AI Investor Insight

Wall Street titan faces Trump in EXPLOSIVE banking fight

‘Morning with Maria' panel discusses President Donald Trump's looming lawsuit against JPMorgan, claims of political targeting after January 6 and Jamie Dimon's response.

The Supreme Court is set to hear arguments over whether Trump can fire Fed board member Lisa Cook. The oral arguments come amid a new criminal probe into Fed Chair Jerome Powell.

110天前Insight Analytics约5分钟阅读

European Luxury Stocks Slump on Trump's Tariff Threat

Sector bellwether LVMH Moet Hennessy Louis Vuitton was down 4.2% and almost all other major European luxury makers dropped as well.

110天前Insight Analytics约5分钟阅读

HDFCBANK.NS 2026 Q3 财报电话会议

Operator: Ladies and gentlemen, good day, and welcome to HDFC Bank Limited Q3 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Srinivasan Vaidyanathan, Chief Financial Officer, HDFC Bank. Thank you, and over to Mr. Vaidyanathan. Srinivasan Vaidyanathan: Okay. Thank you. Thank you, Nirav. Good evening, and a warm welcome to all the participants. At the outset, I know that it's 6:15, 15 minutes behind schedule. We had another meeting we had to conclude and come. Apologies for that, but we'll take as many questions as possible and extend where required. With that, without much ado, we'll straight go into the opening remarks by our CEO and MD. And then we'll -- and we have our DMD Kaizad, any comments we'll take, and we'll go straight to Q&A after that. Sashi, over to you first, and then we'll take it from there. Sashidhar Jagdishan: Good evening, friends. Thank you very much for joining in on a Saturday evening. I know it's rather late, but always appreciate your being here on a Saturday evening. I think we've just sort of declared the results, and you probably would have seen the financial numbers. We're reasonably sanguine and happy about the outcome that has happened. It's in line with our expectations. Looking back, I think the credit growth buildup has been extremely encouraging. We set our sights on a very balanced credit across customer segments. The easing rate cycle and the benign credit has provided catalysts for the credit growth. The CRR release enabled credit deployment slightly ahead of our expectations. As regards to funding, the funding through deposits, we continue to maintain rate discipline, and that has been extremely key. Core individual retail customer segments were seen to be quite strong. For both current and savings, having focused on granular segments have given us encouraging outcomes. And more of this, I'm sure Srini will sort of give the numbers. We did, however, fall short of our strong ambitions, but we are confident that continued focus on our strengths will bring the expected outcomes. On the growth, profitable growth, as mentioned earlier, cost of funds has moved down, reflecting the tailwind effects. CASA growth has been positive. Cost has been under control as productivity improvements have brought in efficiencies. Credit, which has always been our USP, remains best-in-class, allowing us to deliver stable returns as we pivot to the next stage of growth. Looking ahead, the regulator and government continues to be focused on supporting economic and credit growth. At the same time, optimally managing external factors. During the quarter, availability of liquidity was impacted due to some of these. We saw enhanced activity in open market operations and FX swaps to combat some of these challenges. India has demonstrated stable political conditions and consistent policy regime. This has led to being one of the fastest-growing major economies in the world. Growth with subdued inflation management was at the top of the order, and hence, we believe and we are very optimistic about outpacing loan growth in the coming year in FY '27, as we had sort of mentioned to you all along for the last 18 months. Liquidity and benign credit costs provides us a lot of runway to grow. Overall, liquidity in the country is expected to stabilize post trade deals. The foundations are in place to build deposits to fund loan growth. We are expanding our -- we continue to expand our customer base. We are now intensifying customer engagement primarily and largely focused on granular mobilizations. We are aligning pricing with segmented approach, and we shall see that in the coming quarters as well. There's been a lot of talk on the CD ratio. We did sort of drop our CD ratio to significantly since the merger to March '25. As you know, the kind of indicator is not necessarily on the radar for the -- from a regulatory perspective. Having said that, we believe that our glide path to lowering of CD ratio will continue. It's an important focus for sustainable profitability. I completely acknowledge. The cycle -- the easing cycle with credit growth focus in the country surely needs our participation. So the speed of CD ratio movement depends on how we are able to provide funding in the system at rational rates. But having said that, we're very confident that whatever we seem to have committed in the last 2 years, I think by March, I think we should see and by March '27 -- '26 and '27, we should sort of achieve all the -- most of the committed metrics that we have laid out for. I would like to say that under the current scenario, we don't think that we shall be constrained by the CD ratio. To reiterate, we are confident that it will be on a downward glide path. I would also like to reiterate that we shall meet the glide path that we had indicated earlier in terms of the growth, our top line growth, which is in line with the system this financial year and faster than the system in the next financial year. In summary, I have a great appreciation for our customers for partnering with us, and I have the greatest gratitude to all our 200,000 staff who are pillars making this place work successfully. We are confident of the path forward that we have set for ourselves. Thank you very much, and we have all of us here, Kaizad, Srini, and the team here to take on any questions that you may have. Thank you. Operator: [Operator Instructions] First question is from the line of Mahrukh Adajania, an analyst. Mahrukh Adajania: Sir, my first question is on the LDR. You did allude to it. But when do you think now you would reach an LDR, say, close to 90% or below 90%, like any time frame? So that's my first question. And my second question really is on agri compliance. So two large banks have been asked by RBI to make provisions on a certain agri portfolio because of noncompliance issues, provisions of INR 12 billion to INR 13 billion. So as we stand today in terms of your agri portfolio, do you think there is full compliance or there could be some issues somewhere given that it's a large portfolio, it's spread out across the country. And do you think you would be liable to such provisions in the future? Srinivasan Vaidyanathan: Okay. Thank you, Mahrukh. I'll take that. The first thing you touched upon is the LDR from a timing point of view. I think Sashi alluded to that we are committed on the glide path of taking it towards the downward glide path, and we continue to be in that. But on a quarter-to-quarter basis, it is slightly different. And that's because of the seasonality and the opportunity. And you know that in the recent time period, the further opportunity was also provided with the easing cycle and the credit growth focus in the industry as well as the CRR release, which provided that ample opportunity to do that. So given that, we do expect that over the next 1 year to 2 years, we would be getting down further into the levels that we had previously been there, call it, the 90s or low 90s and so on. And that's the level of confidence we have and the pillars that are required to drive that are in place to do that. That's one. The second one is in terms of the agri that you asked about, the regulatory kind of impact, if any. Our regulatory inspection is also complete. And whatever required according to the regulatory requirement, there was about INR 5 billion or so thereabouts, which have been taken in the overall context of our book and our results, if you see, they have been absorbed within that, and there is no special and we have had certain other things that were there. And so in future, we need to operate in a model that is acceptable with the regulatory. So that -- whatever is that, that's an ongoing process of what we do. Any one-time is already subsumed and it is there. And as far as the calibration that we need to do on the agri consequent to those kind of things, recalibration of our book due to the scale of finance, so that what is indeed an agri and what is outside of the scale of finance, scale of finance is the one that determines how much is required for the farm and how much of that is over and above the farm requirement by the farmer. Those evaluations we will take and go through that process to calibrate that. That's in terms of the future impact on that. Mahrukh Adajania: But did the INR 5 billion come this quarter only then? Srinivasan Vaidyanathan: Yes, it is already subsumed in December. Mahrukh Adajania: In December. Okay. And what would be the size of the portfolio? Any such indication you could give? Srinivasan Vaidyanathan: Our agri portfolio is published. You'll be able to see the... Mahrukh Adajania: No, the size of the portfolio on which the provision was taken. Srinivasan Vaidyanathan: No, that's not something -- that's not consequent to this at all because it depends on loan item and what is the scale of finance on each one and so on. But at an aggregate level, that's the kind of level. Operator: Next question is from the line of Kunal Shah from Citigroup. Kunal Shah: Yes. So again, getting on to the question on LDR and deposit growth in particular. So if we want to get the LDRs down and still want to grow loans above the industry average comfortably, then we need to see the acceleration in the deposit growth. And you said like pillars which are required are very much in place. So any reason maybe for a slightly slower deposit growth this quarter? Otherwise, we will need like almost 500, 600 basis points higher than the industry average deposit growth now to get the LDRs down. And any rundown in the bulk deposits, which have been there in this quarter? And if you can quantify that? Sashidhar Jagdishan: See, let me take this and maybe Srini and Kaizad can add into this if required. Kunal, if you recall, we gave a broad range. Number one is there is no regulatory what shall I say, benchmark or a requirement to meet a loan deposit ratio. Was it there as a bit of a nudge when the outlook was negative or when the system outlook was a little tight, liquidity is tight in the period when inflation was moving up and rates were moving up and there was a little bit of a concern on the credit quality of the system. There were certain preventive measures that the regulator had said that try and ensure that you bring down the LDR or maintain a certain stability in LDR. That is the -- at that point in time. Whether that -- whether there is a number that you need to meet, I don't think there is any compulsion. But in our own interest, we had given a kind of a glide path wherein we had said that we will come to a certain number in FY '25, which we achieved. We said we will try and be in a range of somewhere between 90% to 96% in the year FY '26, which is what we will be is what we are very confident about. And then maybe by FY '27, by the natural growth and even with the growth in the way we are expecting in terms of faster growth rate, I think we should land somewhere around the 85% to 90% for FY '27. We continue to believe that this is going to be there. It's not an easy thing, as we have said, of course, but we know what are the strategies we need to do. There were certain tactical measures we could have taken in the third quarter. We chose not to, but that's all right. I mean these are sometimes learnings we probably may have missed, but we know what are the things to be done to bring about these kind of meeting our glide paths that we have committed in the broader sense on a longer -- medium- to longer-term basis. So as regards the kind of deposit growth that is required, I think the pace at which we are growing deposits in line with the top line growth that is more or less matching 11-plus percentage in the second year -- in this year should -- and probably slightly faster, which is what we normally do in the fourth quarter, like most -- what we have done in the past, should lead us to the kind of range that we are -- we have committed to. And we are very confident that, one, as we have a clear cut, as I said, all things remaining same with whatever we are seeing in the macro, we should believe that the growth runway opportunities for growth and hence, in the deposit requirements other than certain events that may happen, which you and I will not be able to predict now, we are reasonably confident that we will land -- and as Srini mentioned, don't look at quarter-to-quarter movements. We are on a -- you look at on an annual basis or on a medium- to long-term basis, the trends will be in that kind of period. So I think the inflection has started. We had to contain ourselves in FY '25 for all the right reasons. I think now we are opening up, the engine is opening up, and you will start to see this kind of a consistency in the trajectory that we have laid out for ourselves. Kunal Shah: Sure. And anything on bulk deposits rundown, quantification, if possible? Srinivasan Vaidyanathan: More than quantification. I mean, Kunal, that's part of the business. There are certain segments that we patronize. I think Sashi mentioned about where rate discipline has been the key. And to some extent, we participate for relationships and certain extent, we don't need it, we don't go there. But on the whole, if you look at the retail or non-retail, retail, there are individuals in retail, which have been phenomenally growing and growing. There are certain non-individuals in retail, which is branch related. It could be institutions, trusts and HUFs and whatnot. Examples of some non-individual but branch related, where we have had some lower levels of growth. And there are certain other customer segments which we have seen, particularly capital market segments where it has been low, where we have not paid rates as much as what the market has demanded or what the competition has offered. And that is what you see that is reflected in our cost of funds. If you look at our cost of funds is down by about 10 basis points, 11 basis points or so in the quarter. So we're trying to manage it growth with the profitability, and that is what you are seeing, right? So segment to segment, time to time, it changes, but at least you've got a color of how we operated in the recent time period. Sashidhar Jagdishan: So you're right, Kunal. Just to supplement what Srini is saying. The focus -- the good part is retail has grown very steadily and very -- and all these are the granular ones. I'm very happy with that. If the non-retail, tactically, we did not sort of offer the kind of market rates that were there. And we said it's all right because we did sort of know for the kind of growth that we needed, that is good enough. Kunal Shah: Got it. And one last question on labor code. So the impact of almost INR 8-odd billion, looking at our employee cost and then comparing maybe the labor code impact vis-a-vis the employee cost for others. For us, it seems to be relatively on the higher side, more than 10% of the employee cost, not so much for the other banks. So is this more of an estimation which has been done? And what would be the recurring impact which would be there on the cost as such? Srinivasan Vaidyanathan: Good point. Thanks for raising that. One, it is an estimate given whatever information that we have. And that estimate is driven through an actuarial process, right? So you go through the normal process of how you do and there is an actuarial valuation and determination of how do you do. Again, that is -- there is some signs in that, but it is based on certain assumptions that come. That's the second thing. The third thing is that variables. When you look at these variables, the definition of what is wage, what are determined to be wage inclusion, exclusion, the rule-making on that is pending. You know that, right? So there are some assumptions that go for one of the variables that go into those assumptions, and that is not based on determined rules, that is based on some assumed things. So that's the second -- third thing. The next item is the -- that individual organizations can be very different because of the longevity of the staff that you see there. So that determines on how long and what is the kind of tenure and so on and so forth, both historical and anticipated. And so many other factors like that go into play. So at this time, I would just ask you to take it as a higher estimate based on best available information and through a scientific actuarial process that has come. And as and when the rule-making evolves, as and when more information is available, this will be evolved. And again, we can -- I can't venture to come out with a forward-looking or what impact on an ongoing basis, cannot do at this time. And the reason being that we need to have all of these in place before we can get there. And that is why this is not determined at an employee level to say next month when somebody retires, this is the kind of amount that it can come or what will be the amount determined for a provident fund and so on and so forth. It cannot be determined at this stage. This is a really high level based on best estimate. Operator: Next question is from the line of Chintan from Autonomous. Unknown Analyst: May I get into the LDR again, please? So Sashi, please, did I hear you correctly when you said 85% to 90% by FY '27? That seems to be aggressive to me. If I look at consensus numbers, it's expecting 13% loan growth and 93% LDR. If you are going to achieve kind of the 90% in the next fiscal year, that suggests a very strong deposit growth number. And I know you've kind of said that you want to prioritize growth now. So it's not piling up. So if you could help us... Sashidhar Jagdishan: Chintan, thanks for asking. Maybe then let me -- I've given you a broad range because I don't want to box myself with a narrow range. But having said that, we have been operating in a range of around the 87%, 88% in the premerger level, 3 years before the merger. And so when I say 90%, of course, I would have meant somewhere around the plus or minus in that particular range of 90%, maybe around the 88%, 89%, et cetera, or it could be 90% to 91% as well. But why I mentioned this, at least the trend lines that we are saying, if it's -- it can be 96% for FY '26 or a 95%. We are all right. At least the direction is what we are looking at for. We just gave a broad one so that we know what -- if we are lucky to really step up growth or the liquidity changes and we have more benign liquidity and no FX operations or FX swaps or open market operations, maybe then it will be wonderful. So that is why I'm saying since I do not know what's going to be the liquidity condition in this, therefore, I gave a broad range. But even if I achieve these kind of directions directionally going there, that's something that we can achieve. As I said, there is no regulatory number to comply to. It is just a direction that I think we need to achieve for ourselves, let alone the regulator asking us to do. It is something that we believe just by doing what we are supposed to do will lead us to that kind of thing. I don't have to do anything extra to measure that metric. It will happen. So when we did sort of forecast a faster growth rate for ourselves than the system, we also -- as we have seen, we have been having deposit growth rates in line with normally the top line growth, slightly faster than the loan growth. So estimating that is what we believe where we will land for FY '26 and '27. So don't take it literally that we may be on the lower end of that range. It could be anywhere in that range. Practically speaking, it will be somewhere -- if it's 90% is that range, then somewhere around the 90% is something that we'll be happy with. Similarly, somewhere around the 95% is something that we'll be happy with for FY '26. Unknown Analyst: Appreciate that. I mean if you're trading off EPS growth for slightly slower ROE improvement, that's fine. I mean that's not the issue, especially if the opportunity is there in the market. So -- but I just wanted to make sure because we have an occupational hazard to kind of do our due diligence in our model. So I just wanted to get that flexibility that you have highlighted now. The second question was around asset quality. Could you -- you've got a unique vantage point, second largest bank in India. Could you give us some idea about any pickup in growth momentum, any pickup -- any issues in asset quality, particularly due to the U.S. tariff or in the MSME area? So it's a combination of is growth improving? And are there any asset quality concerns more broadly, if not in your book? Sashidhar Jagdishan: So if I got the question right, you want to know the trend for asset quality and how it is looking. Across segments and even first at the sectorial, you're well aware that the banking industry right now to borrow a term is going through a Cinderella phase where you've got very strong balance sheets when I refer to that from an asset quality point of view. We have the lowest accretion of gross NPAs and net NPAs are at decadal lows. Mirroring this trend has also been reflective on our books. We have seen very low accretion to gross NPAs. And none of the particular portfolios have indicated any stress building up. So I think the economic environment with the kind of GDP growth that one has seen, the kind of consumption growth that one is seeing as well as the wage increases that one has seen on one hand and on the other, the lowering of the interest rates and affordability, therefore, going up, including the fiscal benefits that were given to not take up much time, I would say the asset quality continues at the bank to be pristine. And as of -- as we see it, there is no particular segment which is showing any major signs of concern. Srini, would you like to... Srinivasan Vaidyanathan: Perfectly good. There will be seasonality in agri specifically... Sashidhar Jagdishan: That is separate... Srinivasan Vaidyanathan: Outside of that, every segment, including the agri segment period-to-period, if you see, is lower, both from a leading delinquency and into the slippages, which are far lower. And then from there, going into loss given default is also lower. You're seeing that the recoveries wherever we are there, that is also on an absolute level, good level. Chintan, I hope that gives you a perspective on both sides. Unknown Analyst: Yes. And just on growth momentum, are you seeing things improve generally in the economy? Srinivasan Vaidyanathan: In the economy, the growth momentum, yes -- if you look at some of those indicators that we have seen, the -- take the crop cycle itself, very improved. The sowing cycle has improved over prior year, very healthy water reservoir levels have aided that. The manufacturing PMI continues to be in the expansionary zone with many programs that are coming in. Services sector doing very well on the consumption demand side. If you look at the recent time period for card spend, which is important for you to look at, the overall card spend up 15%, 3.4% sequentially. Within the card spend, when we look at the discretionary category of card spends, the discretionary category spends have grown 21% year-on-year. The nondiscretionary, which is the bread and butter normal activity is about 13% up. So that indicates that when the kind of a discretionary spend goes up, people do go and indulge. That's what you're seeing there. On the other side, we do see revolver rates not picking up. So which means people are spending to pay down. So there are certain other segments of the society, which is what is spending. So on an overall level, I would say that similarly, you've seen the auto and the tractors and so on. 2-wheeler has been somewhat less than expected, but then the 4-wheeler autos and the tractors type have done exceedingly well. And you're seeing some of that reflected in the aggregate level GDP output that gets reported too. Operator: Next question is from the line of Nitin Aggarwal from Motilal Oswal. Nitin Aggarwal: I have a question on the branch productivity and deposits now that we are so hopeful about the deposits pickup and targeting at close to 90% kind of a number. So like if you look back as to what kind of experiences that we used to have in terms of the branch vintage and the deposit buildup, has -- is that kind of sustaining in the recent years because the deposit growth is just not picking up at the system level and that is a key constraint across banks with LDRs, the number that we are seeing across many banks. And related to this, own branch kind of over the years has been like coming off from pretty high number now to every successive year, we are opening more branches. So do we see... Sashidhar Jagdishan: Nitin repeat that. Nitin repeat that? We could not hear you. Nitin Aggarwal: Sorry. So I was also saying that related to this, if you look at the branch expansion run rate, every successive year, we are now opening up lower number of branches, like FY '23 versus '24 to '25, every year, we are going down in terms of branch expansion. So how do you look at this corollary between the branch vintage and the deposit buildup? And do you think that the current pace of expansion will be sufficient for us to sustain that above industry growth rate over the next 3, 4, 5 years? So just some thoughts around this. Srinivasan Vaidyanathan: Okay. So I'll get started with the last one first, which is to do with the branches. Nitin, you can't look at 1-year branch, but you have to look at a trend of what was it, right? So for that, if you go back to -- you look at a 5-year branch trend, I'll give you round numbers of the branch trend. We opened about 250 branches in 2020, 350 in '21, 750 in '22, 1,500 in '23, 900 in '24, 700 in '25. So if you look at this, 250, 350, 750, 1,500, 900, the opportunity space that it provided, we took that and accelerated all within the overall returns framework, right? All through this time period, if you look at our returns between 1.9 to 2, right, in that period. So where there was, we accelerated, and we don't need to do 1,500 or 900 and so on. We can be more modest, but still add to the branches. It is important to add to the branches because currently, we have only a little more than 6% of the country's branch network with us. So that means our branches 9,600-plus is about a little more than 6% of the systems branch, right? So we have -- and we have more than 11% of the market share of deposits with us. So that's one in terms of -- we have more room to run and more share to gain through that process. Next is productivity, right? What does it do from a branch productivity? If you look at the per branch productivity, we are now at about INR 305 crores or thereabouts on a per branch at an aggregate level. Despite all of these additions that I talked to you about, if you go back where we -- I just mentioned to you about how we were doing per branch, if you go to '23 or '19 to '23, that time period. For that time period, about INR 237 crores per branch, right, at that time. And I told you INR 237 crores per branch before I started to talk about those acceleration of the branches, right? Now with all of those acceleration, we are at INR 305 crores per branch. So at every incremental branch, when we add, it is also at an aggregate level added. But this is at an aggregate level. Then that takes to the next one that you talked about at a micro level, right? At aggregate level is one. Let's talk about micro level in terms of where it starts to have the pivoting point for further scale. First, the breakeven is about 2 years or so. When you look at the breakeven, branches that are in the metro and urban area typically breaks even in about 22 months. Branches that are in the semi-urban and rural area takes about 27 months, thereabouts. On an average, about 2 years, it breaks even. So that's one. And these models are in consonance with our legacy branch models, which means they are confirming to what are traditionally there. That's number one. Number two, the pivoting point where 4, 5 years ago, where we analyzed to what does a branch do in 5 years, 5 to 10 years and 10 to 15 years and so on, when you look at it, where the scaling factor is about the 5th year mark to the 10th-year mark, it moves, and it moves about 3x. Between 5 to 10 years, it goes about 3x up. And then once it goes into 10 to 15 years, 10x up. So that is very important, and that scaling factor continues to operate now. Now what is more interesting and important than that is, currently, if you look at the branches that are in the bucket, 5 to 10 years bucket, which are doing 3x than what they were doing 5 years ago, 1,232 branches, right, out of the 9,600, 1,232 branches are in that bucket, right? And if you look at the branches before that, the 3- to 5-year bucket, 3- to 5-year bucket, we have 1,300 branches. So we are entering into the pivoting point where the cohorts that are entering into the 5-plus bucket is more than the cohorts that are going to exit from 5 to 10. So that is -- again, similarly, when you look at the 10- to 15-year bucket, it got 2,499 branches. And then the 5 to 10-year branches are going to go into those cohorts. And so that's almost 43% of our branches are vintage branches, less than 5 years. So this is the cohort that needs to move through the pipe and get there. And so we are quite -- that is point, I think we said that we are positioned well with good expectations coming out of that. And that's, again, aided by several factors that go. Nitin Aggarwal: Okay. So... Srinivasan Vaidyanathan: Another data point, Sashi was just reminding me because when we reviewed it with him. On an incremental basis, when you look at it, these new branches contribute slightly north of 20% of the overall incremental that comes -- deposits that come, which is very important, right, that these things keep adding accreting as we go along. That's something I wanted to leave... Nitin Aggarwal: Right. See, the reason to ask this is also because while advances side is still in our control, we can maneuver the advances growth and choose the business segments we want to underwrite. But deposits, if we compare across the best and private banks also, typically, the growth kind of has its own saturation point. And if you look as to how HDFC Bank has done last year and versus what is the current year, probably we will be closer to in terms of deposit rate versus what we were last year on a good case basis. So for us to talk about that LDR can come so sharply next year, do we look at this deposit growth run rate break out from as to how the trends have been in the recent years? Can this really happen with the kind of vintage gains that we talk about? Srinivasan Vaidyanathan: Nitin, these get benchmarked by district, by our presence in those districts, that's how we benchmark and that's how we work our marketing and product teams, work with our distribution channels where we are present to orchestrate and move this, right? So two things I want to mention. One is new account acquisition is an important element. We are at about 100 million customers. Last quarter, we added about 1.5 million new liability relationships. It is important to get that new account value because that's how you keep building. And the change in balances. So that means the existing customers adding, accreting has been lower in the recent time periods when some kind of choices into various other financial institution they take. So some of that has been slower. But again, you beat that by getting more presence and more customers and have diversified product -- asset product because you know that in the last 2 years, our retail asset products were slow than where we are now trying to accelerate or move. For every asset product that you have, again, cards, I think not in the last quarter, but maybe a few quarters ago, we have spoken cards. For card customers spending on their card account and having 100 outstanding, at the aggregate level in the bank, we see almost north of 5.5x deposit balances from the customers. So what does it mean? We want more of our customers to have cards. And same with mortgages, which I think last time we spoke, 99% today, we have penetration. That means we are not selling a mortgage product. We want to get the customer relationship. When we are giving a mortgage product, we get the savings account and the savings account gets funded approximately today at initiation at about INR 35,000. And then when you look at the 12-month, 18 months on books, which is the kind of vintage we can measure today and see, we are seeing that it is growing 2, 2.5x. But historically, some of those category customers that we have seen, it has got the propensity to have 5x more than a customer who does not have a mortgage. So liabilities don't come only purely on just an engagement and asking. It also comes by multiple products that get sold. Operator: Next question is from the line of Suresh Ganapathy from Macquarie Capital. Suresh Ganapathy: Yes. So first question is on LCR. What would be this quarter? And how it would move post the April 2026 guideline, whether it will move up, move down? Srinivasan Vaidyanathan: LCR, we reported 116% in this quarter. Suresh Ganapathy: And post the new guidelines? Srinivasan Vaidyanathan: No. The new guidelines, we don't expect any material change that can impact us. Suresh Ganapathy: Okay. And just a question on margins itself. It's been almost 9 quarters since the merger, your margins have not gone anywhere. In fact, it is even lower than what you had reported at 3.4%. I know there are several moving parts. Are you really confident that you can get this up in the next 2, 3 years? Srinivasan Vaidyanathan: Suresh, if you think about the margin, the most important lever on the margin is the cost of funds, which at various points we have mentioned. And within the cost of funds, there are a few. One is the time deposit repricing, which has a lag effect. We have changed time deposit rates in line with the policy rate change, but not fully, but maybe 2/3 way, we have changed 125 basis points is what the policy has changed. We have done about 2/3 into that. We need to see what more. And again, that what's competitively priced, right? So we are not at a disadvantage anywhere there. And that takes almost 5 quarters to flow in. Part of that this quarter, you have seen 10, 11 basis points change in cost of funds. That is the lag effect of that flowing through, then that continues. So that's one element. And the second element is the borrowing. Quarter-to-quarter has remained static at about 13%. But again, more than a quarter, if you look at the year, we were at about 7%. Broadly, the industry is at about 6%, 7%. So there is an opportunity space to beat that to keep coming down. That is another important lever that provides this cost of funds change. And the third one is the CASA, which again is a customer on the other side more than we creating any action where we need to work through to bring selling within the new customers and better engagement, more products, more retail products. That's the kind of process we need to take through to get to that industry average and beat that industry average over time. Yes, there is a line of sight, and these are some of those elements we work through. Operator: Next question is from the line of Prakhar Sharma from Jefferies India. Prakhar Sharma: Congratulations on the results. Just wanted to delve on this deposit growth part. It was an interesting color that you said that the granular retail has grown, but slightly bulkier retail hasn't. Is there any sort of a data point that you can share in terms of the growth or the mix in the two? And one alternative is, can we use the LCR deposit number and the growth there as a reference point to just get some comfort on what's the range of growth there because 4Q onwards, it gets aggressive on pricing. So if you can share some color, that will be right. Srinivasan Vaidyanathan: The second aspect of the question I didn't get, probably we will see. But as far as the rate of growth is concerned that you asked about the categories, certain other categories that you wanted. Yes, I mean, the -- if you look at the institutional types, they were in the mid-single digits, right? The institutional type of deposits, mid-single digits. That's what we have said. And within the retail branch, the non-individuals were much more modest. I think it was again a little more higher single digit. And the individual, individual within the branches were in the solid double-digit growth. Prakhar Sharma: Sorry, the individual at the branch was at? Srinivasan Vaidyanathan: No, I didn't give you a number. I said it's a good double digit, and everything else was in single digit. Yes. Prakhar Sharma: Okay. And is there a way to just give a context of within your total deposits, 83% is classified as retail. How much would be the granular retail and how much would be the quasi-institutional retail? Srinivasan Vaidyanathan: I don't think we have published that. But yes, when we say that is a branch-driven deposits where there are RMs engaged with either an individual or the individual organizations and institutions, that is what. Operator: Next question is from the line of Abhishek Murarka from HSBC. Abhishek Murarka: So Srini, going back to the branch addition question, and thanks for giving so much color. But just net-net, are you still looking to grow or add about 5%, 7% branches this year and in FY '27? Or what are your near-term plans? I understand the whole picture you painted about the scale-up of old branches and how that will accelerate deposits. I just want to know your next 1-year plans in terms of branch additions. Srinivasan Vaidyanathan: Yes. To answer in short, 5% to 7% implies 500 to 700 branches annual. I don't believe that, that kind of branch addition we can do in the near future. We'll evaluate as we go through the annual planning process and come back at some point in time, but it would be of a good order. Sashidhar Jagdishan: Abhishek, just to add to what Srini is saying. If you've seen the last cohort of what he just said in terms of the 4,800-odd branches over the last 5 years. Today, it is contributing, as he mentioned, somewhere around the 20-plus percentage points in terms of the incremental liabilities or the deposits that we are mobilizing. As this cohort starts to -- which we are seeing delivering and getting to a substantial number, then we know that we have the confidence to start to step up our -- the next phase of launching new distribution points. Obviously, we want to wait and watch. We are not saying we will not add any branches. As he mentioned, we will add branches, but these are probably in -- normally in suburbs where there is kind of an opportunity that is what we are now focusing on. But the -- we want to ensure and stabilize the last cohort of the 4,800 branches stabilize and start to get to a certain level of maturity and level of contribution, which is substantial, then it will -- we know that, that will be on an autopilot and then we can start to see the next phase of introduction. And obviously, at that point in time, we will have to rethink in terms of we would have probably moved far beyond in terms of our branch transformation and automation. So there will be some new thought processes in terms of what we -- how we need to add or how we need to sort of expand our distribution. It's not that it's going to be different, but maybe there will be some amount of recalibration that we will do in the next phase of branch additions. Abhishek Murarka: Sure. So Sashi, as I understand, that's a great point -- for making that point. So today, about 50% of branches, which is this 4,800 is contributing around 20% of incremental deposits. Is it correct to think that when this starts contributing maybe 40%, 50% of incremental deposits, that is when you start thinking about future expansion. Is that the right way to think about it? Sashidhar Jagdishan: Whether it's 40%, 50%, 60%, we will keep on recalibrating because we are -- there are a lot of things that we are trying to do. Obviously, we also -- if you really look at it, we stepped up our distribution the moment we knew that we announced our merger. And we knew that we needed to fund not just at that point in time, the future of -- in the future. So all this is going to add to incremental deposits in a substantial way into the future. But -- so there will be a lot more dimensions that we will examine not just the extent of contribution, but probably certain events that we may have or certain other dimensions that we may look at before we start to step up the pedal on the new phase of incremental. And you look at it even over our 30-year period, there have been these phases of right from 2009 onwards to 2013, '14, we stepped up our distribution. Then we had a little bit of a pause, then we started off again. So we -- this recalibration and doing it in phases is something that we have been doing. It's not a new thing. We have been doing this for right through our 30 years journey. And I think we will continue to do. Obviously, the dimensions keep changing in terms of what we need to look at as we move ahead because the world is changing very fast. The kind of technology implementations that we are doing, as we unveil, we probably may need different thought processes as well. So let me pause out here and probably -- you probably will get the drift. Abhishek Murarka: Sure. And the second thing is on credit cost. Now if I look at your net slippages, ex of the agri part, but let's say, look at the net slippages in the 9 months or last few quarters, around 30, 35 basis points. Write-offs are holding steady at INR 3,200 crores roughly a quarter. So why is the underlying credit cost around 55 bps and not coming off? I mean, don't you think that should also start coming off at some point if this kind of trends continue. Srinivasan Vaidyanathan: Abhishek, a couple of things. One is the slippages. If you're looking at excluding agri slippages, it's 24 bps in the quarter. Prior quarter was 23 bps. Prior year was 26 bps. So order of magnitude, call it, 25 basis points. That is the kind of a slippage in a quarter, right? That's what you're seeing. So not the 35 or something that you're talking about. That's one. The second thing is that credit costs -- also, you have to look at it, including the recoveries because when you write off certain loans as it progresses through some of the delinquency buckets, then you get it in the form of recoveries. And net of recoveries, if you see, we are at about 37 basis points or thereabouts. And when you look at, again, last quarter, last year, order of magnitude, very similar within a few basis points, 5 basis points. So it's not just about the 55 basis points. It is also about the net of the recoveries, which comes in quite handy. And it's a function of how fast you write off and how you recover. Abhishek Murarka: Sure. That's what I was referring to. So net of your recoveries, et cetera, it should keep coming down because your slippage performance is -- I mean, it's improving. The book is growing and your absolute is pretty much stable. So you're seeing very good asset quality trends. And I was sort of wondering why the credit cost is not coming off. Srinivasan Vaidyanathan: So why will -- see, in a growing book, if the slippage is steady, the losses are steady, recoveries are steady. I don't know what you're expecting, maybe something else... Abhishek Murarka: So 50, 55 is more or less BAU is what you're seeing. Srinivasan Vaidyanathan: No, GNPA? Abhishek Murarka: No, no, no, no, credit card. Okay. I'll take this offline. I probably not saying myself clearly. No problem. Finally, just one question on cards. Overall, card receivables are pretty stable. If I look at the data that comes out in RBI, the spend market share for you is doing well, [indiscernible] market share is doing well. So why is it not reflecting in the receivables? Is it just transactors running down? Or is it something else? Sashidhar Jagdishan: No, actually -- great question, Abhishek. I think if you really look at it, the segment that we are patronizing is more the middle and upper middle segment. Therefore, slightly higher-end cards is what is in our portfolio. The proportion of that is large. And a large part of that, over a period of time, we have been -- I mean, as you know, the card -- credit card -- what shall I say, the behavior has also changed over a period of time. Today, we look at it not as net receivable from a revolve perspective, from an asset perspective and an earnings perspective, we are looking at it as an enabler for our liabilities or deposits. Srini has mentioned in the past, and that is something that we are extremely proud of, the spends in the cards actually provide a significant portion of our deposit momentum. Today, 20% to 25%, maybe in the mid of 20% to 25%, I can say, is the range at which out of the total deposit basket, the kind of momentum that you're seeing, whether it's on the healthy balances and what it contributes to total, it's somewhere around that 20%, 25%. So the credit card focus today is more not from a net receivable basis, but from a transactor basis. And as I said, I mean, whether it's a lot of you on the call or people in this room that we are, we all pay on a standing instruction basis on due dates. So this is something that we are very happy with. And so this is the kind of a new strategy that we are evolving. Obviously, we are also recalibrating some of the business model in cards. We have been doing that, and we probably are -- have come out with something which is very encouraging and something that the organization will really benefit from our card strategy. Srinivasan Vaidyanathan: I want to add one thing on the card, particularly the card revolving aspect of it, right, which is if you go back to 2020 or before and compare to today's revolvers, they are slightly under 2/3 level, right, slightly under 2/3 level. So that means of the pre-2020 levels revolvers, right, at level. And so the profile of the customers, and that is why you see the deposit balances of those customers, which is a little more than 5, 5.5x was slightly under 4x at that time. So the profile of those customers are also different where they do transact, they do keep balances and the revolver balances are lower for certain other segments. And we have not liberally offered the credit line increases and made more and more revolvers to tip them off into delinquency. We've been -- credit has been cautious on that. Operator: Next question is from the line of Jayant Kharote from Axis Capital. Jayant Kharote: Sir, one question is on your loan growth broad guidance of above system next year. Sir, I just wanted to understand when we are saying we'll grow above the system, what is our range of assumption for system growth? Because we are seeing some acceleration in the system growth itself where we are moving from this 11% to 13% band to maybe closer to 14%, 15%. If we were to move in that band, would we have accounted for that kind of system growth and we say we can grow above that? Sashidhar Jagdishan: So our understanding as of now is next year, we expect system growth to be between 12% to 13% when you look at nominal GDP and the credit growth that's required to support nominal GDP. So if we're talking about 12% to 13%, we are talking about a couple of percentage points above that going into the next year. We see distribution on the retail side, you've been seeing over the last 2 quarters coming up, our positioning also in the MSME space, given our geographic coverage as well as our suite of products that we have out over there and the wholesale piece, which you would have seen in this quarter again coming back. We do believe that we have the customer segmentation to be able to grow at a couple of hundred basis points over system growth next year. Jayant Kharote: Great, sir. I think this answers you're working with the 12% to 13% range at least. Second part is, on a broader 3-year or 4-year question. We have seen products like mortgage getting a lot of competitive intensity. PSA banks being well capitalized are probably being more aggressive in vehicle, increasingly auto. Do you see this competitive intensity eroding profitability for the larger players over the next probably 3 years, not a 6-month or 12-month question? Srinivasan Vaidyanathan: See, we are addressing competition only through relationship and not through pricing. Mortgage product, as you've seen that in the last 12 months, we are not leading through a mortgage product. We are leading through relationships where the mortgage product could be a fulcrum around which we can operate. Same with auto. I do want to let you know that our auto loans are almost a little more than 80% self-funded, which means the customers when they take auto loan, we want their liability accounts. We want them to have balances in that and the loan self-funds itself for the most part within the balance sheet. So it is about relationship offering, and that is part of the engagement in the branch, and it's not just a product and a loan balance sheet building approach. Sashidhar Jagdishan: Having said that, Srini, absolutely in order. I think we do continue to be the largest financiers in the auto loan space in the country. not only in terms of the disbursals but also the book size as well as if you see our year-on-year growth in the entire automobile space, I think that is reflective of what our position is and the target market that we will have. So it is relationship. It is also ensuring that we have the right pricing for the product based on the customer segmentation, and we don't feel any need to do business at price points which don't make economic sense. Jayant Kharote: And your market reading is, as of now, we are not in that situation where aggression is eroding margins for the broader system, at least in auto? Sashidhar Jagdishan: I'm sorry, I didn't catch your question. Can you repeat it, please? Jayant Kharote: So not for HDFC, but probably for broader system. Are you seeing that aggression in the auto segment from the public sector or maybe the broader system aggravating in the last couple of quarters? Sashidhar Jagdishan: Yes. We've seen it not only in auto, but also in the home loan product. So these are two products where we have certainly seen some amount of, if I may say, a bit of irrational pricing, but irrational pricing has never sustained. It will play itself out and bury itself in a couple of quarters on the outer side, if not earlier. Operator: Thank you very much. Ladies and gentlemen, we have come to the end of the allotted time for the call. I would now like to hand the conference to Mr. Vaidyanathan for closing comments. Srinivasan Vaidyanathan: Okay. Thank you, Nirav, and thanks to all the participants for taking the time to attend. At the outset, I again want to mention that we did come 15 minutes late. We did extend to be there. Further questions, any more comments, Investor Relations team will be on standby to guide and help and explain or clarify anything you need today or over the weekend or next week, whenever you desire, we are available. With that, we'll sign off for today. Have a great weekend. Bye-bye. Operator: Thank you very much. Unknown Executive: Thank you. Sashidhar Jagdishan: Thank you all. Thank you very much for all the hard work. Operator: On behalf of HDFC Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.

Operator: Good day, and thank you for standing by. Welcome to WaFd, Inc.'s Fiscal First Quarter 2026 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Brad Goode, Chief Marketing and Investor Relations Manager. Brad Goode: Thank you, Josh. Good morning, everybody. Happy New Year. Let's dive into our 2026 first quarter earnings report. You can find our earnings press release, along with our detailed fact sheet and investor scorecard on our website at wafdbank.com. During today's call, we'll make some forward-looking statements, which are subject to risks and uncertainties and are intended to be covered by the safe harbor provisions of federal securities law. Information on risk factors that could cause actual results to differ are available from the earnings press release that was released yesterday and the recently filed Form 10-K for the fiscal year ended September 30, 2025. Forward-looking statements are effective only as the date they are made, and WaFd assumes no obligation to update information concerning its expectations. We will also reference non-GAAP financial measures, and I encourage you to review the non-GAAP reconciliations provided in our earnings materials. With us this morning are President and CEO, Brent Beardall; Chief Financial Officer, Kelli Holz; and Chief Credit Officer, Ryan Mauer. I'd now like to hand the call over to Mr. Beardall. Brent Beardall: Thank you, Mr. Goode, and good morning, everyone, and happy new year. This morning, we will cover 4 areas for you. First, Kelli will provide you with a detailed review of our balance sheet and income statement for the quarter ended December 31, including the impact on our margin from the increase in nonaccrual loans, which everyone has undoubtedly noticed; second, Ryan Mauer will provide comments on the current status of our loan portfolio and credit quality trends; third, I will provide you my insights on our future prospects, capital management and macro developments that impact WaFd; finally, we'll be happy to answer any questions you have. Before turning it over to Kelli, I want to point out that based on your historical inquiries about repricing on our assets and liabilities, we have added a new table to our fact sheet on Page 6. This table details our largest categories of assets and liabilities, what percentage of each is fixed versus variable, then the cumulative amount of repricing and quarterly increments over the next 2 years. Please note that this table takes into account both the variable rate instruments and fixed rate instruments that mature in the stated time frames. It also takes into account the effect of various hedging strategies. Kelli, I'll turn it over to you to walk through the quarter end results. Kelli Holz: Thank you, Brent. As announced, WaFd, Inc. reported net income available to common shareholders of $60.5 million or $0.79 per diluted share for the quarter ended December 31, 2025. This compares to net income to common shareholders of $0.54 per share for the first quarter of fiscal 2025 and $0.72 per share for the September '25 quarter. The $0.07 increase in earnings per share for the quarter was a result of improvements in both income and expense, a modest increase in net interest income and increased noninterest income as well as an overall decrease in total noninterest expense. For the balance sheet, loans receivable decreased $240 million during the quarter, primarily due to a decrease in our inactive loan types, SFR, custom construction and consumer lot loans, which combined decreased by $256 million. Loan originations and advances for the quarter outpaced repayments and payoffs in our active loan types with originations at $1.1 billion and repayments and payoffs at $1 billion. Active loan types include multifamily, commercial real estate, C&I, construction, land A&D and consumer loans. For the inactive loan types, advances were $25 million and repayments and maturities were $321 million. Please see the table in our fact sheet that provides a breakdown between our active and inactive loan types. Total investments and mortgage-backed securities increased $728 million during the quarter, funded primarily by the increase in borrowings of $671 million. Investment purchases were primarily discount-priced agency mortgage-backed securities with an effective yield of 4.93%. This increase in mortgage-backed securities is part of our overall investment strategy currently replacing the single-family mortgage loan balance runoff. Total deposits decreased by $21 million during the quarter, with noninterest-bearing deposits increasing $125 million or 4.9%. Interest-bearing deposits increasing $434 million or 4.5%, while time deposits decreased $580 million or 6.4%. Core deposits ended the quarter at 79.7% of total deposits, up slightly from the September quarter at 77.9%. Noninterest-bearing deposits ended the quarter at 12.6% of total deposits. The loan-to-deposit ratio ended the quarter at 92.7%. We have made significant progress in this area. As you may recall, our loan-to-deposit ratio just 2 years ago at December 2023 was north of 110%. WaFd's liquidity and capital profile remain strong with a robust core funding base, a low reliance on wholesale borrowings and significant off-balance sheet borrowing capacity. In addition, all of our capital ratios are in excess of regulatory well-capitalized levels. For the income statement, net interest income increased $1.2 million from the prior quarter the effect of the reduction in interest paid on liabilities outpacing the reduction in interest earned on assets by 2 basis points. The net interest margin was 2.7% in the December quarter compared to 2.71% for the September quarter. For the spot rate as of December 2025 period end, the yield on interest-earning assets was 5.05%, while the cost of interest-bearing liabilities was 2.76% with a resulting margin of 2.77%. Comparing the spot rate at September 30, which was 2.82%, to our December quarter margin realized at 2.7%, 9 basis points of the difference relates to nonaccrual interest, one-time reversals when loans go nonaccrual and also interest income not being recognized going forward from the nonaccrual date. The 3 remaining basis points relates to our purchase of mortgage-backed securities during the quarter, as I mentioned, with a net yield of 4.93%. While these purchases put pressure on the margin, they generate annual net interest income of approximately 1.03% of the average balance is purchased. For the December quarter, this amounted to $1.2 million in net interest income. Looking forward, I would expect more pressure on the margin from additional mortgage-backed securities purchases in addition to increased net interest income. Total noninterest income increased $1.9 million compared to the prior quarter at $20.3 million, contributing to the noninterest income is $3.2 million gain on sale of a branch property offset by losses of $408,000 taken on certain equity method investments in the quarter compared to gains on those investments of $815,000 in the prior quarter. Total noninterest expense decreased $1.3 million or 1.2% from the prior quarter as a result of reduced compensation and technology expenses, offset by increases in other expense. Decreased expenses combined with increased income resulted in a decrease in our efficiency ratio for the current quarter to 55.3% compared to 56.8% in the prior quarter. During the quarter, 1.95 million shares of common stock were repurchased at a weighted average price of $29.75. The impact on earnings per share for these rate purchases was $0.02 for the quarter. Our share repurchase plan currently has a remaining authorization of 6.3 million shares, which, depending on share price, provides a compelling investment alternative. I will now turn the call over to Ryan to share his comments on WaFd's credit quality. Ryan Mauer: Thank you, Kelli, and good morning, everyone. As reflected in our earnings release, we had a solid quarter of new loan production along multiple product lines. As Kelli indicated, total production in our active portfolio was $1.1 billion for the December quarter. This loan production was centered in commercial and industrial of 46%, commercial real estate of 23% and construction of 25%. Importantly, we were able to achieve this level of loan production with a consistent approach to underwriting that maintained a moderate risk profile. Adversely classified loans decreased by $51 million in the quarter and now represent 2.94% of net loans compared to 3.16% as of the September quarter and 1.97% as of December 2024. Total criticized loans increased by $30 million to 4.6% of net loans compared to 4.93% -- excuse me, 4.39% as of the September quarter and 2.54% as of December of 2024. It should be noted that the increase in criticized loans is not concentrated in any one business category or line, and is reflective of the economic environment where elevated interest rates and economic uncertainty impacted both commercial and consumer borrowers. In addition, an asset being criticized does not imply that loss exposure exists. Rather, it is a representation that the borrower is experiencing some level of financial stress that needs to be addressed. Nonperforming assets increased to $203 million or 0.75% of total assets from $143 million or 0.54% at September 30, 2025. The change is due to nonaccrual loans increasing by $62.7 million or 49% since September 30, 2025. This was offset by a decrease in REO of $2.3 million during the same time frame. Delinquent loans increased to 1.07% of total loans at December 31, 2025, compared to 0.6% at September 30, 2025, and 0.3% at December 31, 2024. While elevated in comparison to recent periods, these credit metrics remain modest in light of WaFd's loan loss reserve and capital position and are indicative of our culture of early and proactive portfolio management. It is important to note here that the increases in delinquencies and nonperforming assets were largely impacted by 2 commercial relationships over 90 days past due. Outstanding balances to these relationships amount to $58 million collectively. Although appropriately placed on nonaccrual per policy, there was no charge-off taken upon revaluation, and we are actively collaborating with both borrowers to resolve the issues. If nonperforming assets and delinquencies were adjusted for these relationships, NPAs would be 0.67% of total assets compared to 0.64% at September 2025 and delinquencies would be 0.78% of total loans compared to 0.6% at September of 2025. The net provision for credit losses in the quarter was $3.5 million. The provision is the result of decreased loan balances, mixed credit metrics, including increasing trends and negative migration of criticized and nonperforming loans, and $3.7 million of net charge-offs taken during the quarter. Net loan charge-offs for the quarter represented a nominal 7 basis points of total loans annualized at December of 2025. The charge-off was driven by a relationship in the C&I energy sector as a result of depressed oil prices, coupled with diminished working capital. For reference, over the last 10 years, net charge-offs have averaged a recovery of 2 basis points per year. And over the last 3 years, net charge-offs have averaged 10 basis points per year. The allowance for credit losses, including the reserve for unfunded commitments, provides coverage of 1.05% of gross loans at December 31, 2025, compared to 1% in December of 2024. For the commercial loan portfolio, the allowance represents 1.33% of net loans compared to 1.26% as of December of 2024. Credit metrics at December quarter end, while elevated from prior quarters, remain at healthy levels overall and have been impacted by 2 primary drivers: first, the elevated interest rate environment has impacted loan demand and borrowers' expense structures; second, the economic uncertainty driven by tariffs continues to impact borrowers' top line revenue results as well as material costs. Looking forward, these factors remain headwinds for credit quality. While the uncertainty related to tariffs remains elevated, the interest rate environment appears to be easing in the near term. With that, I will turn the call over to Brent for his comments. Brent Beardall: Excellent. Thank you, Ryan. I think we've started off the year well with a 10% linked quarter EPS growth and a 40% year-over-year growth, and importantly, 18% growth in transaction deposits on a linked quarter basis. Our strategic plan Build 2030 is designed to fully shift our focus to where we can add the most value to our clients and our shareholders, serving the banking needs of businesses. This shift takes time, disciplined effort and comes with specific goals. The most important goal is increasing our noninterest-bearing deposits to total deposits from 11% last year, up to 20% by 2030, and we are currently sitting at 12.6% today. It is an ambitious goal, but it is what we need to do as it will also drive increased loan demand and branch utilization. The way our peers have achieved their lower cost of funds is to focus on serving small businesses, which is exactly what we're doing. Here's what we've accomplished so far. It's hard to believe that it was just January last year that we recognized or reorganized our frontline bankers into 3 segments -- 3 teams to kick off Build 2030. During that time, we've become a preferred SBA lender and 98% of our branch managers who formally specialized in mortgage lending have now passed our small business credit certification process. Our 3 different lines of business are: first, our business bank, handling commercial credit needs up to $10 million and all small business and consumer deposits. This includes our 208 branches through our 9 Western states; our corporate bank, all large commercial credits and treasury needs; then our commercial real estate bank, recognizing our historical strength and expertise in commercial real estate, we have dedicated a team to serve the credit and treasury needs of real estate developers and investors. We acknowledge that we have work to do to improve our profitability. As you have heard, our margin is 2.7% for the quarter with return on tangible common equity of 10.6%. If we can get our margin up to 3% which is our short-term goal within the next 2 years. Everything else being equal, return on intangible common equity would be 12.9%. The key from my perspective is growth in C&I loans and deposits, supported by growth in CRE loans while running an efficient bank. I'm very pleased to see our efficiency ratio down to the top end of our target range at 55% this quarter. We believe that we have the products and teams in place to grow our active loan portfolios by 8% to 12% over the next 1 to 2 years. Last quarter, our active loan portfolio was essentially flat, but we believe we have now turned the corner and will start growing. Looking forward, our lending pipelines continue to expand while deposits remained challenging. Our lending pipeline is up $697 million or 28% over the last quarter. To detail it, our total lending pipeline as of the September 30, 2025 quarter was $2.5 billion. And today, our total lending pipeline is at $3.2 billion while deposits remain fairly flat. Looking at the number of accounts. In the last year, noninterest-bearing accounts are up by 5,800 accounts, a 2.5% increase, which is modest, but importantly, it reverses a trend of declining numbers we had seen over the last several years. C&I loans after opening up business lending to our branch teams, in the last year, we have increased the number of C&I loans we have on our books by 97%. With each of these new business relationships, we are planting the seeds for additional growth going forward. As we announced last quarter, we launched WaFd Wealth Management on August 31 with hiring of experienced professionals from a wirehouse firm here in Seattle. Our goal is to organically grow wealth management to $1 billion in assets under management in the first 2 years and then go from there. Early indications are very positive. Assets under management amounted to just over $400 million as of December 31, and it is nice to fill a hole that we have had in our product offering. We see wealth as an essential element in growing our noninterest income going forward. Turning to capital. With our stock price trading below tangible book value for some of last quarter, you have seen that we were aggressive in repurchasing our shares. We repurchased 2 million shares at a price of $29.75 or 99% of tangible book value. Over the last 7 quarters, your company has repurchased 5.8 million shares at a weighted price of $29.45. This represents 7% of the shares outstanding on March 31, 2024. We continue to believe that with our robust capital levels, when our share price is depressed, share repurchase is the best use of capital. Based on current trading, I think our stock today is trading at about 1.1x tangible book value. As you know, we've appealed our FDIC, Needs to Improve, CRA rating to the highest levels of the FDIC, a committee called the SARC, the Supervisory Appeals Review Committee. We made our case in early December, recognizing it is a long shot, but we felt compelled to do so because our belief is the FDIC examiners were comparing apples to oranges, by comparing WaFd with lenders that sell their loans, and all of this on a segment of our loan portfolio that we have now exited. We expect to hear the final conclusion within the next week, but are anticipating moving forward with the Needs to Improve rating. With that, it looks like we have 4 questions in the queue. So operator, I'll let you open it up to questions. Operator: [Operator Instructions] And our first question comes from Matthew Clark with Piper Sandler. Matthew Clark: First one was around the margin outlook at least in the near term. What's your plan for that $800 million of borrowings that comes due or reprices within the next 3 months? Brent Beardall: Yes. Simple, we will replace that with current borrowers not looking to shrink at this point. So we'll replace it, and if the Fed continues to cut rates, that rate will come down. Matthew Clark: Okay. And then the interest income reversal, I just want to double check the dollar amount. I know you gave the basis points on a spot basis, but I just wanted to just verify the dollar amount of interest income reversal this quarter. Brent Beardall: Kelli, do you want to give that? Kelli Holz: Certainly, for the quarter, nonaccrual interest amounted to just over $5 million. Matthew Clark: Okay. Yes, in the ballpark. Okay. And then the 2 new C&I nonaccruals, can you just give us some color on the types of businesses those relate to and the plan for resolution? Brent Beardall: Yes. Again, we want to be careful and not to call out any specific borrower. Ryan can talk to you about the types of business. But as we laid out, we're working with the clients and are optimistic at this point that we'll have resolution. Ryan, do you want to discuss a little bit further? Ryan Mauer: Yes, I would just say, very generically, one is in manufacturing business being impacted by markets tariff situations, cost of labor, those sorts of things. The other business is a real estate-related entity -- commercial real estate. Matthew Clark: Okay. And then last one for me, just on expense growth this year, kind of where you stand on the build-out of the SBA platform and whether or not you plan to hire more C&I lenders? I'm just trying to get a sense for how we should think about overall operating expense growth this year. Brent Beardall: Yes. Obviously, we'll have our annual merit increases, which will go into effect this March quarter. So as you've seen in the past, and we will be optimistic -- or opportunistic as we look at teams out there, but no significant plans for increases of large teams coming over. We think we have the teams in place and the tools in place. And obviously, we'll continue to make investments strategically from a technology standpoint as well. But I think absent the merit increases, I think we're at a pretty good run rate. And then as we get production to increase, obviously, bonus compensation will increase from there. But I think we're at a pretty solid run rate right now. Operator: Our next question comes from Jeff Rulis with D.A. Davidson. Jeff Rulis: Kelli, you mentioned -- just wanted to kind of circle back. I think you said the expectation is that you would expect further margin pressure, but yet growth in NII dollars, is that at least in calendar 1Q? Kelli Holz: Correct. With the current strategy to replace single-family runoff with mortgage-backed securities. Jeff Rulis: And I guess kind of sinking that, and I know that's different time frames, but Brent sort of mentioned the short-term goal to get to a 3% margin. Just -- I guess if you could kind of meet the 2, I guess, the balance of calendar '26, is this sort of a near-term little headwind and then hope to kind of lift from there? Any color on the trajectory? Brent Beardall: Yes. So again, I want to be very careful not to provide guidance going forward. But clearly, this quarter was impacted by the increase in nonaccruals likewise, as this was impacted negatively a quarter from now or 2 quarters from now, it can go the other way, it would be meaningful for us, not only the catch-up of the previous accrued interest that wasn't counted, but then the ongoing accrual to be very positive for us as well as the continued shift in terms of our balance sheet, as you saw to lower cost deposits. So that's where we see the optimism to get to 3% margin over the short term. Jeff Rulis: Okay. And then the -- just on the loan portfolio, is the inactive runoff this quarter, is that a pretty fair number to use in terms of maybe $200 million, $250 million a quarter in terms of that shrinkage offset by, Brent, I think you said active -- hope to get to 8% to 10% growth? Brent Beardall: Yes, yes, very much so. I would just say the inactive could spike up for us if we have a reduction in long-term rates, right? So there's no refi boom going on, whatsoever. And if we get to a point that we have long-term mortgage rates go down, you could see that after spike up significantly. And we also have a meaningful amount of discount remaining on the Luther book that was accretive to income if and when that happens. Jeff Rulis: Okay. And then just the last one, Brent. On that buyback, your sub tangible book, certainly pencils, I guess, with shares, maybe 10% plus above that average buyback price last quarter. How price sensitive are you? And then maybe balance that with capital? How -- what levels do you think you could be comfortable lowering to if you were -- if you remain pretty active on buyback? Brent Beardall: I don't think you'll see us meaningfully shift our capital ratios at this point, right? We're not looking to meaningfully cut into those. Obviously, we're producing a large amount of income and absent growth, repurchase of shares is our best alternative. I would just say, as you've seen us in the past, the closer we are to tangible book value, the more aggressive we'd be. I still believe that 1.1x tangible, it's the best investment we can make today. Operator: Our next question comes from Andrew Terrell with Stephens. Andrew Terrell: If I could just start and just clarify on the margin. I totally get the kind of mechanics and why there might be some pressure moving into investments. But when you're referencing the near-term kind of expectations, I would assume the margin reset is higher in calendar 1Q just based off of the -- you're lapping the 9 basis point headwind of interest reversal this past quarter. So I guess, is it -- is the margin expected to decline from the reported amount or from the spot rate that you gave, I think it was 2.77% at 12/31. Brent Beardall: I think we're referring to the spot rate, not the reported amount. Andrew Terrell: Got it. Okay. And if I just think about mix of the balance sheet, securities roughly around that 18% of assets today. Is there a target mix of the balance sheet? Or specifically, is there a level where you wouldn't want to build the bond book anymore? Brent Beardall: Yes. If you compare us to our peers, I think we're still relatively light in terms of our bond book compared to others. And as we've talked about, we kind of think of our single-family mortgages as a bond book. They're just not securitized. So I'm not looking to put $8 billion additionally into bonds as we get out of that, but there's certainly room for us to grow the bond portfolio. I don't think we've announced anything that -- I'd say over the longer term, 25% to 30% wouldn't be out of the question. But over the short term, you'll see us kind of ratchet that up over time, depending on the opportunities what the investments are available to us in the market. Andrew Terrell: Yes. Understood. Okay. And just last one for me. I mean the transactional deposit growth was really strong this quarter, both NIB deposits and interest checking as well. I was hoping you could maybe just give a little more color on what you saw that kind of drove that throughout the quarter? Is it just reflective of early momentum from the changes you've made earlier in 2025? Anything unusual in the pace of deposit growth this quarter? Just wanted to maybe unpack the core deposit growth this quarter. Brent Beardall: Yes. I would attribute it to 2 things. The momentum that we're getting in terms of our business shift or mix shift towards more C&I and treasury management. But also, we need to acknowledge that it's the cyclicality, the seasonality towards calendar year-end, those deposits tend to build up a little bit and the credit cards come due, and those come due. And typically, in the first calendar quarter, you see that shift out. So we will see with the results of this quarter. But to your point, a significant runoff in terms of CDs, and that was really offset by increasing our transaction counts that we're very pleased. So time will tell, but we're optimistic. Operator: [Operator Instructions] Our next question comes from Kelly Motta with KBW. Kelly Motta: I did want to ask a follow-up maybe, Kelli, on the MBS purchases. Is my understanding last quarter, that the inactive runoff would be in part to fuel those purchases. It looks like you did a bit more and took out some borrowings, which again drove NII growth, but at the expense of some margin. As you look ahead, is that still a fair way to think about the growth in the securities portfolio? And how should we be thinking about that use of borrowings and potentially using those with that trade ahead? Kelli Holz: Certainly, we did accelerate some of the mortgage-backed securities purchases in excess of, as you mentioned, of the runoff in the single-family intentionally this quarter to get a head start on it. But absent any meaningful loan growth we would use potentially borrowings and deposit growth to continue to grow the balance sheet for investments if they make sense for us. Kelly Motta: Got it. That's helpful. And then I did want to get a point of clarification, Brent, if I may, on your expectations for growth in the active portfolio. I think you said 8% to 12% over 2 years versus -- I think we're seeing that amount in 2026. Is that the right way to think about it? So maybe a slower run up to that 8% to 12% as that pipeline pulls through? Just trying to kind of square that of commentary whether 8% to 12% over fiscal year 2026 is still in the realm of possibility? Brent Beardall: Yes. I'd say in fiscal year 2026, we're probably 6% to 10%, and then we're thinking in fiscal 2027 on the higher end of that range as we really turn things back on, open them up and the most optimistic sign on that is what we're seeing in the pipeline. So spring should -- this next quarter should be a good quarter for us from a loan production standpoint. Now we have to prove it. Kelly Motta: Got it. That's helpful. And you noted your CRA, you Needs to Improve, your fight, you've taken it to the highest level with the expectation that these are very difficult to overturn. Is there anything that getting that lifted would unlock in terms of your ability to look ahead, it seems like you're working SBA trying to get these active portfolios going. But just wondering if there's kind of any additional opportunity that could be unlocked when you think through that CRA Needs to Improve? Brent Beardall: Yes. Really, the most of it is around branching and how easy or difficult it is to do branching activities. And with over 200 branches, you might imagine, we have branches all the time that we need to move as leases expire and so forth. And right now, there are all kinds of hurdles we have to jump through if we can get those moved at all. But it's also with regards to mergers and acquisitions, and we're not actively looking to do deals at all. We need to show that the Luther Burbank was worthwhile, but we like having the options, and having a Needs to Improve, doesn't preclude you from doing a merger and acquisition, it just makes it much more difficult. So if we got out of that, that would be welcome news from our perspective. Kelly Motta: Got it. Got it. That's helpful. And then just maybe one more high-level question for me on that 3% margin trajectory. In your [ expectation ] -- or wish to move towards that over the intermediate term. Are you baking in any additional rate assumptions? Said another way, you've added some borrowings and have some higher cost funding that needs to work down, would rates be some sort of an element to needed to get you there? And maybe if you could just kind of help us out with how you guys are thinking about the kind of recipe in order to get to that 3%. Brent Beardall: Yes. We're really kind of looking at the combination of the forward curve versus what our gut told us, and we're kind of baking in 1 to 2 cuts this year into that assumption. Operator: Thank you. I would now like to turn the call back over to Brad Goode for any closing remarks. Brad Goode: Josh, thanks so much. Hey, thanks, everybody, for joining this morning's call, our second call with you all. Please contact me if you have any further questions. And we hope you have a great day and a great weekend, and go Seahawks. Brent Beardall: Thank you, everyone. Go Seahawks. See you. Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

112天前Insight Analytics约5分钟阅读

WIT 2026 Q3 财报电话会议

Operator: Ladies and gentlemen, good day, and welcome to Wipro Limited Q3 FY '26 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded, and the duration for today's call will be for 45 minutes. I now hand the conference over to Mr. Abhishek Jain, Vice President, Corporate Treasurer and Head of Investor Relations. Thank you, and over to you, sir. Abhishek Jain: Thank you, Yashashri. Warm welcome to our Q3 FY '26 earnings call. We'll begin the call with the business highlights and overview by Srinivas Pallia, our Chief Executive Officer and Managing Director, followed by updates on financial overview by our CFO, Aparna Iyer. We also have our CHRO Saurabh Govil, and our Chief Strategist and Technology Officer, Hari Shetty this call. Afterwards, the operator will open the bridge for Q&A with our management team. Before Srini starts, let me draw your attention to the fact that during this call, we may make certain forward-looking statements within the meaning of Private Securities Litigation Reform Act 1995. These statements are based on management's current expectations and are associated with uncertainties and risks, which may cause the actual results to differ materially from those expected. The uncertainties and risk factors are explained in our detailed filings with the SEC. Wipro does not undertake any obligation to update the forward-looking statements to reflect events and circumstances after the date of filing. The conference call will be archived and a transcript will be available on our website. With that, I would like to turn over the call to Srini. Srinivas Pallia: Thank you, Abhishek. Good evening, and thank you for joining us today. A very happy new year to you. Let me start with the broader environment. Before walking you through our quarterly performance and how we are positioning Wipro for an AI-first world. Across our client landscape, One thing is clear: organizations are reshaping priorities as AI influences how they plan, invest and operate. In fact, AI is now a standing board level mandate led by CEOs who recognized its ability to transform business models, unlock productivity, and create lasting competitive advantage. We are also seeing the same themes continue from past quarters in our deal pipeline. Cost optimization, vendor consolidation and a clear shift towards AI-led transformation. In quarter 3, we also marked two important milestones for Wipro. In December, we completed 80 years as a company. And in October, we celebrated 25 years of being listed on the New York Stock Exchange. These milestones reflect a legacy of strong governance, value and integrity, a foundation of trust that continues to differentiate us with our clients, partners and investors. Turning to quarter 3 performance. Our IT Services sequential revenue at $2.64 billion grew 1.4% on a constant currency basis. Excluding HARMAN DTS acquisition, revenue grew 0.6% in constant currency terms. Growth was broad-based with three of our four markets and four of our five sectors reporting sequential gain. Americas 1 delivered sequential and year-on-year growth driven by strong performance in health care, consumer and LatAm. Americas 2 saw a sequential decline. Europe grew sequentially in quarter 3, led by a ramp-up of the earlier announced mega deal. We're also seeing good traction in the U.K. and Western Europe. APMEA grew sequentially and year-on-year, led by India, Middle East and Southeast Asia. PFSI continues to show strong traction with the ramp-ups and new wins. CAPCO revenue was impacted by furloughs and remained flat year-on-year. Our operating margin at 17.6% expanded 0.4% over adjusted quarter 2 margin and 0.1% year-on-year. We closed $3.3 billion in total contract value and $871 million in large deal bookings. Last quarter, I introduced Wipro Intelligence. It's a unified approach to delivering AI-powered transformation across industries. This approach is anchored on 3 strategic pillars. First, industry platforms and solutions. We are building consulting-led AI solutions across sectors. For example, platforms like PayerAI in health care, NetOxygen for lending and AutoCortex for automotive. These solutions help streamline operations, improve customer outcomes and open up new avenues for growth. Second, our delivery platforms accelerate AI adoption at scale. WINGS, part of our Wipro Intelligence, brings AI into the heart of operations from application management to infrastructure support and business process operations. Vega adds AI-driven capabilities across the development life cycle from wide coding to model tuning and data pipeline. Together, these platforms help our clients modernize faster and operate smarter. Third, the Wipro Innovation Network. This connects our labs with partners, start-ups, universities and deep tech talent around the world. This ecosystem helps us explore new technologies and build solutions for the future. We launched innovation labs in 3 cities in the U.S., Australia and the Middle East, expanding our network, growing our global footprint and strengthening our role as a trusted innovation partner. We are also partnering with client GCCs to drive transformation and turn their call centers into high-impact innovation labs. Let me now share 2 examples of large deal wins that we had, leveraging Wipro Intelligence. First, a leading global education provider in the U.K., which is expanding rapidly across markets has chosen us as a strategic partner for a multiyear transformation. The goal is to build a single secure intelligent operating model that can scale with their growth and improve stakeholder experience. Using WINGS, we will standardize core processes, embed automation and AI-driven insights and optimize costs through a global delivery model. Second, a leading U.S.-based fitness technology company has selected Wipro for a multiyear transformation to accelerate its shift to a subscription-based wellness model and support global expansion. We will use both WINGS and Vega to embed AI and automation across IT infrastructure and core functions, driving efficiency, productivity, growth and better customer experiences. These engagements highlight a clear trend. Clients are bringing us in much earlier and recognizing the step change in the way we deliver and innovate. I would now like to update you on HARMAN DTS. First, a warm welcome to all HARMAN DTS employees joining us. With the acquisition now complete, we have added engineering and AI capabilities that truly complement what we do. This strengthens our engineering global business line and helps us accelerate AI-driven product innovation for clients. The integration also opens new regions and high-growth industries and allows us to take on larger, more complex transformation programs. As our teams come together, we look forward to entering new markets, building deeper client relationships and turning innovation into long-term value. Finally, guidance for quarter 4. In quarter 4, we are projecting sequential IT services revenue growth of 0% to 2.0% in constant currency. With that, I will hand it over to Aparna for the detailed financials. Thank you. Over to you, Aparna. Aparna Iyer: Thank you, Srini. Good evening, ladies and gentlemen, and wish you all a very, very happy new year. Let me share a quick update on the financial performance. Our IT services revenue for quarter 3 grew 1.4% sequentially in constant currency terms and 1.2% sequentially in reported currency. Revenue grew 0.2% year-on-year in reported terms, while declining 1.2% year-on-year in constant currency terms. Our constant currency revenue growth numbers included 0.8% as contribution from the HARMAN DTS acquisition that was closed in quarter 3 '26. Our operating margin for the quarter was 17.6%, an expansion of 40 basis points over the adjusted operating margin for Q2 and 10 basis points improvement on a year-on-year basis. I would also like to highlight that this is one of our best margin performance in the last several quarters. As we move to Q4, we will need to factor for incremental dilution of HARMAN DTS. That said, our endeavor, as always, will be to maintain the margins in a similar band as in the last few quarters. Adjusted net income for the quarter was INR 33.6 billion, and adjusted EPS for the quarter was at INR 3.21, an increase of 3.5% quarter-on-quarter and flat year-on-year. Moving on to our strategic market unit and sector performance. All the numbers I will share will be in constant currency. Americas grew 1.8% sequentially and grew 2.8% on a year-on-year basis. Americas 2 declined 0.8% sequentially and 5.2% on a year-on-year basis. Europe grew 3.3% sequentially and declined 4.6% on a year-on-year basis. APMEA grew 1.7% sequentially and 6.6% on a year-on-year basis. From a sector standpoint, BFSI grew 2.6% sequentially and 0.4% year-on-year. Health grew 4.2% sequentially and 1% year-on-year. Consumer grew 0.7% sequentially while declining 5.7% year-on-year. Tech and Com grew 4.2% sequentially and 3.5% on year-on-year terms. EMR declined 4.9% sequentially and 5.8% year-on-year. To give an added color, Capco was flat on a year-on-year basis in Q3. Before I move on to other financial parameters, I'd like to draw your attention to 2 specific one-off charges that we took in our P&L that also impacted our net income. These changes are not included in our -- these charges are not included in our IT Services segment margins. First is an increase of INR 302 crores towards gratuity expenses due to implementation of the new labor code. Second is regarding the restructuring exercise that was completed during the quarter and its impact is about INR 263 crores. I'd like to confirm that we've now completed the restructuring we wanted to do and do not anticipate any further charges. Our operating cash flow continued to be higher than the net income and stood at 135% of net income for quarter 3. Our gross cash, including investments is now at $6.5 billion. Our net other income in Q3 grew 15% sequentially. Accounting yield for the average investments held in India was at 7.2%. Our effective tax rate at 23.9% for Q3 '26 was better than the quarter -- same quarter last year of 24.4%. In terms of our guidance, we would like to reiterate what was stated by Srini. We expect our revenue from the IT Services business segment to be in the range of $2.635 billion to $2.688 billion. This translates to a sequential guidance of 0% to 2% in constant currency terms. Our guidance includes the incremental 2 months of revenue from HARMAN DTS. It is impacted by fewer working days in Q4 and certain delayed ramp-ups in some of the large deals that we won earlier in the year. Lastly, I'd like to share with you that in our recently concluded Board meeting, the Board of Directors have declared an interim dividend of INR 6 per share. With this payout, the cash distributed to our shareholders during the current financial year will be in excess of $1.3 billion, and we will be able to significantly exceed the minimum threshold that we had laid out in our capital allocation policy for the block ending financial year 2026. With that, I'm going to ask Yashasvi to open it up for Q&A. Operator: [Operator Instructions] We'll take our first question from the line of Nitin Padmanabhan from Investec. Nitin Padmanabhan: I had a couple of questions. So one is, I think this quarter, we lost almost $24 million of revenue in energy manufacturing resources. Just wanted your thoughts on that vertical. And how do you see the deal pipeline there? When do you think this can sort of turn around? The second is you alluded to some delays in ramp-ups impacting growth for next quarter to give some -- if you could give some color there. I presume this is related to the large deals. By when do you see this sort of beginning to ramp going forward? And third, where are we expecting to have the wage hike cycle. Those are the three. Aparna Iyer: So Nitin, I'll take your second question. And then on EMR, I'll ask Srini to answer, and on attrition, we have Saurabh here, he could take that on hike -- salary hike sorry. Nitin, in terms of our large deal conversion, each deal is different. One of the significant deal wins we had in Q4 of the last financial year, Phoenix is now fully ramped up and its revenue is fully realized and it's part of our quarter 3 performance. So that's on track. Some of the other deals, given the nature of the deals that we won, we've earlier also highlighted that these deals will take a few quarters to ramp up. So it's a question of it coming in through the course of the next few quarters. And therefore, we have called it out saying that in Q4, we may not be able to realize the full impact and therefore, we're calling it out. The other lever that is playing out is typically furloughs do come back, but Q4 continues to have lower working days, which is not really sometimes offsetting for those furloughs. And therefore, we've given you the guidance we have. But these deals should continue to convert. This deal a little different. We are confident it will take some time, but it will ramp up. Srini, You want to talk on EMR and then Saurabh can talk. Srinivas Pallia: Thanks, Aparna. Happy New year, Nitin. As far as EMR is concerned, our performance in this sector clearly has been impacted based on the macroeconomic uncertainty, we have seen some during tariff related and also some disrupted supply chain issues that we faced. However, our pipeline continues to remain strong in the sector. And essentially, the significant pipeline is around either vendor consolidation or cost takeout. And if I were to give a little bit of color to our specific segments, we have -- we see good momentum in energy in both Americas and Europe, and as far as manufacturing is concerned, we are seeing that in Europe. Also, our Capco business, which is doing some -- is also seeing some traction on the energy consulting side. So net-net, that's the situation that we have right now with the EMR, Nitin. Over to you, Saurabh. Saurabh Govil: Salary hikes, we will take a call in the next few weeks in terms of doing it. Our intention is to look at it this quarter, but we'll confirm it in the next couple of weeks. Nitin Padmanabhan: Perfect. That's helpful. Just one clarification. Do you think EMR should start getting back to growth sometime next year? That's the last question from my end. Srinivas Pallia: As far as EMR concerned, Nitin, I'll just repeat that. One is the pipeline. Like I said, specifically, we have good momentum on the pipeline in energy in both Americas and Europe. And as far as the manufacturing is concerned, it's in Europe. I think our focus right now is to convert these deals and then that should drive the revenue growth for us. And we are just getting focused on winning some of those deals, Nitin. Nitin Padmanabhan: Perfect, very helpful. Thank you so much and all the very best. Aparna Iyer: Thank you. Srinivas Pallia: Thank you. Operator: Next question is from the line of Vibhor Singhal from Nuvama Equities. Vibhor Singhal: Congrats on a solid performance. So Srini, my question was mainly on the -- basically the consumer vertical. You mentioned about the challenges in the EMR vertical. Banking has been doing well for us. In the consumer vertical, the growth was tepid in this quarter. We continue to decline on a Y-o-Y basis. How do you see the outlook in this vertical? We know this vertical also has been impacted a lot by the tariff uncertainty that has basically impacted the producers. But any -- in your conversation with the clients in terms of our interactions in the pipeline, do you see it turning the corner in coming quarters? Or do you think it will be some time before some clarity emerges in this vertical? Srinivas Pallia: Thanks, Vibhor. If you look at our consumer sector, clearly, if you recollect, I talked about it before as well that the tariffs had an impact on this, and that is reflected in our numbers. And also, if you reflect, there was a large SAP program, which was put on hold last year by our customers. And again, the client is yet to reinitiate. And that is one of the things that is impacting our year-on-year performance as well in this particular thing in this particular market sector. However, the overall trend that we see right now is mixed here for us in consumer. Some of the wins we had earlier this year is slowly ramping up, and that should support the growth in this sector. I do not have -- from a quarter 4 perspective, whatever growth we are seeing, that's baked into our forecast number. Vibhor Singhal: And similar thing on the -- basically [ tech ] vertical. I know it's not that big a vertical, but I think both tech and health vertical appear to be doing good. Any specific project ramp-up that we saw in this quarter, which led to this growth? Or do you think it's a growth which we can sustain in the coming quarters as well? Aparna Iyer: Sorry, which sector did you refer to Vibhor? Vibhor Singhal: Aparna tech and the health care verticals, both of them separately. Aparna Iyer: In some sense, in health care, we've been consistently doing well, and we've had both in our year-on-year performance. Seasonally, obviously, we have the open enrollment season that really does improve our health performance in Q3. So that has also added to the performance. In terms of our tech and, we've continued to do well in some of our large technology players. And there is a little bit of the HARMAN acquisition numbers, which is also reflected in the overall sector's performance. And I think communications in general have done -- has been better for Europe and APMEA. That's the color I can give you. Vibhor Singhal: Perfect. That's really helpful. But -- just one last question from my side. You mentioned about the few headwinds in Q4 that you would be facing. And if I look at our guidance, 0% to 2% in the consolidated level, and if we were to, let's say, extrapolate the 2-month incremental impact of HARMAN acquisition, the organic growth will probably fall somewhere between minus 1.5% to plus 0.5%. Is that the right understanding? And is the reason for that very much as you mentioned in your opening remarks as well. Aparna Iyer: Vibhor for some reason, we are not able to hear it clearly. Can you just slow down the question? Vibhor Singhal: Yes, can you hear me? Operator: I'm sorry, his line is disconnected. We'll move on to the next question. [Operator Instructions]. Next question is from the line of Ravi Menon from Macquarie. Ravi Menon: Congrats on a really strong margin performance this quarter. Now that you've come to sequential growth even in a seasonally weak quarter, I surprised that organically, we seem to be hinting at a slight decline possibly at the lower end of our guidance next quarter. And Capco should also be coming out of from the furloughs that it's had this quarter, right? So could you talk a bit about that? And beyond that, do you think that sequential growth is possible looking at the pipeline and the slight improvement possibly if we have on the demand environment? Aparna Iyer: So I will ask Srini to talk through the demand environment. You know we guide based on the visibility that we have at the start of the quarter. I've shared with you that some of the furloughs that typically does come back has been partially offset by the lower working days that we are also seeing this year. And to that extent, we are seeing some softness continue, right? But that said, our endeavor would be to obviously execute the quarter better through this next 90 days, right? Srinivas Pallia: So Ravi, if I look at it, there is no significant change in the demand environment. specifically the discretionary spend as the uncertainty continues. Second, January is the time when many of our customers will finalize their budgeting process. We'll have a much better understanding and view of where they are going to spend. But having said that, if I look at the current pipeline that we have, a significant piece of this pipeline is around cost optimization and vendor consolidation, which are the key levers for our clients. And they are using this as a lever for savings, and they want to reinvest these savings into AI capabilities and also some of the advanced transformational projects that they want to do. For us, we believe this is an opportunity for us to capitalize on this, and we'll make strategic bets in each of these sectors and markets, continue to invest in our clients to do this. From a full year visibility, like Pana said, there is uncertainty in the market and customer continue to remain in wait and watch mode. At this stage, our guidance represents best visibility we have. And if there are any further updates, we will definitely share, Ravi. Ravi Menon: And the -- you talked about vendor consolidation and cost takeout and clients actually using those savings for transformation. Are they actually giving both to the same vendor? Or do they prefer to split that out? What that you're seeing at least in the wins that you have? Srinivas Pallia: So Ravi, it's a mix. There are certain clients who are doing that and continuing with the current partners. And there are certain clients who are changing, and there are certain clients who are increasing the scope and using multiple partners as well. So it clearly varies from client to client. Ravi Menon: And one last question on the HARMAN DTS. Which segments do you think this really improves your possibility of win rates? Srinivas Pallia: So Ravi, if I understand the question, how the HARMAN DTS acquisition will help us, right? Ravi Menon: Correct. Yes. which sectors do you expect the win rates to improve? Srinivas Pallia: So clearly, HARMAN brings in both design to manufacturing capabilities and AI-powered product innovation. In that context, clearly, the sweet spot for a combined unit is, especially the engineering global business line that we have is the tech and com sector. That's, I think, primarily the one where we see a significant opportunity. And the other 3 sectors, I would pick are health, consumer and EMR, Ravi. Operator: We'll take our next question from the line of Sandeep Shah from Equirus Securities. Sandeep Shah: Just the first question is because of delay in ramp-up of deal wins of the last 2, 3 quarters, is it fair to assume if those ramps up in the first quarter next year, then the seasonal softness, which generally comes in the first quarter may not be true next year? Aparna Iyer: So Sandeep, yes, in some sense, that will be the objective that we ramp up enough so that we can offset for some of the weakness that could arise. That said, we don't guide for Q1, but we would like to clarify that it's just delayed and some of those do take time to ramp up and confident that it will ramp up and we will keep you posted. Sandeep Shah: Okay. Just Aparna, I wanted to understand the guidance on the margins, which you said narrow band compared to Q3 margins or earlier range? Aparna Iyer: So you again know we don't guide for margins. You've seen our performance over the last 8 quarters. We've consistently improved, right? I think all credit to the team, we have been fairly resilient on margin, and we will continue our endeavor to keep it. But that said, we will have to invest for growth. And that's the #1 priority, right? We've acquired DTS HARMAN, and that will mean an incremental dilution to our margins that we will have to absorb. So we continue to chase and win large deals and they come with a different margin profile. And these are very important investments we'll have to make. And there will also be decisions that will have to be made on wage increases that Saurabh spoke of. A lot of moving parts. Our endeavor is going to be to make sure that we keep it in that band of 17% to 17.5%. If you recall, we had said that while we stated that band with the acquisition, we will see pressure to that. Right now, we are continuing to hold that band, which itself is a positive. But like I said, we will have to take it quarter-to-quarter. There will be some quarters where we will have to invest in our people, in our deals, in our clients and for growth. So we will make those trade-offs. Sandeep Shah: Yes. Just last couple of questions. The deal TCV in this quarter, both on large deal and total has been slightly softer versus very strong momentum in the earlier 3 quarters. So any reason where is it the client decision-making being slowed down or it's the intense competitive pressure, which has led to some decline in the win ratio? Aparna Iyer: Yes. Typically, like I said, some of these deals, they tend to club, right? We are contesting a lot of large deals. They are in the cycle. We are hopeful of closing them. You will continue to see the momentum on large deal wins. At $1 billion or maybe we are just shy of $100 million. That's been the normal trajectory. Obviously, in the first half, we had a few mega deal wins, 4 to be specific. We hope to win more, right? So I wouldn't read into it in terms of slower decision-making cycle or competitive pressure. I would just say that they tend to lump up. We have a lot of good deals, and we will see the momentum pick up. Sandeep Shah: Okay. And just the last question, Aparna with the war chest of $6.1 billion, though we are distributing dividend, but is it fair to assume that buyback continues to remain one of the options in the mind to give this excess cash back to the shareholders? Aparna Iyer: We have said that buyback will continue to be a means by which we will return cash to our shareholders. It's certainly an option on the table, and we will consider it at an appropriate time. Sandeep Shah: Okay, thanks and all the best. Aparna Iyer: Thank you. Operator: Next question is from the line of Kumar Rakesh from BNP Paribas. Kumar Rakesh: I have just one question. Srini, do you think given the kind of mix which you have, both of vertical and the capability at Wipro, you would be able to get back in line with the industry average revenue growth -- or would it make sense to just slow down your margin, get to mid-teens sort of a margin, be able to better compete with some of your peers, maybe peers as well or maybe acquire some of the companies to reset the mix. What's your thought on that? Srinivas Pallia: Kumar, clearly, first, if you look at our inorganic strategy, it is very clearly aligned to the strategic priorities we called out. We constantly look for sectors and the markets combination in terms of where we need to invest, where we need to acquire new capabilities. And if you look at specifically HARMAN DTS, clearly, it's giving us a combination of both what I would call as capabilities and also a few new markets that they are already in. So we will -- we continue to look at opportunities for us, Kumar, as we continue to move forward. Our strategy is both growing our organic and inorganic and continue to invest in inorganic. And you are right, we do have cash. And as far as that is concerned, it is an opportunity for us to look at the market, scan the market and do the right investment that makes it a win-win for us. Operator: Next question is from the line of Rishi Jhunjhunwala from IIFL. Rishi Jhunjhunwala: Just wanted to understand ex of HARMAN doesn't look like there would be much of a sequential growth in 4Q and 1Q, as we were discussing earlier in the call, historically has had some weak seasonality. I noticed a pretty sharp increase in our overall headcount in this quarter. So just wanted to understand, given the outlook for the next couple of quarters, what is driving this? And how do we read that? Saurabh Govil: The headcount for this quarter is primarily driven from 2 things. One is the acquisition, DTS acquisition. And second is one of the large deals in Phoenix, we had done as reding. I think when we ramped up the deal. So that's been the reason for seeing the ramp-up in this quarter. Otherwise, from a hiring standpoint and supply side, I don't see a challenge. Attrition has been at 2 percentage low for the quarter, trending the same in the next quarter. We are going to go to the campuses again. We had taken a bit of a hiatus in this quarter -- next quarter. So from a supply side, utilization is looking up net of the furloughs, which we -- net of the leaves which people have taken. So we are fairly confident in the headcount supply side to manage the demand. Rishi Jhunjhunwala: Understood, sir. The second question is just wanted to understand this restructuring cost that we have booked in our financials. Is it in the same nature as what we did in 1Q? And if not, if you can give some color around that? Saurabh Govil: The restructuring basically has pivoted on obsolete skill and primarily in 2 areas. One is in Europe, where we have a tough labor laws and second is in Capco. These are the 2 big areas that we did that, similar to what we have done in Q1. Rishi Jhunjhunwala: Understood. And just last thing, there was a bookkeeping question. There is a spike in D&A in this quarter. Any particular reason? And is that a normalized level going forward as well? Aparna Iyer: We have taken a provision for bad debt charge. And I think that's the line item that will show an increase. That's in the usual course of business. You should see that go off starting next quarter. Rishi Jhunjhunwala: Aparna, I was asking about depreciation and amortization? Aparna Iyer: Okay. And typically, we do assess the intangibles every year. And if -- based on the expected forecast, et cetera, sometimes we tend to accelerate such amortization. In this quarter, we did accelerate some amortization towards one of the earlier acquisitions, and that's reflected. And that should also normalize. However, we will have an increased amortization charge coming in for the DTS HARMAN. So yes, you should wait for the next quarter to get some more normalized then... Operator: Next question is from the line of Kawaljeet Saluja from Kotak Securities. Kawaljeet Saluja: I had just a couple of questions for you. First is that at $6.5 billion, it seems that you have plenty of excess cash. So how do you intend to flush this excess cash out? Would it be through dividends or is buyback on the cards? And if buyback is on the cards, then what are the considerations set required to move towards that path? That's the first question. Aparna Iyer: Okay. You're right. We did note that we've been having excess cash. And as a result of that, last year, we had increased our capital allocation. And we've said that we would start increasing our dividend payout. We did that. We paid out INR 6 in the last financial year. This year, we've almost paid INR 11 per share, which is about $1.3 billion. We should opt -- nearly account for like -- if I had to just annualized our YTD EPS is about 88%, 89% of that. So at least what the increased dividend is doing is we're not adding to the excess cash and leaving enough for watches for whatever acquisitions and organic investments we need to make. Is buyback an option to still consider in terms of returning excess cash to shareholders? Indeed, it is. And what are the considerations for that, we will have a discussion with the board on that, and we will come back considerations include whether we have enough net cash available in order to pursue the investments we need, and we will keep the market posted, Kawal. But other statutory considerations are quite in the place for buyback. Kawaljeet Saluja: Can you repeat that last part again? I missed it. Aparna Iyer: I said there are some statutory considerations that you can't do a buyback within 12 months. You can't do it if there is a merger pending for NCLT, et cetera. None of that is -- I mean, all of that is conducive, Kawal, for us.. Kawaljeet Saluja: So let's say, if you had to theoretically decide to do a buyback, today, you can do that. Whereas in the past, there was an NCLT process or merger, which would have acted as an impediment -- there is no such impediment. I mean you can do that as and when you feel it's the right time. Is that the way to look at it? Aparna Iyer: Yes. Absolutely. Kawaljeet Saluja: Noted. The second question is for you and Srini. Let's say, if those 2 mega deal ramp-ups were not delayed, then what would the guidance have been for, let's say, the March quarter? Any way to detail it out either quantitatively, which may be difficult or even qualitatively, that will be very helpful to understand the growth trajectory. Aparna Iyer: Obviously, we can't talk about it quantitatively, Kawal. And qualitatively, like I said, it's only delayed. these ramp-ups should happen. And each deal is different in its nature, right? For example, something like Phoenix, which was entirely net new and fully where there was a clear go-live date and readiness, we've been able to do that, and that's fully into our revenue starting Q3. So that played out perfectly to plan, right? Now in some of the other larger deals that -- or mega deals that we could be winning in terms of vendor consolidation, these deals typically have both an element of renewal and new. Obviously, the renewal is fully in and that continues, and we're not seeing any changes in terms of the expectations. In case of the new, the element of new, some of these things are taking longer, either due to client situations where there could be some changes in the client environment that they're going through and therefore, there is a little bit of a delay in terms of the timing of the ramp-up or it could just be the nature of how it is going to play out, right? Because we will have -- it will take 6 quarters. That's what I earlier alluded to. So it is going to take that time. And we are hopeful that this will flow through in the coming quarters. Kawaljeet Saluja: Noted. Thank you so much. All the best. Aparna Iyer: Thank you. Thank you Kawal. Operator: Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to Mr. Abhishek Jain for closing comments. Over to you, sir. Abhishek Jain: Yes. Thank you all for joining the call. Have a nice day. Thank you. Operator: Thank you. Thank you, members of the management team. On behalf of Wipro Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

112天前Insight Analytics约5分钟阅读