HDFC Bank Q1FY21 conference call Takeaways!

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Hunger of a Startup & Systems like a global organisation

The results summary tweet: https://twitter.com/JstInvestments/status/1284435835417325569?s=20 | Adding to that:

  • The rumours in media are discussed:
    • Why the top executives left 
      • Munish Mittal, CTO: Went for more detailed & advanced studies in Oxford
      • Abhay Aima: Went for alternate interest in spiritualism.
    • Auto loan business issue: Followed due process. No loan quality issue; personal misconduct was observed & disciplinary action was taken.
    • Altico loan issue: Need to refund 210 crs as regulator advised.
  • Economy showing green shoots like Capacity utilisation in Auto, FMCG, Steel etc.
    • The rural economy is relatively better but could lose steam as the demand was mostly pent up.
  • 150bps policy repo rate cut from Feb & 6.5 lakh crores extra liquidity in the system as of today.
  • Gave increments, bonus & promotions even in this crisis.
    • Not laid off a single person from our whole group.
  • 1.2 million liability customers acquired (80% of last year, same quarter)
  • 95% of the branches are operational, 13000 ATMs are operational.
  • Payments business: 70% of January levels.
  • Online Education, subscription businesses, e-commerce services are thriving.
  • Restricted consumer loans, until there is a better recovery (probably, September)
    • Retail Originations Fell by 70% QoQ (stricter underwriting) & distribution of third party products is significantly low.
    • Credit cards sourcing fell by 87%, spending down by 40% pre- COVID. (book down by 4.5% QoQ)
    • 2W & tractor financing showed greater sales.
  • Transformation to Software as a service (Saas) company (Top 4-5 Big tech are in process of collaboration)
  • Accelerated slippages using analytical models, Provision coverage including all categories is 149%.
  • 1002 business correspondents added during the quarter.
  • June 30th, Moratorium granted is 9% of total accounts.
    • 90% of moratorium 2 has come from moratorium 1.
    • From the 1st moratorium customers, 70% has paid back. (Opt-in moratorium)
  • The main driver of growth during the quarter has been corporate banking: PSU, Private & MNCs: 
    • 86% of the externally rated portfolio is AAA or AA.
    • Power, transportation, material, energy discretionary & consumer-related sectors showed growth.
    • Collections in June were 94% of the last year.
    • Agriculture, Pharma, fertilisers & Telecom showed positive collections.
    • New advances were large to Public sector companies & Highly reputed promoters.
    • The unsecured portfolio is better rated internally than secured.
  • SME portfolio: Self Funding for customers who borrow (not including those who don’t borrow) is 75%.
    • 3-5% of customers may face issues in payment as per current estimates (<0.25% of total advances)
  • Collections in digital from 59% to 74% YoY.
  • Unsecured retail portfolio: Personal loans, business loans & Credit cards.
  • Reason for expanding in Semi-urban & Rural: Credit deposit ratio their is 30-35% & for the country is 120%.
  • Not going to grow, if the opportunities are not there.
    • No compromise in credit quality. All incremental book is of better quality than the existing book.
Also Read on FinMedium:  Pharmaceutical Industry 10 Years Future Outlook---Opportunity!

Read Next: What makes HDFC Bank the bank it is today? And why is it a darling of all investor classes from FIIs to Retail investors?

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JST Investments is a Mumbai-based investment firm that believes in long-term wealth creation. It's a brainchild of Aditya Kondawar, Aditya Shah, and Anish Moonka.
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