ICICI Bank Q4 22/23 Earnings Call Transcript

Quartr
Provided by Quartr
April 22, 2023

Key Takeaways

  • Robust profitability: Core operating profit jumped 36.4% yoy to ₹138.66 billion in Q4 and 28.1% yoy to ₹491.39 billion for FY23, while profit after tax rose 30% yoy to ₹91.22 billion in Q4 and 36.7% yoy to ₹318.96 billion for the year.
  • Strong balance sheet growth: Total deposits grew 10.9% yoy (5.2% sequentially) to support an 18.7% yoy (4.7% sequentially) rise in the overall loan portfolio, driven by 22.7% yoy retail loan expansion.
  • Improving asset quality: Net NPA ratio declined to 0.48% at March 31 2023 (from 0.55% in Q3 and 0.76% a year ago) with an 82.8% provision coverage ratio, underpinned by prudent contingency reserves of ₹131 billion.
  • Digital and distribution push: The bank added 480 branches in FY23 and saw over 9 million activations of iMobile Pay by non-customers, while 70% of trade finance transactions were executed digitally in Q4.
  • Strong capital and shareholder returns: CET1 ratio stood at 17.12% and total capital adequacy at 18.34% (post proposed dividend), with the board recommending an ₹8 per share dividend for FY23.
AI Generated. May Contain Errors.
Earnings Conference Call
ICICI Bank Q4 22/23
00:00 / 00:00

There are 8 speakers on the call.

Operator

Ladies and gentlemen, good day, and welcome to the ICICI Bank's Q4 FY 'twenty three Earnings Conference Call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. On your touchtone phone. Please note that this conference is being recorded. I now hand the conference over Mr.

Operator

Sandeep Bagshi, Managing Director and CEO of ICICI Bank. Thank you, and over to you, sir.

Speaker 1

Good evening to all of

Speaker 2

you, and welcome to the ICICI Bank earnings call to discuss the results for Q4 of Financial Year 2023. Joining us today on this call are Anoop, Sandeep Batra, Rakesh, Anantya and Abhinik. The Indian economy has continued to show resilience amidst the volatile global environment. The underlying growth momentum is visible in increasing steel and The government led CapEx cycle is continuing. Financial stability has been maintained and inflation to elevate it has moderated from its peak.

Speaker 2

We will continue to monitor these developments closely. Our strategic focus is growing our risk calibrated core operating profit through the 3 60 degree customer centric approach and by serving opportunities across customer segments and ecosystems. We continue to operate within our strategic framework and strengthen our franchise, enhance our delivery and servicing capabilities and expand our technology and digital offerings. The core operating profit increased by 36.4% year on year to INR 138,660,000,000 in this quarter and increased by 28.1% year on year to INR491,390,000,000 in financial year 2023. Core operating profit Debt provisions grew by 34.7 percent year on year to INR122.47 billion in this quarter and increased by 43% year on year to INR424,730,000,000 in financial year 2023.

Speaker 2

The profit after tax grew by 30% year on year to INR 91,220,000,000 in this quarter. For the fiscal year 2023, the profit after tax grew by 36.7% year on year to INR318,960,000,000. The Board has recommended a dividend of INR 8 per share for financial 2023 subject to requisite approvals. Total deposits grew by 10.9% year on year and 5.2% sequentially at March 31, 2023. Term deposits increased by 17.1% year on year and 4.3% sequentially at March 31, 2023.

Speaker 2

During the quarter, the average current and savings account deposits grew by 8% year on year and 1.2% sequentially. The liquidity coverage ratio for the quarter was about 124%. The retail loan portfolio grew by 22 point 7% year on year and 5.4% sequentially at March 31, 2023. Including non fund based outstanding, The retail portfolio was 45.7 percent of the total portfolio. The Business Banking portfolio grew by 34.9% year on year and 7.8% sequentially.

Speaker 2

The SME portfolio grew by 19.2% year on year and 6 such as Instabiz and MerchantStack. The domestic corporate portfolio grew by 21.2% year on year and 3.8% sequentially at March 31, 2023, driven by growth across well rated financial and non financial corporates. The rural portfolio grew by 13.8% year on year and 5.5% sequentially. The domestic loan portfolio grew by 20.5% year on year and 5% sequentially. The overall loan portfolio grew by 18.7% year on year and 4.7% sequentially at March 31, 2023.

Speaker 2

We continue to enhance our digital offerings and platforms to onboard new customers in a seamless manner, provide them end to end digital journeys and personalized solutions and enable a more effective data driven cross sell and up sell. We have shared some details on our technology and digital offerings in Slide 17 to 28 of the investor presentation. The net NPA ratio declined to 0.48% at March 31, 2023 from 0.55% at December 31, 2022, and 0.76% at March 31, 2022. During the quarter, there were net additions of INR 0.14000000000 to gross NPAs, excluding write offs and sales. The provisioning coverage ratio on NPAs was 82.8% at March 31, 2023.

Speaker 2

The total provisions during the quarter were INR 16,190,000,000 or 11.7 percent of core operating profit and 0.7% of average advances. This includes contingency provision of INR 16,000,000,000 made on a prudent basis. The bank holds contingency provisions of INR 131,000,000,000 or about 1.3% of total loans as of March 31, 2023. The capital position of the bank continued to be strong with CET1 ratio of 17.12 percent, Tier 1 ratio of 17.6% and total capital adequacy ratio of 18.34% at March 31, 2023, after reckoning the impact of proposed dividend. Looking ahead, We see many opportunities to drive growth in the risk calibrated core operating profit.

Speaker 2

We believe our focus on Customer 360, Extensive franchise and synergy and collaboration within the organization, backed by your digital offerings and process improvement and service delivery initiatives, will enable us to deliver customized solutions to customers in a seamless manner and grow market share across key segments. We will continue to make investments in technology, people, distribution and building our brand. We will remain focused on maintaining the strong balance sheet with prudent provisioning and healthy levels of capital. The principles of fair to customer, fair to bank and 1 bank, 1 team, 1 ROE will continue to guide our operations. We remain focused on delivering consistent and predictable returns to our shareholders.

Speaker 2

I now hand the call over to Anandir.

Speaker 1

Thank you, Sandeep. I will talk about balance sheet growth, credit quality, E and L details growth in digital offerings, portfolio trends and the performance of subsidiaries. Our balance sheet growth, Sandeep covered the loan growth across various segments. Coming to the growth across retail products, The mortgage portfolio grew by 17.6% year on year and 4% sequentially. Auto loans grew by 23.2 Year on year and 5.1 percent sequentially.

Speaker 1

The commercial vehicles and equipment portfolio grew by 5.2% year on year and 3.8% sequentially. Growth in the personal loan and credit card portfolio was 43.2% year on year and 9% sequentially. This portfolio was INR258.96 billion or 12.3 percent of the overall loan book at March 31, 2003. The overseas loan portfolio in U. S.

Speaker 1

Dollar term declined by 23.8 Year on year and 2.6 percent sequentially at March 31, 2023. The overseas loan portfolio was about 3% of the overall loan book at March 31, 2023. The non India linked corporate portfolio declined by 52.3% or about US336 $1,000,000 on a year on year basis. Of the overseas corporate portfolio, about 89% comprises Indian corporates, 7% is overseas corporates with Indian linkage, 2% comprises companies owned by NRIs or PIOs and the balance 2% is non India corporates. Credit quality.

Speaker 1

There were net additions of INR0.14 billion to gross NPAs in the current quarter Compared to INR 11,190,000,000 in the previous quarter, the net additions to gross NPAs were INR 8,730,000,000 in the retail, Rural and Business Banking Portfolio and there were net deletions from gross NPAs of INR 8,590,000,000 in the corporate and SME portfolio. The gross NPA additions were INR42.97 billion in the current quarter compared to INR 57,230,000,000 in the previous quarter. The gross NPA additions from the retail, Recoveries and upgrades from gross NPAs excluding write offs and sales were INR42.83 billion in the current quarter compared to INR46.04 billion in the previous quarter. There were recoveries and upgrades of INR31.47 billion from the Retail Rural and Business Banking portfolio and INR 11,360,000,000 from the corporate and SME portfolio. The gross NPAs written off during the quarter were INR11.58 billion.

Speaker 1

There was sale of NPAs of INR2.01 billion for cash in the current quarter compared to no sale of NPAs in the previous quarter. Net NPA declined by 25.9 percent year on year and 8% sequentially to INR 51,550,000,000 at March 31, 2003. The non fund based outstanding to borrowers classified as non performing was INR 37,800,000,000 as of March 31, 2023 compared to INR 38,690,000,000 As of December 31, 2022, the bank holds provisions amounting to INR 20,050,000,000 against this non fund based outstanding. The total fund base outstanding to all standard borrowers under resolution as per various guidelines declined to INR 45,080,000,000 These are about 0.4 percent of the total loan portfolio at March 31, 2023 from INR 49,870,000,000 As of December 31, 2022, of the total fund based outstanding under resolution at March 31, 2023, INR38,330,000,000 was from the retail Rural and Business Banking portfolio and INR6,750,000,000 was from the corporate and SME portfolio. The bank holds provisions of INR 13,800,000,000 against these borrowers, which is higher than the requirement as per RBI guidelines.

Speaker 1

Moving on to the P and L detail. Net interest income increased by 40.2% year on year to INR176.67 billion in the quarter. The net interest margin was 4.9% in this quarter compared to 4 point 5% in the previous quarter and 4% in Q4 of last year. The net interest margin was 4.48% in FY2023. The impact of interest on income tax refund on net interest margin was nil in Q4 of this year and in the previous quarter compared to 1 basis point in Q4 of last year.

Speaker 1

The domestic NIM was at 5.02 This quarter compared to 4.79% in the previous quarter and 4.12% in Q4 of last year. Of the total domestic loans, interest rates on 46% are linked to the repo rate, 3% to other external benchmarks And 20% to MCLR and other older benchmarks, the balance 31% of loans have fixed interest rates. The cost of deposits was 3.98% in this quarter compared to 3.65% in the previous quarter. The sequential increase in NIM reflects the impact of increase in interest rates on loan yields, while repricing of deposits occurs with a lag. We expect to see the cost of deposits continuing to increase in future quarters.

Speaker 1

Non interest income, Excluding treasury income grew by 11.3% year on year to INR 51,270,000,000 in Q4 of 2023. Fee income increased by 10.6 percent year on year to INR48,300,000,000 in this quarter. EBITDA from retail, rural, business banking and SME customers grew by 14.8% year on year and constituted about 80% of the total fees in this quarter. Dividend income from subsidiaries and associates was INR 2,730,000,000 in this quarter compared to INR 2,320,000,000 in Q4 of last year. The dividend income this quarter included interim dividend from ICICI Prudential Asset Management and dividends from ICICI 9 Canada.

Speaker 1

On costs, the bank's operating expenses increased by 26.7% year on year in this quarter. The bank had about 129,000 employees at March 31, 2023. The employee count by about 23,200 in fiscal 2023. Employee expenses increased by 40% year on year in this quarter. During the quarter, the bank took a more conservative approach on certain assumptions underlying the provisions for retirement benefit obligations, which resulted in an additional expense of INR 3,350,000,000.

Speaker 1

Non employee Expenses increased by 19.6% year on year in this quarter, primarily due to retail business related expenses and technology expenses. Our branch count has increased by about 480 in the last 12 months, and we had 5,900 branches as of March 31, 2020. The technology expenses were 9.3% of our operating expenses in this fiscal year compared to about 8.6% in the last fiscal year. The core operating profit increased by 36.4 percent year on year to INR 138,660,000,000 in this quarter. Excluding dividend income from subsidiaries and associates, the core operating profit grew by 36.9% year on year.

Speaker 1

The core operating profit increased by 28.1 percent year on year to INR491,390,000,000 in the full year FY2023. The total provision during the quarter was INR 16,190,000,000 or 11.7 percent of core operating profit and 0.7% of average advances. These include contingency provisions of INR 16,000,000,000 made on a prudent basis. The total provisions during FY2023 decreased by 22.9% year on year to INR66.66 billion. During the year, the bank made contingency provisions of INR 56,500,000,000 and the impact of change in provisioning norms The corporate SME and Business Banking NPAs to make them more conservative was about INR 11,960,000,000.

Speaker 1

The provisioning coverage on NPAs was 82.8% as of March 31, 2023. In addition, we hold INR13.8 billion of Further, the bank holds contingency provision of INR 131,000,000,000 as of March 31, 2023. At March end, the total provisions other than specific provisions on fund based outstanding to borrowers classified as nonperforming for INR 226.35 billion or 2.2 percent of loans. Core operating profit less Provision grew by 34.7 percent year on year to INR122.47 billion in Q4 of this year. There was a treasury loss of INR0.40 billion in Q4 compared to a gain of INR1.29 billion in Q4 of the previous year.

Speaker 1

The tax expense was INR 30,850,000,000 in this quarter compared to INR 22,050,000,000 in the corresponding quarter last year. The profit after tax grew by 30% year on year to INR 91,220,000,000 in this quarter. The profit After tax grew by 36.7 percent year on year to INR318.96 billion in FY 2023. The consolidated profit after tax grew by 27.6 percent year on year to INR 98,53,000,000 in this quarter. The consolidated profit after tax grew by 35.6 percent year on year to INR 340.37 billion in FY 2023.

Speaker 1

Moving on to growth in our digital offering. Leveraging digital and technology across businesses is a key element of our strategy of growing with its calibrated core operating profit. We continue to see increasing adoption and usage of our digital platform by our customers. There have been more than 9,000,000 activations of Imobile Pay by non ICICI Bank account holders as of end March. The value of transactions by non ICICI Bank account holders in Q4 of this year was 1.3 times

Speaker 3

the value of transactions in Q4 of last year. We have seen

Speaker 1

about 2 in Q4 of last year. We have seen about 225,000 registrations from non ICICI Bank account holders on Instabill Until March 31, 2023, the value of financial transactions on Instabib grew about 22% year on year in this fiscal year. We have created more than 20 industry specific facts, which provide the support and purpose based digital solution to corporate clients and their ecosystem. Our trade online and trade emerge platforms allow customers to perform most of their trade finance and foreign exchange transactions digitally. About 70% of trade transactions were done digitally in Q4 of this year.

Speaker 1

The value of transactions run through these platforms in Q4 of this year was 1.7 Thanks for value of transactions in Q4 of last year. Recently, the bank launched startup ecosystem banking to cater to the banking needs of startups in the areas of treasury, transaction banking, lending, managing foreign direct and regulatory compliances along with personal banking services for employees and founders. During the quarter, the bank launched an array of digital solutions for capital market participants and clients of custody services. These solutions enabled various participants, including brokers, portfolio management service providers, foreign portfolio investors, for indirect investors and alternative investment funds to seamlessly meet all their banking requirements. We have provided details on our retail business banking and SME portfolio in Slides 34 to 45 of the investor presentation.

Speaker 1

The loan and non fund based outstanding to performing corporate and SME borrowers rated WBE and below was INR 47,040,000,000 At March 31, 2023, compared to INR55.81 billion at December 31, 2022 and INR108.08 billion at March 31, 2022. The sequential decline was primarily due to prepayments and repayments during the quarter. The total outstanding of INR 47.04 billion at March 31, The maximum single borrower outstanding in the BB and below portfolio was less than INR5 1,000,000,000 at March 31, 2023. At March 31, 2023, we held provisions of INR4.09 billion on the double bn below portfolio compared to INR4.48 billion at December 31, 2022. This includes provisions held against borrowers under resolution included in the BB and Below portfolio.

Speaker 1

The total outstanding to NBFCs and HFCs was INR834.90 billion at March 31, 2023, Compared to RUB765.4 billion at December 31, 2022, the total outstanding to NBFCs and HFCs We're about 8% of our advances at March 31, 2023. The sequential increase in the outstanding to NBFCs and HSPs This is mainly due to disbursements to entities having long vintage and entities owned by well established corporate groups. The builder portfolio including construction finance, lease rental discounting, term loans and working capital was INR398.87 billion at March 31, 2023 compared to INR360.11 billion at December 31, 2022. The builder portfolio is about 4% of our total loan portfolio. Our portfolio largely comprises well established builders, This is also reflected in the sequential increase in the portfolio.

Speaker 1

About 4.6% of the builder portfolio at March 31, 2023 was either rated BB and below internally or was classified as non performing compared to 5.6% at December 31, 2022. Finally, moving on to subsidiaries and key associates. The details of the financial performance of subsidiaries and key associates are covered in Slides €49,000,000 to €51,000,000 71,000 to €76,000,000 in the investor presentation. The VND margin of ICICI Life increased from 28% in FY 2022 to 32% in FY2023. The value of new business increased by 20 7.8 percent year on year to INR 27,650,000,000 in FY2023.

Speaker 1

The annualized premium equivalent grew by 11.7 percent year on year to INR86.40 billion in FY2023. The profit after tax of ICICI Life increased by 7.6% year on year to INR 8,100,000,000 in FY INR 7,540,000,000 in FY 2022. The profit after tax grew by 27% year on year to INR 2,350,000,000 in Q4 this year compared to INR 1,850,000,000 in Q4 last year. The gross direct premium income of ICICI General was INR 210,250,000,000 in FY2023 compared to INR 179,770,000,000 in FY2022. The combined ratio was 104.5 percent in FY2023 compared to 108.8 percent in FY2022.

Speaker 1

The profit after tax was INR17.39 billion in FY2023 compared to INR12.71 billion in FY2022. The profit after tax in FY2023 includes reversal of tax provisions of INR 1,280,000,000. The profit after tax was INR4.37 billion this quarter compared to INR3.13 billion in Q4 last year. The profit after tax of ICICI AMC was INR 3,870,000,000 in this quarter compared to INR 3,570,000,000 in Q4 of last year. The profit after tax of ICICI Securities as per Indes on a consolidated basis was INR 2,630,000,000 in this quarter compared to INR 3,400,000,000 in Q4 of last year.

Speaker 1

ICICI Bank Canada had a profit after tax of 15 point Canadian dollars in this quarter compared to CAD4.3 million in Q4 last year. ICICI Bank UK had a profit after tax to US5 $1,000,000 this quarter compared to US3 $100,000 in Q4 of last year. As per Ind AS, ICICI Home Finance had a profit after tax of INR0.96 billion in the current quarter compared to INR0.53 billion in Q4 of last year. With this, we conclude our opening remarks, and we will now be happy to take your questions.

Operator

Thank you very much. We will now begin the question and answer session. We have our first question from the line of Mahrukh Arajania from Novama. Please go ahead.

Speaker 4

Yes, hi, congratulations. My first question is on outlook for margins. So, obviously, the margin achievement for FY 'twenty three has been phenomenal. But would you have a So I show below which you think margins won't fall, but obviously margins are peakish for the sector. So could you give us a band in which You would like to hold margins even if they are not sustainable at these levels.

Speaker 4

That's my first question.

Speaker 1

I don't think that we can really give a band. Our effort, first of all, would be to continue to grow our liability franchise in a healthy way across optimizing quantum and cost because that is really the starting point. And then price our lending in an appropriate fashion while, of course, looking at the entire ecosystem and customer level profitability. And also manage interest rate risk and earnings at risk on the balance sheet as best we can, While having to work with the fact that the requirement of pricing a large part of the lending to external benchmark That creates this cyclicality. And then we will see where we emerge out of it.

Speaker 1

Our endeavor, of course, would be To protect our operating profitability as far as we can.

Speaker 4

Sure. And I have another two questions. Firstly, on OpEx. So, would you have any branch addition plan or target for next year? How many Branches you plan to add?

Speaker 1

So if you see, Maruk, this year the face of branch additions has picked up Significantly, we have added 480 branches in the year and out of that 180 has come in the 4th quarter. So I think that's kind of a starting run rate and we should see significantly higher branch additions next year than what we have seen this year.

Speaker 4

Okay. And my last question is on the insurance subsidiaries. So after RBI's approval to TFC yesterday, would you review your plans for your stakes in your insurance subsidiary? I mean, how do you view your stakes now after what happened yesterday?

Speaker 1

I think we have as you may have We have received an extension of the timeline required for compliance with the BR Act to September 2024. So we have sufficient time to think things through and take You know the appropriate course of action. So that's what we will do.

Speaker 4

Okay. But there is no Affirm thought already that you would not now want to increase takes in subsidiaries or any such thing, right? It is open for review and discussion.

Speaker 1

I'll just repeat that we have a year and a half to comply with the requirements of the Act, which require us to either be above 50 or below 30. So we see over this period of time what to do.

Speaker 4

Sure. Thanks a lot. Thank you.

Operator

Thank you. We have a next question from the line of Hiren Kumar Thakurla Desai, an individual investor. Please go ahead.

Speaker 5

Yes. So I have a few questions. Okay. One has been NIM related question is answered. So deposit growth has scuttled a little bit in comparison to advance growth.

Speaker 5

So is there some strategy you haven't paid to

Speaker 3

write out?

Speaker 1

I think we have We comfortably funded a 20% loan growth with our level of deposit growth while maintaining pretty healthy levels of liquidity. We started the year with significant excess liquidity. And as we ran that down, we have ramped Increase the deposit growth. So if you look at the second half of the year, deposit growth has been approximately, I think, three times of what it was in the first half and that momentum is continuing. So we don't have any concerns on that front.

Speaker 5

So in the a lot to that is, so do we believe that we are somewhere close to peak in deposit rate

Speaker 1

I think that really depends on the policy how the policy rates move and How different banks position themselves in a competitive context. I think currently for the last A couple of months rates have been quite stable and we don't see an immediate trigger.

Speaker 5

Okay. And one last question is, so we have seen a jump in provision. So

Speaker 6

is there some sign of

Speaker 5

Is it quality issue that you see or it's purely, I mean, just a prudent Provisioning, given that we are doing very good margins and profitability.

Speaker 1

Actually, on a full year basis, our provisions have declined by more than 20%. And So this is despite our making contingency provision on a prudent basis of INR 56,500,000,000 As well as the impact of the change in our provisioning norms to make them more conservative, which was about INR 12,000,000,000. So excluding these two, Our provisions for the year would actually be negative. So we are not seeing any uptick in provisions at all.

Speaker 5

Sorry to persist,

Speaker 1

So again, in Q4, we made total provisions of INR 16,190,000,000 of which the contingency provision itself was INR 16,000,000,000. So excluding that, the provisions were negligible.

Speaker 5

No, no, I get that. But contingency also is, I mean, just that, there is nothing more to read into.

Speaker 1

Look, we have it is a part of our approach of being prudent and strengthening the balance sheet.

Speaker 5

Okay. Thank you. That's understood.

Operator

Thank you. We have our next question from the line of Abhishek Murarkar from HSBC. Please go ahead.

Speaker 7

Yes, good evening and thanks for taking my question. So the first question is going back to NIM. We see that your yield on funds is or yield on advances is still growing at 50, 60 bps Q o Q, Even though your cost of funds now is increasing at a faster pace, so when does this inflection happen? And on an average, do you think in FY 'twenty 4 over 'twenty three, your NIMs will move up still? Or do you think that on average, it would be, let's say, flattish?

Speaker 1

So if you look at it, I think in this quarter, we had the benefit of The repo rate hike which took place in December, which fell through into the external benchmarking portfolio, Our yield on investments has also gone up as we have increased our government bond portfolio at Higher yields and we've also seen a repricing of our floating rate bond portfolio. At the same time, the deposit costs have also started to reflect the higher The higher rates at which deposits are being raised incrementally. So I think we would believe that the NIMs are I kind of peak on your levels and from here we should see a moderation. Of course, It's difficult to give a very precise outlook on that. So I wouldn't want to get into the level of NIM for next year.

Speaker 1

As I said, our focus will be on growing the business in a sustainable way.

Speaker 7

So Ananda, just going or taking that forward, do you think then the loan growth will become more operative to drive PPOP growth because NIM should largely moderate from here. And then there's more pressure to maintain, let's say, 18%, 19% loan growth. And do you think that's possible?

Speaker 1

I don't think we would See it as a pressure to do anything. I mean, we would believe that there is sufficient opportunity for us to grew and that we are quite comfortable from a funding perspective to support that level of growth. But yes, mathematically, growth in earnings would be more driven by growth in the business than Any increase in margin for sure.

Speaker 7

Right. And your loan growth outlook for next year, Can you share, I mean, do you think the system growth is going to slow down from here? And how are you going to be placed relative to that?

Speaker 1

I think that most of the analysts are predicting or forecasting a slowdown in system growth, which is where we have ended the year at whatever 15%, 16%, may come down by 2%, 3 percentage points. From our perspective, we continue to see pretty strong momentum in across the retail products And that we have seen in the Q4 as well. And in certain product in certain customer segments such as SME and Business Banking, for example, we continue to have a market share that is lower than our overall market And there is a higher growth opportunity for us. And for most of these segments, as we spoke about in the call, We believe our product offerings and our digital offerings are pretty strong and we are growing our distribution as well. You would have seen the employee count additions that we have done and what we have spoken about branches.

Speaker 1

So we are, I would say, pretty

Speaker 7

So you should be able to hold on to, let's say, current growth rate given all these efforts that you're taking?

Speaker 1

We don't target a particular level of loan growth, but I mean I'm not seeing anything today which suggests that there could be any material drop or that we would not be able to grow our business or that demand would be inadequate.

Speaker 7

Got it. Got it. Thank you so much. Do you mind if I squeeze in one very quick question, if that's okay?

Speaker 2

Yes, please.

Speaker 7

Yes, sure. Thanks. So just on this branch addition, you said it's going to go up significantly. We look at 4 80 branches roughly that you have added, that's around 9%, 10% of your opening branch count. Do you think this run rate will go up?

Speaker 7

As in you will end up adding maybe 15% of your current branch count or do you think this run rate remains the same?

Speaker 1

It could go up as well.

Speaker 7

Okay. And the hiring is in anticipation of that because the employed per branch has gone up?

Speaker 1

Yes. So, Branch, there may not be that way a direct A correlation, we would be hiring across a range of functions, including, for example, credit, Front line sales, technology, product teams and so on. But yes, obviously, given the level of I think that we've done in the last 6 months, we would expect those to become productive over the next year.

Speaker 7

Got it. Thanks so much and all the best for future quarters. Thank you.

Operator

Thank you. Ladies and gentlemen, in order to ensure We have our next question from the line of Kunal Shah from Citigroup. Please go ahead.

Speaker 3

Yes. Hi, congratulations. Good set of numbers. So firstly, on the operating profit, given that NIM trajectory 3 could slow down, there could be some moderation in the overall industry wide credit growth and since we are investing into the franchise as well. So So maybe in terms of what we have been highlighting with respect to 20% operating profit growth all through over the past several years, Maybe what are the levers available just to ensure that the operating profit growth sustains in that range?

Speaker 3

But there should be definitely a moderation which we should see over next couple of quarters.

Speaker 1

I think what we have seen on the operating profit growth has really been an outcome of the business that we have done, underwriting that we have done, Our liability profile and our approach to overall profitability, I think When we really adopted operating profit as the main operative metrics for us, we were making Significant provision on our historic NPL book. And Now

Speaker 3

if we

Speaker 1

look at it, that is largely addressed. And given the kind of provisioning policies that we have now where There is very little lag between an asset turning delinquent and or over 90 day and getting provided for The credit operating profit less provision is a pretty accurate reflector of the Earnings of the business or the growth and quality of the business. So that's one thing to keep in mind. Of course, As you would know and as we have discussed in the past, the kind of margin expansion that we have seen this year We'll not be there next year and there will be some pressure on margins, but that will hopefully we'll get addressed along with growth.

Speaker 3

Any rewards with respect to either risk income or maybe Some other line items which can provide incremental delta?

Speaker 1

So I don't think we're looking at it on a line item We see a lot of opportunity in the market and that is what we would try to capitalize on. And look at the overall kind of earnings performance of the business, including credit costs.

Speaker 3

Sure. And lastly, in terms of the overall term deposit growth, if you can throw some color in terms of how much has been saved from the retail side and how much was Wholesale because there was a strong growth which was there in this quarter. Yes.

Speaker 1

So we are focused mainly on the retail And more granular deposit growth, we have not really been large takers of high value bulk deposits.

Speaker 3

Okay. So, larger part of the growth is retail? Yes. Okay. Yes.

Speaker 3

Thank you.

Operator

Thank you. We have our next question from the line of Nitin Agarwal from Motilal Oswal. Please go ahead.

Speaker 6

Yes, hi. So one question is like on the trend and recoveries and upgrades, What is really driving this? And what have we changed in our underwriting approach to enable like negligible credit cost on successive basis? While the entire system is reporting a very benign credit cost, but numbers for ICICI with almost 0 to negative credit cost It's way better than everybody else.

Speaker 1

So this year, one aspect that we have benefited from is pretty Strong recoveries on the corporate side. We were able to complete the resolution of some of the older corporate NPIs. So and that's So we split out the corporate and retail additions and deletions for you and Those deletions on the corporate side would also reflect into some level of write backs. On the retail side, I think our Experience with the portfolio has been pretty good both in terms of the Performance in terms of overdues and ounces and so on. And at the same time, also in terms of Collections of delinquent accounts, again, because we have accelerated our provisioning on these portfolios significantly, They become delinquent.

Speaker 1

We provide and then as the collection efforts continue, the customers Become regularized again. So when we have a granular portfolio, a lot of Delinquency and recovery can happen in a much quicker manner Than in a larger chunkier corporate portfolio where it can take several years to resolve an account.

Speaker 6

Right. Sure. And secondly, while Anandu, you talked about the growth opportunities in the retail business, But how do you see the growth prospects in the corporate banking going into FY2024 and FY2025?

Speaker 1

Very difficult to predict. I think this year, of course, as you would have seen, our Corporate Banking Wholesale Banking growth has been higher than in the previous years. I think For the system also, there has been a recovery in corporate credit growth, I guess, post the turn in the monetary environment and Some shift from bond markets to banks. We are seeing certainly opportunities for lending in Some of the sectors like NBFCs, real estate, which has become a significantly stronger sector in the last 3, 4 years. So there are those opportunities.

Speaker 1

The public sector companies continue to Invest as well. So these are some of the opportunities which are there and we really look at sort of for each corporate client What is the overall ecosystem opportunity and lending is a part of that.

Speaker 6

Right. And lastly, if you can just share some color on the treasury losses. This quarter, very small treasury loss of INR 40 odd crores. Some split off this, if you can share.

Speaker 1

So actually, we don't We said booking large treasury gains in our core SLR and other portfolios. We had on other portfolios some profit, but we had a mark to market on our security receipts As you know, portfolio, which the security receipts with underlying assets that we would have sold to the assets reconstruction companies over the years. So there was a small negative on that account, which gets reflected in the treasury line item.

Speaker 6

Okay, sure. Thank you so much and wish you all the best.

Operator

Thank you. We have our next question from the line of Saurabh S. Kumar from JPMorgan. Please go ahead.

Speaker 5

Hi, good evening, Aravind.

Speaker 1

So just on this exchange rate,

Speaker 2

so this 75%, 80% recurring rate that we're seeing

Speaker 5

on the retail business, is that you think normal or Is

Speaker 2

this just out of COVID,

Speaker 5

we are just experiencing a strong momentum?

Speaker 2

I'm just asking that

Speaker 5

your gross number is very high is maybe 2.5% and it is extremely low. So is net number sustainable is the question.

Speaker 1

So I think we have always been saying that the net additions in retail will And they have actually gone up, but probably if you look at the Gross additions and gross deletions for the quarter, the deletions, which are accounted for by very old NPLs would not be much. In fact, now we have in addition to a pretty accelerated provisioning, we have fairly accelerated write offs as well. So I think this is a level of deletions is, I would say not abnormal. But having said that, as the portfolio grows and Even we will see an increase in the net additions as well.

Speaker 3

Okay. That's it. 2nd, sir, is

Speaker 5

on this RIDF, so your reduction, Which

Speaker 2

we have seen year on year, is this mostly a bank centrician of loans? Sorry?

Speaker 5

The RIDF. The RIDF.

Speaker 1

So these are this is basically the net maturities. So we have had more maturities of our IDS investments And the incremental investments that we have been called upon to make.

Speaker 5

Okay. So incrementally, it is you must be meeting all the requirements even at this growth. Would that be a fair comment?

Speaker 1

So we do meet the overall requirement. We have Some shortfalls in a couple of the subcategories. And we do have some RIDF calls as well, but Those are quite moderate and the maturities out of the past years and ITS portfolio have exceeded that.

Speaker 5

Got you. Thank you, sir.

Operator

Thank you. We'll take our last question for today from MB Mahesh from Kotak Securities. Please go ahead.

Speaker 2

And then just two questions. 1, when you look at the mortgage part of the book, Could you just tell us how have you kind of worked through the borrowers with respect to the increase in interest rates?

Speaker 1

Through the standard structure of home floating rate home loan in India is that the When the interest rate rises, the EMI the tenure gets extended subject to certain Cut offs, which could be in terms of age or Certain criteria that are defined for the various customers. And similarly, when the interest rates decline, the tenure gets shorter and customers also understand This cycle pretty well. So in the current cycle, of course, given the sharp increase in the benchmark rates over a relatively short period, Very large part of the portfolio would have seen an EMI increase, but that has happened.

Speaker 2

Okay. And the second question is that if you look at the increase in, let's say, CASA ratio, does that growth Slow down reflect anything about the underlying customer profile? In the sense that are you seeing salary credits or Savings credit is kind of significantly slowing down for Rohrer in the portfolio. As a consequence of it, you should see a slowdown in the sector quite soon.

Speaker 1

No, I don't think so. I think what has happened is that we had 2 years of extremely strong growth. And probably this is the year when our segment of customers has seen a consumption recovery and so on. The second is, of course, as interest rates go up, you would see some shift from SAAR to SD. And those seem to be the 2 main factors, the base effect and the rise in interest rates on the savings account side.

Speaker 1

On the current account side, actually, when we look at the average growth, it has been a little bit better. Although, Again, the circumstances in terms of tight liquidity and so on are not that conducive to current account growth, but we have been able to offset Some of that with us, the digital propositions and getting more flow through the bank.

Speaker 2

Okay, perfect. And one last data giving question. Have you reported the LCR issue? Yes.

Speaker 1

I think Sandeep mentioned it. It was 124% for the

Speaker 2

Okay, perfect. Thanks a lot.

Operator

Thank you. We'll take our one last question from Adesh Parasrampuria from CLSA. Please go ahead.

Speaker 2

Yes, hi.

Operator

I'm sorry, sir, your voice is baking. I'm sorry, sir, we are unable to hear you. I'm sorry, sir, we are still unable to hear you.

Speaker 2

So yes, just keep my question. Thank you.

Operator

We could hear you now. You repeat?

Speaker 5

Okay. Anil, if you can, the question is on fees. We did have A bit of clean out on fees in the sense that we got choosy on selling insurance. We've let go of some prepayment charges and all.

Speaker 2

Just wanted to understand, is that part of the

Speaker 5

base or it still takes a little bit time before we get the normal fee growth?

Speaker 1

I would think it is maybe in the second half, it is largely part of the base. Insurance, of course, has been something that has been coming down over the last couple of years. And the other charges, etcetera, is something that That slide through the year. So it should probably be we should probably be closer to the base in that area.

Speaker 5

And one question is, you did say you'll add employees, but when I look at the other expenses ex The employees have had a decent growth over the last couple of years, right, in accelerated technology spend. As NIM slows down, is that a hiver or because you had branches and given the profitability is too strong that will That should not be used as an RV viewer.

Speaker 1

No. So I think we have consistently Said that we believe that there is a good market opportunity for us and we will not we will continue to invest in that. And If for a couple of quarters, operating expenses growth is higher than revenue growth, we would not really worry about it too much as long as we I have a sustainable path, so we'll have to just look through that.

Speaker 2

Okay. You can be clear. Thanks.

Operator

Thank you. I would now like to hand the conference over to management for closing comments.

Speaker 1

Yes. Thank you, as always, for sparing time on a Saturday, and we'll be happy to take other questions that you have after the call. Thank you.

Operator

On behalf of ICICI Bank, that concludes this conference. Thank you for joining us and you may now

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