Ladies and gentlemen, good evening, and welcome to HDFC Bank Limited Q2 FY 'twenty two 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 a brief complimentary by the management. Please note that this conference is being recorded. I now hand the conference over to Mr. Srinivasanvaidyanathan, Chief Financial Officer, HDFC Bank.
Thank you, and over to you, sir.
Okay. Thank you, Ritu Jain. Good evening, and welcome to all. Let's start with providing the context on the environment and the policies, which are at an inflection point for our cumulative growth. With support incentive demand and easing of mobility restrictions in the country, economic activity moved above the 2nd wave levels in early August.
Increasingly, in recent weeks as well, economic activity has remained robust. We expect economic activity to recur further During the festive season, pick up in vaccination and the likely increase in government spending. Activity indicators like PMI, GST collections, EVA bills, etcetera, fared better In Q2, it continues to be building up. We expect GDP to show positive sequential growth for the coming quarters. Inflation has remained within policy range and RBI has kept its policy stance accommodated.
Now in this backdrop, the bank is operating and is poised for capturing significant growth opportunities. Key enablers are very well lined up for execution of our strategy. For instance, capital adequacy is at 20%. Our CET1 ratio is at 17.4%. Liquidity is strong as reflected in our average LCR for the quarter at 1.23%, approximately $6,000,000,000 excess over a floor of 110%.
Balance sheet has been built with great resiliency. The G and P ratio has remained within a reasonable range of 1.35%. Coping and contingent provisions obligating to INR 9,200 crores, helps in derisking the balance sheet. About 400 branches are in the pipeline to open within a short period of time. To give additional context on the branches, we also added 432 branches The past 18 months that is during the COVID period positioning us for capturing the opportunity progressing on the vintage Michelin models.
We added 5,868 people in the quarter, 9,248 people in the first half of this financial year. We have added 12,259 people over the past 12 months, which ensured our people were ahead on the productivity curve before reopening of the market once COVID Technology enablers are getting in place for driving future ready organizations with several partnerships for co creation and for product sales and marketing. Several large programs are in progress under the digital factory and enterprise factory umbrella using Agile methodology. HDFC Bank is the first to deploy its own landing zone in September 2021 using a hybrid multi cloud strategy for hosting applications on cloud. It will enable the bank to build and deploy highly scalable platforms with flexible capacity utilization while confirming to the high security posture of the bank.
In the month of September, bank website traffic received website received a traffic of about 82,000,000 visits from approximately 34,000,000 visitors. This is an increase of over 24% versus last year. As per our analysis, HDFC Bank has received more than 30% to 80% higher website traffic than the next bank in the public or private sector, respectively. Over 60% of the visits went through mobile device, indicating the mobile simplicity of the footfalls. The growth momentum that has already started, which is set in motion shows great early results.
During the quarter, we opened an all time high of about 2,400,000 new liability relationships, which is an increase of 31% over prior year and 45% over previous quarter. Total deposits sequentially grew by 4.5% led by Strong momentum in CASA deposits, the result grew at 7.6%. Total advances sequentially grew by 4.5% with a substantial upswing in retail Retail Assets, Commercial and Global segments growing at 5.4% and 7.4% respectively. Credit cost spend for the bank has grown 36% on a year on year basis with a sequential profit growth of 27%. Early results for the 1st 10 days of October Show 42% growth in card spends over a similar time period in September driven by customer spend.
We are making new headway in leading the market to digitize the economy. In the last 5 weeks of the quarter, we issued 416,000 credit cards, We commencing our accelerated approach to digitizing the economy through card payment products. It is expected to sustain and grow monthly run rate from here onwards. Preparations are underway to consolidate a large number of ongoing merchant offers. 2 large players are already announced.
Bank customers contributed almost 55% of spend during the special sales organized by ecom platform players. About 7,000 plus hyper local assets for the subscription is underway to ensure that these are available to customers across geographies. There are several strategic partnerships in pipeline. There are 10 One such has been concluded, which is re staging Millenia, Infinia Metal, Freedom credit card offerings. The bank expects to see momentum building up in new offerings in consumer commercial business space for the coming quarters.
UKA transactions per account, both P2P, P2M Put together, I sequentially grown by 35% to INR 89 crores transactions, and over year, it has gone up by 2.2 times. For the quarter in terms of value, P2P market share is about 10% and P2M market share is about 15%. Mobile transaction mobile banking transaction stands in first half has seen a growth of 66% year on year. We are positioned to capture the opportunities in emerging growth segments of VNPL through enhanced product offering and segmented sales and marketing with a product led approach and partner led approach to pay this convenience to customers for small value transactions to enjoy free credit period up to 30 days to pay for multiple items or services in a consolidated manner and pay in EMI for larger value purchases in monthly installments. This is targeting to acquire new customers, activate existing customers and drive stickiness.
We have over 3,500,000 customers with such busy EMI loans. Consumer Finance business is enabled across 1.3 lakh merchant points. The bank's merchant offering is scaling to provide enhanced value added services across various segments. The bank has 2,500,000 acceptance points as of September end with a year on year growth of 27%. Acquiring business volumes, including credit, debit, UPI, API, direct pay, Grew by 45% year on year to receive INR 3,53,000 crores for the quarter.
The bank's acquiring market share is up 47%. We are consistently improvising merchants and customer engagement and user experience on the SmartHub Merchant platform. Several new developments on the platform have been implemented in month of September. As on September 30, 1,000,000 small businesses operate through this new smart hub platform. With the above strategy, the bank is confident on achieving the scale of 20,000,000 merchants and also be the largest payment ecosystem in the country.
Asset volumes are gaining momentum to reach new heights driven through relationship management, digital offering and built of products. In the wholesale segment, Profit has seen strong cash flow and also has preference to use market instruments for borrowers, but at the fair degree of prepayment. However, on the retail asset front, incremental disposals during the quarter exhibited nominal growth of 50% sequentially and 71% Year on year, we're sitting in a sequential growth of 5.4%. Alvin Kapiti can give you more color in terms of what you're seeing in the market.
Thanks, Srini. Very good evening, everybody. The retail assets book has exhibited a robust quarterly Sequential growth of around 4.5% by September 21 over June 21 and around an 11.5% on a year on year basis, September 21 over September 20. This is on the back of the incremental disbursals in the quarter with large portfolios like whether the 4 wheeler auto loans, unsecured loans and mortgage loans have achieved new highs, And we expect a positive sequential growth in the coming quarters as well. To supplement this, Let's also look at a quick sense of how we see the macroeconomic indicators from a business point of view, and I'd like to next 2 minutes supplemented with what's happening on the ground level.
So one is the monsoon we see finally is normal levels. The rural economy has started to show at a ground level the feel good factor. You will have a good Rabi season probably in the next 6 months. If I look at the employment indicators, we can see that it's probably September reached the pre COVID levels, if I look at the PMI data. If I look at the bureau data for loans, the industry inquiry for loans has witnessed a month on month increase.
And for all our retail asset business, it's confirming a strong demand and validating our confidence P. Vijay Kumar:] Now if I also look at the mobility index that we watch, I think it's improved across states with the potential to boost consumption. Added to that, if I want to just look at quick eyeball into the GST, electricity generation, The price generation index of industrial production, I think all of these are showing a positive trends. Now let me quickly add this to the ground level, I think what's happening, What I hear from my teams and the way the business trajectory is moving. Let me begin by auto loans.
So our book is has shown has grown against the tide at a healthy pace. And just to give you a sense, The domestic vehicle sales units witnessed a drop at an industry level of 37% for the month of September 21 over September 2020. However, incremental auto loan disbursal for HDFC Bank in value terms has increased by 36% during the [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Same period. Probably that could give you a sense of our level of traction that we are building. We understand from our manufacturing partners that these are there are global supply chain issues affecting the supply of vehicles.
And however, This we should be able to probably in a month or 2 get a much more tighter grip on that. And that will, I think, add to our strength of What we are building on the disbursing side. On the unsecured personal loan side, our incremental disbursals are exhibiting sustained growth with Very consistent sensible delinquencies are focused on increasing government business, which is our core strategy on this product is yielding positive results, And we plan to strengthen the segment consistently in quarter on quarter thereafter. On the combined mortgage books, and I'd like to comment on the home and lap loan against property, together, it's exhibiting a strong sequential quarter on quarter growth, and we expect this growth rate to sustain in the latter half of the year as well. Loans above 1 lakh are clearly showing a significant higher traction.
And I think loans below that, that's 2 wheeler and the microfinance segment, we expect the dispersal run rate to reach pre COVID over the next 60 days. We are beefing up our distribution on both business loans and loan via noteworthy quantum, which will yield results in the subsequent quarters. And this effort is on as I speak to you. And Even when I look at the ground level feel on the confidence of the self employed, if I look at the textile side, they're talking about The businessmen are talking about an expectation of a growth of 30% to 40%. A couple of home appliances guys are talking about a 20% higher than pre COVID.
The food grains, telecom, FMCG is talking about a range of 20% to 30% growth. So just a feel And what we are hearing at the ground, we are not only increasing our market share across products, but we are also Same time ensuring and witnessing our social quality is improving across the risk bands. So whether it's the bureau, The quality of the receivables score, certain percentage of better customers is increasing. Our open market distribution, We believe gives us a strength of first right to refuse and that strength will give us a substantial quantum leap as we come up with new digital products, Whether it's on the auto loans or it's a couple of other products as the government kind of opens up that and allows the law of the land allows Certain even the mortgage side. We are further strengthening our geographical footprint, both on reach and density.
We are also strengthening our contactless end to end digital journey. This was a big strength which we developed during the pandemic times. Another area like I mentioned to you is the government and the used cars, which is going to make our future level readiness. We are market leader position coupled with our portfolio quality, The sustained economy recovery that we see in an ongoing festival season even with the festive treats that we have launched in our limited capacity to add to the existing demand that we see at the ground level. We are clearly bullish on our retail assets growth in the coming quarters, And we believe we should be in a position to be ahead of the curve quarter on quarter.
Thank you, Srini.
So thanks again for that. Now the next segment I want to talk about is the commercial improvement business that saw the Rahul, a few words on this, please. Thank you, Srini. As Srini said, Commercial and Google Banking had an
end of period growth in
assets 27.4 percent YOY, 7.5 percent Q o Q. The Casa performance remains strong at 21% YOY and 4 0.6% Q o Q. Business growth was aided by continued market share gains, expansion in SORU segments, The semi urban and rural areas underlying strength in the economy and carry forward of June momentum as we opened up after a still environment in April May. While the growth rates were high in a normally quiet quarter, we entered into a traditionally strong second half where we are already seeing strength. We have a strong growth outlook in both the December March quarters.
Our Rural Banking business had approximately 12% quarter on quarter growth, Helped by record disbursements, strong customer acquisition through deeper village penetration in One Mac villages where we already operate. Secondly, through program expansion in 1 lakh with more villages, which we are steering over the next 18 to 24 month period. Crop diversification, focus on small and marginal farmer, slightly delayed but strong swing from June to July with a normal monsoon and rural infrastructure support initiatives. The business remains on track for a 20% to 25% growth for the full year on a conservative basis. Our transportation finance business saw 5.2 percent Q o Q increase.
We have now improved our market share to 25% to 30% with almost all OEMs In the product categories that we want to be present in strength, retail commercial vehicle volumes that we financed In this particular quarter compared to YOY, it was 4.5 times. But if you look at it, the industry volumes grew 1.2 times.
So we
significantly improved our position. Similar trends in both construction equipment and tractors, the second half is expected to be a stronger period And the industry is on a growth phase. The industry has absorbed the impact of changes such as Agdal Load Norms and BH6, etcetera. With overall growth picking up, growth in e commerce, particularly that leads to strong demand for the TV industry, sustained interest spend by the government and takeoff of scrappy's policy over time, this business is on a strong footing for growth. In our mid corporate segment, which is largely self funded, It's our 29% YOY increase and 5.6% Q o Q.
We began the year with a goal to expand our business footprint The Temba business remains on track to expand with strength. We see growth in CapEx demand in several sectors. We believe a recovery in consumption and over the coming quarters will help lift capacity utilization rates, favorable environment and improvement in corporate revenue growth bodes well for improvement in balance sheet position. This coupled with policy measures such as lower corporate tax rate, labor response, PLI The transition to a multipolar world with companies looking to diversify incremental production should help improve private sector CapEx growth as well In the next 12 to 15 months, our Wholesale SME business, it saw an asset growth of 33% y o y, 7.5% Q o Q and remains largely self funded. At the start of the year, we set a goal to expand our footprint to 5 75 districts During the year, we are almost there at the end of 6 months.
In our retail SME business, we had record disbursements 83% higher than quarter 1. It remains on track for a 50 plus percent growth during this financial year. Our healthcare business had a 5.2% Q o Q growth rate. This is a result of strong cash flows in the sector. We have optimistic outlook for this segment and are enthusiastically participating in the government's flagship LGCA scheme.
What stuff are we doing digitally? Well, but for mortgage perfection, which is dependent on SRO. The bank largely does the entire processing digitally that includes customer front end for transaction initiation and execution, Credit checks and clearances to documentation, title search and disbursement. The proof that it works beyond the storyline is reflected in pace of customers' acquisition. Let me just share an anecdote.
It happens in a dry fruit belt in a particular part of Southern India, where a lot of banks are present. When we went in over there, we basically saw a particular name And all that we simply did was the ability to go out and do PCFC in foreign currency as well as forward cover as a hedging tool being able to do online together with our enormous support that we go out and provide. And we were able to convert that entire wealth into an HDFC Bank customer segment. And these are stories that come from all around the country. We are also working diligently on our system upgrade to be able to plug in with product and data atomy stack in India, which is fully developed.
During the quarter, we launched our dukandar overdraft program supporting street vendors and small hoppers. We also piloted Kirana overdraft with the SMCB major. As we roll these out, we are reaching out to areas of economy that need a helping hand. Srini, in summary, we are on track to have the strongest growth over the last few years in both our rural and SME business. Number 2, when we look at the SME growth outlook, not just this year, but for the next financial year, We are poised for a 1 plus 1 model, which basically means that whatever is our book as of March 31, 2022, We feel confident that we will be able to aid exactly the same amount of disbursement, incremental disbursement in the next fiscal year.
That is how the strong the business momentum is within HDFC Bank and how strong the underlying trends are in the economy. Having achieved our cities and district expansion goals for mid corporate and wholesale SME businesses, we are working diligently to expand our village by 1 lakh more villages through our Hargao Hamara village campaign, our DC network and leveraging the common service centers. We are also participating in a lot of government schemes such as the Agri Interest Fund, CGSMU, LG CAS, CGTMSc, PMFMU, PM Kislan Saturation, PMMSY, ECLGS, Kusum and a variety of other schemes. There are about 25 schemes that we are looking at and participating and supporting what
is needed
to be done for the ecosystem. Thank you, Srini. Okay, Thank you, Rahul and Arun, for that getting a ground level view of what's going on there. Now getting to revenues. Net revenues grew by 14.7 percent to INR25,085 crores, driven by an advances growth of 15.5 and deposits growth of 14.4%.
Net interest income for the quarter was at INR17,684 crores, which is 70% of net revenues. It was up 12.1% over previous year and up 4% over previous quarter. The net interest margin for the quarter was at 4.1%, which is similar to the It is similar to ranged in the prior periods. Net interest income growth is reflective of underlying shift from unsecured lending essentially gravitating towards higher rated segments in the COVID period. This is also represented in our ratio of net interest income to RWA, which is consistent at around 6%.
Moving on to the details of other income. Other income at INR 7,401 crore was up 20.5% over prior year 17% over the previous quarter. Fees in commission income that constitutes approximately 2 thirds of the other income was at 4,946 crores and grew by 25.5% compared to prior year. Retail constitutes approximately 93% and wholesale constitutes 7% of the fees in commission income. FX and derivatives income at INR367 crores was higher by 55% compared to prior year.
Trading income was at INR 676 crores for the quarter. Prior year was at INR 1016 crores. Where I spoke about this level of INR 601 crores. Miscellaneous income, of which which is at INR 912 crores, includes the recovery from return of accounts and dividend from subsidiaries. You'll cover about the recovery from return of accounts at a later stage.
Expenses for the quarter, those were at INR 9,278 crores, an increase of 15% 15.2% for the previous year. Year on year, we added 256 branches, almost one branch per workday, bringing the total branches to 5,686. We also added 1350 ATMs since last year. We have 15,717 business correspondence That is 3,747 higher than same time last year. This quarter expenses includes approximately INR 80 crores of charge taken for employee stock options granted in the quarter.
The expensing of employee stock options through the P and L is constitute the regulatory circular issued in August 21, applicable to the industry on a prospective basis, effective financial year 202022. Our cost to income ratio for the quarter was 37, which is similar to prior year level. As technology investments are stepped up and retail segments fixed up further, we anticipate the The increase driven by incremental volumes, sales promotional activities and other discretionary expense on the in the Retail segment. Moving on to PPOE. The pre positioned operating profit at INR 15,807 crore grew by 14.4% over prior year.
Our 3 portion operating process is about 4 times little more than 4 times coverage provides little more than 4 times coverage for total operations. Coming to the asset quality. The G and P ratio was at 1.35% of gross advances as compared to 1.47% in the prior quarter and 1.37% on a pro form a basis prior year. Our net NPA ratio was at 0.4% of net advances. It's pertinent to note that the 1.35 percent GNP ratio has about 20 basis points that are standard.
These are included by us in NPA as one of the other publicity of the borrowers in NPA. The core annualized slippage ratio for the current quarter with 1.8% on a quarterly basis, 48 basis points of INR 5,300 crores. During the quarter, the recoveries and upgrades were about INR 3,500 crores, call it approximately 30 basis points. Write offs in the quarter were approximately INR 2,600 Gross approximately 25 basis points, right? Sale of NPA was INR 500 crores that is included in one of the categories above.
The restructuring under the RBA resolution framework for COVID-nineteen as of September stands at 150 basis points, 150 crook will be provided. It is pertinent to note that this is at a borrower level and includes approximately 25 basis points of other facilities of the same borrower, which are not restructured but included in restructuring reported above. Prusions. The core specific loan loss prisions for the quarter Well, it is 2,286 crores. The total proceeds reported were 3,925 crores.
The total promotions in the current quarter included additional contingent portion of approximately INR 1,000 crores. The specific portion coverage ratio was at 71%, There are no technical write offs, no head office in branch portfolio integrated. At the end of current quarter, contingent croresion towards loans were approximately INR 7,700 Growth bank's floating crores remained at INR 1450 crores. General crores remained at the general crores is at INR 5,800 crores. Both issuances comprising all of these, which is specific floating, contingent and general, were 163% of gross nonperforming loans.
This is in addition to the security held of collateral in several other cases. Looking at through another lens, floating contingent and general provisions were 1.24% of gross advances at the end of September. Going to credit cost ratio, the core credit cost ratio that is specific loan loss ratio is at 0.76% for the quarter against 1.46% for the prior quarter and 91 basis points on a pro form a basis for prior year. Recoveries which are recorded as miscellaneous in terms that I report to amounts to 23 basis points of gross advances as against 14 basis points in the prior quarter. The annualized credit costs For the quarter, it was at 1.3%, which includes the impact of contingent portions of approximately 40 basis points.
Prior year was at 1.41%, and prior quarter was at 1 point 7%. Now with that, Jimmy, you want to give some color on credit at that stage, please?
Sure, Srini. Thank you. Hi. Good evening, everyone. So a bit of an update on what's happening on credit and credit quality over here.
So As we entered this quarter, the impact of the 2nd wave was actually abating with lifting of lockdowns, economy opening up and of course the rapid progress of vaccination. This improvement in economic and business activities further accelerated during August September. And as a result of this, there have been improvements in various key risk indicators, which I will just come to in a minute, which has resulted in a gradual reversal to our kind of business as usual situation.
Let me elaborate on the
portfolio quality with the help of these risk metrics and I'll just start with retail assets. So if you look at demand evolution, at an overall retail asset level, the demand resolution for the month of September was 97.5%. It's almost back to the pre COVID levels of 98%, and it's higher than the level seen before the 2nd wave of March 21, which was before just a second wave hit. We move on to the resolution rates across various BPD buckets. I'll just give you a bit of color on that.
The bounce resolution has also shown a lot of improvement. We are now better off in the pre COVID levels of Feb 2020 in most of the products. And it might also be of interest for everyone to know that Around 10% more than the customers who previously used to self cure on bounce are now self curing. What this means is The customer bounces but does not require any intervention or persuasion to actually clear and clear the check on his So that's another encouraging sign in terms of what bounces in the resolution there.
Moving to the actual collection resolution in
the various DPD Most pockets have reverted to pre COVID levels and in some products are actually better than the pre COVID levels. The bank expects the remaining resolution rates in all buckets to reverse the pre COVID levels by around December or January 20 2 In the absence of course of any unforeseen extraneous impact of a 3rd wave, etcetera. Coming To the 3rd wave itself, I think we have done a lot to prepare ourselves for this. So we've been working with the staff as well as our collection vendors to get the workforce vaccinated. The 1st dose coverage amongst this population is almost 100%, and the 2nd dose coverage will be in excess of 90% within the next 30 days or so.
Since the bank does not expect to stop collections as it did in the second wave, both office and field, Marang, of course, if there are lockdowns imposed, but otherwise, we would be ready to and continue our collection efforts. Coming to recovery, the recoveries in the portfolio has been quite encouraging again. For the quarter, the recovery is around 10% higher than pre COVID levels, and this is also improving month on month. So in the actual month September, the last month of the quarter, it was around 20% higher than the pre COVID levels, and this also should see further improvement. So it's an encouraging trend.
Wholesale credit continues to be
very stable. There's been healthy underwriting and credit performance, so we don't have much Sure, report there. The severity of the second wave did, of course, affect the SME sector. However, post June, again, there has been a steady reduction in the number of COVID cases, and therefore, the unlocking across most Let's get started and this will to an improvement in the business and the cash flows for these customers as well. SME book, of course, is fairly diversified with no industry Having more than 5% exposure except the agricultural, which is largely focused on priority sector and therefore is required to be put in those Quantum.
The other measures of the SME segment that we always comment upon, which is the self funding, the collateralization, And the average cash flow, all these things continue to remain stable as they have been in the past. The wholesale and SME book overall continue to maintain the high Small note on the ECLGS portfolio. So given the exceptional circumstances that had led to ECLGS to be announced, the bank had a very proactive approach to this particular scheme, and we did do a fair amount of the first CCLGS particularly before it started getting segmented into the stress sectors. Given our usual approach to Portfolio Risk Management. We have been continuously monitoring and carrying out a detailed quantitative assessment on these portfolios to gauge the potential risk associated with these This assessment has been carried out by us considering several parameters like the individual behavior, scores, Liability behavior, asset repayment behavior, the overview status free as well as post the CLJF and of course, bureau information, which might lead to some It's something we can glean from other institutions' performance.
So all this has been done and continues to be done and will continue to be done going forward as well. But our study suggests that there is good robustness in this business with minimal potential stress that is estimated to be in single digits. Restructuring has also been the 2 scheme that you announced, which are colloquially known as R1 and R2. The bank did take proactive and empathetic stance in this as well, and we have extended this regulatory need to several affected customers. We have carried out a similar exercise of monitoring this particular portfolio and the potential risk that could be estimated.
And this was determined through our ongoing analytics on all these borrowers, their pre and post restructuring behavior, inputs from various other data sources, the banking account performance and, of course, again, the Bureau sources. Anaris, assessment of this particular portfolio using this methodology indicates a round of peak potential impact of 10 to 20 basis points at any point in time, and we, of course, continue to subject these portfolios to enhanced monitoring. So while I've mentioned a lot about The portfolio quality, just let me take a couple of minutes to maybe corroborate some of what Shrini was mentioning in terms of the growth opportunities and what the bank is doing in terms of demonstrating our credit readiness to capture these emerging opportunities. So there are several credit programs that we continue to evolve and adapt to support growth. We've been early adopters of analytics, as everyone knows, to drive these credit decisions and actively been using big data to leverage Diverse data types have done a lot of these programs successfully, create straight through processing through click of a button lending programs.
We have done this historically in large measure for the existing customers of the bank for some time. We have seen the benefit from customer We have also seen that there is no adverse detrimental impact on the portfolios. And we are now Extending these models, of course, with some further analytics and development into mutual bank customers, So that they may also get the same digital experience, the seamless processing, etcetera. Continue to invest in this space for more digitization and better and better experiences to the customers, and we have highly adaptive risk management approaches to these new models as well. We have a suite of newly developed in house models through which we will address these new neuterbank customers.
The robust monitoring of this portfolio also helps us to think that these earnings at a granular level and, of course, lets the bank be alert. It allows us to keep the underwriting teams equipped with the latest conditions and trends, and it supplements our credit processing and our hedge appetite.
We've also introduced a Credit Innovation Lab. The Credit Innovation Lab is being used to incubate
a lot of settlements to test new products, new customer segments, delivery channels across the whole spectrum of lending from microlending, consumer lending, SMEs as well as, to some extent, Wholesale Banking. To facilitate this, the bank is working with a lot of technology partners who are experts in their respective fields to build design these testing mechanisms and, of course, to help us speed the market. So with this, we Hope to keep pace alongside a whole lot of fintechs, be at the cutting edge and actually be at the forefront of these levels of innovation as well. And this lab will focus on the partnership base to even extend distribution and credit delivery to the partner's customers using these models. So we would add, of course, new data sources like the UPI, digital footprints of customers and Several such processes to give insights into various new innovative schemes that we want to put out.
Of course, we will be monitoring this and we will give you further updates as we build some scale on this. Actually, that's what I was wondering.
Okay. Thank you, Jameel. Now getting on to the PBT was printed and you know that 11,883 crores 17.5% growth on the profit after tax of 8,834 crores 17.6%. Now with that getting to balance sheet, I'll keep it light because it's part of the published balance sheet anyway. All I want to bring to your attention is that the 4.5% growth over previous quarter on deposits and 14.4% over the previous year On the deposit side, it's approximately INR 61,000 crores of growth, net growth in the quarter on deposits and 1 lakh 77,000 crores grown since last year.
I want to leave that thought. And similarly, on the advances, Before and after some sequential growth in the 15.5 percent year on year growth on advances means it is about INR 51,000 crores of net growth in the quarter and 1 lakh 51,000 growth since prior year. Now on the capital adequacy, 20% against a regulatory minimum of 11.075. Tier 1 is 18.7 percent. CET1 stands at 17.4%.
Now with that, I want to move to do some highlights on HDFC Financial Services in the US basis because NBFC follows in the US account. The total loan book as of September end stood at INR 60,008 INR 60,000 crores With a secured loan book comprising over 70% of the total loan book, our conservative underwriting policies on new customer acquisition, which was implemented post COVID, continues to be in place, and the company will review its stance in due course based on external environment with increased focus of disbursements At about INR 8,000 crores in the quarter, recorded a 93% growth quarter on quarter and 27% growth year on year. With nonsense proceeding through the country and onset of festival season, we are optimistic on a further uptick in disbursements through Q3 and Q4 Quarters that have traditionally shown relatively strong over the years strong growth over the years. For the recent quarter, Net revenues were INR 19.17 crores against INR 1704 crores for the quarter last year, a growth of 4.5%. Our cost to revenues for the lending business was about 35.4%.
Our provisions and contingencies for the quarter were at INR 634 crores that included INR 175 crores of considerable management overlay on an individual basis. Profit after tax for the quarter was INR 192 crores compared to a loss of INR 85 crores in the prior year and cost after tax of INR 89 crores in the prior quarter. As of quarter end, growth stage 3 NPA stood at 6 6.1%, a reduction of over 200 basis points in the quarter over the previous quarter. Over 70% of the Stage 3 book is secured, which has more than 100% collateral in the SME book and more than 80% collateral in the asset finance book and still carries a prussian coverage of 43%. The unsecured Stage 3 book had a provision coverage of 88% as of September.
Liquidity coverage is healthy at 157%. Cost of funds have been brought down in this recent quarter to 5.96%. The capital adequacy total capital adequacy is at 19.8%. HDFC branches across 956,000 cities. The company has taken benefit of the past few quarters to meet ahead and ensure data and data analytics become the bedrock of growth and build an omnichannel model to deliver business velocity, Welcome the acquisition panel for introducing acquisition fast and providing an intuitive extended customer experience through the loan lifecycle.
On the acquisition, unassisted straight through processing has been enabled for all small ticket consumer loans, which is 90% of all new customer acquisitions. On the underwriting, credit underwriting, enterprise wide automated business tool engine has been implemented, which delivers real time scorecards on our customer applications. The area of collection has enabled all customers to pay using digital payment channels. With markets opening up and customer Accessibility improved to near pre COVID levels. We believe the company is well poised for royalty growth from Neera.
HDFC Securities Got a wide breadth of percent, 213 branches across GBP147 in cities. Four digital centers in this country have shown an increase of 42% increase in total revenue to INR 4.89 crores. Net profit after tax of INR 240 crores is an increase of 34% over prior year. SSL has implemented digital account opening journeys, And it's running successfully over the last few months, leading to a significant increase in the overall trend base to over 3,000,000 as we speak as of September. In summary, we have navigated the shocks arising from COVID pandemic, which has been raging since early 2020.
This has been possible by adopting new ways of working to deliver seamless banking experience to our customers, using this opportunity to scale up and strengthen our infrastructure, Our credit filters were tightened to avoid adverse selection and are progressing now to normalcy support and growth. We have reasonably overcome the effects of the pandemic over the past 18 months across the broad context of balance sheet, P and L and human capital. We are now in a state of accelerating growth. The future ready organization has been in place for more than a quarter, The key enablers for driving growth are well stacked up to capitalize on the early signs that we are seeing now. The quarter results reflect The deposit growth, 14% and advances growth, 16% to build upon.
And the earnings per share The return on asset of 1.9 percent and earnings per share is a total of INR 16 and book value per share stands at INR 3.94. With that, may I request the operator to open up the line for questions, please?
Thank you very much. We will now begin the question and answer session. And 1 on the touchtone telephone. Participants are requested to limit their questions up to 2 per participants. As time permits, you may join the queue for any follow-up.
The first question is from the line of Marukh Arjania from Lara Capital. Please go ahead.
Yes, hello. Good evening. My first question is on NII growth. So what would it really take to get back NII growth to the mid teens? Would it be traction on credit card?
What would it do? That's my first question.
Okay. See, there's a couple of things to keep in mind, right? If you look at over a period of 6 to 8 quarters, How will the book transition from a retail to a wholesale over a period of time? And we are at the It's a shown inflection point where the retail is now starting to take off and at least the momentum on the retail is more than wholesale, Right. And I did give one particular data this turnaround to talk about net interest income on RWA at 6%, right?
So if you look at it, the pricing is for the risk and certain segments that we grew over the last 18 months or so, they're low risk segments. That means you have a lower price that comes with it. But adequately, at the bottom line, if you see the last 18 months return, ROE has been quite steady, 1.9% in this quarter and above 1.9% to 2% every other quarter over the last 4, 5 quarters. So that is one. The inflection point of comp on the retail is going down, right?
So this has got a higher NII from that sense. That has to keep in mind on that one. The second thing is that even in this quarter, while we have had the retail Growth coming up. The so far, the average to catch up, we'll take a couple of quarters for the average
Thanks. My next question is on restructuring. So the restructuring is higher than what we saw in the first wave, that is So what is the profile of the restructured loans? Were they the ones that opted for moratorium last year?
One thing I will mention and then Jimmy will talk more, but one thing I did mention that out of 160 basis points, 25 basis points It's accounts that are not restructured, but we have reported restructured because of the at the borrower level, one other facility of that borrower has been restructured. So it is reported by the way, it is reported 125,000,000,000, but we said 150,000,000,000, 152,000 to be precise. You may want to take the profile of
Yes, sure. Thanks, Shneet. Hi, Maruk. The restructuring has been availed by Many diverse people and as I mentioned earlier, we've been quite empathetic on this. We haven't tried to be excessively Strict as to whether on to or not if someone asked for it and we felt that the person is going to recover well, we would Sure.
In book and in fact, in the various analytics that I mentioned, one of the considerations is our moratorium customers' behavior pre and post moratorium as well. So there would be some moratorium customers in that portfolio.
Sure. But the analysis that we have done would be on R1, right, not on R2?
We have done it on both, Maruk, of course, one has to admit that there's not so much time lapsed post R2, and therefore, the analytics on the R2 book has focused a lot on the behavior of the customer and its attributes before the restructuring. We have found when we are building these Both the behavior before and post restructuring has had a significant bearing on the outcome of the stability of the person thereafter. So Of course, we'll keep up to date with you in future calls as well as to what's happening. But at this Point of time, yes, we have analyzed R2. We have a reasonable insight into it.
And What we put out is what we think the impact is going to be at this point in time.
Thanks a lot. Thanks, Jimmy.
Thank you.
Welcome.
Thank you. The next question is from the line of Kunal Shah from ICICI Securities. Please Go ahead.
Yes. Thanks for taking the question. Again on restructuring, so broadly what you are suggesting is with respect to OTR2. But if you look at the outstanding restructuring tool, should that be altogether at around about INR 20,000 crores, both OTR 1 and OTR 2 put together.
1.5% would be It is less than INR 20,000 crores. 1.5 percent would be about INR 18,000.
Yes. So 18,000 would be this under 2.0 and OTR1, The way we had given the moment out there, that is 5,600 and there is overlap of 2,600. So there would be further addition of INR 3,000 crores under OPR1 as well?
No, no. This is a total number I gave you. 1.5 is the total, R1.5 total. Okay.
Okay. And secondly, in terms of the nature, so broadly, when we look at Retail in particular, wherein, say, under INR 2.0, it is INR 140000 crores. Would the splitting retail between It will be similar to the overall loan book or it will be more skewed as it was either of that?
It will be within the secured and secured have you disclosed secured and secured? We haven't Sorry? No. In the table we published for now, there is no split between the total amount. Yes.
So I just wanted to get some sense if
it will be similar or maybe it is more skewed towards the secured houses that maybe the profile, Particularly within the retail loans of RMB14,000 crores. It may be qualitatively you can comment, yes.
I don't have it in front of me.
Okay, sure. Sure, sure, sure. And I don't have the numbers either, but it's mixed is what I can tell you, but I don't have exact numbers. Sure. And in terms of the movement, which is shown with respect to TR1, finally, the way we are seeing is almost 20%, 22% has cleared.
There is 12 odd percent which has return off. So both put together almost like 30% from last time the restructuring, it has either missed our return off. Now maybe with respect to the current pool, okay, what we are seeing on the 2.0, should we see similar kind of behavior within this restructuring pool because I think you highlighted 10, 20, this kind of an impact when you did that risk and assessment analysis. So how we are actually getting towards that, yes?
That's what Jimmy went through, Kunal, which is to analyze the entire book According to the risk model, the models that we use is for both application review as well as the models that we use For collection behavior and prioritization, to the gross model, that's when we arrived at saying that we need to be watchful for 10 to 20 basis
Okay. Sure. And just lastly in terms of this payment product, so obviously a significant part would be the credit card So another INR 3,000 crores which is there, if we broadly assume, maybe even comparing the last This could be more kind of a pay later or maybe the Mi which you are referring to, which is getting clumped within that portfolio. Would that be the broader number No, I'm saying we have disclosed payment products separately this time. Okay.
Okay. So when we look at the last quarter wherein we have discussed credit card as well and there was a payment product. There is maybe credit card would be subset of it and there is So would it be fair to assume that this INR 3,000 crores is ebi or maybe Pay Later kind of a product which is setting in that pool?
Yes, that is part of the consumer durables that is added there right now.
Okay. It's consumer durables that is there in the payment product. Okay, okay. Yes, thanks a lot. Yes.
Thank you. The next question is from the line of Sudesh Ganpari from query. Please go ahead.
Yes. Hi. Suneet, just a couple of questions. One is on these, we understand obviously the staff This is having gone up because of the soft issue, but even other expenses have gone up so very sharply Q o Q. I mean, how much of this is related to, say, Technology, and is that indeed is going to be the case?
Do you see a gradual rise every quarter as you spend more on technology? Just to understand What could be the impact of that in other expenses this quarter? And the second question is, can you share the GMV of the SmartBuy platform, if you can, that would be great. And also, please comment on the relationship with Paytm. What are you trying to achieve through the Paytm's network?
Yes. Thank you. Okay. Two things that you asked about on the expenses. The expenses growth So if you see that as the retail is powering ahead, which it is already started to power ahead, the cost of acquisition, sales, Promotion, marketing, the retail is far intensive on the front end cost.
You'll see that the cost is really And the income comes from an approval over time. So that's something that will happen. And if you look at historically what happened when the retail Came down, you'll see that the cost came down too, right? And the retail is now giving up, and so this is the one. That is one answer to that.
If you see that the leading indicators of some of the retail activity is going up, the cost will go up. That's right. And Prashanth will come and we will time it in a way that how much of growth we want and to kind of at what price and And what kind of cost to income we as a management, we need to divide and fix it. But that's at least we're making the right kind of investments for future growth. That's one.
In terms of your technology costs, yes, there will be some technology costs that have increased, but not another big deal of an increase. It will be a normal increase That we have seen, 15%, 16% is growing sequential growth of 4%, so that's the kind of a rate 5%. It will have a percentage or so more. Again, timing more than anything. But yes, the fixed cost of the investments that we have done That we are doing and will do will come over time that we migrate.
And the benefits of that Implementation should be felt more in this cost per acquisition going down because we have less manual In the front end sales and we'll have less straight through less of manual intervention rather more straight through. So the prospects will come from The second part of that is the Paytm. See, the same thing we talked about a few things that we will do, right? One is from an acceptance point of view. How do we get some of those terminals?
How are those kind of merchants that today accept the Paytm to accept our That's through a QR approach, right? That means embedded our bank credit card QR into the Paytm QR so that we broad based The merchant acquiring method. So that is one of the partnership activities we have pursued. The other thing is that we are a bank, so we wanted to have the banking relationship So that is another aspect of what we want to leverage the relationship on that. The third one is how do we get the cars acquiring card acquiring to this channel, both merchant acquiring as well as the customers on the Paytm platform, How do we get credit cards on the cloud?
Both the data is a product customer in that arena. We have a lot of details to make it available Q3, the pre approved models are other pre qualified models and so on. But if it is not, we'll have data from our partners, which will be analyzed. Jimmy talked about the lab and other things that we are going through, where in the new to banks, there are several sources That's great. I'll be part of that and then fixed again.
Same kind of an instant approach to store and make that card available on that platform. So these are the 2, 3 things that we are thinking about in terms of what this partnership could mean to us, but this is more than us. It's acquiring it is issuing. It is a relationship for banking. So it's across all of these things.
And this is Think about it as one of the channels, like if you have a branch and the sales channel that we are having, this is one other channel through which multiproducts you have made available to our customers or potential customers.
Okay. Thank you.
Thank you.
Thank you. The next question is from the line of Adarsh Parasramporia from CLSA. Please go ahead.
Hi, Shneur and team. Question was on
the provisioning that we continue to create some contingencies. I just wanted to understand Within that pool of contingencies,
you've talked about restructuring provisions included there. Like you continue to increase that buffer. We'll provide INR400 crores
in this quarter. Could you guide to what's the how are you looking at this number?
Is there a Sure. Where the bank wants to reach and will feel comfortable with that number because otherwise the provisioning was fairly low if I exclude that. Okay. See, the day we will we evaluate promotions every quarter in terms of How we should look at it and how we should evaluate that and take forward. Yes, when we look at the profit portion What we need to look at the 9,000 crores that we have, the 7,700 crores are still contingent and the 14 100 crores of floating provisions together Taken.
Yes, restructuring will come today when we look at various provisioning approach that we do. And what is our target? There is no particular target. We look at it, we will evaluate it to the extent that it makes the balance sheet more resilient. If there were to be another way, if there were to be another shock, the balance sheet needs to be much more resilient, And that's how we will evaluate.
Historically, we've been conservative and our stance has not changed from that sense. Got it. And second question is to Rahul to you. If you
can break up that loan book piece that is now being disclosed Thank you
for rolling in commercial into the
top 3, 4 pockets and that will help So, look, I'm not familiar
as to what breakup do we go and give out. But let me just basically talk to you about what are the opportunities. I have a rule book in which if you look at bureau data Between June 2020 June 21, we increased our market share, whereas if you take a look at the private Sector Bank as a whole. There was a decline in market share. We feel very comfortable in terms of expanding in that space because We had a NPA percentage decline at the Bureau Data as well as the absolute NPA amount, whereas if you take the Ecosystem other partners in our category, they had a 2 percentage increase in NPO percentage.
So we are going to grow. The question is what is the opportunity space in this to grow? And that opportunity space is 15 Mac growth. So we are but a small proportion of that. If you split that between secured and unsecured lending, we would see about 10% to 11% of the secured lending.
There is a lot of room to go out and do that, especially given government policies transitioning Agri to a sustainable rural ecosystem Focus rather than just focus on crop, 3 crop, which basically is water doubling, so to say, wheat rice and sugarcane. Now on the SME piece, come back and think about the SME retail and the SME wholesale, That entire space is roughly about, again, R20 lakh crores or so. And that is the number that you're looking at. And so when we say that look, wherever we are going At the end of the financial year, that amount we are going to basically do incremental disbursement in the following year. That looks very possible because there are about 1.5 crore MSMEs who today borrow of the overall spectrum of crore MSME customers.
My share of those 1.5 crores is fractional, very small. I mean, I wouldn't say that It is something that does not lead for a run rate of growth for me. And of course, if you look at today, the mid corporate segment, it's vibrant, it's healthy, it is growing. We just have to go out and Meet Customers. And let me put it this way, the brand pull and the offering is so strong One of my team members was telling me day before yesterday that we just have to show up at certain places and customers just basically are ready to tie up and welcome us into the banking relationship.
So that is sort of where we are. And that's how I gave you the current growth numbers, the growth outlook, which should give you a sense given the opportunity There isn't a ceiling on the growth in the near term or medium term in this space. Got it, Rahul. Thanks. Thanks, Saurabh.
Thank you. The next question is from the line of Saurabh from JPMorgan. Please go ahead.
Hi, Sune. Sune, could you just quantify Firstly, growth in the net slippage number for this quarter. The second was, if you could also quantify what is your technology Thank you. Revenue on page, which you wanted to go to in the next 2 years? And thirdly was a question on growth.
So Rahul and Arvind have spoken about doubling their books over next 2, 3 years. So I just want to, number 1, confirm if that indeed is the outlook. And secondly, what's your view on the corporate loan growth? Thank you.
Okay. One is in terms of, let's take the technology spend. You wanted the technology That we have forecasted. It's not something that we put out in terms of what we not just account expense. We don't put an outlook or a forecast forward looking statements at all on that.
All we can tell you is that we are making investments across Everywhere. I'll give you indication of the branches, 4 100 branches imminently to open. We're adding people. So far, we've added 12,000 500 people in the last 12 months. We'll continue to add people.
We are making investments in technology. So it is a continuous process. If anything, We will make more investments in technology and thereby get the best out of the digital offerings that we can do. But as Part of this call, let's say, several kind of instances we alluded to and described In terms of the digitalization and in terms of the digital delivery, both from an acquiring point of view and the servicing point of view, We want to be in the forefront of that to get the structure as much as we can, right? So that's something.
But keep certainly, the thought process are going in terms Looking for it, but unfortunately, this is not one item that I can give an outlook or a forecast, right? Because you don't
Shrini, can you quantify that current number? What is your current percentage to revenue or percentage of cost? How much will it
be? That's how the synergies between Given period is 2.7% to 2.8% of revenue, right? That's how you can think about it, and that's where we are. Our number words, if you think about it, are 7.5% or 8% of expenses. If you think about that, that's the kind of a technology cost.
Okay, okay. Got it. Yes. Lippej and the growth.
The clipage during the quarter basis points are annualized at INR 1,800 crores, that's the clipage.
And the next clip is also, Srinivas, you have.
Wholesale growth outlook. Yes. So let me take a minute on the wholesale growth outlook. It all depends on 2 things. 1 is the infrastructure spending from the government, which seems to be already started Because there are good signs, early signs that we are seeing.
Once that starts, we expect the corporates to get behind that. So that could be maybe 1 quarter away before we see the light of that into the corporate book and thereby be positive in that. We are I think about 30% to 30% to 1 third of our focus term lending, which And we are one of the largest providers of infrastructure funding in the country. So we will be participating in that, and we hope to get that That's 1. The second aspect of the wholesale growth is also the capacity augmentation by the corporate.
At this moment, the capacity utilization has not come back to the robust level of mid-70s, And that's something to watch out, 70%, 75% capacity utilization. Last time around, when you touched that range, there was no Okay. That's the argumentation. But Mr. Marant, we do expect that once it gets there, there will be corporate demand coming in from there.
But again, We do see that the corporate buy has much more flexibility now because times have changed. We're able to access the capital markets directly. So that is also one other factor to keep in mind. And yes, we do expect we need to be patient for another quarter or so, And we can see where that is settling.
Okay. Thank you.
Thank you. The next question is from the line of Avishik Khanna from Jefferies. Please go ahead.
Hi, Shimi. This is Sethur. Shimi, my question is on the restructuring and the provisioning. Just wanted to take some perspective from you, Anjali. So, Gulag, in the round 1, you had restructured over 7,800 crores of loans of which RMB 5,467 were actually the personal loan in that category.
And of against that, you have mentioned overall provisions of INR 9.30 crores. Now when I'm looking at The flow of these restructured loans, of the total Loans about INR 1680 crores have slipped, majority of them being in personal loans. If I'm just looking at the personal loan bucket, About 25% have slipped into NCL, and you've written off a majority, maybe 70% plus of it already. Am assuming this is like a 6, 7 month fixed period that we have gone through since the restructuring was completed. So my question is, 1, are we seeing almost 30%, 50% of the personal loans likely to slip into NPLs Alta Round 1.
And should we be applying a similar percentage to the INR 14,000 crores you restructured now? And in that context, how do you look at your contingent floating provision level? Thank you. One thing, I'll comment on the contingent floating, and Jimmy will talk about the Which I believe we talked, but we will recap it again. One, we believe that our contingent and floating positions have done Broadly, not just directed on the restructuring, but most broadly, to make the balance sheet more resilient for any shocks, So that's something to keep in mind.
So it's not just the continuation for restructuring. It is broadly against the balance sheet And to be more resilient and not have a start and have fixed And start and fix and start so that we are able to go through. When the growth cycle is there, we are able to go through the growth without the fix and start. That's what the contingent portion is supposed to Jimmy, in terms of the analysis that you had, you had already talked about it, but please. Yes, sure, Suneet.
I'll just go
through it once again. So We do have our restructured portfolio and we continue to monitor this and it is under heightened monitoring at all points in time. To answer the question you asked directly, should we if I got your question correctly, should we expect 50% of that to slip into NPA? The answer is no. We are evaluating this, as I mentioned, on several different criteria.
I think Maluk had also asked A question on that. I'd mentioned about one of the criteria even being on the moratorium customers and their behavior pre or post moratorium as well as their behavior pre and post Based on the analysis that we have done so far at this point in time, we don't think the impact would be more than 10 to
Thank you, Jimin. Thank
you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Waidi Nathan for closing comments.
Okay. Thank you, Lijaya, for hosting and conducting this. We thank all the participants for participating and engaging with us today. We appreciate your time, and anything further you need, we are available, and Ajit Shetty from our Investor Relations would be available to talk at any time. Thank you.
Bye bye. Thank you.
On behalf of HDFC Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.