HDFC Bank Q4 FY26 Earnings Conference Call | Concall.in

Ladies and gentlemen, good day and welcome to HDFC Bank Limited Q4 and full year FY2026 earnings conference call on the financial results presented by the management of HDFC Bank. 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 the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Srinivasan Vaidyanathan, Chief Financial Officer, HDFC Bank. Thank you and over to you, Mr. Vaidyanathan.

Thank you, Shini, and thank you all. Good afternoon to you and welcome to the full year FY26 annual results call. Let me dive straight into the key aspects of FY26 performance. We had estimated a system credit growth to be around 10.5 to 11.5%. We did 12%, up from 5.5% last year. As you can see, there is positive momentum as we had expected. Deposit growth rate at 14.4% continues to grow faster than the credit growth, which is what we've always been doing. The growth rate is better than the system growth rate. Yet again, net income growth clocked at 11%, similar to the last financial year, whilst EPS growth of 10% versus 3% last year. The yield on assets had a faster transmission as against deposits on a full year basis leading to a NIM drop. Despite the drop in NIMs, the return on assets continued to be stable at 1.9% due to cost efficiencies with cost to income declining from 40.5% to 39.5% on a core basis and focus on quality growth reflecting in lower credit costs. I would like to remind the sizable investments we made over the last five to six years which will bear fruit in the coming years. These investments were despite we witnessing significant events such as COVID and one of the largest mergers in corporate history. The distribution nearly doubled to 9,700 branches. The number of customers nearly doubled to 100 million customers. Our tech investments more than quadrupled to around a billion dollars. The merger with mortgage company HDFC Limited too is an investment for the future. The bank navigated the same in a stable manner over the last three years despite changing economic outlook and regulatory stance. The above is going to provide a huge operating leverage in the future. Sometimes all of us have short memories and forget the core business foundation which remains our moat and strength. Customers at 100 million continue. We continue to acquire about 6 to 8 million customers a year. This will be the funnel for future growth. 22% of our customers are actually 30 years of age. 42% are less than 40 years of age. This enables us an opportunity to engage through their life cycle which would be the future engine of growth. We continue to be market leaders in our core franchise offerings such as cash management. In the capital market segment, we continue to hold about 35 to 40% of the account settlements. In the bankruptcy issue, we hold about 40 to 50% of the escrow settlement. In the trade part of the business, almost 18 to 20% of the country's exports goes through us. In the imports, 13 to 15% of the country's imports goes through us. In the cards merchant acquiring, almost about 35 to 36% of the acquiring comes through the bank. On the issuance of credit cards, 21 to 22% of the issuances of the system is from us. In the spend, almost 26 to 28% of the card spends in the market is through our cards. We are a dominant salary relationship bank in the private sector. We are among the top two MSME banks in the country. So as in the mortgages, we are among the top two mortgage banks in the country. In the wheels business, whether it's auto or transportation, we're the top wheels bank in the country. The above despite intense competitive environment reflects the excellence and execution capability of the bank. Our financial parameters reflect strength and resilience of the bank. We have a strong capital position at 19.7%. Our asset quality is extremely healthy at 1.15% gross NPA. This has been tested across three decades of business cycles. The bank has created a large provisioning buffer of almost 125 basis points to absorb any shocks in the future where this is obviously contingent upon any future events that may occur. We don't have any stress in our portfolio as we speak. Our focus is on profitability while pursuing growth opportunities. The loan deposit ratio is not a constraint. The regulator has come out and talked about it. We have demonstrated our ability to gain market share on deposits every year almost around 30 to 50 basis points over the last 5 years. Hence, it's no longer a binding constraint. We have been building granular and sustainable deposit franchise which is reflected thus in the less than 3 crore retail liabilities. We have moved up from 31% of the total net accretion to about 47% of the total net deposit accretion for the year. This reflects the focus on granular and sustainable deposits. Having said that, the bank will continue to improve its quality of deposit franchise over the years to come. The bank witnessed an unprecedented event recently, but its strength and resilience was seen with stable and strong deposit flows. I would like to take this opportunity to thank the government of India, the Reserve Bank of India, and SEBI for their unequivocal support during that period. However, the most important strength will be our leadership in the technology space. Over the past few years, we have focused on strengthening the bank's long-term competitive position anchored heavily in our technology architecture to operate as a technology-first institution. A large share of our investments has gone towards improving the digital front-ending customer experience. We've been upgrading our interfaces, simplifying acquisition and service journeys, and modernizing our digital platforms. We launched in the year our new net banking, mobile banking platforms and also our payment platform which we probably did it about a couple of years ago. All of them are at a population scale. Today our mobile app serves over 60 million registered customers. The features, the USP of our build focuses on security. We have an OTP-less authentication. We have a lock which is for enhanced security and we have a full stack UPI enabled wallet which we call the Zap account. A combination of the above will make it extremely secure and probably one of the most secure offerings in the country today. The efforts have increased digital adoption to 97% for payments and service transactions and 92% for acquisition journeys. Our goal remains simple: offer customers a seamless, reliable, friction-free experience across all touch points. The next layer after the customer layer is the intelligence layer. This is principally to build an AI-ready engine. We have built a strong intelligence layer that brings automation and analytics to the core of our operations. By decoupling our front end and back end through a modern API gateway and orchestration layer, we now have a strong foundation for the emerging agent-driven AI model. Strengthening AI is only as strong as its data. We have built a robust data foundation anchored by a customer-level, enterprise-level single source of truth from a customer perspective. We went live with our lakehouse architecture, a centralized, scalable data lake with reusable, enriched data marts. While not always visible externally, this work is essential to long-term scalability and AI aspiration. But the big story is how we created in-house the unified AI platform which is going to be the center that spans across the entire organization. It allows us to deploy AI agents quickly without building custom interfaces or bidding systems. The platform brings together enterprise search, document extraction, voice-based agents, a full AI development lifecycle. It supports multi-foundational and open models and includes a unified evaluation model for strong governance, compliance, and security. We have an independent unit in the risk team that adds a second line safeguard. The key components include the model context protocol or the agentic studio and agentic mesh. This will enable us to deploy AI agents at scale, placing us amongst a small group of Indian and global banks with such advanced in-house capabilities. We already have five use cases in production and 14 more in development, improving turnaround times, first-time right outcomes, and freeing mid-office and back-office capacity for customer-facing roles. The above leadership position will enable us to harness efficiencies across the organization and will be a key driver to enhance return on assets over the next 1, 2, 3 years. The guiding principle is return on assets, loan growth and deposit growth, and quality of the balance sheet from a risk standpoint. All of it should culminate in a consistent EPS growth. Let me also take on the subject matter relating to some of the matters that we witnessed during the quarter including the resignation of the former part-time chairman and the Dubai branch related matter. I and the members of the board did provide statements both on the 18th March 2026 event. The government of India, the Reserve Bank of India, and SEBI came out with statements in favor of the bank. The legal review which is what we had committed at the time when we went to the press is in process. As and when this happens, we shall provide a summary of the state. The audited financial statements of the bank for the year ended March 26 carry notes which are self-explanatory on the Dubai branch related matter. The same has been covered in the notes to accounts as well. There is also an NCDRC order which came out on the 23rd of March which highlights that the complainants are not retail in nature or are not uninformed investors and they had a clear intent to pursue high yield, high-risk investment products. So we do not have anything incremental other than the above. So we would like to pause out here and probably take on questions from here. Thank you.

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question assembles. The first question is from the line of Marukat Janya from Tara Capital Partners. Please go ahead.

Yeah. Hi. I just have a few questions. Firstly, that in terms of growth next year, right? What would be the key drivers? So first of all, where do you see your growth? You'd said possibly above sector. So what could that be? What range could that be? And then corporate growth has been a good driver I guess for everyone for the fourth quarter. And that's partly to do with yields as well. So do you see corporate growth sustaining or do you see retail growth picking up from these levels? So that's my question.

So Marukat, if I got your question as to what would be the growth drivers, first on the corporate side, I think you would have seen in our release the increase that we have done over the previous year. We do see this sustaining as there has been demand. Of course, we will have to temper it given the fallout of what we see in the geopolitical area which hopefully should not be more than a couple of months going into this financial year. But we do see an opportunity in corporate across sectors in electronics, food processing, auto, auto ancillaries, the renewable sector, and the semiconductors. Also, it opens up as you well know and aware of the different opportunities which are now available from an acquisition financing point of view including what was already there for more project finance and supply chain. So we see the corporate sector, the emerging corporates, and corporates holding up in the year ahead. Coming to your point on retail growth, Marukat, if you really see, our retail growth has certainly stepped up from where we were last year and we have seen a better step up if you've followed our results in the last three quarters and this step up has been there across our wheels business as well as on the personal loan business side. To add to that, we've also seen consistent holding of demand on the mortgage book and that has also performed well. So, we've seen a growth overall if you look at it or if you look at the balance sheet, we've been about 53-54% in the retail and the balance coming out of wholesale.

Got it. So what kind of growth trajectory should we look at for FY27? Because I guess the earlier guidance was of about sector growth but the sector growth has also moved up substantially.

Yeah. So Marukat, if you really see our loan growth last year was 5% and our loan growth this year is 12%. Right. So I think we will continue to have a good momentum and trajectory in our growth but you have to keep in mind what the geopolitical situation and that fallout is going to be but we are confident that we see the positivity continuing. We've not seen any alarm bells go up as yet and therefore we will continue to focus on all these areas that I covered earlier.

Thank you. Marukat, I request to come back for a follow-up question. Thank you. I request to all the participants, kindly limit yourself to two questions per participant and rejoin the queue for a follow-up question. Next question is from Nathan Nagaral from Motilal. Please go ahead.

Yeah. Hi. Good evening. Am I audible?

Hi. Am I audible?

Yes. Yes, Nathan. Go ahead. Yeah.

Okay, great. So firstly, congrats on a good quarter in a very challenging environment. And so my question is like two questions. Firstly on the deposits. So how do you look at the deposit market share? We have done very well in this quarter but if I look at in context to how the system itself has done we have seen a very sharp pick up in the deposit accretion for the system overall. So how do you kind of look at the market share that HDFC Bank has been able to garner this quarter in context of system number and any color if you can also share on what has driven this huge surge in the business numbers over the last fortnight.

Okay, let me take that if that's okay. See if you look at the quarter, the 2.45 lakh crores of deposits that came in, typically you see that the market is pretty active and accrets maximum almost more than half, close to half or slightly above half of what the year accretes in the last quarter. In this year it's no exception. If anything, it has been more squeezed towards the last month of the quarter rather than the full quarter because January was still tight all across. Somewhere from later part of February to March it has been quite easy and liquid and possibility of deposit gathering is there if you look at the composition. So that's one, there is a market tailwind that is there. I think the system growth as we saw somewhere reported a couple of days ago was about at an aggregate level 11.5% or so system type of growth. Now when you look at the composition of the deposits between retail and wholesale, there is some level of wholesale deposits that come in March quarter naturally because of relationships as well as how the corporates manage their balance sheets towards the end of their financial year and you'll see that the average of the retail versus wholesale is about a percentage point or two different in this quarter which in our earnings deck you'll notice that there is 82 against 84 or something, 82-83 against 84. So retail, I'm talking about the retail. So retail continues to power and stays ahead the 80% mark and within that when we look at the composition of the deposits between the core retail, when I say core retail I mean the higher ticket size NRIs or certain other institutions that are managed through the branches and so on. When you look at it, the core retail is faster and almost close to the total despite there is a good power coming from the wholesale business but the core retail is also almost at that level so we feel quite enthused by the relationship managers gathering and engaging to get these things done. So we are quite positioned for continued growth on this area. Right.

Right. And Shini, like also the other part of the question is like any color if you can share on what has driven this huge surge in the business numbers over the last fortnight of the year.

I mean this time the pickup is exceptionally strong across the system.

Thank you, Nathan. I'll request to come back for a follow-up question. Next question is from Kunal Shah from Citigroup. Please go ahead.

Thanks for picking the question. So firstly again touching upon the growth side. So we indicated like we will try to grow in line with the industry average but we are seeing industry average being upwards of 15. We are still at 12. So we have been below it and next year would we retain the guidance of growing above the industry average or would we say like we will still grow in line with the industry average because industry average itself has picked up to a very large extent. And on the deposits, how much of this is the transitory nature and how much of this can sustain because last year we indicated that we will more focus on the sustainable deposits even during the period end. So just want to get the sense because the difference between the end of period and average deposit is quite high during this quarter.

Okay, let me take one by one. The first one is on the growth in the system. You know, at least if you see through large part of FY26, the nominal GDP growth was expected was somewhere around the 9.5%. So one consensus until the large part of the year was a system credit growth of around 10.5 to 11.5%. This is what we had expected and we calibrated our strategies and our growth in line with that and that is why we grew at 12%. The system, you have said 16 or 15%, but actually when you compare the period end numbers as of 31st March which is published by the Reserve Bank of India and you sort of make the math it comes to somewhere around the 12 to 13.9% that's a system growth. Obviously it has been faster, it is something that we have to navigate but it's not too far away from the momentum we have seen from a 5.4% growth in FY25 to a 12% growth. So I think we, as Kaiz was mentioning, we're very well positioned to continue that kind of a momentum in a manner that we do responsible growth and we don't want to overstretch beyond what could potentially have some landmines in future. And that's the reason why we're not sort of, because of this dichotomy in terms of the growth being slightly more than what one expected in relation to the nominal GDP growth. I think we would like to sort of just leave it at that to say that our trajectory is in the right direction and we will do what is appropriate from our risk and reward perspective. That's part one. Part two on the deposits. Let me first take the granularity of deposits. The retail has always been as a proportion of total deposits has been about 80 to 85% of the total bank's deposits. You have three significant verticals where we have a lot of close relationship being, whether it's corporate banking or whether it is the capital market segment as well. Now let's talk about the 80-85% which is the retail segment. You know, within that there is definitely a focus on trying to see how we can garner more granular time deposits. If you see as I mentioned in my opening remarks the granularity of the deposits has stepped up significantly. In fact, the less than 3 crore deposits have grown which has been mobilized in FY2026 on a net basis has grown up almost about 74% over the net incremental deposits for FY25 on that less than 3 crore bucket. So what constituted 31% of the total net accretion in FY25 now constitutes 47%. It's a very significant number because these are all very less volatile and very sustainable and that is something that we are emphasizing as we move ahead and this particular number should go up even in future.

So 47% is on the time deposits?

On the incremental.

Of the incremental.

Of the incremental.

Got it. So if we have mobilized 3.9 lakh crores for the full year, 47% is that. Now in terms of the volatile or the high frequency deposits, it's quite natural when you have corporate as a significant part, corporate and capital markets which contribute 55% or 53% of the balance sheet you will have large relationship which you need to patronize. And that aspect of the 15% of the total deposits will be volatile in nature. You will see that moving out and probably coming back during every month ends or quarter ends as well. But the endeavor is to try and see how on a full year basis we try and inch upwards the net incremental mobilization and that is what we are all working towards. So that gives the confidence on LCR at 114 odd% because now we are below 115. So how would we look at LCR because now LDR is not in focus but obviously we would want to manage LCR. So what range we would want to sustain the LCRs in?

Kunal, in the past we have mentioned that our endeavor for LCR is to be between 110 and 120. We are somewhere in the middle. Last quarter I think we were about 116, now we're 114, so thereabouts. That's the kind of range at which we intend to operate to be in the middle. Sometimes it goes higher, sometimes it comes below, but somewhere in the middle is where we end up.

Got it, thank you.

Thank you.

Next question is from the line of Pranav from Bernstein. Please go ahead.

Hi. Thanks for taking my questions. My first question, Sashi, is more on guidance. I think if I heard you right, you said LDR is no longer kind of relevant, more on a constraint. And I also heard you saying that loan growth you would rather focus on improving momentum rather than benchmarking the system. So is there one metric that you use internally to assess performance which kind of captures some of these pushes and pulls you have on the different metrics that would also be helpful for I guess for instance to track performance. That's the first question and second question is on...

The borrowings have come off almost 11% year-on-year, but the NIM trajectory is broadly similar with what some of your peers have reported. So is that something you expected a year back? Meaning borrowings come off but NIM doesn't really get impacted, or has something changed in there? And more importantly, will a reduction in borrowings have a meaningful impact on NIM going forward, or is that even a lever that you are thinking about? Those are my questions, thank you.

Just if I ask a follow-up, my question is more on relative. So hypothetically, if let's say borrowings were to decline by 75%, right? So let's say your borrowings just come off to 6 or 7% of liabilities today, do you think NIM will improve very significantly?

Okay. Got it. On the first question on the metric, is there like, I think I heard you say that you focus more on returns rather than just NIM. So is some version of POP the metric that would be appropriate? So what would be the best metric then?

Okay. But that doesn't capture growth, right? I mean...

Topline growth and returns and...

EPS. That's what you already... Understood. Thank you. Thank you. That's helpful.

Thank you. Next question is from Lanos Shadri Sen from MK Global. Please go ahead.

Can I request you to unmute your line and proceed with your question?

Sir, can you hear me?

Yes, go ahead.

Audible?

Yes.

Hi. Thank you for the opportunity. Two questions. One is I was hearing Shashi with interest in terms of the investments that are being made in the last five years. Are we now entering a cycle where the cost-income ratio has peaked and we can expect significant benefits to come through? I know part of it will come from revenue growth itself because loan growth is bouncing back. This should be a better year for margins, etc. But on the OPEX side, is there a possibility that the overall OPEX could slow down from here because a large part of these investments that you made are done, or do you think this is an ongoing process and there are not too many levers?

Thanks. The second question is on retail loan growth. You've done well in terms of recovering the overall loan growth but retail still at, I think it's in the single digits. I think there's some upside for a franchise like yours going forward. What would be the levers to accelerate retail loan growth? Which products, which channels? More harvesting of cross-selling within your existing customer base? Should we expect some forward momentum in that part of the business in the coming FY27, early in the year, and would it be back-ended or front-ended?

So I think, you know, I did cover it in my opening response to Maruk. We have seen good traction across products in wheels, personal loans as well as in the mortgages space over the last three quarters sequentially. And in terms of levers, today, if I just take mortgages, we were doing mortgages earlier out of about 6,800 locations. We are now covering mortgages from more than 7,800 locations, closer to 8,000. So one is we are using distribution. Two is we've got our digital channels working very well and we have seen a higher utilization of our 10-second loans both in our express loans, in auto loans and personal loans. We've also seen more addition to the customer acquisition base, that was what Shashi referred to earlier, as well as the foray that we have done in the salary accounts. And these salary accounts create the base for us for better cross-sell and penetration of our retail products. And we are the leading bank in salary accounts and the quality of the franchise we have out over there. So if you look at our physical distribution of branches, if you look at the better penetration and utilization of our digital channels, as well as you look at the increasing acquisition that we have in our what we call our pre-approved base, because we have the history of the client because of the salary relationship, has obviously created the momentum without going down the asset quality ladder.

Yeah. And okay, I'm being prompted by Shashi on a very important metric. We have seen our disbursements go up quarter-on-quarter, which is another parameter on the retail space. And we do know that on the mortgages side, I do believe that we would be amongst the top two with hardly a gap in terms of the quarterly disbursements that we have been doing. In the auto loan space, we have grown well. We continue to be market leaders and we have the largest engagement with all the OEMs as well as the dealer base which acts as the real feeder for the retail loans. So between the physical channel, between the digital channels, between the customer acquisitions and across the set of our core retail products, we do see that growing well. We also see ourselves doing well in a product that we have launched over the last year and has come up very well, has been our gold loan business. We've built a good quality book out over there and I do see that also continuing to contribute. The last lever I may touch upon to give you a sense has been on our MSME business. We have been market leaders in MSME business and today we are number one in the country on the entire MSME space. To give you some granularity, we are number one in 15 out of 28 states and we are in the top two in 25 out of the 28 states in MSME. If you also see the pack which my colleagues have put out, we've grown our business banking which is mainly representative of our MSME. We've grown at about 20% year-on-year and that will continue to also be in that range of 18 to 20-21% depending upon obviously some of the developments in the economy. So that should give you, I hope, a good sense of what will be the levers on our branch, on our consumer bank and the channels through which we will get it.

Can you talk about the merger synergies as well?

That wasn't the question but I'm happy to cover it.

Thank you, KV. Thank you. That is extremely important as to what we are looking at from a mortgage book perspective. It's not just the book but the kind of primary relationship that we are all focusing on and that's going to really be a large sustainable franchise over a long run and quality and very appreciated.

Thank you. Next question is from the line of Ricken Shah from Capital. Please go ahead.

Good evening. So I had three questions. The first one is on the yield on investments. So this number is down about 60 basis points in the last two quarters when the overall yields have gone up. So why is the interest income on investment yields going down? So that's one. Second, if you could just highlight what's the cost of deposit and what is the residual repricing if any remaining from the current levels. And thirdly, it's on the treasury gains. So similarly there seems to be no impact on the treasury gains or effects despite the yield movements and the RBI move. So how should we think about it as we move into the next year on this particular two points? Thank you.

If I can. Right. So, even the geopolitics, the yields, the 10-year G-Sec were decisively moving up right in the last six months specifically but the book yields have kept going down. So just wondering what's the missing part here?

Yeah. Fair enough. Fair enough.

Yeah, the other one you talked about the cost of funds. I think we published the cost of funds which is about 4.4% or so, has marginally come down and then from last year to this year I think so far has come down by 50 basis points or so. And cost of deposits is part of a component of that and very similarly it moves down in line with that.

Residual repricing, if everything else remains the same, there will be further reduction coming on the residual because the time deposit takes five-six quarters or so to go. And so some residual again remains to be seen in terms of the preferences for what type of the coming. Yes. All else remaining same, there is a tendency for the repricing to factor in more.

No, there is some negative impact. If you see that the rate of growth on the treasury income is modest, and the reason for that modest is that I'm talking about the FX component of the treasury, it's modest because there is a volume impact. So due to various risks on the foreign exchange trade, there have been lower volumes and lower spreads too. And also in terms of the, there is some impact of the unwinding that is also there.

Thank you. Next question is from Abhishek Mora from HSBC. Please go ahead.

Hi, good evening. Thanks for taking my question. So I had a question on the third-party distribution fee. Actually if I look at it on a full year basis, the growth has been hardly 3.5%. And this is lagging your overall customer growth. This is also, you know, when you compare it to the retail asset, retail liability fee growth, this is lagging quite a bit. So what is really leading to this? Is it just a slowdown or cross-sell has become more difficult or you're defocusing on some product? What's really leading to this slower growth in this line? So that's point number one. Question number one, sorry. The other one is on margins. So you said that there's some repricing of TDs left which should be positive but on the other side the loan mix is gradually changing more towards corporate. How should we look at margins from here for let's say the next year? Does it trend down or does it flatten out?

Mr. Vaidyanathan, on the mix, so lower life sales is it? And is that like temporary or is some change in process or something which has led to it? Or is it just, you know, coincidental or nothing really to read into it? How do we look at it?

Got it. Okay. Okay. Thank you for that.

Thank you and all the best.

Thank you. Ladies and gentlemen, we will take that as our last question as we have come to the end of the time allotted for the call. I would now like to hand the conference to Vanatam for closing comments.

Oh, thank you. Thank you all for participating today. We are closing at the appointed time which is 5:00 p.m. because we have another meeting scheduled soon after this. If there are any more questions, comments to be provided, please feel free to contact our investor relations team. We'll be happy to engage with you over the next few days, weeks, whatever it takes. Thank you. Have a great weekend. Bye-bye.

Thank you very much. On behalf of HDFC Bank Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.