HDFC Bank Ltd (HDB) 2017 Q2 法說會逐字稿

Ladies and gentlemen, good evening and welcome to HDFC Bank earnings call on the financial results for the quarter and half-year, ended September 30, 2016, presented by Mr. Paresh Sukthankar, Deputy Managing Director and Mr. Sashi Jagdhishan, Chief Financial Officer. 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. (Operator Instructions) Please note that this conference is being recorded.

I would now like to hand the conference over to Mr. Sukthankar. Thank you and over to you sir.

Good evening, everyone, and welcome to this earnings call. I know many of you are jumping from calls to call, so we'll try and keep this as short and sweet as possible. Very briefly, a few financial parameters and then we'll jump into the questions.

Net revenues for the quarter were INR10,894 crores, an increase of 18%. NII growth was at 19.6%. That came on the net interest margin for the quarter at 4.2%. Other income, which was about 27% of net revenues, grew by 13.7%. Operating expenses were up 16.2%, which meant that the cost to income ratio was at 44.7% as against 45.4% in the corresponding quarter.

Provisions were at INR749 crores as against INR681 crores for the corresponding quarter. Profit before tax at INR5,275 crores, was up 21%. Profit after tax, net profit, was at INR3,455 crores, up 20.4%. For the half-year, just if you look at the first half, net profit was up 20.3% at INR6,694 crores.

On the balance sheet side, overall balance sheet growth was at 19.5%, touching INR7,88,000 crores. Advances at INR4,94,000 crores, grew by 18.1% and deposits at INR5,91,000 crores, grew by 16.7%.

The CASA ratio was at 40%. CASA deposits grew by about INR10,000 crores sequentially. Savings accounts growth year-on-year was at 21.6%. Current account deposits grew year-on-year at 13.4%. Branch network at 4,548 and 54% of these are in semi-urban and rural areas. We have a presence now in 2,596 cities.

Asset quality; gross NPAs at 1.02%, net NPAs at 0.3%, restructured loans at 0.1%. Total capital adequacy at 15.4% and Tier 1 capital adequacy ratio at 13.3%. You've probably seen some of these numbers already.

But I just thought I'd take a quick snapshot of these and I'll open the call for questions now.

(Operator Instructions) Mahrukh Adajania, IDFC.

Just wanted a few details. So your all-in cost of -- of FCNR deposits all-in domestic cost would be around 6.5%, would that be a correct estimate?

No, the all-in cost of the FCNRs, including the swap cost would have been close to about 8.4%, 8.5%, let's say 8.5%.

Right, but then RBI paid something right, so --

No, no, RBI didn't -- RBI offered us a swap, which was off market. So if you look at the basic deposit, the interest that we were paying on the deposit, plus the swap that we -- the swap which we pay to RBI to essentially convert that to rupees, which was of course lower than -- so what RBI paid was the difference between, let's say, the market price on that swap -- for the market cost on that swap and what we had to pay.

So that would be [8.5%]?

Yes, roughly.

And your average cost of funds currently would be under [6%]. So if you replace these deposits, would there be a margin aggression or the yields have also fallen, so there wouldn't be?

No. Whatever we would replace these at would be the marginal cost of funds for us. This is incremental to -- you don't increase your deposits at the average cost necessarily, because whatever we could get as CASA and so, we would have got. So I don't think there is a movement of any meaningful amount in terms of the cost of the original deposits and the cost of the replacement liquidity, maybe a marginal reduction, because also remember if it is deposits, while the deposit rates currently would be lower than that, you would have the reserve cost, which would gross up. If you remember the FCNR piece did not have the reserve cost. And, of course, those deposits came with a benefit in terms of PSL, which -- alternative funding in the form of deposits would not have. Of course, we've replaced these with borrowings with infrastructure bonds that we've issued, which also have some PSL benefit partially. So it's a mix of various liquidity sources. But from a basic cost point of you, I don't think there is a meaningful difference at all.

So we did see a 20 basis point reduction in margins. Would it stabilize there in the third quarter, or FCNRB would put further pressure on this?

So let me put that into perspective. The net interest margin at 4.2%, when you say 20 basis points lower (multiple speakers) from these on a sequential basis, actually I'll break them into two. There's a 10 basis points would be actually -- if you were to reflect that margin on the basis of the new calculation of the balance sheet side that is required now, where you have to gross up the balance sheet for LAF. So when you gross up for LAF, last quarter would also have come down from 4.4% to 4.3%. This quarter, on a similar basis, grossed up for LAF, we would be at 4.2%. So that is one piece, which is really just a denominator increase because you are adding -- earlier you would add -- LAF would be netted from investments, now you are adding it as on both investments and borrowings. But there is a reduction of about 7 basis points, 8 basis points thereafter, let's say 10 basis points. And part of that is also a result of the lower margin, or even a negative carrier for some portion for the excess liquidity that we have raised and we are holding in short-term instruments, including T-bills and so on, which we will use for paying off the maturing FCNR. To that extent that drag will go off.

And these are -- I'm just sort of explaining what would have impacted NIMs in this last quarter. I don't have a guidance for the current quarter or the next quarter, beyond the fact that our NIMs have traditionally remained in this range of about 4% to 4.3%. And at this point of time, I see no reason why, whether it's the FCNR impact or any other impact, we should not remain broadly in this range of 4% to 4.3%.

Nilesh Parikh, Edelweiss.

The question is on advance growth, right. So we've seen, obviously, by your standards it's come off below the 20% mark. Just wanted to kind of, is there any particular segments that compared to past run rates, we've probably gone a bit slow on that segment? And just wanted to get your outlook going forward on that.

So, Nilesh, the lower growth on the advances book is a little more on the corporate side in this quarter. If you look at it year-on-year, September last year also saw a bit of a blip towards the quarter-end on the wholesale side. And therefore year-on-year there is a slightly lower growth. But even sequentially the growth on the corporate side is a little muted relative to, as you said, some of the rates that we've achieved in the past. The retail piece has grown at about 21.7%. So there I don't think the growth, and this is retail growth, not by Basel, but by internal MIs, if you look at the retail growth by the Basel classification, the growth rate again is -- domestic growth rate is even higher.

On the Corporate side, there are two, I think, points, which I'd mentioned. One is that although we had -- we continue to have disbursements, which are not very different from what we have done in the previous quarter, the immediate previous quarter. We did have some larger one-off deals, which had been done in the March quarter, which ran off in this quarter. So those were short-term loans, which were there, booked in March and therefore -- and ran off in this quarter. So that clearly -- or it's outstanding for the March year-end and the June quarter, and this came off before September.

Secondly, some growth in the corporate book has also happened through the commercial paper growth, because clearly that's also where some of our corporate customers are borrowing from, and we've seen some growth out there as well. So have we continued to grow that segment in terms of funding, the answer is yes. But the overall rate of growth at 18-odd-percent, while it might still outpace the system by about 8%, but is a little lower than what it was at the end of June.

Just on the repayments that you saw, now given where the rates are getting finer, do you see this trend kind of continuing, maybe at some level you would participate through, say, CPs, but some of that would also kind of get taken out by the other participants in the market. So --

So, of course, the fact that there is -- and I think I said this last quarter as well, I mean competition, frankly, besides being amongst banks is between banks and market instruments. Of course, a lot of those market instruments also tend to get invested, at least some of them get invested by banks themselves. But, we still continue to see opportunities to do short- and medium-tenure loans, some amount of refinancing. So it's not that there are no opportunities across our customer segment. Despite whatever cannibalization might take place with bonds or with commercial paper, part of it we will, of course, participate in that growth and part of it we will grow our loan book in any case. So I wouldn't sort of read too much into a particular -- and when I mentioned about those short-term loans, those were one-off six month loans, which had a certain maturity, they matured and that was the end of it. It wasn't necessarily, to my mind, replaced with commercial paper for those clients.

Nilanjan Karfa, Jefferies.

Maybe I'm going to make you repeat this. If I look at the broad growth and then look at the margin, is there some kind of a pricing pressure that we're seeing in some segments?

I think competition is intense at the top end of the market. Everybody is looking at the few prime customers, where you have both the credit appetite and who are borrowing. And some of it, therefore, as I said, is actual pricing competition from players themselves, and now with the MCLR, everybody is as competitive as each other in terms of pricing some of the loans across the shorter tenures, in particular. So there is that increased competition. On the retail side as well, I guess with the expectation that rates are coming down, there is intensified competition. Some of that intensified competition is reflecting in loan yields and some of it is also reflecting in perhaps fee -- processing fees and stuff like being waived, or especially in this festive season, one would certainly have seen a bit of it in the last quarter, or you'd probably tend to see that in this festive season quarter as well. But, the part which I alluded to on the margin side is relating to our investments in Treasury bills or some part of the CP growth, is just that -- remember, I mean, if we have about $3billion of FCNR maturing in this -- over the next month or so, we would have naturally raised that roughly INR20,000 crores of liquidity over the last few months. And we would have kept that liquidity in instruments, which at the margin would have just about covered our cost or perhaps some of it would have even had a negative carry. That would also reflect in that lower margin. So when you talk about is there pricing pressure? Yes. But is that what has really caused that roughly 10 basis points of NIM erosion, the answer is no. There are other factors as well.

And if I can kind of add on right, we talked about MCLR raising, but I think the bulk of the loans are still priced to the base rate, right? And many of the large PSU banks have so far not cut rate. Now, I don't know when they will start cutting or transmitting rates, but let's say in another couple of months, if this start really transmitting the rates for whatever reasons, would you believe these margins for our Bank and for the broader banking system are going to sustain at these levels?

Well, I think our base rate itself was already on the marginal costing, as far as we are concerned. Obviously, the cost and other elements of that competition were a little different, but we were, in any case, already lower than what the larger part of the system has been. So I don't think others recalibrating their base rate downwards puts any additional pressure. And as I said earlier, at the margin, when you're talking about newer loans, the base rate is irrelevant. For the new loans, it is going to be at MCLR or it's a fixed rate, both of which lend themselves to whatever competitive pressures there are in the marketplace. And then, of course, there are market instruments, which we're competing against.

Suresh Ganapathy, Macquarie.

Just basically on the priority sector lending fees, now that you have to maintain it on a quarterly basis, I'm pretty sure that the average -- the necessity to maintain the priority sector loans on an average -- every quarter basis it actually increases, rather than doing it on a near-end basis. So, two things. How are you trying to manage this better? Are you also taking the PSLC route and also do you think because of this there can be some impact on margins?

So, I think it was great point, [Manish]. The good part, of course, for us is that while at the margin we would have done some, -- sorry Suresh -- is that we while would have done some amount of this new PSLC sort of a thing, the larger part of our PSL, we've been doing traditionally through our own book. So the part where you are buying either earlier through the IDBC or through actually buying portfolios, or now even through the PSL certificates, that is the marginal piece and in that we tend to be partly a seller and partly a buyer for different sub-limits within the PSL requirements. To that extent, there will be some PSL low yielding assets which come on a little earlier, rather than in a particular quarter, you're going to have them on average. And that I guess does impact a little bit in the NIM, if at all. But we really don't see a meaningfully higher challenge, because we've always been doing a very large portion of our PSL ourselves through the year as part of our regular business. But, yes, the cost of that Suresh in terms of what we buy through that certificate that of course comes in our fees -- no, the cost comes in fees as well, or in expense line? What we buy comes in the expense line and what we have sold comes in miscellaneous income, is part of our other income. So neither of them -- PSLC transactions don't affect the margin. They affect, as I said, either the fee line or the expense line. But to the extent that you are booking your own PSL through the year, if some of that is at lower yields, naturally that will impact the NIMs.

And just quickly on the LCRs, and obviously there has been further relaxation from RBI on this aspect. Does it really make life much easier now, considering the -- or do think these relaxations are adequate and you will not see much impact on margins because of the LCR issue?

At this point of time, we are very comfortable. Obviously, every year when you have that additional 10% requirement going up and you move from -- you move to now a daily sort of a monitoring basis, I think -- but at this point of time, it seems comfortable.

Just to clarify on this daily monitoring, does it change from next year, or how does it then impact? I mean, you should measure on a quarter end basis or you have got do it on a daily basis?

We have to do it on a daily basis from -- I think from Jan 1.

Jan 1, 2017. Okay fine. Thank you so much.

Seshadri Sen, JP Morgan.

Two things. On the growth side, we are seeing credit cards starting to tail off. Is there any particular reason? Is it being cannibalized by some of your other products, or are the revolve rates falling, or just is it -- more importantly, is it a trend or it's just a one-off blip?

Actually, within credit cards, obviously, there is a spend and revolve portion. And within credit cards, we also have this, you know, converting your EMI spend, your revolve, into an EMI outstanding for a certain period. That keeps coming off. So, whenever you don't have the same level of spend before that, there is a bit of a runoff, which offsets some of the growth. I would think that the -- for instance, this quarter, which tends to be accounting for easily -- sometimes close to even 40% of annual spends, or 35% to 40% of annual spends come in this quarter. And so, if we maintain the revolve ratios, we will see a slightly higher growth on the cards front. So there is a seasonality to it. There is no conscious move on our part to slow down a particular segment or a particular product. And in any case, some of you should be happy, since we're kept asking that cards is growing too fast and the proportion of cards is going up. But unfortunately, at least -- if this continues for a quarter or two, then there may be something underlying the momentum in that segment. At this point of time, really I wouldn't say we've spotted anything of that sort.

Also, a small thing on home loans. Look, there was again no addition in the quarter. Given that you have to meet PSL on a quarterly basis, can I assume that your PSL situation was fairly comfortable, which is why you didn't need to buy any of the home loan portfolio?

See, one, of course, we do want to buy it on an ongoing basis. It's just that every month or two we make a pool, we have all the other formalities done and then we purchase it. It's true that in this quarter the amount that we purchased was just a little shy of INR2,000 crore, it was about INR1,900-odd crores, while we could have probably bought another roughly INR1,000 crores, INR1,200 crores more. But on PSL, yes, we tend to on a quarterly basis also typically meet the overall PSL requirements. So home loans, which qualifies for the overall PSL doesn't qualify for any of the sub limits. So a INR1,000 crores, whether it's in quarter one or quarter two, or quarter two or quarter three, does not really move the needle for us in terms of PSL compliance, particularly. Of course, all that we need to get and which is eligible we'll ensure that we get it before the year-end.

Manish Karwa, Deutsche Bank.

Paresh, I've got few questions on your subsidiary HDB Financials. Could you share some basic numbers out there in terms of loan book, loan book growth, NII, profitability and NPLs, especially for the first half or second quarter, whatever?

Let me see, may not be all the numbers, but we'll share whatever we've got, sure. So, the total advances as of September were at INR28,800 crores, which is a year-on-year growth of about 39%. What else you were asking for?

If you have NII, profitability and that's it. NII, profitability and NPA if you have.

The NPA number is at about 1.6% -- 1.56% and the NII -- so, 1.56% is the gross NPA and the NII growth is -- yes, so net interest income was at INR472 crores, which was a growth of -- that's for -- the growth on a half-year basis actually was 34%.

And the profits?

Profits for the half year were -- okay, profit after tax for the quarter was INR143 crores. The first quarter was also about [INR140 crores].

I just wanted to check on this, is there some cannibalization of businesses from HDFC Bank and HDB, and how independently this is run and do we also buy some loans out of HDB?

So, one, it is run completely independently, except for a couple of members on the Board and therefore they provide guidance, and ensuring that they stick to what is their --

When I say independent, I mean is there any overlap of customer base between one versus (multiple speakers)?

No, there isn't. Quite simply, Manish, look at it this way. Clearly, HDB charges for the products that both of us do, would charge a rate of interest which typically would be 100 basis points, 200 basis points higher for most products. There may be an odd product that both of us might look at offering somewhat similar growth -- similar interest rates, but in most cases, whether it is commercial [with collat] or most of these products, there interest rates would be slightly higher. And, therefore, it would be unlikely that a customer who can get a loan from us at a lower rate would look to take the same loan, for the same underlying asset from them. So clearly there is a difference in customer segmentation, which is -- at the end of it translates into different borrowing rates for the customer and different lending rates for us across those two. Maybe in some small portion, if there is some part where we're comparing their, say, small fledgling or consumer durable with, let's say, the rCard, EMI or lending for a similar product. There may be some very, very small overlap, but most products there wouldn't be.

And, as of now, the overall capital is completely funded by HDFC Bank only, right? And do you have any proposal to raise money there?

Right now there is no proposal. It's not 100%, but it would be, whatever [97%, 98%]. There will be a couple of percent, which would be not with the Bank, but with their stock options and so on for those employees, but otherwise it's -- and there are no current plans of raising external capital.

And just coming back to the Bank, just one data point. What is the floating provision that we hold now? And in this quarter did we make any floating provisions?

No, we neither made nor consumed any floating provisions. And the floating provisions are about INR1,240 crores.

Manish Agarwalla, PhillipCapital.

Just a question on the few retail products. So what has been your experience in terms of actual credit cost and the credit cost which you price in, in last two, three years? And, considering the fact that if interest rates remains where it is, do you see a scope for further reduction in pricing in some of the products like auto, CV, credit card or maybe, say, personal loan?

Well, I would say, broadly, in the last couple of years the actual costs have continued to be a little lower than what the expected losses or what had been priced in. In most products, we went through a phase in commercial vehicles and construction equipment, where the actual costs were at, or maybe for an odd quarter or two, even higher than what might have been the expected losses. But on an annualized basis, we have always remained at or below for most products. But have we seen some movements up and down in each -- almost every product, and on the -- off lows in almost every retail product, the answer is yes. Is there still, therefore, room that as interest rates come down, should lending rates for these products come down, if your question is related to the funding costs, clearly that is something which we would be happy to do. We are not looking to expand our margins merely as rates come down on the deposit side, not transmitting that to lending rates. In any case, competition will ensure that rates remain, at least in line, if not come down a little more than what happens to deposit rates. But if you're saying the rates should come down because of the loss experience, I think that is unlikely to happen, because also from our point of view, a lot of our growth comes from different segments for the same product. So, some segments, we might actually find our actual losses are lower than what we might have priced in. But in some other segments, we might see higher credit costs. Some of these are across different geographies in semi-urban and rural segments. Again, given the infrastructure, given the collection of other costs, you need to factor in a certain -- slightly different credit cost sometimes. There are segments, which relate to some of the priority sector segments, which again tend to have slightly different risk profiles. So, on an overall basis, I think, while asset quality on the retail side remains fairly stable, I don't think there is huge room for changing pricing based on the loss experience.

And just one data point. What would be the RWA?

So, risk-weighted assets would be INR5,76,000 crores.

Rahul Jain, Goldman Sachs.

My question is on the employee hiring side. So this quarter, we have seen quite a bit of an uptick there, and if you look at the employee per branch number that has kind of again moved up to kind of close to 20 kind of a handle. Just wanted to check what level are you doing these hirings at. How should we think about it, especially given that some bit of a digitization has also been picking up? So that is one. I have a few more. So maybe if you can answer this one first, please.

So, one, of course, a lot of the hiring tends to be in the branch banking and liabilities piece and the retail assets piece. A lot of it tends to be front-line and related to that some part in other segments, which support that growth. Does this hiring happen on an even basis through the year? Probably not. So you tend to have a chunkier hiring growth in a couple of quarters and this clearly -- I mean what I'm saying is I wouldn't really extrapolate what we've hired this quarter into each of the next few quarters. There are different functions, different geographies where we are hiring, and others where we would see productivity improvements. And, therefore, with natural attrition some rationalization of the total staffing in some other places. So, on an overall basis, what you would over a period of time see is the net additions. So, admittedly, this quarter has seen a slightly higher growth than what we saw in the previous quarters. I don't think you're going to see the same growth repeating, but you will continue to see some additions for either new branches or in specific products where we are seeing growth.

And just an extension, so what kind of an employee cost increase we should kind of look at? This quarter, of course, was higher after seeing kind of a softer number for the last two quarters. So going forward, do you think this would remain around 20-ish mark, I mean 18%, 20% mark, or there is a scope for this number to kind of come down?

Honestly, now we do not have a guidance on growth -- any particular number at all. Again, the increase in staffing, because it tends to happen much more at certain slightly more front-end junior levels. The numbers and the increase in costs don't sort of really -- the increase in numbers and increase in overall costs don't have a very direct correlation. In the first quarter, you would have also seen some increase, which you tend to see that impact flowing through for the rest of the year, is the natural annual wage escalation, right, the increments for the year, which tend to be typically in high single-digit kind of ranges. But what that number should be, I think you'll have to make your own estimates. We don't have a guidance on that.

Second question was on branch expansion. So this quarter in particular, I think, your branches went up just by seven-odd number. Do you think -- I mean, so this is kind of an one-off thing, wherein we did not really expanded the network and looked to consolidate, or we are kind of changing our overall growth -- or the expansion numbers out there?

So, I would say, a bit of both. Are we moderating the overall need to open a certain number of branches? I mean, I think we're coming to the core of wanting to open 200, 250 branches in the year. Some of this is reflective of the fact that we have established a larger footprint that we think is appropriate at this point of time. Obviously, based on how the economy does and how overall growth rates pan out over the next few years, if we need to further accelerate on the footprint, we will do that at that point of time. But currently, at least in terms of number of cities and the spread of those cities between metro, urban, semi-urban, rural, and unbanked, I think we are okay there. So there is no particular sort of feverish addition to the footprint.

In terms of branches themselves, again, partly driven by the digital -- increase in the digital share and partly, given the underlying momentum across other channels, here we feel that at this point of time 200, 250 is an adequate number for this year.

And this would be evenly split between urban and rural, right -- metro, urban and rural, semi-urban?

Yes. We'd probably land up doing about half and half between metro, urban and semi-urban, rural.

Just one data point. Can I get a break-up of fixed deposits into -- or maybe time deposit into wholesale and retail?

I really don't have that breakup with me right now. If I was to take a very rough guess, yes, I'll do a two-third, one-third or a [70:30] (multiple speakers) as an approximation.

Kaitav Shah, SBICAP Securities.

Sir, this will be more on a macro level, for the mid corporate and SME space, where do you think these sectoral growth coming off, or do you think there are challenges out there?

In the mid-market and SME space, is it?

Yes, sir.

But you're talking from a challenges, in terms of growth opportunity or credit cost? I mean --

Credit cost and growth. I mean, growth clearly is not there, but credit cost, are you seeing increased delinquencies, NPAs there?

So, in this particular quarter, we haven't seen any further pickup in the -- what is just our SME piece or even little bit of the middle market, which is our business banking segment. But we had seen this in the previous quarter and I -- not to say that we may not see it in future quarters. So generally speaking, with the slightly muted growth that some of these customers have seen, there has been some asset quality pressure, but it's, I think, largely stabilized now, so that you have some small variations here and there, but I don't think it's getting any worse. To the extent that some of these mid-sized and smaller players get impacted by delayed payments from either larger corporates or contracts, or government payments, which have been held up and so on, those kind of issues they tend to come in and go in cycles. But from our point of view, we still see that there are adequate opportunities to grow in those segments and especially, in the back of the expanded geography, our business banking franchise has continued to grow across some of our newer branches as well.

So of the slippages, what would be the broad mix between retail, corporate and --

We actually don't split it beyond the broader numbers. I would say, by and large, asset quality has been roughly, equally stable in both wholesale and retail in this quarter.

Sanket Chheda, ICICI Securities.

If I may get the breakup of the provisions in terms of [your provisions] in floating and converts?

So the provisions for the quarter were [INR749 crores] of which [INR641 crores] was specific provisions and [INR101 crores] were general provisions and there were some other provisions of about [INR7 crores].

And, what is the MFI book now sir? Last quarter it was around [$40 million].

Yes, it's about [$42 million, $43 million], [about] INR4,200 crores or so.

Rakesh Kumar, Elara Capital.

Just one question I had on the overseas advances book. So, net accretion in the book in this quarter, has it come down substantially?

Yeah, first of all, the overall overseas book is not large, it's about 7% of our total advances. So (multiple speakers). Well, as of September, the growth year-on-year in that book has been about 6%. In this quarter, we really didn't see much of a growth in this quarter. Of course, we haven't seen the meaningful part of the run-offs in that starting also. Most of it will happen in this quarter.

So compared to INR5,000 crore net accretion number in the Q1, this quarter I think it is INR182 crore, net accretion?

You're saying in the overseas book?

Overseas loan book, the net accretion Q-on-Q was INR5,000 crore in Q1 and it is INR182 crores in Q2. So, does it have to do also with some of the FCNR deposit, what people had given, so against that they have taken some loans in these markets and --

The loans which had been taken in the overseas books for the FCNR loans have not -- as of September have not run off. They will actually all run off in this quarter. And that total amount is approximately $1.9 million, let's say $2 million. But none of that has contributed to any run-off in the September quarter.

So in third quarter when it happens, would not that have positive impact on the margin in Q4 and thereafter, maybe, because that loan would be at the lower rates?

It's correct that from a volume perspective you are knocking off INR13,000 crores, INR14,000 crores in balance sheet size. Clearly that was at a lower NIM. But given the size of that book, will that be large enough to move the needle for the overall NIM for the Bank, given the size of the balance sheet at INR7 lakh crore plus, I'm not sure. But, yes, in isolation, is this a negative impact on balance sheet and a marginally positive impact on NIM, yes.

Rohan Mandora, Equirus.

Sir, I just wanted to get your view on incrementally for lending towards [intralinked] sectors, what is our view on that? Do we see some specific asset, where we could be doing some refinancing, or just wanted to get your view on that?

Yes. So we do see, primarily, the opportunity right now more in the nature of the refinancing, which is taking place for completed projects. Clearly, transactions where the project risk is complete and therefore the borrowers are looking to refinance. And in any case, with what has happened to interest rates, apart from the project risk going away, there is also a further opportunity for reduction in cost for the companies. Those are opportunities that we're participating in. Apart from that, in terms of newer transactions, we do participate selectively across the customer base that we have been dealing with.

So these refinancing would typically be what tenure of loans?

Depending on what the underlying sort of asset and projects are for, but they tend to be anywhere between 10 to 12, 13 kind of tenures.

And sir, within Corporate segment, what are the focused sectors that we are targeting that's of incremental growth?

We have a very diversified portfolio across about 22, 23 industries. From our point of view, we are looking at wherever there are customers where we have a credit appetite and who are looking to borrow. So I don't think we are focused on a few sectors. We're looking at the better placed players and the survivors across a multiplicity of sectors. And clearly, as we are all aware, there is probably stronger underlying growth momentum and demand in the sectors relating to the consumption part of the economy, relative to the investment part of the economy.

Abhijeet Sakhare, Kotak Securities.

Sir, have you given the slippage number for the quarter? I think I've missed that number.

The annualized slippage is 1.2%

And in terms of amount?

[14.40].

And sir, secondly, have you seen a decline in investment yields this quarter? At least the calculated numbers tend to suggest a sharp sort of (multiple speakers).

Yeah. There would be some decline in the investment yields.

Sir, on the account of?

Well, part of it is on account of what's happening in the market yields, and part of it is on account of the fact that we would have, at the margin, added some investments, where we were holding either commercial paper or Treasury bills, which are short-term investments we were holding to fund the maturities of FCNR coming up. So there is liquidity that we have maintained in the form of short-term investments, which would naturally have had a much lower yield.

Nilanjan Karfa, Jefferies.

Paresh, just two data questions. You talked about the slippage, what was the recovery upgrade number?

Upgradations and recoveries put together are INR764 crores.

And can you tell me what the number of employees were in Q1, please?

[90,000]. So addition is 4,200 in the quarter.

Sorry sir, how much it is sir, 4,200?

4,200 in the quarter is the addition (multiple speakers).

Close to 91,000 -- just shy of 91,000, and we ended the quarter at about 95,000.

Hiral Desai, Anived Portfolio Managers.

So, just wanted to check, in the RBI classification that you guys provide, the business banking number has actually, I think, spiked about 23% QoQ. So is there some kind of a reclassification there, because the number was I think flat for almost five, six quarters earlier?

In the RBI classification what comes through is really the portion of business banking where the outstanding is less than INR5 crores, or the turnover is less than INR25 crores, now INR50 crores. So, the breakup in business banking, between what goes into retail and wholesale is just a function of the composition of the portfolio at that point of time. If you really look at the total business banking piece, as we look at it across both the segments of retail and wholesale, then that actually has grown year-on-year at about 15%, as per the, what we would call the internal MIS numbers.

The other is, of the personal loan book that we have about INR45,000 crores, just wanted to check what is the split between the salaried and the self-employed within that?

I don't have the exact breakup with me, but I would say approximately 60-odd percent would be salaried, maybe a little more than that.

What percentage of this incremental sourcing would be, let's say, outside of top 10 cities?

I don't have that breakup with me right now.

Nilesh Parikh, Edelweiss.

Yeah Paresh, just one last thing. On fees, we've seen another soft quarter on this line item. So just wanted to -- is there one particular stream within the overall set, which is kind of disturbing this, or are we kind of seeing this as general across all the segments there?

In this particular quarter, the softer line was the retail loan fees, which I've briefly sort of mentioned earlier as well that given the sort of competitive pressures, as well as the positioning there by various players on the fee waivers and so on, you did see retail asset fees softer. But that's more to do with perhaps these couple of quarters. But other than that, I don't think there is any particular line that is dragging it. Generally, fee growth across most of the product lines has been in the 12% to 15% range and that's where we've been in the overall growth at about 13.5%.

So, I don't want to kind of get a number from you. But in terms of how does it kind of play out going forward, right, in terms of different segments, because these pressures, obviously you know with -- I don't know -- means it will stay elevated for an extended period of time, given that new players coming in and obviously targeting the same pie. So do we kind of break out of a particular range of fee income or kind of should we expect in the similar range going forward?

I think if you look at the last few years as a combination of some lines, which were affected by regulatory changes and some by competitive pressures, we've had for most quarters, in the last few years, a growth rate which has been somewhere in the low-teens. We have had an odd quarter, where there is an annual charge of some sort, which takes it to higher than 15%. But, otherwise, for the longest time we've remained there, I don't see any particular reason why we would be able to break out of that low-teen kind of range, low-to-mid-teens kind of a range. The only point which I would reemphasize is that most of these fees are high-quality, not linked to our loans. Most of them don't even consume capital. So to that extent, whatever comes through it's a healthy fee accretion, which comes in.

I think we'll just take one last question, because I think we are --

Nilanjan Karfa, Jefferies.

Paresh, If I remember, sometime, I think early last fiscal year, you had mentioned about this retail fee being about 90%, if I'm not mistaken, and this is probably --

[80%] to 90%, yes, somewhere in that range.

It used to be around 80%, I think two, three years back. How is it doing right now? And you probably also gave a broad range between third-party, credit card, retail assets et cetera being in that 10%, 15% range. Is that still holding out or --?

It's more or less the same. Somewhere in the mid to high 80s tends to be retail. And, in fact, much of the composition of our fee incomes has not really changed, because individual growth rates across a year have really not changed. You had a few products, which in a particular quarter tend to show higher and then lower growth rates. So the composition has really not moved much in the last few quarters.

Would you say the same thing about the transactional fees?

Transactional fees, meaning? (multiple speakers) Almost all our businesses, whether it is cash management, whether it is trade, whether it is -- other than distribution, most of our fees are transactional in nature, actually.

Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. Sukthankar for his closing comments.

Well, I hope we've been able to -- the fact that some of you've got a second and third look-in means that there are probably one too many questions pending at the end of this. Once again, thanks for being on this call. And I wish you all a great festive season ahead.

Thank you very much members of the management. Ladies and gentlemen, on behalf of HDFC Bank Limited that concludes this conference call. Thank you for joining us and you may now disconnect your lines.