ICICI Bank Q3 23/24 Earnings Call Transcript

Quartr
Provided by Quartr
January 20, 2024

There are 7 speakers on the call.

Operator

Ladies and gentlemen, good day and welcome to ICICI Bank Limited Q3 FY 'twenty four Earnings Conference Call. As a reminder, all participant lines will be in listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Bakshi, Managing Director and CEO of ICICI Bank.

Operator

Thank you and over to you, sir.

Speaker 1

Thank you. Good evening to all of you, and welcome to the ICICI Bank earnings call to discuss the results for Q3 for financial year 'twenty four. Joining us today on this call are Sandeep Bhakra, Rakesh, Ajay, Anandia and Abhinik. The Indian economy continues to remain resilient with upward revision in the GDP growth estimate We're financial year 'twenty four by RBI, reflecting the consistent actions and initiatives of the policy makers. As the liquidity and interest rate environment evolves, we would continue to monitor the developments closely.

Speaker 1

At ICICI Bank, our strategic focus continues to be on growing our core operating profit less provisions, I. E. Profit before tax, excluding treasury, through the 3 60 degree customer centric approach and by serving opportunities across ecosystems and micro markets. We continue to operate within our strategic framework to strengthen our franchise and expand our technology and digital offerings. Maintaining high standards of governance, deepening coverage and enhancing

Speaker 2

delivery capabilities are

Speaker 1

our focus areas for risk delivery capabilities are our focus areas for risk calibrated profitable growth. The profit before tax, Excluding treasury, grew by 23.4 percent year on year to INR135,510,000,000 in this quarter. The core operating profit increased by 10.3% year on year to INR146.01 billion in this quarter. The profit after tax grew by 23.6 percent year on year, rose INR102.72 billion in this quarter. Total deposits grew by 18.7% year on year and 2.9% sequentially at December 31, 2023.

Speaker 1

Term deposits increased by 31.2% year on year and 4.9% sequentially at December 31, 2023. During the quarter, the average current and savings account deposit grew by 5.3% year on year and 0.2% sequentially. The bank's average liquidity coverage ratio for the quarter was about 121%. The domestic loan portfolio grew by 18.8% year on year and 3.8% sequentially at December 31, 2023. The retail loan portfolio grew by 21.4% year on year and 4.5% sequentially.

Speaker 1

Including non fund based outstanding, The retail portfolio was 46.4 percent of the total portfolio. The business banking portfolio grew by 31.9% year on year and 6.5% sequentially. The SME portfolio grew by 27.5% year on year and 6.7% sequentially. The rural portfolio grew by 18.2% year on year and 4.6% sequentially. The domestic corporate portfolio grew by 13.3% year on year and 2.9% sequentially, driven by growth across well rated Financial and non financial corporates.

Speaker 1

The overall loan portfolio, including the international branches portfolio grew by 18.5% year on year and 3.9% sequentially at December 31, 2023. We continue to enhance our digital offerings and platforms to onboard new customers in a seamless manner, provide them end to end journeys and solutions and enable more effective data driven cross sell and up sell. We have shared some details on our technology and digital offerings in Slides 15 to 26 of the investor presentation. Net NPA ratio was 0.44 percent at December 31, 2023, compared to 0.43 percent at September 30, 2023 and 0.55% at December 31, 2022. During the quarter, there were net additions of INR 3,630,000,000 to gross NPA, excluding write off and sales.

Speaker 1

The total provisions during the quarter were INR10,500,000,000 or 7.2 percent of core operating profit and 0.36 percent of average advances. The provisioning coverage ratio on NPAs was 80.7% at December 31, 2023. In addition, the bank continues to hold contingency provision of INR131,000,000,000 or about 1.1% of total loans at December 31, 20 The capital position of the bank continued to be strong with the CET1 ratio of 16.03%, Payer bond ratio of 16.03 percent and total capital adequacy of 16.70 percent at December 31, 2023,

Speaker 2

including profits

Speaker 1

for the 9 months ended December 31, 2023. This includes the impact of Recent regulatory guidelines on increasing the risk based on consumer loans and credit to NBFCs. Looking ahead, we see many opportunities And backed by our digital offerings, process improvements and service delivery initiatives will enable us to deliver holistic solutions to customers in a seamless manner grow market share across key segments. We continue to make investments in technology, people, distribution and building our brand. We remain focused on maintaining the strong balance sheet with prudent provisioning and healthy levels of capital.

Speaker 1

The principles of return of capital Tier 2 customers, Tier 2 banks 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. I now hand the call over to Anandir.

Speaker 2

Thank you, Sandeep. I will talk about loan growth, credit quality, P and L details, growth in digital offering, portfolio trends and performance of subsidy. Starting with loan growth, Sandeep covered the loan growth across various segments. Coming to the growth across retail products, The mortgage portfolio grew by 15.9% year on year and 3.7% sequentially. Auto loans grew by 22.5 0.4% sequentially compared to 40.4% year on year and 10.2% sequentially at September 30, 2023.

Speaker 2

The bank worked on increasing pricing, further refining credit parameters and optimizing sourcing costs, resulting in lower disbursements of loans during the quarter as compared to the previous quarter. The credit card portfolio grew by 39.5% year on year and 11.5 The personal loans and credit card portfolio were 9.4% and 4.1% of the overall loan book, respectively, at December 31, 2023. The overseas loan portfolio in U. S. Dollar terms increased 9.8% year on year at December 31, 2023, the overseas loan portfolio was about 3.4% of the overall loan book.

Speaker 2

The non India linked corporate portfolio declined by 30.4 percent or about US116 $1,000,000 on a year on year basis. Of the overseas corporate portfolio, about 92% comprises Indian corporates, 4% is overseas corporates with Indian linkage, 2% comprises companies owned by NRIs or PIOs and the balance 2% is non India corporate. Moving on to credit quality. There were net additions of 3,630,000,000 to gross NPAs in the current quarter compared to INR1.16 billion in the previous quarter. The net additions to gross NPAs were INR23.02 billion in the Retail, Rural and Business Banking Portfolios.

Speaker 2

And there were net deletion of gross NPAs of INR19.39 billion In the corporate and SME portfolio, the gross NTA additions were INR 57,140,000,000 in the current quarter compared to INR 46 INR0.87 billion in the previous quarter. Recoveries and upgrades from gross NPAs, excluding write offs and sales, were INR53.51 billion in the current quarter compared to INR45.71 billion in the previous quarter. The gross NPE additions from the retail, rural and business banking portfolio were INR54.82 billion in the current quarter Compared to INR43.64 billion in the previous quarter, there were gross NPE additions of about INR6.17 billion from the Kitan credit card portfolio in the current quarter. We typically see higher NTA additions from the Kitan credit card portfolio in the first and Q3 of the fiscal year. Recoveries and upgrades from the retail, rural and business banking portfolio were INR31,800,000,000 compared to INR 30,190,000,000 in the previous quarter.

Speaker 2

The gross NPE additions from the corporate and SME portfolio were INR2.32 billion compared to INR3.23 billion in the previous quarter. Recoveries and upgrades from the corporate and SME portfolio were INR21.71 billion compared to of INR13.52 billion in the previous quarter. The gross NPAs written off during the quarter were INR13.89 billion. There was sale of NTAs worth INR0.36 billion in the current quarter compared to INR1.79 billion in the previous quarter. The sale of NPAs includes INR0.29 billion in cash and INR0.07 billion of security receipts.

Speaker 2

As these NPAs were fully provided, we continue to hold provisions against the security received. The non fund based outstanding to borrowers Classified as non performing was INR 36,940,000,000 as of December 31, 2023 compared to INR 38,860,000,000 As of September 30, 2023, the bank holds provisions amounting to INR20.61 billion against this non fund based outstanding. The total fund based outstanding towards standard borrowers under resolution at Surveyor's site declined to INR33.18 billion or about 0.3 percent of the total loan portfolio at December 31, 2023, from INR35.36 billion at September 30, 2020. Of the total fund based outstanding under resolution at December 31,020,000,000,000 was from the Retail Rural and Business Banking portfolio and INR 5,360,000,000 That's from the corporate and SME portfolio. The bank holds provisions of INR10.32 billion against these borrowers, which is higher than the requirement as per our GAAP guidelines.

Speaker 2

Moving on to the P and L details, net interest income increased by 13.4 year on year to RUB186.78 billion. The net interest margin was 4.43% in this quarter compared to 4 point 3% in the previous quarter and 4.65% in Q3 of last year. The sequential movement in NIM reflects The lagged impact of increase in term deposit rates over the last year on the cost of deposits. The impact of interest on income tax Refund on net interest margin was 4 basis points in Q3 of this year compared to nil in the previous quarter and in Q3 of last year. The domestic NIM was at 4.52% this quarter compared to 4.61% in the previous quarter and 4.79 percent in Q3 of last year.

Speaker 2

The cost of deposits was 4.72% in this quarter led to 4.53% in the previous quarter. Of the total domestic loans, interest rates on 49% are linked to the repo rate, 2% to other external benchmarks and 18% to NCLR and other older benchmarks. The balance, 31% of loans have fixed Interest rates. Non interest income excluding treasuries grew by 19.8% year on year to INR 59,750,000,000 In Q3 of 2024, fee income increased by 19.4% year on year to INR53,130,000,000 in this quarter. Fees from retail, rural, business banking and SME customers constituted about 79% of the total fees in this quarter.

Speaker 2

Dividend income from subsidiaries and associates was INR 6,500,000,000 in this quarter compared to INR 5,160,000,000 in Q3 of last year. The year on year increase in dividend income was primarily due to higher interim dividend from ICICI Securities, ICICI Prudential Asset Management and ICICI Securities' primary dealerships. On costs, the bank's operating expenses by 22.3% year on year in this quarter, employee expenses increased by 30.5% year on year in this quarter, Reflecting mainly the increase in the employee base from the second half of fiscal twenty twenty three onwards, The bank had about 141,000 employees at December 31, 2023. The number of employees has increased by about 23,006 100 in the last 12 months and about 1700 in the current quarter. Non employee expenses increased by 17.8 year on year in this quarter, primarily due to retail business related and technology expenses.

Speaker 2

Our branch count has increased by 123 In Q3 of 2024, and we had 6,371 branches as of December 31, 2023. The technology expenses were about 9% of our operating expenses in the 9 months ended December 31, 2023. The core operating profit increased by 10.3 percent year on year to INR146.01 billion in this quarter. Excluding dividend income from subsidiaries and associates, The core operating profit grew by 9.7% year on year. The total provision during the quarter were INR10.5 billion 7.2% of core operating profit and 0.36% of average advances compared to INR5.83 billion fees in the previous quarter.

Speaker 2

The provision during the quarter included the impact of INR6.27 billion First one is the recent RBI circular on investments in alternative investment funds. The provisioning coverage on NPAs was 80.7 As of December 31, 2023, in addition, we hold INR10.32 billion of provisions on borrowers under resolution. Further, the bank continues to hold contingency provision of INR131 1,000,000,000 as of December 31, 2023. At the end of December, the total provisions other than specific provisions on fundings outstanding to borrowers classified as non performing for INR230.25 billion or 2 percent of loans. The profit before tax, Excluding treasury, grew by 23.4 percent year on year to INR135,510,000,000 in Q3 of this year.

Speaker 2

There was a treasury gain of INR1.230 billion in Q3 compared to INR0.36 billion in Q3 of the previous year. The tax expense was INR34.02 billion in this quarter compared to INR27.02 billion in the corresponding quarter last year. The profit after tax grew by 23.6 percent year on year to INR102.72 billion in this quarter. Growth in digital offering, leveraging digital and technology across businesses is a key element of our strategy Of growing the risk calibrated core operating profit, we continue to see increasing adoption and usage of our digital platform by our customers. There have been more than 10,000,000 activations of IMobile Pay by non ICICI Bank account holders at end December 2023.

Speaker 2

Our merchant stack offers an array of banking and value added services to retailers, online businesses and large e commerce firms, Such as the digital current account opening, interest overdraft facilities based on point of sale transaction, connected banking services and digital store management among others. We have created more than 20 industry specific stacks, which provide bespoke and purpose based digital solutions 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. Our digital solutions integrate the import transaction lifecycle with solutions providing frictionless experience to the client and simplify customer journey. About 72% of trade transactions were done digitally in Q3 of 2024. The volume of transactions through the Trade Online platform in Q3 of 2024 grew by 26.2% year on year.

Speaker 2

We have further simplified cross border remittance journeys with new enhancements. Part IRM is a multiparty cross border virtual account architecture, enhanced security features and remittances reconciliation with payer identification. Smart ORM enables pre vetting of outward commitment transactions to ensure ever fee submission before booking foreign exchange deals. ILend, the retail lending platform currently enabled for mortgages is being upgraded on an ongoing basis with new features such as Integration with Account Aggregators, opening up instant paperless Savings Bank account for newly onboarded mortgage customers and instant property valuation reports for select developers to provide enhanced customer experience and serve the customers' 360 degree news digitally. Moving on, we have provided details on our retail business banking and Turning to performing corporate and SME borrowers rated BB and below was INR58.53 billion at December 31, 2023, compared to INR47.89 billion at September 30, 2023 and RUB55.81 billion at December 31, 2022.

Speaker 2

This portfolio is about 0.5% of our advances at December 31, 2023. Other than two accounts, the maximum single borrower outstanding in the BB and below portfolio was less than INR5 1,000,000,000 at December 31, 2023. At December 31, 2023, we held provisions of INR9,250,000,000 On the BB and Below portfolio compared to INR8.17 billion at September 30, 2023, This includes provisions held against borrowers under resolution included in this portfolio. The total outstanding to NBFCs and HFCs was INR784.84 billion at December 31, 2023, compared to INR837.49 billion At September 30, 2023, the total outstanding loans to NBFCs and HFCs were about 6.8% of our advances at December 31, 2023. The builder portfolio, including construction finance, Lease rental discounting, term loans and working capital was INR456.85 billion at December 31, 2023, Compared to INR 430.58 billion at September 30, 2023, the builder portfolio is about 4% of our total loan portfolio.

Speaker 2

Our portfolio largely comprises well established builders, and this is also reflected in the sequential increase in the portfolio. About 3% of the build up portfolio at December 31, 2023 was either rated BB and below internally or was classified as non performing compared to 3.5% at September 30, 2023. Moving on to the consolidated results, the consolidated profit after tax grew by 25.7% year on year to RUB110.53 billion in this quarter. The details of the financial performance of subsidies and key associates are covered in Slides INR 46,000,000 to INR 49,000,000 in the investor presentation. The annualized premium equivalent of ICICI Life was INR 54 point INR3 1,000,000,000 in 9 months ended December 31, 2023 compared to INR53.01 billion in 9 months of last year.

Speaker 2

The value of new business margin was 26.7% in 9 months ended December 31, 2023, Compared to 32% in 9 months of last year and 32% in fiscal 2023, the value of new business was INR14.51 billion in the 9 months ended December 31, 2023, compared to INR17.1 billion in the 9 months of last year. The profit after tax of ICICI Life was INR6.79 billion in 9 months ended December 31, 2023, compared to INR5.76 INR 6,000,000,000 in 9 months of last year and INR 2,270,000,000 in Q3 of 2024 compared to INR 2,200,000,000 in Q3 of 2023. The gross direct premium income of ICICI General was INR2.3 billion in this quarter compared to INR54.93 billion in the same quarter last year. The combined ratio stood at 103.6 percent in Q3 of 2024 compared to 104.4% in Q3 of 2023. Excluding the impact of cat losses, the combined ratio was 102.3% in this quarter.

Speaker 2

The profit after tax was INR4.31 billion in this quarter compared to INR3.53 billion in Q3 last year. The profit after tax of ICICI A and C as per Ind AS was INR5.46 billion in this quarter Compared to INR4.20 billion in Q3 of last year, the profit after tax of iTSAS securities as per NDS on a consolidated basis was INR4.66 billion in this quarter compared to INR2.81 billion in Q3 of last year. Icetia Bank Canada had a profit after tax of CAD13.9 million in this quarter compared to CAD11.5 million in Q3 last year. ICICI Bank U. K.

Speaker 2

Had a profit after tax of US6.7 million dollars this quarter compared to US3.1 million dollars in Q3 of last year. As per India, ICSA Home Finance had a profit after tax of INR1.86 billion in the current quarter compared to INR1.05 billion in Q3 of last year. With this, we conclude our opening remarks, and we'll be happy to take your

Operator

Thank you very much. We'll now begin the question and answer session. The first question is from line of Maruka Janya from Nuama. Please go ahead.

Speaker 3

Yes, hi. I just wanted to know about Operating expenses have not grown much this quarter. So going ahead, do we expect this kind of growth? Any comments on the OpEx

Speaker 2

As it's concerned, I think if you look at the non employee expenses, those are really growing in line with the business. And this quarter, of course, the advertising and sales promotion expenses on a year on year basis, the growth was on the higher side because of The tested season related spend, while last year the tested season was split over Q2 and Q3. So those are really going in line with the business. On the employee side, I think is where we have seen in recent over the last, I would say couple of years in the last maybe 6 quarters, a pretty high growth because of the increase In the clean size of the bank, but as you would have seen in this quarter, the net increase has slowed down, I mean, compared to about 10,000, I think, for 10,000 to 11,000 in the first half, we wrote about 1700 in Q3. So, we would, I think, not be probably looking at adding the kind of headcount at the same pace.

Speaker 2

So that will play through into the operating expenses as we go ahead.

Speaker 3

Okay. So the headcount Shins now will be moderate only. This is not just a one off.

Speaker 2

They will not be at the pace that we have seen over the last Over the previous 3 to 5 quarters, yes.

Speaker 3

Got it. And just in terms of LDR, there's a lot of discussion around it already. You are okay, but do you have any thoughts on LDR? I mean, would you like to retain LDR at current levels I'll bring it down. Any views on that?

Speaker 2

So the way we look at You know the balance sheet and the funding structure, Omar, is that we look at, I would say, 3 ratios, but certainly the CD ratio or the LDR, The LCR, which is a measure of current liquidity and the NSFR or the net stable funding ratio. So the SCR and the MSFR are a little more granular in the sense that they do take into account the nature of assets and liabilities In terms of product, counterparty and tenure, so we look at all 3. If we look at the The LCR and the NSFR, we are at well above the regulatory minimum. We are at about 120%. On the credit to deposit ratio, I think couple of things.

Speaker 2

1, typically, a bank with a higher level of capital We tend to have also higher CD ratio mathematically. When we look at our CD ratio, we also look at The overseas operations and the domestic balance sheet separately because they are managed separately and In the overseas operations, we have relatively limited deposit taking capability. Of course, now the impact is much lower than it used to be, say, 7, 8 years ago, because that portfolio has come down to less than 5% of our overall portfolio, but it does have a percentage point To work impact. As far as the bulk of the balance sheet, which is the domestic balance sheet, of course, Deposits are our primary source of funding, along with capital. In addition to that, we Always try to optimize between the wholesale deposit taking and the more stable wholesale sources like refinance And bonds.

Speaker 2

So in general, if you look at it over a longer period of time on the domestic balance sheet, our CD ratio has kind of hovered around the mid-80s other than periods of very high liquidity and very low loan growth Like the pandemic. So that is kind of the way in which we manage it looking at all these three ratios on an ongoing basis.

Speaker 3

Got it. And assuming that rates will remain stable, would you say that your margins have now bottomed out and this Repeat the level at or is deposit competition too strong to say that assuming no change in policy rates?

Speaker 2

So on the deposit side, I think the retail deposit rates have remained stable for a fair period of time now, at These are peak rates, although I think at various points of time banks have moved up and down in certain other buckets. Of course, in Q3, I think given the overall liquidity environment, we did see Some amount of hardening of the wholesale deposit rates, which is reflected in the CD rates and also the rates being quoted For high value kind of deposits. And I think if you look at even currently systemic liquidity is running at a negative. So I guess that scenario will stay for some time until maybe a monetary policy starts to Term a little more accommodative. So that's on the deposit rate side.

Speaker 2

From a margin perspective, I guess, We had said in the past that we expect the full year margin this year to be at a similar level than last year. And that implies some further margin compression in Q4, but it should be much lower than what we have I think Q3 was already much lower than Q2, and it should be lower than what we have seen in Q3.

Speaker 3

Okay. Thanks so much. Thanks a lot.

Operator

Thank you. I request all the participants Next question is from the line of Abhishek Murakah from HSBC. Please go ahead.

Speaker 4

Yes. Hi. Thanks for taking my question. So two questions. 1 on asset quality.

Speaker 4

So if I see your slippages In retail rural business banking, that has gone up, even if I knock off the Kitan credit card slippages. So can you explain where that has come from? And similarly on the recoveries and upgrades in corporate and SME, is there any kind of one off or what's happened there? That also improved

Speaker 2

Yes. So I think as far as the retail side is concerned, nothing Specific to call out, I think it's really spread across products. And if you look at the delta relative to the size The portfolio, it is not very high not particularly meaningful. So as we have been saying, we would Expect the net additions and both the gross and net additions on the retail side to gradually normalize upward, both as the portfolio Those and seasoned. On the corporate Ty, we did have 1 or 2 larger sort of upgrade this quarter.

Speaker 2

But in a way, the benefit In provisioning terms of that was kind of offset by the provisioning on the AIF So, investments. So, taking it all together, if we look at kind of the credit costs, If you look at the provisioning for the quarter and eliminate maybe a very chunky corporate upgrade, eliminate the AIF provisioning and when we try and look at an adjusted number, it would be still below kind of Maybe 50 bps of loans and about 10 bps of the PPOP. So that is the context in which we would look at The NPL formation and recoveries from our planning and risk appetite perspective.

Speaker 4

Yes. And sort of extending that, does it mean that even in the next few quarters, we should continue to see Trade costs in that range because you have enough PCR anyway and that can come down a little bit. So trade costs can remain low for, let's say, next 3 to 4 quarters. Is that a fair conclusion?

Speaker 2

We don't really give forward looking thing, but I would say that, yes, I mean, I don't see Anything imminently that would cause it to spike up. There will be some gradual normalization upwards.

Speaker 4

Got it. And my second question is just on cost of deposits. If you can share maybe your incremental cost of TD's Or incremental cost of deposits, anything that you may have handy, that would be helpful.

Speaker 2

So we are not we don't publish those That is under the admission.

Speaker 4

Okay. Got it. Got it. Thank you and all the best.

Operator

Thank you. Next question is from the line of Rick Khansham from IIFL. Please go ahead.

Speaker 1

Thank you for taking the questions. I just have one question on cost of deposits. If you could just qualitatively comment as to the repricing on the existing book of TD, Would you say that by 4Q, a large or most of it would already be repriced into the P and L or it could flow into 1Q as well?

Speaker 2

There could be some flow into 1Q as well, but I think Most of it should be done in Q4. There could

Speaker 1

be some flow into 1Q as well. In this quarter, it Increase 20 bpsqoq. So in terms of the quantum, should it be kind of slowing down from the current run rate?

Speaker 2

I would get it.

Speaker 1

Okay, fine. Thank you, sir. That's all.

Operator

Thank you. Next question is from the line of Kunal Shah from Citigroup. Please go ahead.

Speaker 5

Thanks for taking the question. So the question is on yield. When we look at it, in fact, the rise in some of the high yielding portfolio, sequential growth has been strong. And we would have increased the rates, even suppose the tweaking of the risk quits by RBI, but still overall build on advances are down. So just want to understand on that date.

Speaker 5

And this entire NBFC rundown which has been there, is it like we tried to pass it on in terms of the rates and then there were repayments or We have been conservative for the risk quit stance from REI.

Speaker 2

So on the first question, I think part of the Impact on the Advancer yield is because of the addition to the KCC NPL. So basically what happens is that you Kind of have to you do recognize a year's worth of interest income. So that does impact the yield on advances. In other parts, 1, if you look at the Share of the high yielding portfolio, it is still not that high and we have seen Recent growth in mortgages and auto and so on and also on the corporate side, so which continue to be pretty competitive. So I would say the yields have been broadly stable and to some extent Any mix benefit that could have come has been offset by the non accrual on the KCC loan.

Speaker 2

On the sorry, the second question was on the NDSC exposure. I don't yes, I mean, I guess that We keep looking at the various exposures from a risk reward basis. I mean, we did not have any credit confirm On these exposures, they were finely priced exposures and we Have, therefore, the borrowers couple of borrowers are prepaid and we were quite okay with that.

Speaker 5

And how much rate pass on or was there in NBFC?

Speaker 2

It would really depend on the client. I don't think there is any We will have some in that sense. As you see the book itself, I mean even adjusting for This prepayment has not really grown much during the quarter. So there would not have been any Very large lending that would have happened to refresh.

Speaker 5

Okay. Okay. Yes. Thank you.

Operator

Thank Next question is from the line of Nitin Agarwal from Motilal Oswal. Please go ahead.

Speaker 2

Yes. Hi. Thanks for the opportunity and congrats on good results. So one question again around the yield and as to really how do you look at the competitive intensity in unsecured products? And even in the mortgage, are you seeing that lenders cutting down on spreads because the repo rates have been unchanged, but are the rates like seeing some moderation there?

Speaker 2

And so basically and going forward, how do you see the unstructured loan mix also moving for the bank? Because until now, it has been very steady and Some other private banks are indicating that they will continue to drive that up. So what will be our approach on the unsecured loan mix? So these two questions. So I think as far as the market competitive intensity in rates, that is kind of Continuing, I think we'll have to see if things change in Q4, but certainly in Q3 across most of the products, Mortgages and corporate lending, we continue to see a fair degree of competitive intensity.

Speaker 2

The way we look at it is to try and be disciplined in our pricing and to kind of look at the customer and see what are the what is the total relationship value that we can have with The client and their ecosystem and then take a call on the loan pricing. I mean, we, in general, are not particularly focused on loan growth. So in that sense, we are able to calibrate our pricing decision. I'm sorry, what was your second question?

Operator

Yes.

Speaker 2

So just related to this, like has your aggregate mortgage portfolio yield come down over, say, the second quarter? No, it could not have because incremental business takes time to see You had another question after the yield competitive mix. I'm sorry, Amit.

Speaker 1

And that was like

Speaker 2

on the unsecured loan mix, How would you assume that? On the unsecured loan mix, I think as far as personal loans is concerned, as we have mentioned, we have taken some Steph, in terms of refining the credit parameters, basically in any portfolio, you have certain cohorts which contribute more To the delinquency and you try to figure out what are the origination markers of those cohorts and then cut origination in Those particular segments, which is what we've done and we've also rationalized, for example, sourcing payouts as well as We moved our pricing on personal loans by maybe 30, 25 basis points. So I would expect that Growth in that portfolio may continue to moderate a little bit even from a current level. But from overall P and L impact, I would think that it should not have much of a P and L impact because In any product or business, it's not just about the yield and the margin. Hopefully, If we are managing the sourcing cost well and that will contribute to profitability and hopefully if we are As you know, reducing in the right cohorts, that will contribute to credit costs being better as well.

Speaker 2

Right. And around credit calls, any comments around that? No, I think I spoke earlier in relation to Your question, I mean, I do agree that there is some noise in that line item this quarter because of the AIS and the large corporate recovery. But if one Kind of tries to broaden that out. As I said, we are we would be at about maybe 50 bps of loans and 10 Percent of the PPOT.

Speaker 2

So it's a site well contained and sort of within our risk category. Okay, sure. Thanks, Hamal. Thank you so much. I wish you all the best.

Operator

Thank you. Next question is from the line of MB Mahesh from Kotak Securities. Please go ahead.

Speaker 1

Anandir, just two questions. One is on Slide 34. There has been a drop in the AA kind of a rated portfolio and an increase in the BBB part of the portfolio?

Speaker 2

Yes. So actually, Mahesh, I think 2 things largely explain that. One is that The reduction in the NBFC portfolio, most of our NBFC portfolio is well rated, rated A and above. So as a result of the reduction in that portfolio, we would have seen some reduction in the outstanding in the higher rated category. And the second factor was that we had one of the larger upgrades of NPLs that we had I got upgraded I got rated in the BBB family on upgrade.

Speaker 2

So it's So one is sort of, I would say, positive movement from a capital and profitability perspective. The other is a Positive movement from a credit perspective. But yes, because of those 2, the mix does look Slightly different. Okay.

Speaker 1

Second question, is there an interest towards an impact on the account of the KBC quarter sum, Which is meaningful?

Speaker 2

We have not really given a number. I mean that's Part of the sort of margin happens every 1st and third quarters. So, we've not called out that number

Speaker 1

Anup, this I didn't get the line of

Speaker 5

on the

Speaker 1

on secured loans, are you saying that things have started to worsen or you say that It is at the margin, I mean, more or less the same.

Speaker 2

So I think it is remaining more or less the same. I mean, we have Looking at that portfolio very closely, as I said, in any portfolio at any point of time, there's always a bottom cohort, which Bank could sort of build it out. And given the overall commentary on unsecured and The increase in capital charge and so on, we have tried to sort of trim that part of the portfolio.

Speaker 1

Perfect. Thank you.

Operator

Thank you. Next question I start on the line of Chintan Joshi from Autonomous. Please go ahead.

Speaker 6

Thank you. So can I just follow-up on that unsecured point you made? So you mentioned that some cohorts are seeing different delinquency trends on unsecured. If you were to do cohorts by time of origination, is the recent kind of origination Shane, seeing different delinquency trends, so not breaking cohort by quality, but by time. Are you seeing any difference?

Speaker 2

I think the markers we look at are more in terms of the characteristics of the customer and how If I find wherever if you are able to look at delinquency in terms of the characteristics of the customer and see What kind of loan borrowers are contributing more to delinquencies, not to do with time as such.

Speaker 6

And if you do look at TAM, is it similar trends so far as say a loan given at the end of COVID and Versus kind of in the last 6 months?

Speaker 2

I don't think we have really commented on that.

Speaker 6

Okay. The other question I had was on Cost of deposits have increased 19 bps quarter on quarter. You are indicating some more NIM pressure, But I doubt you're referring like if I think about the exit run rate, if I keep NIMs flat On a FY 'twenty four versus FY 'twenty three basis, then it would be kind of 4.2, but that I don't think that's what you're Trying to imply. So if I break that down a little bit more, could you give some color on how much more repricing is left on the deposit side that we can factor in?

Speaker 2

We've not given earlier how much more repricing on the deposit side. I think what we So there will be some more increase in the cost of deposits in Q4 and possibly a little bit into Q1 as well. It should be less than what we have seen and the NIM impact should also be less than what we have seen in this quarter. Okay.

Speaker 6

And a final quick one, any indication on branch expansion number for FY 'twenty five?

Speaker 2

No, not really. I think this quarter, we added about 123 branches. So As we have said in the past, we follow a pretty bottom up approach. I mean, it's the people closest to the market who kind of Recommend branch openings and then we do some assessment and open it. So we are not holding back on any branch opening, but we don't have a particular Branch opening target, I think.

Operator

Thank you. Next question is from the line of Param Subramanian from Nomura. Please go ahead.

Speaker 1

Yes. Hi. Thanks for taking my question. So on the average CASA ratio, so if you look at it quarter on quarter, we are not seeing any let up in the pace at which this is moderating. So any indication on where do you see this, say, bottom order starting to pick up?

Speaker 2

Or do we have to wait for a

Speaker 1

much more loser liquidity environment like you were alluding to earlier? Yes.

Speaker 2

So, Faram, I think this is something you're seeing to varying degrees across the system, across all banks. I think in our context, we are probably doing relatively better on the current account side. I think our Payment products and payment platform are contributing to that to higher float balances. On the power side, I think it's much more a function of interest rates and consumption. So I guess, I don't have an answer at the moment.

Speaker 2

I think we will have to Wait for a couple of quarters and eventually see how things pan out next year as liquidity sort of Normalizes in the system.

Speaker 1

Got it. Anandya, just one more question again around this, but how are we geared towards, say, government spend coming back? Yes. How much is that, if you can give some direction number as a percentage of our deposits, say, so when that comes back, how does that help you in terms of Casa as well as overall deposits.

Speaker 2

So we don't take I mean, Our focus as far as the government is concerned is more from providing solutions which enable them to manage their cash flow and You know provide MIS reconciliation digital solutions. So yes, the flow of that money through our system does create growth. It is some part of our base, but one caveat is that the government is also becoming Progressively more efficient in the way in terms of the way in which it manages its finances. So I don't think one can rely too much

Operator

Thank you. Ladies and gentlemen, we will take that as the last question. I now hand the I will now turn the call over to the management for closing comments.

Speaker 2

Thank you very much for taking the time on a Saturday evening as always and Happy to speak on any other clarifications. Thank you.

Operator

Thank you very much. On behalf of ICICI Bank

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Earnings Conference Call
ICICI Bank Q3 23/24
00:00 / 00:00