Q1 19/20

Jul 20, 2019

Quarterly report

Ladies and gentlemen, good evening, and welcome to the HDFC Bank Q1 FY20 earnings conference call on the financial results presented by Mr. Srinivasan Vaidyanathan, Deputy Chief Financial Officer. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after a brief commentary by the management. Should you need assistance during the conference call, please signal an operator by pressing star 2 0 on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Srinivasan Vaidyanathan. Thank you, and over to you, sir. Thank you, Lisanne. Good evening to all. We appreciate you taking the call this evening. Getting to the highlights for the quarter now. The bank's total income for the quarter ended June 30, 2019, at INR 32,361.8 crore grew by 22.7% from INR 26,367 crore in the corresponding quarter of the previous year. Net revenues for the quarter amounted to INR 18,264.5 crore, an increase of 24.8%. Net interest income for the quarter was INR 13,294.3 crore, registering a growth of 22.9%. The core net interest margin for the quarter was 4.3%. Other income for the quarter amounted to INR 4,970.3 crore. Fees and commission income, constituting 71.5% of other income, grew by 12% to reach INR 3,551.6 crore. As you know, the fees and commissions for the quarter were impacted by changes in regulations concerning mutual fund commission payouts, which happened in the preceding quarters. Excluding income from mutual funds fees and commission, fees and commission grew by 15% over the corresponding quarter of the previous year. Now to the breakup of the other items in the other income. Foreign exchange and derivatives income at INR 576.7 crore grew by 15.4%. Trading income at INR 212 crore compares to a loss of INR 283 crore last year's same quarter. Miscellaneous income, which includes dividends and recoveries at INR 630 crore, grew by 36.3%. The total other income, as I said, INR 4,970.3 crore grew by 30.2%. Operating expenses for the quarter were INR 7,117.3 crore, an increase of 18.9% over the corresponding quarter of the previous year and at the same level as quarter ended March 31, 2019. In the current quarter, the bank incurred higher PSL fee cost, excluding which total operating expenses increased by 16.9% on a year-on-year basis. Core cost-to-income ratio for the quarter ended June 30, 2019, was 39.4% as against 40.1% for the corresponding quarter ended June 30, 2018. Total provisions were INR 2,613.7 crore for the current quarter as against INR 1,629.4 crore for the corresponding quarter in the previous year. General provisions include additional provisions of INR 85.9 crore for standard advances to NBFC HFC sector. Profit before tax for the quarter ended June 30, 2019, was up 21.6% to INR 8,533.6 crore. Net profit for the quarter grew by 21% to INR 5,566.2 crore. And now to some balance sheet items. The bank's balance sheet size as of June 30, 2019, was INR 12,65,253 crore against INR 10,80,409 crore as of June 30, 2018, an increase in size of 17.1%. Total deposits as of June 30, 2019, amounted to INR 9,54,554 crore, an increase of 18.5% over June 30, 2018. CASA deposits grew at 12.8% with savings account deposits at INR 2,63,338 crore and current account deposits at INR 1,25,663 crore. Term deposits at INR 5,25,553 crore grew by 22.5% over the previous year. CASA deposits comprised 39.7% of total deposits as on June 30, 2019. The bank's continuing focus on deposits helped in maintenance of a healthy liquidity ratio at 126%, well above the regulatory requirement. Total advances as of June 30, 2019, were INR 8,29,730 crore, a growth of 17.1%. Domestic advances grew by 17.9%. Advances to the vehicle loan segment, where sales volumes have seen some reduction, grew by 8.3% over the previous year. As per regulatory Basel II segment classification, domestic retail advances grew by 16.5% and domestic wholesale advances grew by 19.6%. In this quarter, a higher proportion of PSL certificates were used to meet PSL requirements. Moving on to capital, network and asset quality. With regards to capital adequacy, total capital adequacy ratio as per Basel III guidelines stood at 16.9% as against a regulatory requirement of 11.075%. Tier I capital adequacy ratio was 15.6% compared to 13.1% in the previous year. CET1 capital stood at 14.8% as of June 30, 2019. As of June 30, 2019, the bank's distribution network was at 5,130 banking outlets and 13,395 ATMs across 2,764 cities and towns, a growth of 326 banking outlets and 587 ATMs over June 30, 2018. 53% of the branches are in semi-urban and rural areas. Number of employees increased by 7% to 104,154 as on June 30, 2019. Gross non-performing assets were at 1.40% of gross advances as on June 30, 2019, 1.12% excluding NPAs in agricultural segment, as against 1.33% as on June 30, 2018. Again, 1.09% excluding NPAs in the agricultural segment. Coverage ratio was stable at 70% as on June 30, 2018 and June 30, 2019, and 41% as on March 31, 2019. Net NPAs were 0.4% as on June 30, 2019. The bank has been creating contingent provisions of certain pool of accounts in certain sectors over a period of time. In this quarter as well, we have created net additional contingent provision of approximately INR 165 crore. The bank held floating provisions of INR 1,451 crore as on June 30, 2019. Total provisions comprising specific, general, and floating provisions were 115% of gross non-performing loans as on June 30, 2019. Now a couple of paragraphs on subsidiaries. For the year ended June 30, 2019, HSL, our securities company's total income was INR 189.3 crore against INR 193.5 crore for the quarter ended June 30, 2018. Profit after tax before comprehensive income for the quarter was INR 66.5 crore as against INR 72.6 crore in the previous year. HDB Financial Services Limited net interest income grew by 12.9% to INR 962.7 crore. Profit after tax before other comprehensive income for the quarter was INR 221.9 crore compared to INR 228 crore the prior year. HDB FSL had 1,381 branches across 996 cities. Gross impaired loans were at 2.3% of gross loans, and net impaired loans were at 1.7% of net loans. The total capital adequacy ratio was at 18.1% with the Tier I capital adequacy ratio at 12.5%. Now, a few lines on consolidated results. Bank's consolidated net profit for the quarter ended June 30, 2019, was INR 5,676 crore, up 18% over previous year. Consolidated advances grew by 17.2% from INR 7,51,386 crore as on June 30, 2018, to INR 8,80,939 crore as on June 30, 2019. Kindly note that the financial results of the bank subsidiary companies have been prepared in accordance with notified Indian Accounting Standards. However, the bank's consolidated financial results include financial information of the subsidiary companies based on the recognition and measurement principles as per Indian GAAP. With that concludes the prepared remarks. We get back to Lisanne to open it up. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may please press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to ask questions relevant to the financial results. Participants are also requested to use handsets while asking a question. The first question is on the line of Mahrukh Adajania from IDFC Securities. Please go ahead. Yeah, hi. What would be your mark-to-market provisions on your bond portfolio this quarter? What would be your total non-performing investments? Hello? We had a mark-to-market gain in this quarter of 81 crore, that is recouping losses that have been previously taken. Your increase in specific provisions is not because of any mark-to-market on bonds? No, it is not. Why has it increased so sharply? Mahrukh, if you had listened to Srini, there are a couple of parts to the increase in specific provisions. One is the fact that, let's keep agri aside. Agri is one of the reasons. We've always been mentioning right from June 2017 onwards, that the agri portfolio, especially in the quarters of June and December, will have a bit of a stress. That continues even as we speak, unless and until all the state governments in the country have a resolution for the same. That's number one. Number two is we have also sort of stepped up some of the provisions in the unsecured book. For example, it's all product programs where you have certain rates of provisions that we have taken. We have stepped up the provision for the unsecured book as well. That's number two. Number 3 is the growth in the balance sheet side or the loan side also will have a bit of an increase in the absolute increase in the provisions. Number 4, as Srini was mentioning, in addition to the specific provisions, HDFC Bank has created additional contingent provisions for a pool of accounts in certain sectors. Optically speaking, you are seeing a slightly higher growth rate of almost about 60-odd%, et cetera. But on a pure specific basis, it is about 36%. If you were to adjust the charge, the charge to ANR is about 1.07%. If you exclude the agri charge and if you exclude the one-off on account of the heightened rate of provisioning on the unsecured book, it is about 0.8%. The general provision is included in the general line, right? Not in the $24 billion. That is right. What was your slippage during the quarter? The slippage during the quarter is about 2.03%. Here also, you need to sort of look at the core slippage, ex agri, which is about 1.4%. In absolute terms, that was? In absolute terms, the slippage number is 4,225 crores for the quarter. I don't have the number ex agri, but we will sort of give it to you during the course of the call. Okay. I just have another question on deposits. In terms of the CD ratio, do you have any target in mind? You're happy with holding it at 85, 86, or do you want it to go lower? We always would love to have this lower. Right from January 2018 onwards, HDFC Bank has been endeavoring to push up the deposit mobilization. I think you have seen we have been steadily increasing the deposits, including the FDs, to support the kind of growth that the company has been seeing right from the last couple of years. Having said that, as you know, we are also a large cash management bank. When you adjust for the cash management flows, which are lying outside the deposit accounts, the CD ratio comes down. In addition to that, since we also rely on institutional funding, we have been diversifying our funding by resorting to institutional funding, long-term institutional funding or sub-debts including some infrastructure bonds in Tier II. The CD ratio, when you adjust for all that, comes down to a far more palatable around the 75% levels. Of course, deposit is one of the key strategies for HDFC Bank. We have been stepping up the new customer acquisitions. It will take some time for the balances to build up there. As a part of the strategy, which is embedded in every customer segment, we have been pushing up liabilities as one of the key drivers of business as we expand. Just one last question on the impact of zero MDR on fees going forward. We have not sized that up, Mahrukh. It is too premature at this juncture. The rules are expected. The Finance Bill is passed as of yesterday. The rules will come, the notifications will come specifying exactly what that is. Only then we will know which kind of segment and what is impacted. Okay. Thank you so much. Thank you. The next question is from the line of Agastya Dave from CAO Capital. Please go ahead. Thank you for the opportunity, sir. Question, sir. Provisions, sir. Your line got blocked. We cannot hear you. Mr. Dave? Hello, Mr. Dave? Ladies and gentlemen, the line for the current participant seems to have dropped off. We will move on to the next participant. This is the line of Abhishek Modi from Asit C. Mehta. Please go ahead. Thanks for taking my question. Few of my questions you already answered. Just one thing. Earlier this quarter, the management spoke of strategy that you are not interested in exposure to NBFC in microfinance. What is our strategy been current quarter and future? Are you still cautious on the NBFC side? In terms of microfinance, do you see still reversal of demonetization impact coming through? Because you were expecting delinquency in that microfinance part to increase. Thank you. Hello? Hi, this is Jimmy Tata. I am the CRO. Yes, we continue to look at NBFCs with caution. That is not to say we do not extend credit to NBFCs, but the caution remains. We have seen them look after a liquidity scenario over a few months. There has been various ways in which each of them has addressed this problem. There would be impacts and effects of the manner in which they have addressed this problem, as well as looking into the individual portfolios and businesses of each of these companies. So we remain cautious, but as before, we are not precluding ourselves from. Yes, sir. In terms of microfinance, I think last quarter told that because of reversal of demonetisation, you saw delinquency increases. Is it still being continued this quarter, the microfinance part? We do the microfinance largely ourselves. We create our own groups. We propagate them in terms of financial literacy. We try to propagate their businesses and the channelization of those. We think it is a very good initiative for us to take. Yes, we do continue with that initiative. With respect to the delinquency and the impact of macro factors like demonetisation, et cetera, that is wearing off and things are improving. Thank you. That is all my questions. Thank you, sir. Sure. Thank you. The next question is from the line of Nagaraj Chandrasekar from Laburnum Capital. Please go ahead. Hi. Thank you for taking my question. Have you recently had guided to being able to get cost to income down by 300 odd basis points over the next few years? What really will drive this? Is it purely a shift wrestling towards the corporate bank, given these are lower operating expense-intensive loans? Or what are some of the other things that should drive this decline that you're guiding to? Thank you for that question. It's a good question. One could really see the kind of mix in our business that's been pretty much stable over a long period of time. There could be some quarterly variations in the pace of growth and also a function of what's happening in the economy. Broadly, through a three to five-year period, we should see similar kinds of business mix, i.e., which is about 23%-25% being retail and about 45 odd percent being wholesale. With this kind of a mix, we are saying we will still like to continue to see the cost to earnings down over a three to five-year frame. That is the context at which we had mentioned that it will be in a range of almost about 300 odd basis points over the next three to five years. The way we are planning to do that, it's a combination of two things. Number one, of course, digitizing our processes, whether it's our front end or the back end, whether it's our operations, just improving and enhancing the productivities from our staff. The second aspect is how do we sort of try and see how we can enhance our digital marketing initiatives so that the unassisted digital origination of products is also increasing over a period of time. The combination of all these things is what we believe that there is still a headroom to reduce our cost to earnings. Just a follow-up on the second part. When you mention unassisted digital lending, can you give us a sense of proportion within the retail book of these loans by volume, by disbursements, what they would be now or targeted to be in the next two years versus the recent past? Sure. Currently, it is a pretty low number. It is in single digits. We want to take it to at least double digit or slightly higher than that over the next three to four years at least. Just between the corporate book and the corporate loan category, we are hearing that you are hiring employees from other banks that have functioned and a lot of pressures from campuses. How are we making sure that these new hires are being sort of institutionalized into the HDFC way of underwriting and risk management? See, I don't think we are sort of dramatically changing the composition of our team out here. We do have a fair amount of stability at least from the mid-level to the top level, across segments and across verticals and across sections, including whether it is the front-end wholesale banking or even the back-end credit risk teams. What we are trying to do is as a part and parcel of where we are, we constantly try and see whether we can take in a breath of fresh air so that we are not just inwardly looking. We try and see how we can sort of learn new things There are things that are changing, and we need to constantly be challenged in terms of what are the things that we need to do differently. This is something that we have been doing in the past, and this is something that we will continue. If you're seeing a slight step up in that, it's just that it's bunching up at this time. Having said that, we always would like to have a balance between continuity and a bit of fresh air. I don't think this intake of some new members from other banks is going to really change our credit architecture or culture or our thought process in the company. Jimmy would also like to have some words on that. Just to add one line on that, as far as since you mentioned the underwriting, whether it is retail or whether it is wholesale in the risk management department, you will get a few freshers in. Once again, it's very good to have an outside perspective. To mitigate any risk that may come culturally, as you mentioned yourself, there is a considerable seasoning period. There is an internal training. There are several products and departments of the bank where there is actually a testing process prior to which anyone receives a credit initial. It is not that they join the bank and receive initials. Just one quick point. Could you give us the core NPA ratio, like AGRI at the fourth quarter financial? It continues to be at 1.1 step. Both are more or less the same. Thank you. Thank you. Mr. Chandrasekhar, are you done with your questions? Yes, thank you. Okay. Thank you. The next question is on the line of Manish Ostwal from Nirmal Bang. Please go ahead. Thank you for the opportunity, sir. My question on the growth of our customer segment, we have seen that there is a considerable slowdown in the consumer segment, both automobiles and other categories. How do you see the growth between consumer business for at least this year? The vehicle segment, be it an auto loan or a two-wheeler or a commercial vehicle segment, whether used or otherwise, I think has seen a bit of a change over the last couple of quarters. I think that's the moderation which is probably reflecting the slightly different type of growth numbers that we're seeing. Probably you guys are, and I think Srini also did mention that ex of that vehicle segment, I think the growth rates are somewhere around 19.3%. As I was mentioning, when you hear the industry experts on that particular aspect, I don't think even the vehicle manufacturers have got a real driving this lower demand for vehicles, whether it's the auto or the two-wheeler side. Some are saying that it normally happens once in four years, and I think a couple of quarters it should sort of pick up. But having said that, when you look at the other numbers, you may see that on a pure absolute numbers, there could be a bit of a slowdown. It's not really a slowdown. What is masking some of the numbers is the fact that especially on the corporate side, we had some large one-offs in the recent March quarter, which is a runoff. But adjusting for that, I think it continues to be reasonably stable on the wholesale or the consumer side ex vehicle segment. We'll have a wait and watch how the vehicle segment pans about in the next couple of quarters. But I think on an absolute term, we should continue to add what we are focusing on every quarter on an average basis, what are we trying to add incrementally to the book. When you compare on a year-on-year basis, let me also sort of alert you that exactly a year ago in June, we had one of our best quarters in terms of what we mobilized on an absolute basis in the June quarter. There is a bit of a base effect as well, which is playing out here. But notwithstanding that, as we speak today, we believe that our outlook continues to be reasonably stable, letting how the vehicle segment pans out. Sure, sir. The second question on the NBFCs/housing finance companies. There is a liquidity pressure for that segment and the lenders are risk-averse to lending to that particular segment. At HDFC Bank, how do you see that portfolio? Secondly, what was the growth of last six months in that portfolio for us? A growth number I don't have. The housing companies are amongst the institutions and NBFCs to whom we do lend. Our portfolio continues to be good. You used the word averse, I think. I'm sorry if I don't remember it correctly. But we are cautious, as I mentioned to one of the earlier participants on this. We're cautious, and we continue to remain cautious. We have a portfolio. Our portfolio is not- Troubling us at this point in time, and I don't have the growth number. You asked for growth over what period? Last six months. I don't think it's appreciable at all. If it is- Thank you very much, sir. It would be, yeah. Thank you very much, sir. You are welcome. Thank you. The next question is from the line of Nirmal Bari from Sameeksha Capital. Please go ahead. Yes, sir. Thanks for taking my question. My question is relating to provisions. You earlier said there were four components for the increase in provisions, one of which was the increase in provisions for unsecured loans. In the previous quarter, we had kind of slowed down on the unsecured loan part, though the portfolio was doing well. And this quarter, we are increasing provisions on that. Is there some kind of increase in NPAs or some kind of delinquency increase that we are seeing there in terms of H1 or H2, because of which we are increasing provisions? That was first. Secondly, if you can also talk about the specific provisions for certain group of companies that we have made of INR 165 crore and how is this group of companies different from the NBFC, HFC provision of INR 55 crore which we have done? Thirdly, even after combining both of these, the year-on-year jump in provisions is way higher than the increase in NPAs versus the growth in book. Is there some portion relating to seasoning of NPAs? Okay. A lot of questions embedded in this one question. Yeah. The first part of it is, as I said, yes, with consumption slowing down, we believe that it is better to be slightly more conservative in the rate of provision that we do on the unsecured book, which is the reason why for a certain bucket size, we have sort of stepped up the provision rate. This is a one-time impact that will be there. And of course, it will continue at the same rate even going forward. As I said, we are all in the same economy. We are also seeing this, but it doesn't mean that there's a problem with our book. It continues to be well within the product program that has been defined thus far. This is just a kind of conservative approach in terms of trying to ensure that we are able to reflect kind of the outlook that we have. Number two is on the second question which you- Contingent. On the contingent provision where we provided on a net basis an additional INR 165 crore. As I said, we do have certain sectors not necessarily emanating out of the NBFC or HFC sector. It includes all sectors, other sectors as well, where we have taken, using the probability of default and loss given default, a certain amount of contingent provisions where the occurrence or the non-occurrence of an event is something that could lead to a potential loss in the future. It doesn't mean that it is there already. This is very similar to Stage 2 provisions in IFRS to a kind of extent, in a very loosely coined. That is what we have done. The general provision on NBFC and HFC is independent and separate of whatever we have done thus far. That's part two of your question. Part three was on increase in provisions. As I mentioned to you, the increase in provisions, yes, you're right, it has increased. But when you look at this, and which is what I thought I had mentioned it, sometimes it's better to look at it as a ratio. When you sort of look at the ratio ex-Agri and ex these sort of one-off adjustments that we have done on account of unsecured books and et cetera. The charge to ANR is more or less similar around the 0.75% to 0.8% levels, which has been the case over the last four, five quarters. Obviously the book has also grown. When you really look at the book that has grown over the years, you probably are forgetting that right from June quarter onwards, some of the core book has been growing pretty sharply. Like for example, unsecured was growing at about upwards of 30%, and so was auto until March quarter. The December quarter, it was still a very healthy growth. It's only in March quarter, I think it started to peter down on the vehicle segment. Otherwise, we did see a fair amount of healthy growth across all the consumer-facing products. On a year-on-year basis, when you look at the ratios, it's more or less similar, excluding Agri and the one-offs that I just spoke about. Okay. Sir, just to reconfirm on the first part of my question, that whatever increase in provision that we are keeping on the unsecured book, it is largely to do with the consumption slowdown and the external environment, and not because of anything internal with the SIDBI program. Yes. That is correct. It is cautionary above just slowdown. It is cautionary, and we feel it is advisable at this point. Over. Okay. Thanks. If I have further questions, I will join back in with you. Thank you. The next question is on the line of Prakhar Agarwal from Edelweiss Securities. Please go ahead. Yeah. Hi, sir. A couple of questions. First is on your corporate book. We have been highlighting that we may see some growth moderation in corporate given the rundown in a couple of cases of CNC that we financed. Apart from that, if you exclude that, how do we see, have you gone cautious in that number also, or probably x of that growth then continues and we maintain the numbers? No. I think, please, I am not trying to give you an outlook, but surely I can explain what has happened during this quarter at the wholesale side. You are right, some amount of maturities of some short-term loans that happened during the quarter. In addition to that, we got some repayments from certain on account of some government accounts, and we did sort of also provide short-term facilities to mutual funds in the previous quarter. All that sort of fairly ran off during the particular quarter, which is what is reflecting in the kind of a tepid net accretion to the wholesale book. But outside adjusting for that, I think it has been a reasonably normal quarter, which is what we have been seeing over many quarters, excepting that, of course, let me also tell you that even if you adjust for that, is it as good as what we saw in June of last quarter or September of last quarter? May not be. There is a bit of work to be done. We are confident. Let us see how it works about. We are not seeing anything untoward, but it is not going to be an easy thing as well. Let me also tell you that sure, we are part of the same economy. We hear a lot of noise levels in the economy in terms of consumption slowdown, economy which is pretty much evident the way in the last few quarters it has been coming down, the GDP growth rate. There is a bit of a kind of a struggle in terms of what are the kinds of good assets that are available in the market for us. We have to work harder, but let us see how this pans about in the next couple of quarters. Yes, sure. Second is in terms of, so last quarter we have said that on unsecured part, we have gone cautious. What are the signs probably you look at for stepping back that growth probably again starting to grow that part of portfolio? Yes, we have been cautious. We are always cautious, and at this point of time, we don't look at steps to step it up. I think we would keep our policies intact. We would look out for new markets, we would look at new segments, we look at new geographies, and the growth essentially comes from there. If your question was, are we looking at releasing our caution that previously existed? No. No, sir. My question was in terms of we would have had cautious because of some particular aspect which might come in. What are the things that you probably monitor just to get that caution out, if at all? What are the things that probably look at why have you gone cautious if that is the case on this sort of portfolio? I think we had a period of relatively good and healthy growth. That level and trajectory need not always remain, and if you don't see that kind of a trajectory, I wouldn't put it down to us becoming cautious. I would put it down to us looking and seeing where opportunities are and booking what we can within our policies and parameters based on what opportunities exist. There was a very high level of growth sometime back, and it is going to moderate at some point in time. Yeah. Sure, sir. And sir, last thing in terms of HDB Financial. We have seen some toughening their asset quality numbers. Anything to read into it? Some comments on that would be helpful. I think the primary increase in NPLs in the subsidiary companies on account of the construction equipment or the commercial vehicle segment, more so the asset prices having come down sharply. I think that has sort of increased losses on repossession, and that is what has sort of increased the charge to the P&L for this particular quarter. Other than that, I think he's had reasonably stable numbers as such. But yes, he's also very clear that he doesn't want to sort of change anything for the sake of growth. We are also equally conservative set of players. Cost of funds have actually gone up on a year-on-year basis, which all of us know about it. So margins have taken a knock of almost about 30, 40 basis points for him this quarter, which is reflected in the earnings as well. In addition to that, I think the asset repossession losses have sort of reflected in higher losses for him, which is the reason why he has a slightly tepid growth rates in the bottom line numbers. Sure. Thank you so much. Thank you. The next question is from the line of Anand Rama from Emkay Global. Please go ahead. Yeah. Thanks a lot, sir. My first question is on the risk-weighted assets. Can you please provide me the number of, I mean the amount of risk-weighted assets in this quarter and what's the YOY growth? Sir, this is the operator. Sir, your voice is breaking up. Hello. Yes, sir. Your voice is breaking up. Can you repeat your question? Yeah, sure. Can you hear me now? Yeah, Anand, I think- Hello. Yeah. You need to probably reduce the volume on your handset or et cetera. Sure. Is it better now? Yeah, that is right. Sir, can you please provide me the details on basically the risk-weighted assets? So what is the amount of risk-weighted assets in this quarter, and what is the YOY growth number? Okay. It is there in the press release, but just to tell you, it is 965,635 crore, which is a growth of around 14% on a year-on-year basis. Okay. So there were some banks this quarter said that there is a higher charge on the unrated exposures in their book. Is that something similar that we have seen for ourselves as well? So this was effected in June 2018 of last year for us. Hello. Yeah. Anand, we had sort of Yeah effected this in last June itself. Okay. Sure. Secondly is about our HFC provision that we have done in this quarter of about INR 86 crore. So what's the percentage of provisions that we would have done? Is it 10%, 20%? No. See, this is not just an HFC, but this includes NBFC and HFC as all the standard assets in those particular categories, number one. Number two is- Okay I wouldn't know how much it is, but obviously this is on the basis of PD and LGD, et cetera, that we run on the expected loss basis. So Jimmy, you want to? Yes. It's not determined in terms of a percentage of anticipation, et cetera. We have models within the bank that are used to calculate the probability of default and loss given default. So the expected loss after that is what has been projected, and based on those expected losses, these provisions have been arrived at. Sure. And sir, just in that you said that in response to one of the participants, is that we have to some extent, we set up the provisions on the unsecured loans. We have seen some impairment coming also in the HDB Financial Services. So what are the signs that you're picking up from the ground because of which you feel you need to set up the provisions now? Are you seeing some early delinquencies or what is that? Oh, no. I think one of the participants had asked earlier whether it is environmental or whether it is some internal risk. It is not internal, it is environmental, and it is cautionary. So the signs that we are seeing are the signs that are visible to everybody. It is not because of any internal developments. Okay, sir. Thank you. Thanks a lot. Thank you. The next question is from the line of Anand Laddha from HDFC Mutual Fund. Please go ahead. Hello? Yeah, Anand. Hello? Hello. Yeah. Ask the second part. Go ahead. On the same question on the set up provision on secured loan, if you can give some color in terms of, are you seeing over-leverage in your customer? If you run the bureau score, are you seeing increasing leverage in the customer within cities, within urban center, within Tier I? Incrementally for personal loans, where is the demand coming? Is it coming from metros, or is it better cost like Tier I, Tier II? Lastly, on the CASA side, sir, the slower growth in the saving deposit, one should believe this is a new norm that's You want to take the CASA first and Yeah, I think let me take the CASA first. So Anand, the incremental accretions that we have seen, if you go back to about eight quarters on what we keep on adding on the CASA, this is not the first time. In fact, it's slightly healthier than what we have seen in the third quarter of last year or what we've seen in the first quarter of last year as well. So you do have these kind of norms of what we net on a net basis accrete into the savings book. What you also need to look at is this, we have been growing the assets or the advances pretty healthily over many quarters now. You need a fair amount of funding to support that kind of growth. Right from October 2017 onwards, we have been trying to push the mobilization of FDs because we realize that we are comparing or competing with not just banks, but also with other financial services participants like mutual funds in terms of yields from a customer perspective. If you really look at the kind of rate that we are offering, especially on the retail side, the retail time deposit rates have been pretty much stable and attractive for us and across the banking system as well for some time. So we have seen a fair amount of mobilization of time deposits every quarter, and that is also sort of reflected in a slightly healthier growth even in this particular quarter to about 22.5% on a year-on-year basis. Now when you do that, there will be situations wherein if I were to go to a customer and say that, "Sir, we have good rates. Why not parking your funds, creating FDs?" He will intuitively go to his net banking and book his FD by debiting the savings account. We are all right with that. You will see a bit of a dip in savings account. At least we now know that we have, which we did not probably in many years in the past, that we probably did not even ask our customers, saying that, "Why aren't you keeping your FDs with us?" Probably we were not competitive enough. As long as we are needing liquidity and we are trying to drive adequate funding as a key strategy to sort of push growth, and as long as our pricing is in line with whatever increase in incremental cost, I think we are happy to see a bit of a slower savings growth. But the key is the total liabilities, the core funding or the core granular deposit is what is key for us. That is what we have been driving. A bit of a small shave off in savings accounts in terms of attrition, we are all right. As long as we know that he is dipping into his things and creating an FD for us is good. Surely, we would love to have him take it from other bank and put the FD. But that's not going to happen always. You have to wait for maturities in the other banks because most of the FDs do have a premature penalty requirements. That's where we are at this juncture. Let me then hand over to Jimmy for the third set of your questions. Yeah. Sorry, if you could just give me the exact specific of your first part. Just wanted to understand on the second provision we did on the unsecured part. Yes. Are we seeing increasing the customer leverage, and incrementally on the personal loan rate, we are seeing a growth coming from, is it coming from metros or Tier 2, Tier 3 cities? What proportion of customer are salaried customer and what proportion are unsalaried, self-employed customer? Sure. All three first to go along with. Yes, studies conducted across the Indian market are showing two or three things. Customer leverage is increasing, the frequency of borrowing is increasing, and the ticket size is increasing. This is across secured and unsecured personal loans, and this is across the country. It is not peculiar to any particular geography or type of geography. The growth is coming from the metros and large towns. The growth is also coming from the semi-urban and rural areas. We have been looking at picking up assets in the retail space from the semi-urban and rural areas actively for the reason that they are relatively unbanked, and therefore, we do seem to have a better choice and selection over there. That said, those areas do not necessarily have the required infrastructure, et cetera, to support second way out repayments in case there is a problem in those geographies. And for that reason, there is at times a difficulty in rural areas as well. But our selection process at this point of time is a little better because we are slightly ahead of the game as compared to competition in these areas. What was your last one? I am sorry. Percentage of the unsecured loan in terms of personal loan from salaried customer and self-employed customer. Salaried and self-employed. We have various products. The personal loan is typically entirely to the salaried segment. The business loan is obviously out to the self-employed segment. There are several initiatives that we are going through, many on a pilot basis, I must say as well, across the country. These would largely be out to the self-employed segment. They are looking at smaller traders. They are looking at the semi-urban and rural. That is the way in which the mix would be changing. Not because we are not finding adequate salaried people for the personal loan, but because the product suite and portfolio is diversifying and expanding on its own. What would be the absolute amount of- Absolute amount of sorry. What business loan it will have? The business loan portfolio, if memory serves me right, is around 13,000 crore. If you give me half a second, I will actually confirm that. Just one moment. Yes, I have just cross-referred. INR 15,000, sir. Lastly, if you can share what portion of corporate loans are linked to external benchmark? Sashi, would you know that? Sorry. External benchmark linkage in corporate loans. Like- I think it is a very minuscule amount, but exact percentage is it Anand? Then we will get back to you, Anand, on this one. I do not have offhand what is the exact percentage or proportion of our loans which is external benchmark. All I know is that very minuscule portion of it. Let me get back to you. Fine. Thank you, sir. That is from my end. Rajiv. The next question is on the line of Jay Chandra from B&K Securities. Please go ahead. Yeah. Thanks for the opportunity. Sir, first question is can you give me the breakup of recovery and write-off in this quarter? Just a moment, please. Breakup. Write-off and recovery. Write-offs 2,115 gross. Recoveries 1,002. Okay. Sure. Sir, this step-up provisioning that you mentioned, this would be applicable to already slipped account, right? Because that is why it is there in the loan loss provisioning and the contingency line item. Already what? Already Slipped account. It is only for the. Let me tell you. When it is 90 days past due, there is a journey which sort of traverses from 90 to 180 days or 150 days before we write off. All that we have done is in certain buckets, 90 to 120 to 150. We have just stepped up the provision in one of the buckets. That is all we have done. Correct. Sure. Yeah. Great, sir. If you can just mention, I think you said last quarter that this core fee income has been weak because of the lower retail disbursement and little bit impact from mutual fund and lower credit card. Is the situation still there or how should we see this core fee income growth? Thanks. I think Srini did mention the mutual fund. Mutual fund, that kind of a drag is going to happen for some time till the base effect wears off until March of next year. Next to that, I think we have seen a 15% growth rate. The key drivers of that is the retail asset again because let's face it, the disbursements are not as strong as the previous years because, of course, the vehicle segment is the one which is dragging it down. On the balance, which is on the payment side of the business, the volumes have been increasing. We are getting a fair amount of traction again back, which I think had a bit of a temporary blip in the whole quarter of this year. Also on the third party, the mutual fund, not mutual fund, the life insurance segment has started to see reasonable amount of volumes during this quarter. So combination of both on the payment side and also on the, when I say payment streams, largely the credit card issuance fees and issuance fees of the business, not just credit card but even the debit card issuance and the life insurance volumes have helped us to get to that 15% growth rate which is what was mentioned at the beginning of the call. Sure, sir. And sir, just very small clarification. HDB Financial has consolidated as well as standalone reporting. What is included in HDB consolidated? Okay. HDB consolidated, when we say we are disclosing a consolidated reporting, it includes HDFC Securities and HDB Financials as per Indian GAAP. Because as you know, both of them have moved on to Ind AS, which is what is regulatory required. So the consolidated financials are the Indian GAAP numbers of the bank plus HDFC Securities plus HDB. Now, on a standalone basis- This is the standalone financials of the respective entities in Indian GAAP. In Ind AS. Ind AS. Sorry, my apologies. Ind AS. Sure, sir. Actually, I was asking HDB, what would it include in its console? HDB has standalone as well as consolidated. What entity is included in the consolidated HDB, if you can answer? No, there is something. Oh, that is the-- They do have securitisation. Whatever they securitize, I think they are consolidating that. So in the air, so you do have that, what is that called? No, sir. Derecognition. They derecognize the sale. You talk about it. Just, in this the derecognition criteria is not met in case there is some credit enhancements that are provided and which don't meet the Indian derecognition criteria below a certain threshold. So that's why it is consolidated. It's put back on the books, so it continues as an asset in the books. Sure, sir. That's very helpful. Thank you. Thanks so much. There was one other question about the floating rate on the wholesale book. You want to put out 5%, 6% or so for floating rate? The external linked benchmark loans is about 5% to 6% of the total book. External benchmark. Thank you. The next question is the line of Agastya Dave from CAO Capital. Please go ahead. No. Two more. Two. Can you. Hello? Sir, your voice is breaking up. Sir, can you hear me now? Yes. Hello. Yes, we can hear you. Sir, on the unsecured book, you mentioned that you made, you just stepped up provisions and you said something which I missed. So this level of provisioning in absolute percentage of whatever you are doing, that will remain constant or this was a one-off absolute increase in overall provisions? No, it will remain constant. What we have changed and what we mean and refer to by step-up is in the various buckets post-delinquency. The provisions as we previously applied will now be applied at a step-up or a higher rate. The impact of that effectively would be that whereas we completely provided for a transaction in 180 days, that is between 90 to 180 days, we will now be completely providing for that transaction between 90 to 150 days. Perfect. So that's what. I got it. Sir, other questions were answered. Just one last question. We have seen a huge move in the yields, and even though the spreads have not compressed, still everything else is going downwards. The liquidity from a deficit situation has moved to a fairly substantial surplus. In that context, do you think whatever we are seeing in the economy, a lot of the slowdown was being blamed on lack of liquidity and very tight spread, very increased spreads. Do you think that will reverse now? Will we see a better state of going forward because of these spreads? Or is it something else? Well, we have to wait and watch. Your question is right. It is one of the reasons or alleged reasons for which people were complaining about. Yeah, with now the liquidity situation being comfortable with, of course, even the other ease coming off. I am not too sure in terms of the outlook or in terms of the risk aversion or the outlook in the economy. Maybe that is also something that is very important which will sort of define as to whether credit will pick up or not. Having said that, it's not that it's so bad. I do not want anyone to sort of go out of this particular conference saying that it's such a bleak kind of an environment. It's pretty much stable. It's just that all of us are used to certain levels of growth, and now when you see a plus or minus 3% or 4% here or there, we are all trying to sort of understand what has happened. But at least when you come here, there's a lot of curious activity within HDFC Bank, and I think we are pretty much comfortable at this rate. We are not sort of really complaining about it. Let's see if there are any dramatic changes in our events during the course of the quarter or the coming quarters. But as we speak, we are pretty much comfortable with what we have and what outlook we have on a very scalable basis. Sir, you wouldn't say that the retail portfolio on a macro level outside the bank, I'm not talking about HDFC Bank as a whole, but just in general, the retail portfolio in general is showing signs of distress. You wouldn't go as far as that, right? I have not studied these portfolios in detail, and therefore, I wouldn't like to comment on the stress or lack of stress in any other book. Okay, sir. Thank you very much for your time, sir. Thank you. Bureaus, I just mentioned in one of my responses. Those studies are available through the bureaus. But beyond that, I don't think it's something- Sure, sir. Thank you. Thank you very much, sir. Thank you for your time. Thank you, sir. Thank you. Thank you. Ladies and gentlemen, that has been the last question. I now hand the conference over to Mr. Srinivasan Vaidyanathan for any comments. Thank you, operator, and thank you to the participants. If you still have questions or need any clarifications, feel free to call our investor relations. Ajit Shetty and team would be very happy to respond to you. Thank you. You may disconnect calls. Thank you. 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. Thank you.