HDFC Bank Limited 2027 Q2 Earnings Call

Okay. Thank you, Nirav. Good evening and a warm welcome to all the participants. Today, we have with us Shashi, Anup and Kaizad. Without much ado, we will get the meeting started with Shashi for your opening remarks first, please.

Thank you, Srini, and thank you, everyone. Let me start with the economic environment. The GDP growth in Q1 FY27 has been better than anticipated in high frequency indicators such as industrial production, strong e-way bill, cargo activity, credit growth reflects sustained momentum. Retail consumption growth has also been robust with passenger vehicles, two-wheeler sales all growing upwards of 30-plus percentage. Even consumer durables grew at about 11% YOY. This all bodes very well for the economy, especially with the festive season underway. The broader policy environment has been supportive of economic activity. Alongside this, measures in the form of credit guarantee support to MSMEs have also been effective. RBI's proactive response through measures like the special FCNR swap window generated record inflows, about $133 billion, and helped stabilize the currency. With that background, let's take a quick look at how the business has been shaping up.

We continue to strengthen our liabilities franchise, and it has been delivering with great vigor. Deposits increased 18.8% YOY on a reported basis, including a 4 percentage point lift from special FCNR window. As you will see in our published deck, CASA grew at about 10.8% on an overall basis, and within this, retail CASA growth was about 11.2% YOY compared to 9% year ago, reflecting improving momentum. We added about 1.7 million liability relationships in the second quarter, which is 25% higher than Q1 and 33% higher than the fourth quarter of last year. Building on these new acquired relationships and deepening our existing relationships will enable the liabilities engine to step up further in the coming days, even as we keep adding newer relationships at a rapid pace.

The asset side of the balance sheet also continued to get stronger. Total AUM grew 15.3% year-on-year, including a 1.9% impact of FCNR leverage, with SME and retail assets leading the charge. The pace of retail disbursements is accelerating and has crossed INR 90,000 crore during Q2 FY 2027 as against INR 76,000 crore in Q1 of this year. Growth has been balanced across all lines, whether it is personal loans, the wheels business, gold and agri, and other MSME business as well. This is also reflected in the rising growth trend in EOP loan book, especially for retail assets ex-agri. September 2026 annual growth is about 11.2% compared to 9.1% as of June 2026 and 7.4% as of March 2026. New credit card issuances at 1.4 million have grown by nearly 19% quarter-on-quarter, indicating the expansion of the growth runway. On the MSME and mid-market business, growth momentum is also improving rapidly.

September 2026 EOP loan growth has grown 23.5% year-on-year compared to 17%-18% year-on-year growth level seen in the last few quarters. Of course, this quarter, we have the ECLGS 5.0 scheme that also created significant opportunities we successfully leveraged. Our ECLGS disbursements of INR 41,000 crore were highest across all banks, and as of August 2026, when the scheme achieved targeted levels. What is driving this momentum? Since May of 2026, the entire retail and MSME business and channel supervisory architecture across the country have been focusing on daily operating rigor across frontline, the credit and operations and service verticals, all working from one view across products and across all channels to ensure a same day, same time resolution of delivery of products and services, queries, and complaints as well. The focus has been on digital adoption and straight-through processing, which is moving up significantly.

The turnaround times on product deliveries have come down anywhere between 10% and 15% in a short span of time, while service delivery TATs have come down by 30% during the quarter. Which means the front line can touch more customers within the same work hours. This is reflected in the customer visits per resource per day going up significantly compared to the prior quarter, almost up by about 50%. This will have an impact on growth, and that is pretty much reflected in the early signs that we have seen on the momentum. For example, the savings accounts per branch per day have gone up by 19% in the last few months, between a Q2 and a Q1. Core incremental deposits per branch per day is up 2.3 times from Q1.

Sometimes, of course, extraordinary one-off outflows may mask this underlying momentum, but at some point in time, this will start to reflect as we move forward. Daily disbursal run rate of key retail and MSME products are up by 10%-20% versus the prior quarter. Our asset quality remains pristine, with GNPA at 1.11%, 13 basis points lower than year on year. Credit costs remain low at 44 basis points. The risk weights total assets at 69%. Our industry-leading asset quality metrics reflect the top quartile credit quality choices we have consistently made. The bank's well-balanced performance translated to ROA of 1.8%, which has been the range that we have been there for a very long time, and quarterly PAT of INR 19.5 billion, which is a growth of 12.7% approximately if you exclude the trading gains. We have a solid platform to reap the. Sorry. On technology, I would like to spend some time.

HDFC Bank has always incorporated cutting-edge technologies into its operations, and we are now bringing AI into the heart of how the bank operates. In the quarter gone by, we introduced applications and apps and features in various areas that will help enhance customer experience and protection. In the area of digital safety for customers, we introduced Edge Security. Very mindful of the fact that a lot of our citizens in the country are being subjected to digital frauds. I think this is going to be a game changer in terms of cutting-edge technology that we can offer to customers. A unified protection stack and tools like Kavach and Secure Lock. We launched several apps to increase customer convenience, including product journeys, AI conversational banking, and AI collections bot that helps customers stay repayment-ready.

We also strengthen our real-time fraud prevention capabilities as well. As my long innings at HDFC Bank come to an end, I would like to say that it has been an absolute privilege to lead this organization that brings together some of the most brilliant minds and over 200,000 extremely committed and focused professionals. A cutting-edge technology, a solid brand that binds the 100 million customers, and the collective zeal to consistently deliver top-class results for all our stakeholders. While leaving this organization is an emotional moment for me personally, I take comfort the fact that I'm leaving behind a solid platform which has demonstrated strength and resilience to navigate regulatory embargoes and unprecedented COVID event, a large complex merger when the economic outlook warranted monetary tightening, and other governance matters of the recent past having been settled completely.

A platform where we invested over the past few years in re-architecting and reinforcing our technology from the core to AI layer, ready to be harnessed in our product and service deliveries. A distribution strength which will deliver as a vintage of branches mature. An optimism stemming from the fact that the net interest margins, which in recent times has borne the brunt of faster repricing of assets and a lag in cost of funds in a down rate cycle, is also positioned for a reversal as we enter the upward rate cycle. This will get further enhanced as the proportion of retail and MSME assets outweigh the proportion of corporate and home loans over a period of time. I'm sure that the bank will keep scaling greater heights, which will be a matter of immense pride for all of us.

I'll also leave behind the hands of an able team spread across various levels in the organization throughout the country, led by a new and an able leader, and I welcome Anup at this juncture heartily to the institution as well. Thank you for all the support over all these years, and I wish you and families a very happy Dussehra and festivities, and I'm sure you will continue to provide the same kind of support and affection that all of you have showered on us over these 30 years to the new leadership team, and take it to its rightful glory over a period of time. Thank you so much. Thank you.

Thank you, Sashi, for that very passionate and a good recount of recent and the decades that you have served the bank. Thank you very much for all of that. Now we have with us today Anup. We are delighted to have you, sir, here with us. Welcome, and over to you for a few sentences that you want to share.

Thank you, Shashi. Thank you, Srini. Thank you, Kaizad. I am really grateful to the board for the trust placed in me as MD and CEO. I look forward to working with the board, chairman, leadership team, and colleagues across the bank and the group to build on the group's very strong foundations. It is indeed a privilege and a responsibility I hold with deep respect. The group's rich legacy, market leadership, and reputation within India's financial ecosystems are exceptional. I thank Shashi for his impactful six-year leadership, successfully navigating the post-pandemic phase, completing the landmark HDFC Limited merger, scaling our branch network, and strengthening the core technology capabilities. The clear long-term goal is to deliver sustainable long-term value for shareholders, employees, and clients. In the near term, I will engage with regulators, customers, shareholders, and other stakeholders to gather insights that will be a key input to our organizational priorities.