ICICI Bank Q1 24/25 Earnings Call Transcript

Quartr
Provided by Quartr
July 27, 2024

There are 7 speakers on the call.

Operator

Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Bhakshi, 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 Q1 of financial year 2025. Joining us today on this call are Sandeep Batra, Rakesh, Ajay, Anandya and Abhinay. The Indian economy continues to remain resilient as reflected by high frequency indicators, growing growth momentum such as expansion in manufacturing and services PMI, higher tax collections, real estate buoyancy and pickup in rural demand, supported by the consistent actions and initiatives of the policy makers. At ICICI Bank, our strategic focus continues to be on growing profit before tax, excluding treasury, through the 3 60 degree customer centric approach and by serving opportunities across ecosystems and micro markets.

Speaker 1

We continue to operate within our strategic framework to strengthen our franchise, maintaining high standards of government, deepening coverage and enhancing delivery capabilities, our focus areas for our risk calibrated profitable growth. The profit before tax excluding treasury grew by 11.8% year on year to INR140,801,000,000 in this quarter. The core operating profit increased by 11% year on year to INR154.12 billion in this quarter. The profit after tax grew by 14.6 percent year on year to INR110,590,000,000 in this quarter. Total deposits grew by 15.1% year on year and 0.9% sequentially at June 2024.

Speaker 1

Term deposits increased by 19.9% year on year and 3.1% sequentially@june30, 2020 4. During the quarter, average deposits grew by 17.8% year on year and 3.3% sequentially and average current and savings account deposits grew by 9.7% year on year and 5.1% sequentially. The bank's average liquidity coverage ratio for the quarter was about 123%. The domestic loan portfolio grew by 15.9% year on year and 3.3% sequentially at June 30, 2024. The retail loan portfolio grew by 17.1% year on year and 2.4% sequentially.

Speaker 1

Including non fund based outstanding, the retail portfolio was 46.3% of the total portfolio. The business banking portfolio grew by 35.6% year on year and 8.9% sequentially. The SME portfolio grew by 23.5% year on year and 4% sequentially. The rural portfolio grew by 16.9% year on year and 3.4% sequentially. The domestic corporate portfolio grew by 10.3% year on year and 3.1% sequentially.

Speaker 1

The overall loan portfolio, including the international branches portfolio, grew by 15.7% year on year and 3.3% sequentially at June 30, 2024. The net NPA ratio was 0.43 percent at June 30, 2024 compared to 0.42% at March 31, 2024 and 0.48% at June 30, 2023. During the quarter, there were net additions of INR 26,240,000,000 to gross NPAs, excluding write offs and sales, reflecting mainly the seasonal higher additions in the Kissan credit card portfolio and lower recoveries and upgrades compared to previous quarter. The total provisions during the quarter were INR 13,320,000,000 or 8.6 percent of core operating profit and 0.43 percent of average advances. The provisioning coverage ratio on NPAs was 79.7% at June 30, 2024.

Speaker 1

In addition, the bank continues to hold contingency provisions of INR 131,000,000,000 or about 1.1 percent of total loans at June 30, 2024. The capitalization of the bank continues to be strong with the CET1 ratio of 15.92 percent and total capital adequacy ratio of 16.63% at June 30, 2024, including profits for Q1 of 2025. Looking ahead, we see many opportunities to drive risk calibrated profitable growth. We believe our focus on Customer 360, extensive franchise and collaboration within the organization, backed by our focus on enhancing delivery systems and simplifying processes, will enable us to deliver holistic 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.

Speaker 1

We are laying strong emphasis on strengthening our operational resilience for seamless delivery of services to customers. We remain focused on maintaining the strong balance sheet with prudent provisioning and healthy levels of capital. The principles of return of capital, Tier 2 customers, Tier 2 bank and 1 bank, 1 team will continue to guide our operations. We remain focused on delivering consistent and predictable returns to our shareholders. I'll now hand the call over to Anand Jain.

Speaker 2

Thank you, Sandeep. I will talk about loan growth, credit quality, P and L details, growth in digital offerings, portfolio trends and performance of subsidies. Suneet covered the loan growth across various segments. Coming to the growth across retail products, the mortgage portfolio grew by 14.2 percent year on year and 2.5 percent sequentially. Auto loans grew by 14.8% year on year and 1.7% sequentially.

Speaker 2

The commercial vehicles and equipment portfolio grew by 13.9% year on year and 2.2% sequentially. Personal loans grew by 24.9% year on year and 1.5% sequentially. The credit card portfolio grew by 31.3 percent year on year and 4.2 percent sequentially. The personal loan and credit card portfolio were 9.7% and 4.4% of the overall loan book, respectively, at June 30, 2024. The overseas loan portfolio in U.

Speaker 2

S. Dollar terms grew by 5 0.4% year over year at June 30, 2024. The overseas loan portfolio was about 2.8% of the overall loan book at June 30, 2024. The non India linked corporate portfolio declined by 9% or about US24.8 million dollars on

Speaker 3

a year on year basis.

Speaker 2

Of the overseas corporate portfolio, about 92% comprises Indian corporates, 6% overseas corporates with Indian linkage, 1% comprises companies owned by NRIs or PIOs and the balance one percent non India corpus. Moving on to credit quality. The gross NPA additions were gross NPA additions were INR59,160,000,000 in the current quarter compared to INR51,390,000,000 in the previous quarter. However gross NTA additions of about INR7.21 billion from the Kifan credit card portfolio in the current quarter. We typically see higher NPA additions from the Kifan credit card portfolio in the first and Q3 of fiscal year.

Speaker 2

Recoveries and upgrades from gross NPAs, excluding write offs and sales, were INR 32.92 billion in the current quarter, compared to INR 39.18 billion in the previous quarter. The net additions to gross NPAs were at RMB26.24 billion in the current quarter compared to RMB12.2 5,000,000,000 in the previous quarter. The gross NPA additions from the retail, rural and business banking portfolio were INR 57.32 billion in the current quarter compared to INR 49.28 billion in the previous quarter. The additions for the quarter include the KCC NPAs mentioned earlier. Recoveries and upgrades from the retail rural and business banking portfolio were INR29,330,000,000 compared to INR 32,170,000,000 in the previous quarter.

Speaker 2

The net additions to gross NPAs in the retail, rural and business banking portfolios were INR 27,990,000,000 compared to INR 17,110,000,000 in the previous quarter. The gross NPE additions from the corporate and SME portfolio were INR 1,840,000,000 compared to INR 2,110,000,000 in the previous quarter. Recoveries and upgrades from the corporate and SME portfolio were INR 3,590,000,000 compared to INR 7,010,000,000 in the previous quarter. There were net deviations of gross NPAs of INR1.75 billion in the corporate and SME portfolio compared to INR4.90 billion in the previous quarter. The gross NPAs written off during the quarter was INR 17,530,000,000.

Speaker 2

There was sale of gross NPAs of INR 1 point 14,000,000,000 in the current quarter compared to INR 3,270,000,000 in the previous quarter. The sale of NPAs includes about RUB1.02 billion in cash. The non fund based outstanding to borrowers classified as non performing was INR 35,430,000,000 as of June 30, 2024, compared to INR 36,710,000,000 as of March 31, 2024. The bank holds provisions amounting to INR 19,640,000,000 against this non fund based outstanding. The total fund based outstanding to all standard borrowers under resolution as per various guidelines declined to INR 27,350,000,000 or about 0.2% of the total loan portfolio at June 30, 2024 from INR 30,590,000 at March 31, 2024.

Speaker 2

Of the total fund based outstanding under resolution at June 30, 2024, RUB 23,250,000,000 was from the retail, rural and business banking portfolio and INR 4,100,000,000 was from the corporate and SME portfolio. The bank holds provisions of INR8.63 billion against these borrowers, which is higher than the requirement as per RBI guideline. Moving on to the P and L details, net interest income increased by 7.3% year on year to RUB195.53 billion in this quarter. The net interest margin was 4.36% in this quarter compared to 4.40% in the previous quarter and 4.78% in Q1 of last year. The impact of interest on income tax refund on net interest margin was nil in the current and previous quarter and was 3 basis points in Q1 of last year.

Speaker 2

The domestic net interest margin was 4.44 percent in this quarter compared to 4.49% in the previous quarter and 4.88% in Q1 of last year. The cost of deposits was 4.84% in this quarter compared to 4.82% in the previous quarter. Of the total domestic loans, interest rates on 50% of the loans are linked to the repo rate, 2% to other external benchmarks and 17% to LCLR and other older benchmarks. The balance 31% of loans have fixed interest rates. Non interest income, excluding treasury, grew by 23.3 percent year on year to INR 63,89,000,000 in Q1 of 2025.

Speaker 2

Fee income increased by 13.4 percent year on year to INR 64,900,000,000 in this quarter. Fees from retail, rural, business banking and SME customers constituted about 78% of the total fees in this quarter. Dividend income from subsidies was RUB 8,940,000,000 in this quarter compared to RUB 2,900,000,000 in Q1 of last year. The year on year increase in dividend income was primarily due to a dividend from ICICI Securities, ICICI Lombard General Insurance and ICICI Prudential Life Insurance in Q1 of this year compared to Q1 of last year. On costs, the bank's operating expenses increased by 10.6% year on year in this quarter compared to 19% in FY 2024.

Speaker 2

In Q4 of last year, the year on year increase was 12.9%, adjusted for a one off in the previous year's base, as we had stated on the earnings call. Employee expenses increased by 12.5% year on year in this quarter, reflecting mainly the impact of annual increments and promotions that takes place during the Q1 of every fiscal year. Non employee expenses increased by 9.2% year on year in this quarter, primarily due to retail business related and technology expenses. The technology expenses were about 9 point 3% of our operating expenses in this quarter. Our branch count has increased by 64 in the first quarter.

Speaker 2

We had 6,587 branches as of June 30, 2024. The total provision during the quarter were INR 13,320,000,000, a year on year increase of 3.1 INR12.92 billion in Q1 of 2024. This includes the impact of release of AIF related provisions of INR 3,89,000,000 during the quarter, pursuant to clarity on the regulatory requirements. The provision during the quarter were 8.6 percent of core operating profit and 0.43 percent of average advances, compared to 9.3% of core operating profit and 0.49% of average advances in Q1 of 2024. Adjusting for the AIS provision release and the seasonality of KCC provisioning, which comes in only in Q1 and Q3, the credit cost to advances would be about 50 basis points, which is the adjusted credit cost level we had spoken of in the earnings call for the previous two quarters as well.

Speaker 2

The provisioning coverage on NTAs was 79.7 percent as of June 30, 2024. In addition, we hold INR8.63 billion of provisions on borrowers under resolution, as I mentioned earlier, and the bank continues to hold contingency provision of INR131 1,000,000,000 as of June 30, 2024. At the end of June, the total provisions other than specific provisions on fund based outstanding to borrowers classified as non performing were INR234.03 billion or 1.9 percent of loans. The profit before tax excluding treasury grew by 11.8% year on year to INR140.80 billion in Q1 of this year. Treasury gains increased to INR6.13 billion in Q1 from INR 2,520,000,000 in Q1 of the previous year, primarily reflecting and realized and mark to market gains on equity and on security receipts.

Speaker 2

As you are aware, from the Q1 of this year, the revised investment guidelines have become applicable under which the mark to market gain on investments classified as fair value through P and L flows through the P and L, which was not getting recognized prior to the introduction of these guidelines. And hence the future course of treasury gains will depend on these market movements. The tax expense was INR 36,340,000,000 in this quarter, compared to INR 31,990,000,000 in the corresponding quarter last year. The profit after tax grew by 14.6 percent year on year to INR 110,590,000,000 in this quarter. Sandeep earlier talked about the capital adequacy position with the CET1 ratio, including profits for Q1 of 2025 of 15.92 percent, Tier 1 ratio of 15.92 percent and total capital adequacy ratio of 16.63% at June 30, 2024.

Speaker 2

These ratios include the impact of increase in risk weighted assets for operational risk, which is computed in the Q1 of every fiscal year and also the impact of the revised investment guidelines that are clickable became applicable during the Q1. Growth in our digital offering, we continue to enhance the use of technology in our operations to provide simplified solutions to customers. The bank has launched an industry first initiative, Smart Lock, that empowers customers to instantly lock or unlock key banking services such as UPI, debit cards and credit cards with just one click on IMobile Pay. About 71% of paid transactions were done digitally in Q1 of 2025 and the volume of transactions through our trade online platform grew by 21.5% year on year in Q1 of 2025. We have provided details on our retail business banking and SME portfolio in Slides 25 to 32 of the investor presentation.

Speaker 2

The loan and non fund based outstanding to performing corporate and SME borrowers rated WBD and below was RMB52.86 billion at June 30, 2024, compared to RMB55.28 billion at March 31, 2024. This portfolio was about 0.43 percent of our advances at June 30, 2024. Other than 2 accounts, the maximum single dollar outstanding in the BB and below portfolio was less than RUB5 1,000,000,000 at June 30, 2024. At June 30, 2024, we held provisions of RUB8.49 billion on the BB and Below portfolio compared to INR9.03 billion at March 31, 2024. This includes provisions held against borrowers under resolution included in this portfolio.

Speaker 2

The total outstanding to NBFCs and HFCs was INR 854,120,000,000 at June 30, 2024, compared to INR773.68 billion at March 31, 2024. The total outstanding loans to NBFCs and HFCs were about 7% of our advances at June 30, 2024. During the current quarter, the increase in the NBFC portfolio was primarily due to lending opportunities to higher rated borrowers as well as opportunities for investment via the bond market. The builder portfolio, including construction finance, lease rental discounting, term loans and working capital was RUB 521.30 billion at June 30, 2024, compared to RUB 482.92 billion at past 31, 2024. The build up portfolio was about 4.3% of our total loan portfolio.

Speaker 2

Our portfolio largely comprises well established build outs and this is also reflected in the sequential increase in the portfolio. About 2.2% of the build up portfolio at June 30, 2024 was either rated BB and below internally or was classified as non performing compared to 2.7% at March 31, 2024. Moving on to the consolidated results. The consolidated profit after tax grew by 10% year on year to INR 116,960,000,000 in this quarter. The details of the financial performance of subsidiaries and key associates are covered in Slides 40 to 42 and 62 to 67 in the investor presentation.

Speaker 2

The annualized premium equivalent of ICICI Life increased to INR 19,600,000,000 in Q1 of 2025 from INR 14,610,000,000 in Q1 of 2024. The value of new business increased to INR 4,720,000,000 in Q1 of 2025 from INR 4,380,000,000 in Q1 of 2024. The value of new business margin was 24% in Q1 of 2020 5 compared to 24.6 percent in fiscal 2024. The profit after tax of iSESY Life increased by 8.7% year on year to INR 2,250,000,000 in Q1 of 2025 compared to INR 2,070,000,000 in Q1 of 2024. The gross direct premium income of ICICI General was INR 76,880,000,000 in Q1 of 2025, compared to RMB63.87 billion in Q1 of 2024.

Speaker 2

The combined ratio stood at 102.3% in Q1 of 2025 compared to 103.8% in Q1 of 2024. The profit after tax was INR 5,800,000,000 in Q1 of 2025 compared to INR 3,900,000,000 in Q1 of 2024. The profit after tax with ICICI AMC as per India was INR 6,330,000,000 in this quarter, compared to INR 4,740,000,000 in Q1 of last year. The profit after tax of ICICI's security that stood in layers on a consolidated basis was INR5.27 billion in this quarter compared to INR2.71 billion in Q1 of last year. Icetia Bank Canada had a profit of INR20.3 million in this quarter compared to INR16.4 million in Q1 last year.

Speaker 2

ICICI Bank UK had a profit after tax of C7.7 million dollars in this quarter compared to C9.4 million dollars in Q1 of last year. As per India, Sytheshia Home Finance had a profit asset tax of INR1.17 billion in the current quarter compared to INR1.05 billion in Q1 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'll now begin the question and answer session. The first question is from the line of Marukh Ajani from Nomura Institutional Securities. Please go ahead.

Speaker 4

Yes, hi, congratulations. My first question is on So are you still comfortable with maybe targeting a loan growth of mid to high teens? And would you be comfortable increasing your LDR since it's already lower than peers? Or would deposits continue to grow in line with loans? That's my first question and then I have 2 more.

Speaker 2

So, Maruk, we don't target any particular level of loan growth. But we have grown our deposits quite comfortably during the quarter at average deposit growth of 17% on an average basis and 15% plus on a period end basis. So we don't the deposit flows are quite healthy and in terms of supporting the loan growth. As you said, the deposit rates continue to be tight. The wholesale deposit rates have not really come down during the Q1 as they do usually do.

Speaker 2

And off rate, there is 1 or 2 hikes in the retail deposit rate also, although one case, it is at a longer tenure. So we'll have to see how the deposit market moves going ahead, but we are not we don't see that as a constraint in terms of the available lending opportunities. On the lending side also, I think there is price competition the other way and we are seeing fair amount of competition particularly on the corporate side. So we'll keep calibrating both. As far as the LDR is concerned, I think it's low to mid-80s is the level of domestic LDR that we have historically operated at.

Speaker 2

And I don't see any big change in that. It may vary 1 quarter here up or down, but broadly it should be at that level. As far as both deposit growth and loan growth are concerned, of course, over the next couple of quarters, we will also have to take into account the implications of the revised guidelines on ACR, the draft which has come, which will have some impact on both deposit markets and loan markets. So we'll have to see that as we go along as well.

Speaker 4

Okay. So my other two questions, one is if you have any rough calculation on NCR and can we assume that 90%, 95% of deposits would fall under the digitally enabled tab? And the other question is just on retail recoveries, right? So obviously, do you see them slow down because there's a lot of in your customer segments because there's a lot of discussion on customer leverage in some segments or the other. So in your set of customers, do you see the retail recovery flowing in as smoothly as you saw last year?

Speaker 4

How does it play out?

Speaker 2

On the first one, we I think it's a fairly easy calculation to do because the LPR disclosures are public. And at least I think all the analyst reports that we've seen as of yesterday for the major banks talk about between a 10% 14%, 15 percentage point impact. And I think that's a fair estimate. On the recoveries, I think we have been saying for some time that the pace of recoveries will vary and may not continue at the same pace because we were still collecting out of the pool of NPS that got created in fiscal 2021, fiscal 2022. So that pace will slow will come off, but and therefore the credit costs will also normalize upward.

Speaker 2

But as I mentioned earlier, finally, if we look at it, the credit costs are still at or below around 50 basis points. And the NPA ratios, provisioning coverage are all fine. So I think that's the way we would look at it.

Speaker 4

Okay. Thanks a lot. Thanks.

Operator

Thank you. Next question is from the line of Nathan Agarwal from Motilal Oswal. Please go ahead. Nathan, may I request on mute your line and go with the question, please?

Speaker 5

Hello. Am I audible?

Operator

Yes, you are now. Go ahead.

Speaker 5

Yes. Thank you so much. And congrats on a good quarter. I have two questions. First is on the cards portfolio like there are few other banks and NDCs have reported acute stress in this segment and the system in general is seeing some rise in delinquencies.

Speaker 5

So how do you see the asset quality outlook here? And if you can just also provide some color on the credit cost currently versus the long period average, some qualitative color around that will also be helpful. So that's one first question.

Speaker 2

Yes. As far as cards is concerned, it's less than 5% of our loan portfolio and whatever happens in the credit cost there has flowed into the overall numbers. I would say that it is we see it as a growth business and we are investing in growth in that business in terms of both products and distribution and our offerings. So that's a business we would like to grow. On the credit cost, if you're asking about on the overall basis, I think we are as I said, currently, we seem to be operating at about 50 bps.

Speaker 2

This I would expect it to further normalize gradually. But what the long period average will be in the kind of portfolio construct and the systemic construct that we have now is difficult to say at this point. But I would say that it will be better than historical levels for sure.

Speaker 5

Okay. And but Ananda also meant this credit cost outlook on the cards specifically, like how do you compare versus long period average?

Speaker 2

We don't really call that out. As I said, it's about 5% of our book, but it is a book we would be very keen to grow.

Speaker 5

Okay, okay. Sure. And the other question is on the yield on advances, which has come down this quarter around 8 basis points. So how do you read that? Is it like that the yields have peaked out and will sustain around current levels?

Speaker 5

So how do you really read this?

Speaker 2

So, part of it would just be the impact of the non accrual on the KCC portfolio because there is unlike that is non accrual of interest accrued over a slightly longer period. That will be one component. And others, there will be some small movements here and there, nothing really specific to call out. On lending rates per se, as I said, I think we continue to see a reasonable amount of competition, particularly on the corporate side.

Speaker 5

Sure. And just one clarification, the treasury gain also, which is a higher number this quarter versus our updates that we have reported in the prior years? So some details as to behind this gain and how do we like to see this moving?

Speaker 2

So we would have made gains from our normal proprietary trading business, which trade equities, fixed income and currency. We also had some gains on our security receipts portfolio, both realized gains because there were redemption of the security receipts. And then there would be the 1st component would largely be the mark to market on the fair value through P and L portfolio, which earlier we had to only take the negative NPM impact. Now under the new guidelines on the AFS portfolio with NPM impact either positive or negative close to the AFS reserve. And on the fair value to P and L portfolio, whether positive or negative, it flows through to the P and L.

Speaker 2

And in this quarter, it would have been been a positive impact. So those would be the 3 impacts. In the overall context, even at INR 6,000,000,000, the treasury profit number is not is a pretty small component of the P and L.

Speaker 5

Right. Got it. Thanks, Ananda so much and wish you all the best.

Operator

Thank you very much. Next question is from the line of Manish Shukla from Axis Capital. Please go ahead.

Speaker 5

Yes. Good evening and thank you for the opportunity. Just going back to the yield on loans question on the Q o Q, I appreciate that. But even if you look at Y o Y, the yields are 9.86 to 9.8. During this period, the share of retail, SME and Business Banking has gone up, which I believe is higher yielding business.

Speaker 5

MCLR rates will be higher. GMPA proportion is lower and yet the yield on advances have not gone up. What would explain that?

Speaker 2

I think the yield on advances really has been at a stable level over the last year. If you look at all the categories that we mentioned, there has been no real increase in market pricing, which would have taken the ease up. In fact, if we look at, for example, as you know, even on something like personal loan, the lending rates were at very low teens kind of lending rates. The mortgage market has been very competitive as has been the corporate market. So there is no real case for yields to go up.

Speaker 2

Also on the SME and Business Banking side, I think we and I would guess other private sector banks are or most banks are operating at really the upper end of the quality spectrum. So it's not in itself a high yield business in that sense. So in that context, I think the yields are quite okay. It's in terms of the yield movement reported.

Speaker 5

Okay, sure. Secondly, OpEx growth for the full year, how should we really think about it relative to either balance sheet growth or income growth? And if you could talk about it separately in terms of employee and non employee expenses?

Speaker 2

If you don't give guidance on expenses or different components of expenses, but as you would have seen, the OpEx OpEx growth has been coming down over the quarters and the adjusted growth for Q4 was also between 12% 13%. This quarter it is 10% odds. So I would expect that that should be a fair indicator. I don't think that there is anything that should take it up materially in our business as usual sense.

Operator

Next question is from the line of Abhishek Murakh from HSBC. Please go ahead.

Speaker 3

Hi, good evening everyone. Thanks for taking my questions. So, three questions. 1 in cards and PL, did you think any additional tightening is needed or the current growth rates QoQ growth rates allow you to filter out enough risk on this kind of QoQ trend can continue?

Speaker 2

So, I think I don't think we are looking at really any

Operator

material tightening. I mean,

Speaker 2

there is minor tweaking and refinement that we keep last year and I think the growth rate has come up. If you look at the year on year growth, it has come from 20 4% to from 40% to 24%. And I'm guessing by the time we end this year, it will be closer to a 20% kind of number, so lower. So there I don't think there is anything much to be done. Card is an ongoing refinement, but as I said there, as you know, we want to grow the business.

Speaker 2

So to answer your question, I don't think anything major.

Speaker 3

Okay, perfect. Again, question is on corporate loans. Now we've seen a few banks growing corporate loans on a Q2 basis this quarter. Is this because there is now some bit

Speaker 2

of asset quality stores in

Speaker 3

the retail side and therefore you're moving to this side or there are better opportunities in this space? How do we rate this and what's happening in that space if you could give an update?

Speaker 2

So it is nothing to do with asset quality on the retail side. I think it really depends on what opportunities come at any point in time and what is the pricing available. So, if you look at we've spoken out in this quarter also, we saw a growth in the NBFC portfolio and a growth in the real estate portfolio. And some of this, of course, is at decent pricing and as well as well within our risk reward thresholds. In the previous quarters, for a couple of quarters, our NBFC portfolio had gone down because of some prepayments, etcetera.

Speaker 2

So that has not happened this quarter. So I think if we look at it on a for the last several quarters, our corporate book has grown at around 10%. It could be 8% to 9% in 1 quarter, it could be 11% to 12% in another. And that is a pretty steady pace. No change in approach.

Speaker 2

Going forward, I think what we are currently seeing again is a fair amount of competitive intensity in that space. So we'll have to calibrate to that.

Speaker 3

Okay, perfect. And just quickly on LCR, so just as an approach, now do you need to maintain 20%, 25% additional LCR over the 100% on an ongoing basis or once you are reserving higher and anyway it is more stringent, you don't need to maintain that much surplus and that can be how you offset the impact of this new circular?

Speaker 2

I think we have to think all that through

Speaker 1

and

Speaker 2

we have to, I guess, look at refining both the asset and liability side of the balance sheet. But you have to think that not something we can respond as of now.

Speaker 3

Okay, got it. Thank you so much and all the best for

Speaker 5

the quarter.

Speaker 1

Thank you.

Operator

Thank you. Next question is from the line of Piran Njini from CLSA. Please go ahead.

Speaker 5

Yes. Hi, team. Congrats on the quarter. Just sort of getting back to some of the questions that were asked earlier on yields. Now I just I'd be interested in your thoughts as to borrower demand has been strong for the last 2 years.

Speaker 5

The raw material cost for banks is going up yet. None of the banks, not just you, but none of your peers have been able to pass it on to the borrowers. Why do you think that's the case really? Or is it that because there is growth you are sacrificing NIMs?

Speaker 2

No, it would not be correct to say that it has not been passed on at all. So I think if you look at, for example, products even though it has been very competitive, but products like home loans, auto loans and a number of asset classes, yields have gone up between certainly FY 2020, 2020 3, that is not going up any further now. On the corporate side, I think in 2 markets, I would say, corporate and mortgages, there is episodes of competitive intensity because I think different banks may have different motivations at these points of time.

Speaker 5

Okay. Is it also the case that within each product, the customer selection is getting better? So just getting to like Manish's question about the product mix is changing, but then in each product you're getting to better types of customers, so the effective yield has not changed. Is that is what is happening?

Speaker 2

Well, I would say that for the quality customers, the banks are quite competitive in terms of yield. And I think broadly, banks are focused on the prime, I would say, more prime or end of the stack.

Speaker 5

Spec. Got it. Okay. That was it from my end. Thank you and wish you all the best.

Operator

Thank you very much. Next question is from the line of Param Subraman from Nomura. Please go ahead.

Speaker 1

Yes. Hi. Thanks for taking my question. Just one question from my side.

Speaker 2

Could you explain the quarter

Speaker 1

on quarter movement in network because it's up 15,600 crores, whereas the profit for the quarter is 11,000 crores. So is

Speaker 6

there something that I'm missing here?

Speaker 2

Yes. So the revised investment guidelines became applicable in the quarter. And as we have disclosed in our stock exchange release, we recognized an AFS reserve plus retained earnings of about INR 32,000,000,000 net of deferred tax and that the AFS reserve would have increased a little bit further based on market movements between April June. So that would be the main component. In addition, some amount of capital and reserves gets added every quarter due to stock option exercises.

Speaker 2

So that's a smaller number.

Speaker 6

Got it. Okay, okay. Thank you, Nandir. Yes, got it. Thank you.

Operator

Thank you. Next question is from the line of Ketur Shah from R and D Financial Service. Please go ahead.

Speaker 6

Thank you. All my questions have been answered. Thank you.

Operator

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

Speaker 2

Yes. Hi. So first, we will be

Operator

Sorry to interrupt you. Can you speak to the handset, please?

Speaker 6

Yes. If you can just quantify the impact of funeral charges circular, which has come through, that would be helpful. And secondly, maybe with respect to recoveries, maybe with corporate recoveries are anticipated to be relatively lower, should we see the faster normalization we had seen in one of the peer banks that impacting the grade cost immediately in 1 single quarter. Do we expect such kind of volatility or maybe for us, as you mentioned, it should be gradually or maybe gradual normalization, which will come through in the quarters?

Speaker 2

So on the penal charges, circular, we have not really put out any number. So that's not something I can share. On the recovery part, I would just say that overall, our credit costs have been quite steady even in the last couple of quarters where for various reasons the reported numbers were pretty low, we had kind of said that the adjusted cost for the quarter would be around 50 bps and that is where it is. There will always be some up and down in terms of additions, recoveries, etcetera, but that's okay. I mean, but not something that we would want to specifically comment on.

Speaker 6

Okay. And lastly, in terms of as you've also indicated in terms of the retail, couple of players have hiked by almost like 20 odd basis points. How would we take a call maybe are we looking to be equally competitive and increase the interest rates? And even in terms of the branch expansion in King's Hillis compared to what you have earlier articulated in terms of the plan on an annual basis?

Speaker 2

On the rates, we'll take a view. These are dynamic markets. So as we go along, we will take a view and based on both sort of our target, our kind of desired level of mobilization as also the maturity bucket in which works for us. On the Vans, no change as such.

Speaker 6

Okay. Thank you. Thank you and all

Operator

we'll take that as the last question. I'll now hand the conference over to the management for closing comments.

Speaker 2

Thank you all for taking time out on a Saturday as always. And if any other clarifications are required, please reach out. Thank you.

Operator

Thank you very much. On behalf of ICICI Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.

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Earnings Conference Call
ICICI Bank Q1 24/25
00:00 / 00:00