since June, noting this trend was unusual compared to previous festive seasons, and asked if specific cohorts or transactor proportions were responsible. He also asked about significant quarter-on-quarter action on the corporate side, the benefit from PSU entities, and the increase in the BBB proportion, clarifying if it was driven by business banking or broader corporate growth. Finally, he questioned the OpEx growth nearing 30% after earlier single-digit growth, asking about other contributing elements and future cost containment levers.

Answer

Anindya Banerjee (CFO, ICICI Bank) stated that the transactor portion has increased across most players, and the Q3 credit card decline was a one-off offset from strong Q2 festive growth, expecting gradual improvement. He clarified that the bank views credit cards as part of an overall customer offering. For corporate growth, Mr. Banerjee noted participation where the bank has a franchise, despite price competition, and that the settling of external benchmarks provides confidence. He confirmed comfort with A-family ratings and managing BBB within internal limits. Regarding OpEx, Mr. Banerjee expects costs not to rise at the previous pace, noting a marginal sequential decline in Q3 (excluding labor code impact), and that the labor code will marginally increase recurring costs, which the bank will absorb while maximizing PPOP.

Kunal Shah inquired about growth trends in various retail segments like vehicle, personal, and mortgage loans, including the impact of GST cuts on vehicle loans and comfort with personal loan credit costs. He also asked about the expanding Loan-to-Deposit Ratio (LDR), the pace of loan versus deposit growth, and the bank's strategy for managing margins and garnering term deposits. Finally, he sought initial commentary on the potential impact of RBI's proposed guidelines on Expected Credit Loss (ECL) and risk-weight benefits.

Answer

Anindya Banerjee, CFO, confirmed an overall loan growth pickup from 1% to 3% sequentially, expressing optimism for continued growth. He noted declining retail NPL additions and healthy asset quality, particularly in personal loans where corrective actions in FY22-23 have yielded positive performance, leading to increased disbursements. On LDR, Mr. Banerjee clarified it's a quarter-end measure, with system-wide LDRs expanding in Q2, and anticipated further increases with CRR cuts in Q3, affirming comfort with current and slightly higher sustainable levels. For RBI guidelines, he expects a net-net positive impact on capital for most banks, but noted the guidelines are still open for comments. He stated no expected impact on ECL transition given the bank's current provisioning levels, with ongoing credit costs under ECL still being assessed.

Kunal Shah from Citigroup Global Markets Inc. sought further clarification on the Net Interest Margin (NIM) calculation change, specifically the sequential decline after adjustments. He also asked if credit costs have now normalized or if further gradual increases are expected.

Answer

Anindya Banerjee, Group CFO, clarified that the sequential NIM decline was primarily due to the day-count effect, which the new method eliminates going forward. He stated that the underlying credit cost is approximately 50 basis points, and he does not foresee any major movements from this level.

Kunal Shah from Citigroup Global Markets Inc. sought further clarification on the Net Interest Margin (NIM) decline after accounting for calculation changes and tax refunds, and asked if the bank's credit cost has now normalized or if further adjustments are expected.

Answer

Anindya Banerjee, Group CFO, reiterated that the Q4 reported NIM would have been lower on a like-for-like basis and that the Q1 impact of the calculation change was minimal. On credit costs, he stated that the underlying level is approximately 50 basis points, and while it could fluctuate, no major movements are anticipated.

Kunal Shah from Citigroup sought clarification on the drivers behind the 21 basis point expansion in net interest margin (NIM), questioning the impact of one-offs, and asked for guidance on the NIM trajectory given the potential for significant repo rate cuts.

Answer

Executive Anindya Banerjee attributed the yield expansion primarily to a day-count convention benefit reversing from prior quarters and the absence of KCC non-accrual, denying any significant one-off items. He acknowledged that while deposit rates are falling, a higher level of rate cuts would inevitably impact margins due to the lag in deposit repricing compared to immediate loan repricing.

Kunal Shah of Citigroup asked for the quantified impact of the new penal charges circular, whether credit cost normalization would be gradual or volatile, and the bank's strategy on retail deposit rates following competitor hikes.

Answer

Executive Anindya Banerjee declined to quantify the impact of the penal charges circular. He affirmed that credit costs have been steady at an adjusted level of around 50 bps and expects a gradual normalization. Regarding deposit rates, he stated the bank will take a dynamic approach based on market conditions and its funding requirements, without committing to a specific action.

Kunal Shah from Citigroup asked about the reasons for lower overhead costs, seeking to know if there were any one-offs. He also inquired about the pace of employee additions, the outlook for OpEx growth relative to the balance sheet, and whether the bulk of deposit repricing is now complete.

Answer

Anindya Banerjee, Executive Director, clarified there were no significant one-off reversals. The moderation in overheads was attributed to optimized sourcing costs and a slower pace of employee additions, which is expected to continue at a more measured rate. He noted that while the bank focuses on risk-adjusted profit, OpEx growth is expected to remain moderate. On deposit costs, he mentioned that a February rate hike will still have some impact, though not a large one.

Kunal Shah inquired about the bank's incremental deposit market share, which seemed to have declined, asking if it was due to bulk deposit rundown or lower overall growth. He also sought clarification on the increase in contingency provisions and the drivers behind the sequential uptake in fee income.

Answer

Srinivasan Vaidyanathan (CFO) stated that deposit market share is an outcome, with the bank focusing on granular retail deposits, and that non-retail deposits decreased while retail grew. Sashidhar Jagdishan (CEO) highlighted disciplined pricing and comfortable year-on-year average deposit growth of 15%. Srinivasan Vaidyanathan (CFO) confirmed the contingency provision increase was precautionary and opportunistic, not related to ECL buildup. For fee income, he noted a 9% growth, consistent across products, with Sashidhar Jagdishan (CEO) adding that asset buildup and disbursals contributed to better earnings.

Kunal Shah from Citigroup Global Markets Inc. asked about the specific segments HDFC Bank is targeting for accelerated growth and the reason for the significant 4,000-employee increase in the quarter. He also sought clarity on when Net Interest Margins (NIMs) might return to previous levels.

Answer

MD & CEO Sashidhar Jagdishan attributed the employee growth to staffing new branches and expanding the technology and sales teams, with a future focus on front-end roles. He reiterated broad-based growth plans across all segments. Chief Financial Officer Srinivasan Vaidyanathan explained that NIM recovery will take a few quarters, as it depends on the pace of future rate changes and the significant lag in repricing the bank's deposit base, which has an average duration of 15-18 months.

Kunal Shah from Citigroup Global Markets Inc. sought details on the bank's key growth priorities, the reason for a 4,000-employee increase in the quarter, and the outlook for Net Interest Margins (NIMs) given deposit duration.

Answer

CEO Sashidhar Jagdishan stated the employee increase was driven by staffing for newly opened branches and additions to sales and technology teams. CFO Srinivasan Vaidyanathan noted that with deposit duration centered around 15-18 months, it will take a few quarters for NIMs to stabilize, contingent on the pace of future rate changes and the lagged repricing of liabilities.

Kunal Shah followed up on margins, asking if the bank can maintain a narrow band even with significant repo rate cuts. He also questioned the outlook for the CASA ratio in a falling rate environment and the bank's stance on the pace of its Loan-to-Deposit Ratio (LDR) reduction.

Answer

CFO Srinivasan Vaidyanathan acknowledged that rapid, successive rate cuts make quarterly margin stability difficult, but stability is achievable over a full year. He reiterated the historical trend of the CASA ratio improving with a lag as rates fall. For the LDR, he confirmed the goal remains to reach the 85-90% pre-merger range by FY '27, with the decline in FY '26 being less steep than in the prior year.

Kunal Shah from Citigroup followed up on margin sustainability in a scenario with significant repo rate cuts. He also questioned the outlook for the CASA ratio and the Loan-to-Deposit Ratio (LDR) in a falling interest rate environment.

Answer

Executive Srinivasan Vaidyanathan explained that while margins are managed within a stable range annually, rapid, successive rate cuts could create a short-term lag before funding costs fully adjust. He reiterated the historical inverse correlation between policy rates and CASA ratios, expecting CASA to improve with a lag as rates fall. For the LDR, he confirmed the bank's goal remains to bring it down to the 85-90% range by FY '27, noting the pace of reduction would be less steep in FY '26 to support loan growth at the market rate.

Kunal Shah questioned HDFC Bank's comfort level with Priority Sector Lending (PSL) obligations, its strategy for boosting deposit growth without relying on higher rates, and how it plans to manage upcoming borrowing maturities.

Answer

CFO Srinivasan Vaidyanathan explained the main PSL challenge is sourcing small and marginal farmer loans due to ticket size constraints, not a lack of confidence in other categories. He reiterated that deposit growth is driven by customer engagement, pointing to a 20% YoY increase in monthly fund inflows. Executive Director Sashidhar Jagdishan emphasized focusing on average deposit balances, which show resilient underlying momentum.

Kunal Shah asked if the bank was more comfortable on its Priority Sector Lending (PSL) position and questioned the deposit growth strategy, asking if rate hikes would be considered given that other efforts haven't yielded expected results, especially with large borrowings maturing.

Answer

CFO Srinivasan Vaidyanathan clarified the key PSL challenge is sourcing specific sub-categories like small and marginal farmer loans, not overall PSL. He firmly stated that rates are not the primary tool for deposit gathering; the focus is on engagement and service, evidenced by a 20% YoY increase in monthly fund inflows. Executive Director Sashidhar Jagdishan emphasized looking at the resilient 12-quarter average deposit data over volatile period-end numbers.

Kunal Shah asked about the potential impact of the RBI's draft circular on lending to group entities on HDB Financial Services and its planned IPO. He also questioned the bank's strategy for reducing its Loan-to-Deposit Ratio (LDR) and the target level or timeline for this reduction.

Answer

CFO Srinivasan Vaidyanathan emphasized that the circular is a draft and that HDB is a regulated, supervised entity with no policy arbitrage versus the bank. He confirmed the HDB IPO process has been initiated to meet the September '25 deadline but declined to give a specific timeline. On the LDR, Vaidyanathan stated the goal is to return to the mid-to-high 80s range within 2-3 years, an accelerated timeline from the previous 4-5 year estimate. CEO Sashidhar Jagdishan added this acceleration positions the bank to capitalize on a potential credit cycle change in the coming years.