HDFC Bank Ltd (HDB) 2015 Q4 法說會逐字稿

Thank you for standing by and welcome to the Q4 and full year 2015 results conference call presented by Mr. Paresh Sukthankar, Deputy Managing Director of the Bank.

At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. (Operator Instructions)

I'd like to hand the conference over to Mr. Paresh Sukthankar. Over to you, sir.

Good evening, everyone. As was just mentioned, I'll walk you through some of the key parameters of this quarter and the full-year results and we will plunge into questions thereafter.

So for the quarter ended March, our net revenues were INR8,576.9 crores and the year-on-year growth for the quarter was 23.3%. Off these net revenues, 70.1% were net interest income. NII grew by 21.4% to touch INR6,013 crores. This net interest income growth was on the back of asset growth and a net interest margin, which was at 4.4%, which is stable on both a year-on-year and a sequential basis.

The other 29.9% of net revenues, which was the other income, that grew by 28.1% from INR2,001 crores to INR2,563.8 crores. If you look at the major components of other income, the largest component is fees and commissions, which is 72% where the growth was 20.6% from INR1,521 crores to INR1,834 crores.

Foreign exchange revenues increased from INR252 crores to INR328 crores and bond gains were at INR196 crores as against INR33 crores for the corresponding quarter of last year. So once again, the other income total at INR2,563 was roughly 30% of net revenues and was up about 28%.

Moving on to operating expenses, the growth there was 21.4%. Cost to income ratio therefore was at 44.9% as against 45.7% for the corresponding quarter of last year -- of the previous year.

Total provisions were at INR576.7 crores. This compares to INR286 crores for the corresponding quarter of last year and compares to INR560 crores in the December quarter. So sequentially it's up about 2.7% but year-on-year there is a large growth. And if you break up the three components of those provisions, then general provisions are up from INR28 crores to INR119 crores, so that's about INR91 crore increase in general provisions.

The specific provisions at INR425 crores are up from INR320 crores, which if you look at it sequentially, is more or less similar but year-on-year it is up about 30%. And then there is other provisions which have moved from minus INR62 cores last year to INR33 crores this year.

So when you look at the swing factor, you'll find that it's roughly equally spread out across specific provisions for NPL, general provisions for standard assets -- total general provisions and other miscellaneous provisions. Net profit for the year then after provisions and taxes was INR2,806 crores for the quarter which was a growth of 20.6% for last year.

If you look at the full-year figures, just a couple of them, the net interest income growth was 21%. Fees and commission growth for the full year was about 14.8%. Cost to income growth -- cost to income ratio for the full year was 44.6% as against 45.6% in the previous financial year. And net profit growth for the full year was at 20.5% clocking a full-year net profit of INR10,215.9 crores, [so it sort of] crossed the INR10,000 crore mark for the first time.

Very quickly on the balance sheet numbers. The overall balance sheet size was at INR590503 crores, so [INR5.9 lakh crores] which grew by about 20.1% over the previous year. Loans and advances were up 20.6% to INR365000 crores. Deposits were up 22.7%, touching INR450000 crores. Within those deposits, if you look at the savings account growth was about 21%, current account growth was about 19.6% and the CASA ratio therefore as of year-end was 44%. We did see a pick-up on the branch expansion side for this quarter. In fact, on a full-year basis, we've added about 611 branches, of which about 355 branches were added in the Jan to March quarter. So in this last quarter, we've added about 355 branches.

Off the total 611 that we added during the year, about half -- in fact, 290 branches were in metropolitan and urban areas and the remaining 321 or 320 were in rural areas and we had one new branch in overseas which was in Dubai. So that was the increase in branches. And therefore, we now have a branch network as of March of 4,014 branches in 2,464 cities. About 55% of those branches now are in semi-urban and rural areas.

On the asset quality front, like-for-like the asset quality was more or less stable. In terms of gross NPAs the comparable sort of numbers would have been roughly 1% both last year and this year. However, this year there is a [sale of an] exposure in NPA during the quarter, net of which therefore the gross NPAs as of year-end were at 0.93%.

Just to give you a bit flavor on this, this is a single corporate NPA, which had been an overdue account and a SME2 account where we have less than 2%, somewhere between 1.5% and 2%, of the corporates' borrowings.

And since we were not completely convinced with the bankability of increasing exposure and since we were not servicing and the account became non-performing, we felt it was prudent to sell the non-performing asset to an asset reconstruction company.

So net of that sale, like I said, our gross NPA is 0.93%. The provisioning on that sale has been accounted for and has been taken in against the floating provisions that the Bank has. So it has been accounted for and [see the stuff].

The net NPAs are at [0.24% -- 0.25%] which is again very similar to what it was last year at about 0.28% or so. Total restructured loans, not much of a change there, we are at about 0.1%-something, so between 0.1% and 0.2% in terms of total restructured loans including [pipeline]. And some part of that restructured is actually being included in the NPAs in any case.

Finally, on the capital, total capital adequacy ratio was at 16.8%, Tier-I is at 13.7% and this is after having declared a dividend of INR8 a share, which is a payout ratio, which is more or less consistent with our prior payout ratios of about approximately 23%.

So those were some of the key financial parameters. I think I'll sort of pause here and -- Sashi and Bhavin are with me as well, and we'll be happy to take your questions.

Yes, if you can throw the call open now for questions please.

(Operator Instructions). Vishal Goyal, UBS Securities.

I think the first question is on this sale of NPL. What kind of exposures basically we could have in similar, I would argue, sector and any similar pipeline there? And second question is on the outlook, especially on growth.

So, for one, we don't have any other exposures in the pipeline or which have similar size or other characteristics in terms of the way the account is behaving. So there certainly isn't a string or even other names of the similar type. We might have exposures in that industry, but they're certainly not of the correct concern or of the correct rating that this particular account had.

As far as growth is concerned, I think we remain positioned to grow faster than the banking system, which is what we've always done. We've done that in this quarter as well. And we've seen that our growth has come from both wholesale and retail businesses. So we remain equally well positioned to tap into growth opportunities in both these businesses in this financial year as well.

To the extent that we have added branches and continue to add branches in this financial year -- in the year which has just ended as well, obviously those will also facilitate some part of the growth that we see.

The absolute rate at which we might grow, it's difficult and we don't have a guidance on the number. We, as a policy, don't have a number guidance on growth or any other financial number. Beyond just the fact that whatever the system loan growth is depending on how the economy does, we will grow a little faster than that.

And also on this sale to ARC, is this for cash or you got SR?

So we've got a 15% -- first of all, it's obviously been sold at a certain discount to the value, but off the value which we have sold at, we would have got 15% cash and the rest SR.

Suruchi Jain, Morningstar.

I had a question about the savings interest rates. Given that you're already giving lower than some of the newer banks and with the cross-sell going up, is there a chance that you would further reduce this interest rate to maintain sort of a similar spread going forward and -- while continuing to maintain your CASA deposits? And the second question is how do you see the CASA moving in the coming years given if you have any changes in savings rates?

We have no plans at this point of time, no plans whatsoever at this point of time, to change the 4% rate that we offer on savings accounts. So obviously the second question in terms of what impact and so on [in fact just doesn't] become applicable at all.

As far as growth in CASA generally, I mean on the retail side, on customer acquisition as well as increasing our balances, increasing our penetration of existing customers, we've been able to drive that fairly well in the last year as well. A lot of our initiatives across multiple loan products, across the entire digital initiatives spectrum has, we believe, strengthened our position in the marketplace because we do have perhaps the most wide product range. We do have extremely compelling and attractive turnaround times, service levels, pricing which is competitive. So our strategy on the one hand to increase customer acquisition partly driven by brand, distribution, product and so on and partly to increase the penetration of existing customers, both of these will, we believe, drive in particular the savings account growth.

On the current account, to the extent that some of these businesses or some of these products do tend to grow as a function of either the capital markets or the liquidity in the system in the supply chains as the economy picks up in terms of growth rates from where it is right now. And if the markets continue to do well then that should also see some growth because we are a market leader in a lot of these transactional banking businesses linked to that.

Okay. Just a follow-up on the retail [SAR] movement, in terms of cross-sell rates, would you be able to share something in terms of average cross-sell rates per customer or even channel penetration per customer?

We don't put that in the public domain. All I can say is that depending on the nature of the servicing because we have different customer segments where we service them either through advisors or relationship managers or personal bankers and so on, depending on each segment, we do have and we do track what our cross-sell ratios are. And of course the attempt is to try and increase the ratios across the range of products. And we've been making some good progress, but there is a long way for us to go. But we don't really share the exact numbers in the public domain.

[Maharoof, IDFC].

This asset sale, would you be able to share what was the gross book value of the assets sold and how much security receipts you have got against it?

Well, the gross value of the exposure was about INR550 crores, but some portion of that, about 20% of that, is in foreign currency which cannot be sold or could not have been bought by the ARC. So roughly 80% of that has been sold. We wouldn't be in a position to tell you the terms on which it has been sold in terms of the income, but whatever it has been sold at, as I said, has been the loss on sale or the write-down on sale has been provided for.

It will be provided for each quarters or fully provided for -- ?

Fully provided for in this quarter.

And the other question I wanted to check is on foreign loan. So a few private banks are growing their foreign loans quite aggressively. You don't see a market for them and they're saying that they're spread neutralized well.

No, we haven't quite seen the same opportunity or at least to the same extent. Our growth on the overseas side -- on the overseas book has been somewhat muted. I don't really see that changing too much. And traditionally, at least we have seen -- wherever we've done foreign currency lending that has usually been a little margin dilutive.

So if you look at our overseas book, most of it actually dates back to the NRI linked opportunity if you remember almost 18 months back, but after that the growth in the overseas book has been somewhat muted. And therefore that growth as you might recall was essentially retail, [it was our] retail.

Got it. Just one last question, because of this monsoon thing, you think your two-wheeler portfolio or any other retail segment would be impacted in terms of asset quality?

I don't -- I mean it's still very early to say, but I don't think there will be a very -- any meaningful or material impact. In any case, if you look at something like the two wheeler portfolio in particular what I mentioned is it's a small portfolio both in absolute terms relation and certainly in relation to the total retail book. So at this point of time premature to comment. I don't see really any meaningful change in the kind of delinquencies for those products.

Amit Premchandani, UTI Mutual Fund.

This time you have given a disclosure of CD loans or the retail loan as per your own classification of retail. If we reduce -- if we deduct the classification as per your -- with the Basel II classification, the difference is quite high on CV front, so almost INR12,000 crores of [CVC] loans are not qualifying as retail for Basel II and almost 40% growth is there on a YoY basis on this portfolio. So can you share with us some insight on what kind of loans these are? Are these dealer loans or fleet loans, large fleet loans, classified as non-retail as per Basel II?

So this time, because we keep getting these questions on how our particular underlying business is doing or not, we thought we'll share both. So what you have of course is numbers that are comparable to what you've been seeing which is based on the segmental reporting. And just to refresh -- just to make it clear for everyone, the segmental reporting into retail and wholesale is based on the regulatory guidelines which are -- where a retail account is classified as retail either based on the size of the exposure which means it is less than INR5 crores or based on the turnover of the business and so on. So that's the way that the segmental reporting is done.

And the business reporting therefore of course is (inaudible) for instance, CV and CE put together, if you were lending to a fleet or if you were lending to an exposure which was more than the cut-off or to an entity which had a turnover which was more than the specified cut-off, it would then still be the same business.

So like-for-like when you look at the CV/CE portfolio put together, it's grown year-on-year at about 8% and sequentially has been more or less flat. The exposures which have come into the total fees which were not in the retail fees are essentially going to be larger borrowers in the case of construction equipment whose turnovers would be more than the cut-off and/or the exposure size would be more than INR5 crores.

On the commercial vehicle side it would primarily be fleet operators where the individual exposures would be more than INR5 crores. This is not different, as you can see, last year and this year. With the same classifications the exposure size is more or less the same.

But the growth is almost 40% in the large ticket size exposures. So is it mainly to do with fleet operators or you are growing aggressively in the CE side of the business?

No, there has been -- it's been the fleets primarily and the future larger borrowers of the same profile that we had in the past. So there has been no change in strategy out there. It's just that, again when you look at whatever growth has been coming across in the last couple of quarters, much of that has come in in the medium and heavy commercial vehicle side of the segment rather than the light commercial vehicle segment. So clearly when you look at therefore the customer profiles as well, those would be appropriate to that segment rather than the LCV segment which was perhaps seeing stronger growth about 12 or 18 months back.

Prakhar Agarwal, Edelweiss Securities.

Hi, Paresh. I am Nilesh here. One question on the -- we've seen a smart momentum building up on the fee income side second quarter running. Just wanted to get your understanding in terms of the sustainability of this as we move ahead. That's number one. [If we can] come back for the second question later.

Yes, there are some fees and commissions which tend to, I wouldn't say, necessarily one-off, but tend to clock in a particular quarter. And we have clearly seen some bounce back for the second quarter in succession on the third-party side, in particular on the mutual fund side.

So if this is maintained then I would say on a core basis probably we have moved from what was perhaps a low double-digit or just about touching the low teen to perhaps between low and medium teen exposures growth rates.

This quarter at 20% is even stronger and perhaps has an element, as I said, of a seasonal or a one-off element. But other than the third-party fees, the other fee lines have just grown at somewhat similar growth rates. So I think the swing factor has been more on this line.

And [particularly] third-party in the first and the second quarter, is this mutual fund or insurance, if you can just give some colors on that.

We took both, but the growth has come mainly -- I mean, the real pick-up is a little more on the mutual fund side.

Equity and mutual funds.

Yes, equity. The close-ended funds which [is probably one thing]. The other thing is the expansion in the last three years, we've been expanding on the semi-urban line, share has inched up to about 55% in terms of branches. Could you provide some color in terms of the contribution to business and at some point we've had said that the incremental throughput both from asset liability is touching around 15% to 20%. Have that number inched up the last one year?

Nilesh, yes, it has inched up marginally, but nothing significant because the business from the metro and urban have also sort of grown at a very similar place. So the proportion is more or less similar. But whatever plans -- we have a three-year plan for it to breakeven for any branch and almost about 90%, 95% of those branches are meeting their plans.

Okay, Sashi. Just one final question, in terms of the savings we've seen about a 11% jump in saving balances on a QoQ basis, any one-off there or (inaudible)?

No, I mean, there normally in the fourth quarter you would see some flows, but even on an average basis we're seeing very similar kinds of growth, so that's pretty encouraging. On the current account side, yes there could be some one-offs which always happens in the March. But in the savings accounts even on an average basis it's being pretty healthy.

Manish, Deutsche Bank.

What is the movement of NPLs for us for the full year now?

So when you say movement means what are you expecting?

I just want the additions to NPLs and reductions from NPLs.

Yes, INR4,790 crores is the additions to NPLs including the one which Paresh just spoke about. And the reductions in NPLs is about INR4,340 crores. So when you talk about gross slippage, for the quarter -- and this is for the full year, and for the fourth quarter, it's about INR1,630 crores and reductions is about INR1,660 crores.

Slippage ratio as is where it's is about 0.45%, but if we exclude what Paresh just spoke about in terms of this one large corporate exposure, it's about 0.3%. So, annualized slippage is about 1.2%.

Okay. And when you say that you have provided for this account, you're meaning that you've provided against your floating provision, is that right?

Absolutely. Yes, that's right, fully provided.

So, what is the floating provisions now at the end of this year?

The floating provisions that we haven't utilized is about --

INR1,523 crores.

INR1,523 crores. (inaudible).

So total coverage ratio, if you look at just at [sick] provisions, the coverage ratio would be about 72%.

73%.

73%. And the total coverage ratio including specific, general and floating provisions is 164% as against 165% for last year. So really the total coverage ratio of course I mean including specific, general and floating hasn't really changed vis-a-vis the NPLs.

Sure. Then roughly what it means that you have used about INR200 crores of provisions for this account. Is that --

Roughly that much.

Yes. And the total [SRS on] books would be of similar lines or similar quantum?

Give or take would be approximately that much.

Okay. And second on the retail loan front, if you can just share your disbursement trends given the fact that every quarter we are seeing growth actually inching up, if I look on a quarter-to-quarter basis, I would probably -- it would clearly suggest that retail growth seemingly or disbursement front is looking up reasonably strong and that should mean that next year growth should be very strong on the retail side from the base that we had for this year. So could you share some details on disbursement [voucher]?

So we won't sort of go into each product but if you look across the range of products other than perhaps gold loans and tractor loans, most of the other products has seen a growth in disbursements which are anywhere between high teens and high-20%s maybe an odd one which is touching even 30%. So yes, you have seen a reasonably healthy pickup in disbursements.

Of course that comes on a base of slightly muted disbursements last year in FY2014, but this is true of auto loans, personal loans, business banking, home loans, so it's pretty much across the range of products where on average let's say somewhere in the 20%s has been the increase in disbursement and in some products even higher than that.

Okay. And lastly on fees while this year our fourth quarter has been very strong or relatively good growth, but given what has happened on mutual fund fees, do we fear that a good chunk of fees can come off going forward?

I guess you are better at trying to predict what's going to be the attractiveness of the market and how mutual funds will do since that has been certainly a contributor. But if you look at fees overall for the full year, year-on-year growth in fees now is, let's say, close to 15%. And the portion which we were discussing on third-party and within that the mutual fund fees, that can see some volatility. Hopefully other components of fees and commissions will continue to see heavy growth.

Okay, fair point. Thank you.

Therefore the other fees which tend to always be a vulnerability for the fee line tends to be regulatory changes which is what we've seen for the last two or three years. And obviously, we have no visibility to what might change on that front if at all.

Anish, Barclays.

So, Paresh, just going through this calculation on the [fee] that has been sold again, you had floating provisions of INR1,835 crores last year and you have INR1,523 cores now, so that means about INR300 crores has been used there, right?

No, not in this quarter, there will be some which would have been used for some of the CV and CE and other businesses in the earlier quarters.

Okay. I see. And the floating provisions were used only for the part that's been sold or the part that like remains also?

For this particular loan -- quarter on both components.

For both components, okay. So the SRs outstanding from ARC last year ending was INR72.33 crores. What is it this year?

Last year was about INR50 crores, INR60 crores -- INR50-odd crores and this year is about --

If I read your -- if I'm reading -- going through the annual report, there is this thing about in other investments, I think you disclose?

There is a separate, I think, table on SRs backed by NPAs, which as of March 31, 2014 had a book value of about INR52 crores which is now about INR260 crores.

INR260 crores. So, the increase is about -- okay, about INR150 crores.

About INR200 crores.

INR210 crores.

INR210 crores, sorry. Yes. So that's basically what is the value of the SRs received. Presumably most of it has come from this account?

I guess, yes.

Okay. And in terms of the fee growth, has there been a lot of -- has non-funded exposures contributed to the fee or non-funded exposures have not grown too much in this quarter?

Non-funded exposures have grown in the regular pace, nothing (inaudible).

Okay. So that's not a driver of the fee. And like just in terms of the car, it's good to see the pick-up. Is your sense that this can sustain given how the economy is doing or is it -- would you say this is an abnormally strong growth this quarter given the shape of the economy?

We've certainly seen bit of a spurt in this quarter. You can't read a trend into a quarter. So I think we have to wait and see whether if you see a similar momentum or at least a close to similar momentum for a few months more, then we would know whether this is something which is completely sustainable.

As I said earlier there might be some element which is typically a year-end drive or a spurt, but there is a stronger underlying momentum for the second quarter in certain businesses, second quarter in succession for certain businesses which therefore we are hoping would sustain.

And it's coming from the corporate side or from retail?

It's coming a little more from the retail side.

Sameer Bhise, Macquarie.

Just had a question, any targeted split between vehicle and non-vehicle loans on our retail side?

Well, we've given you the break-up of auto, CV, two wheeler --

Yes, but over the medium term, how would you want to balance it out?

We are not really targeting a certain mix of individual products within retail because in many ways the growth rates of individual segments within that or individual products within the retail piece is more driven by what the underlying demand for those loans is and then also what our comfort is in terms of the pricing and the credit environment.

Right now we are quite happy to grow most of these businesses within our prices points. So tough to try and predict. If we see car sales and CV sales maintaining the kind of momentum they've at least shown, then you should see some pick-up in these loans because -- especially when you compare it with the growth rates that the underlying car and CV sales were seeing a year back, there is at least some pick-up in that in the underlying moment.

Fair. Thanks. Just had one more data question. As you mentioned earlier, I guess 50% of the asset sale -- stressed asset sale was received in cash, right?

15%, one-five.

15%, one-five, okay, thanks.

Hiral Desai, ialpha Investments.

Thanks for taking my question. Just had a question on the rural and the semi-urban side. Most corporates that we speak to have seen a sharp deceleration in the growth rates, you look at tractors, agri equipment. Have you seen anything similar on your rural retail portfolio?

We actually haven't seen any meaningful change. I guess I can attribute this to two things. One is it is still a relatively smaller proportion of the total retail loans that we might have. Although it's been increasing, but it's still not a very large portion.

And secondly, since a lot of these are new locations for us they are branches which we have opened in the last two, three years, including in the last 12, 18 months. A lot of these are newer markets, so we are growing off a relatively small base. So we still see fairly healthy growth rates. We're obviously gaining market share in these regions because in many of them, especially where these were unbanked regions, we are probably the, not just the first, but the only bank who is lending there. And we've seen that in many of these rural markets there aren't too many players who have the complete product range on the retail asset side as we do, everything from two-wheeler loans, loans against gold jewelry to light commercial vehicles to business loans to agri loans and so on. So I think that is probably sustaining reasonable growth rates for us.

These specific loan products which have done better than your internal expectations on the rural side?

On the rural side, actually even some of the vehicle related loan products in both -- including auto [parts] has I think done a little better than what we had probably anticipated.

The other question was, can you talk about your subsidiary HDB Financial Services because I think the profits had actually become 4X over last couple of years and one of the key products there is LAP, so any specific number you could share for this year, how it is done? And any geographies where you guys are extremely strong?

It's still a relatively small business, but it has been growing off a small base and therefore if you look at the overall balance sheet side it's grown from a little below INR14,000 crores -- INR13,690 crores in March 2014 to almost INR20,000 -- INR19,740 crores in March 2015. So it has seen a very healthy growth rate.

Of course, we've added branches there as well. So they've got about 400-odd branches up from 275 a year back. And the portfolio remains fairly stable there as well because their gross NPAs are less than 1%, net NPAs are about 0.5%.

Across LAP and the other businesses that they do, the growth has come across multiple products. So it's not -- I mean, each of their products although the components for each of these products are different or the proportion for each of these products has been different, growth rates have been achieved across each of these.

Finally on the capital adequacy of this -- of the NBFC of HDB Finance, it remains strong at 23%.

Thanks. That is helpful. All the best.

Thanks.

Abhishek Kothari, Quant Capital.

Sir, a question on your cost to income. We have been initiating a lot of work on our mobile banking front. So, could we see any respite of cost to income on that front?

In the immediate short term, whether it's mobile, whether it's various digital initiatives, I think the focus or the positioning is really more to provide a wider range of services, greater and larger number for a -- many more features to the customers, greater convenience, quicker turnaround time. So they are essentially all geared towards providing the customer a superior experience and therefore hopefully for us to make the relationships sticker and to increase our business from the customer base which is happy of our products.

From a medium to long term point of view, what you are saying makes sense which is that as therefore a larger number of transactions move or even larger number of transactions move from the branch channels to the alternative channels and within that to net and mobile there would be some reduction in the operating costs that the bank incurs in servicing these. But I don't think that's something which is going to make a difference for some time because remember while the number of transactions going through these channels is increasing very, very -- at a very healthy pace, in [propose] to the total transactions, it's still going to take some time for it to moving the needle. So the cost to income ratio improvements of the Bank of digitalization is probably a couple of years away.

And sir some data points, can I have the employee strength and would we look to expand in the same way that we have expanded this year?

So the employee strength now is about 78,000. And when you talk about the expansion, if you're going specifically to the branch expansion.

Branches only, sir.

Yes. Well 600 is clearly the highest number that we have added ever in the history of the Bank. The acceleration that we've achieved in a sense in the last quarter partly represents what we would have otherwise done over the next quarter or two.

So do we expect to add another 600 branches, clearly not. Even if we were to add roughly 300-odd branches and we sort of attribute some of the branches opened in this quarter to what we would have otherwise opened, we would still have seen therefore over a two-year period somewhere between 300, 400 or maybe a little more than that as branches per year. So that's the plan at this point of time.

Obviously this is something that we keep reviewing even through the year. And therefore, we typically start off the year with a certain plan and we, I think, are agile enough to change that plan depending on how we see the market and how we see our costs and revenues evolving.

Okay. Sir, just one question. Last four quarters we have been seeing that business banking book has been shrinking from INR25,000 odd crores in last year Q4 to INR18,800 crores. Anything to read into that going ahead?

So, I would suggest that because [of reviews], you can see the business banking total portfolio, rather than looking at only the segmental -- because that's the portion of the portfolio which is of individual loans which are less than INR5 crores or of a certain turnover side. If you see the total business banking at a business, it has actually grown year-on-year at almost 17.5%, 17.4%.

That is [42 to 49].

Which is what represents the actual business, right, I mean, that's irrespective of what the size of the customer may be. So, it certainly remains a healthy growing business in this year as well.

Okay. Just one data point, RWA for the quarter-end?

INR4,23,000 crores.

Roshan, ICICI Prudential.

There was a mention of a SMA to account in your initial comment which is about 1.5% to 2% of corporate borrowings. Could you please elaborate on that?

I mentioned that the single NPA, corporate NPL which we, I guess, had several questions on and discussed earlier in the call, that's the account which became NPA. And what I mentioned was that our exposure to that customer is roughly about 1.5% to 2% of that company's total borrowings from the system. And I was mentioning that in relation to [our] not been convinced about not feeling comfortable about the bankability or increasing exposure to that name further and therefore are taking -- and coupled with the fact that the account was not adequately serviced and it becoming non-performing our thinking it's prudent to go ahead with the sale.

So the 1.5%, 2% was not in relation to our balance sheet or our loan book or anything of that sort, it was just the fact that we are relatively or an extremely small lender to that entity. And since we were not serviced, this became an NPA and we were -- we took the -- we thought it's prudent to take the action that we did.

Right. And also the SR outstanding increased from INR52 crores to INR260 crores, is it all coming from this particular account?

Yes.

Rakesh Kumar, Elara Capital.

This quarter in particular we have seen quite a strong growth happening in the investment book. So like what is the reason out there?

You are absolutely right. Other than -- apart from the growth in the loan book, we have also seen an increase in the investment that the Bank has made in commercial paper. There is a lot of large corporate customers, given what's happening to yields in the market, has apart from having borrowed what they had from the banking system, have also being meeting some of their short-term working capital requirements [through a] commercial paper. And since we have those relationships and we -- wherever we felt appropriate, we would have also participated in or invested in some of that CP opportunity. So, much of the growth has come essentially from the (inaudible) on the investment side.

What could be the duration of that paper and the average yield we might have -- we're going to get on this book?

Well, I wouldn't have or be going to share the yield, but being commercial paper much of this would be six months, maybe max a portion of it may be a year, but much of it is in the three, six, nine-month period.

Okay. On the movement of NPL, could you say the number of recovery upgradation for the full year?

Yes. The recoveries excluding upgradations is [1,400] and the upgradation is about [1,076].

Shall I take the next question, sir?

Yes. I just want to confirm that the earlier question (multiple speakers).

We will take the next question and Rakesh if you need us then you can come back in the queue, please.

Nilanjan, Jefferies.

A couple of direct questions, can you specify what is the outstanding standard asset provision as of March?

INR1,558 crores.

INR1558 crores. Okay. Would you be able to specify for this full year how much home loans we sourced for HDFC and how much we purchased back from HDFC?

We've purchased from HDFC on a full year basis about [INR7,700 crores].

Okay. And sourced for them?

I don't have that figure, but typically we would have taken about 55% odd, may be a little more than that. [Current] basis we would have originated and then we pick up in the next year, so there may be some spillover.

I will probably take it offline in that case. And probably two more questions, would you specify what the net customer base ending March would be?

About 32 million.

32 million?

Yes.

I presume this would include new accounts you have been opening under the (inaudible) is that right?

It would include all accounts. Although that would -- yes, it would definitely include everything.

Right. Okay. And the last question, we have seen the two break-ups in the loan book, I presume that's going to continue in the quarter going forward, just want to confirm that.

Yes, I mean we take a call on that, the idea was just to at least once [give] -- the segmental reporting is what is actually required to be reported. Just therefore once just to for you all to understand the business we certainly thought we would at least share that on an annual basis whether -- the segmental reporting on a quarterly basis would definitely be something we should continue. When we compare for both pieces, it is something which we will make a call.

Okay. I'm sorry. The last question, the INR4,790 crores, the gross slippage that we mentioned, is that for the consolidated entity or just for the Bank?

Just for the Bank for the year.

For the year for the Bank only.

Yes.

Seshadri Sen, JP Morgan.

I have a couple of questions. One is in terms of your margin outlook, the way I look at it you probably still haven't harvested all your fee funds impact in this quarter and I don't know how much that would be.

And secondly, if I look at the balance sheet, you seem to have a lot of short-term investments as you clarified and I'm not sure you saw a lot of loan expansion in the fourth quarter, how much of that would be short-term as well. So, as the balance sheet readjust, are we looking at some significant upside to margins or am I reading this wrong?

I think any one of these potential factors including the fee funds effect and so on, each of them tend to move the margin by two, three basis points in either direction. So we actually would have gained a little bit about close to three basis points for this quarter. Even if you were to look at the full quarter impact, you would probably get a couple of basis points more.

On the other hand, like you said for the -- to the extent that you have some part of the lending through the CP investment route, yields are that much lower. You've seen within the retail book, a large portion of the growth even in this quarter has come from the home loan which is again low yielding to some of the other retail businesses. In fact, if you look at it, the home loan portfolio on our books year on year has increased by close to 25%.

So there are obviously elements which would give us a couple of basis points of improvement and others which would shave that much off. So I would not really in any way indicate or guide towards a movement in NIMs in any particular direction. I think we would stay with what we have said for a long time which is that, you could see movements in either direction or perhaps even in both directions over the next few quarters. But the NIM we expect will remain in a range of somewhere 4.1%, 4.2% to maybe 4.4% or 4.5%, which is where the range that we've been in in the last five or six quarters.

Okay, thanks. And secondly on the savings bank growth, it's probably one of the better performances in quite a while, especially if you look at the incremental savings bank accrual for the quarter. I know looking at quarterly is sometime misleading, but even then. What exactly is driving the growth? Is it new customers, expansion in balances, a mix of both, branches maturing, some color on that?

So certainly in this quarter we've seen a bit of both in terms of additions to new accounts, new savings accounts, and some build-up in balances. You are right, I think reading too much into a quarter especially with the year-end I think is, it's got its own risk. All the relationship managers, account managers and the Bank itself will naturally try and harvest as much as they can from their relationships.

But the fact is that this is something which they have been able to do not just on a day or two, but it's something which they've been building during this quarter. We've certainly seen that especially in the last month or two in the quarter. So I think we remain optimistic and perhaps reflects some slight easing of liquidity in the system itself and therefore slightly better balances for retail customers. And I guess it also reflects perhaps our getting that slightly incremental market share on the back of the continued efforts on the cross sell and perhaps even relating to some of the digital initiatives.

Great. Thanks a lot, Paresh.

You are welcome. Before we can just go onto the next question, since we've already sort of been in for an hour, can you indicate how many more requests for questions please?

Right now we have 12 questions.

Okay, we'll go through all these 12, but I can -- if I can request you to restrict yourselves to one question each, if that's possible, I'd appreciated that. Let's go on to the next question.

Lancelot D Cunha, ITI Wealth Management.

I just wanted to know if you can give me a sense of how do you see HDFC Bank's a rural initiatives adding value to the business and how do you think that will pan out over the next one or two years?

I would break it into two, one is for a lot of businesses that we are in, particularly on the retail side, it's obviously a larger or a newer market that we are expanding into. So it's the same products that we might do in semi-urban or some urban locations that we are finding, that loading these out into the rural areas, expands the market that we access for those products.

And the second piece of course is that there are specific products, in particular on the [IV] side and also in terms of small business lending or micro lending and so on where the rural markets obviously offer a higher potential because that's typically the profile of all the customers there.

And for those products in particular, given the borrower profile, a lot of those qualify for private sector lending or some of the other sub limits within private sector. So we are looking at this as much as from an expansion of business point of view into locations where they currently don't have access to the complete range of banking services, especially at a service level that we offer.

And secondly in the process of doing this, we are also meeting the regulatory restrictions of private sector lending.

Okay. So do you think this will form a significant part of your loan book going forward or is it still going to be a very small portion?

It won't be a very small portion, it will be an increasing portion. The pace of increase in proportion is not very fast because while we're growing that business it's not that the urban businesses are not growing. So naturally there clearly is an increasing share of rural business, but it is obviously going to build over a period of time.

Mayank, Goldman Sachs.

Just one specific question on a data point, what would be the home loans purchased this quarter from HDFC?

IN4,600 crores.

Jhanvi Goradia, Motilal Oswal Securities.

My question is on corporate side of the loan book. Just wanted to get your view on the activity happening, the nature of this loan service here, a lot of this loan coming from refinancing for the industry as a whole and what kind of sustainability do see going ahead?

The wholesale book actually has grown as a combination of increased working capital and medium term loans. And some of it -- on the term side, some of it would have been refinancing of term exposures. Given the reduction in interest rates, there has been some refinancing either through the debt markets or goes through fresh term loan borrowings and which is where we might have participated to an extent. But much of the increased lending has still remained in the working capital space or the medium term space, which has been our traditional sort of mainstay on the wholesale side.

Okay. And sir, is this refinancing RoA accretive because the yields would not be very high, right?

For us it would be, because we are not talking about refinancing of our own loans. We're talking about customers who would have borrowed earlier at higher rates and of course interest rates have come off. And in some cases it may be projects which have got completed and therefore the ratings might have improved and therefore for us it's an incremental opportunity. And as long as it meets our risk return parameters, for us it would be something which is incremental and accretive.

Prashant Kumar, Credit Suisse.

Just one quick question on related to sales to ARC. So will it be possible to share the sector of the account?

No, I don't think we want to go into anything which is very customer specific. So, giving in an industry would again, I think, not be appropriate.

It's all right.

That's fine. No problem.

Kashyap Jhaveri, Capital.

Just one clarification, when you mention about this gross slippages number and the reduction number, this would not include inter-quarter adjustments unlike in past?

No adjustments, this is the gross increase and the gross reductions. Even if -- therefore (technical difficulty) it would be included as both of these.

So, effectively if an account which is, say, in the 90 DPD -- passed 90 days overdue were to come back to 60 DPD and then go back again, it'll be grossed up twice.

Let's say it went into 90 DPD and then sort of became less than 90 DPD, it would still be included both in gross slippages and reduction?

Yes.

And in FY2014 that was not the case.

FY2014 it was also the case.

Same for the full year?

It's only FY 2013 that has not happened.

So, FY 2014 and FY 2015 both numbers are sort of grossed up on both the sides?

Yes.

So the only difference if you might is the single slippage account that we discussed, but the basic recognition part in terms of in and out is, I think, consistent for the last two years.

Abhishek, IIFL.

Just one question on this asset that is sold to ARC, was this a NPL in fourth quarter or is it before? And the sell down that happened was it a part of a consortium which sold out or you just sold it alone on your own?

It was both the NPL formation or the NPL slippage and the sale was both in this quarter and it was [just up summing the] -- nobody else I think -- nobody else I am sure has sold it.

And just a follow-up of that, would you know whether this is an NPL or not an NPL with others?

I would believe it's not, but it's not for me to know what the status would be an individual bank books.

M.B. Mahesh, Kotak Securities.

A couple of unrelated questions though. Just one is on the car loan growth that we saw this quarter. That was on the -- that seems to be on a fairly high side. So just wanted to understand, is it essentially market share gains or have there been any new products out there?

The second one is, in your credit cards how much of the -- credit card essentially of the receivable that is reported here, essentially translates into an interest earning assets? And the third question is in your FX income, how much would -- is there any treasury related income or all of these are client flows, given the fact that this quarter the volatility was not that high as compared to the previous one?

The first was on car loans --

I think it is largely market share gain, but there has been some pick-up in auto sales in the rural markets for us too. So it's a combination of both. But, yes, you're right, we did have some market share gains in the urban and metropolitan markets. The second question was on the credit cards, roughly approximately the revolve rates would be roughly about around 50%.

50%. Okay. And this has not changed I assume over the last -- has not changed?

No, no, it's been in around that level for some time now.

And the FX income?

The FX income, we do not have too much of trading gains in that. It's largely in this quarter. There have been some higher flows which has helped us to get that kind of a pickup in the fourth quarter. Also in certain export deals the spreads have been better.

There are some large chunky corporate flows, transactional corporate flows which happened this quarter. So but they are corporate flows, customers [that are one-off] flows which were large.

Just one qualitative question, do we have any product which offers savings account rate beyond 4% interest?

No, we don't.

Nikhil, JM Financial.

Just wanted a small clarification on the FII limit issue. Would the Bank be re-applying to the government for treating HDFC stake as domestic or is it settle for good that HDFC Limited's stake will be treated as foreign and hence at least for now there will be no foreign headroom for the stock in India?

As we understand it, as the current policy stands I don't think there is anything which is there for us to re-apply or to be represented differently. In the future we -- so the only way this limit can change is if there is any general policy change over a period of time which we [are obviously not clear about].

[Jatin Agarwal, Karma Capital].

One question. Basically in terms of this base rate thought process, if you could explain HDFC Bank's position versus competition with respect to three things; one, if base rate was to be scrapped; second, if the industry was to move to a marginal costing base rate determination; and thirdly if it is benchmarked on some interest rate which is probably like a LIBOR? So if you could explain that in terms of your thoughts how it stands for HDFC Bank relative to competition that will be helpful?

As far as our pricing is concerned, right, obviously the base rate piece at a minimum lending rate becomes relevant to the wholesale side of the business in terms of what's the minimum that you can lend at. But other than that, whatever is our pricing is really determined by what we believe is the appropriate pricing for that particular product and, of course, determined by competition, because we operate in segments in both wholesale and retail which are extremely competitive.

So I don't think we have a view on it's being scrapped or not. I think from a regulatory perspective that's what the prescription is. As far as marginal costing for it, our calculation methodology already has a marginal cost in the sense, the cost at which or the rate at which we take fresh deposits in those tenures which we incorporate into our calculation is the rate that we take. So we are already at the marginal rate, which is why any re-calculation of our base rate takes into account the latest deposit rates which we have at that point of time. And to the extent that we had for instance drop deposit rates in the last few months, when we last reset our base rate that's reflected in the change right away. The third element was -- what was your third question?

If we move to something like LIBOR.

Yes, general LIBOR and so on. When it comes to floating rate as long as you know how the -- what the benchmark is and as long you are bench pricing your loans on that benchmark rate and you know how the benchmark is going to behave, I guess that's fine with us. Except that each bank has its own -- typically its own cost structure, its own -- the segment that it wants to deal with and therefore its own benchmark. But again you have to see how that benchmark behaves over a period time to know how you are going to price various products. At this point of time costs are always (inaudible).

Nilanjan Karfa, Jefferies.

Just a small qualitative question. Assuming status quo in the current economic environment, based on whatever reengineering internally you would have done, would you believe the fee income improves or the momentum in fee -- the core fee, continues to be better than the loan growth?

No, I wouldn't put it better than loan growth. I would put it maybe marginally better than what it was in fee growth a year back, but it would still lag loan growth.

It would lag?

Yes.

Pankaj Agarwal, Ambit Capital.

Sir, what percentage of your loans are floating rate loans and what kind of impact do you see on your yields because of your recent base rate cut?

Approximately between 25% and 30% would be base rate linked. Between various factors the fee funds impact which we spoke about earlier, the change in base rate and slightly better CASA and so on, so there are multiple factors. So I don't think by itself we see by itself the impact of the base rate change will move margins out of the range that we've been speaking about.

But it will have an impact on yields, right? I mean those --

It will have an impact on yields, but then so is our at the margin our deposit rates are coming off. So if you look at in isolation on yields, yes there will be an impact. Since there are other elements which will impact either yields on the mix side or on the cost of fund side, we don't necessarily see that impact on yields having a meaningful change on the on the margin.

[Sheila Bhatia, Credit Suisse].

My question is just a follow-up question. So would just like to know if you could throw some color on how much are variable rate deposits? So we know that 25% to 30% are floating rate loans and just would like to lower similar distribution on the deposit side?

We don't have any variable rate to deposits. But a large portion of our deposits tend to be short term so they get repriced on maturity and that typically happens even within a couple of quarters or a year, but we have no variable rate deposits.

So if you can just give a proportion of short-term deposits to the total deposits?

For various maturities up to a year, [it would be] almost -- would be somewhere close to 60%-odd, but of course they are -- we would again then have somewhere between one to two years. So you'll have some short short-term deposits which are even less than three months and so on. But then most retail deposits tend to be of tenures of one year and two years.

Sumit Arora, Silver Stallion.

My question on the FX has been answered. So I've got nothing more than that.

Are we through with the questions?

Yes, sir.

Is there any more -- are there any more questions pending or are we through with everyone?

No sir, it's over.

Okay. Then just to bring this call to an end, thank you once again all of you for being on this call and hope we have been able to address most of your questions. I think this brings the call to an end. Thank you.

Okay, sir. That does conclude our conference for today. Thank you for participating. You may all disconnect now.