Kotak Mahindra Bank Ltd (KOTAKBANK) Q3 FY22 Earnings Concall Transcript

Kotak Mahindra Bank Ltd  (NSE:KOTAKBANK) Q3 FY22 Earnings Concall dated Jan. 28, 2022

Corporate Participants:

Uday Kotak — Managing Director and Chief Executive Officer

KVS Manian — President, Corporate, Institutional and Investment Banking

D kannan — Managing Director

Shanti Ekambaram — Group President, Consumer Banking

Gaurang Shah — Group Head – Asset Management and Life Insurance

Jaideep Hansraj — Chief Executive Officer

Nilesh Shah — Managing Director

Deepak Sharma — Chief Digital Officer

Dipak Gupta — Joint General Manager

Analysts:

Jaimin Bhatt — Kotak Mahindra Bank — Analyst

Rahul Jain — Goldman Sachs — Analyst

Sumeet Kariwala — Morgan Stanley — Analyst

Adarsh Parasrampuria — CLSA — Analyst

Kunal Shah — ICICI Securities — Analyst

Gaurav Kochhar — Mirae Asset — Analyst

Abhishek Murarka — HSBC — Analyst

Nilanjan Karfa — Nomura — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Kotak Mahindra Bank Q3 FY ’22 earnings conference call. [Operator Instructions] I now hand the conference over to Mr. Uday Kotak. Thank you, and over to you Mr. Kotak.

Uday Kotak — Managing Director and Chief Executive Officer

Thank you, and good evening, colleagues. I wish you all a very Happy New Year, and hopefully 2022 calendar will be the end of COVID from being a pandemic to an endemic. I’m very happy to share with you the financial results of Kotak Mahindra Bank. On a consolidated basis, we have had profit after tax growth up 30% year-on-year, and I’m extremely happy to share that our business model of concentrated India, diversified financial services is working well. As you know we are in a broad range of financial services, which includes banking, securities, asset management, investment banking, insurance and financing, and we are seeing a very strong growth across the different segments of financial services. As you are aware, our group also on 100% economic interest in all these businesses.

If you look at the mix of our consolidated profits the bank contributed 63% of Q3 FY ’22 consolidated got it, and we look forward to the broad continuing performance of the overall consolidated profits of the bank. Coming specifically to standalone banking I am happy to share that we are going for growth. Growth in our advances is 18% year-on-year and interestingly 8% Q-on-Q. Our Consumer Bank grew at 29% Y-o-Y and 10% Q-on-Q, which is nearly 40% annualized, so the overall advances engine is now working well.

Another significant step in our growth trajectory is the step-up in our customer acquisition. We added 21 lakh customers. In Q3, ’22 versus 8 lakh in the same quarter last year a nearly 3 times growth in new customer acquisitions. As you can see from above we are focused on growth even if it puts some pressure on operating expenditure in the short run. Another very important aspect is. Hello?

Operator

Yes, sir. Please go ahead.

Uday Kotak — Managing Director and Chief Executive Officer

Yeah. Another important aspect of our performance is asset quality, and we’re quite enthused with the outcomes at the end of quarter three. At the bank standalone our annualized credit cost on advances is now 35 basis points, of course, excluding the reversal up COVID provision. The slippages for the quarter are down to 0.3% of advances. In fact recoveries and upgrades are much higher than the slippages, and the standard restructured fund-based outstanding under all frameworks COVID 1, 2 to MSME resolution framework is 0.54%, of the advances. So we are actually seeing a significant improvement in the asset quality and the quality of our balance sheet.

Next, and this is an important item, as we see interest rates moving up, the overall duration of our fixed income bond book is at a low of around 1.5 years. Having said that, we have a very large out of our fixed income book which is not in HTM, as a result of which in the Q3 we have taken a mark-to-market provision through the P&L of INR484 crores on this account. And going forward with a relatively low duration of our fixed income bond book in a rising interest rate environment we feel our bank is very well positioned from a risk metrics point of view.

Further, as interest rates move up we believe strategically a high CASA ratio of 60% will be very, very handy. And all this is in the backdrop of our NIMs now at 4.6% also important if I go back to the consolidated numbers our return on equity is now at 15% keeping in mind despite the high capital adequacy all of 24% including the profits, of course, for this current year. Therefore at a very high capital adequacy a 15% ROE, and also if you look at the nature of risk we carry on our balance sheet we think it’s a very measured and well-moderated and structured risk we are carrying. So all-in-all, we think we are well geared for 2022 and beyond and happy to continue with the strengthening of our broad financial services model, and believe, different engines will fire at different points of time and that is the core strength of our business model. With that I will now hand over to my colleague Jaimin Bhatt, and thereafter to other colleague, who will take you through the various aspects of our financial performance. Over to you, Jaimin.

Jaimin Bhatt — Kotak Mahindra Bank — Analyst

Thank you, Uday. Let me start with the consolidated numbers. And as Uday mentioned we closed this quarter with a post-tax profit of INR3,403 crores at 31% growth on a Y-o-Y basis. And as we can see the bank contributed for this quarter 63% of the overall profits of the bank — of the consolidated entity, which is down from 71% in the same period last year. As Uday mentioned, we own 100% of our subsidiaries and a number of our subsidiaries actually do not need the capital which goes with the growth of their businesses, but nevertheless, each of the segments in the subsidiaries have actually grown pretty well in this period.

The lending entities, which includes Kotak Prime did pretty well in term — on the back of improved collections. Also coming in after taking the hit on account of the increased provision requirements thanks to the RBI change. So Kotak Prime ended the the current quarter with a profit of INR254 crores as against INR149 crores a year ago. The other NBFC KML also again locking in a profit of INR1,100 crores.

The capital market entities going on the back of borrowings in the markets Kotak Securities recording a INR270 crores profit and the investment bank, which is the KMCC bringing in a record INR103 crore profit. They’ve been engaged in several market deals during this period, both on the IPOs and the advisory side. Life insurance, which had a negative first quarter this year has clocked in INR247 crores this quarter compared to what it did a year ago, which was INR167 crores. The mutual fund business is bringing in close to INR150 crores post-tax profit this quarter to an extent held by some investment gains in the trustee company, which is a pre-tax level of INR46 crores.

As Uday mentioned, we end the period at the consolidated level with a capital adequacy of 24.5% which includes Tier 1 itself of 23.7%. A pretty healthy ROA of 2.6% at the consolidated level. At the bank standalone level, as we spoke about the post-tax profit ended with INR2,131 crores, which is about the 15% growth on a year-on-year basis. Net interest income grew about 12% on a Y-o-Y basis and about 8% on a Q-o-Q basis on the back of advances growth, which came at 18% Y-o-Y and 8% Q-o-Q.

If we add the credit substitutes, the total growth of credit has been at 20% on a Y-o-Y basis. And the growth has come across the board in the Consumer segment, the Commercial segment and the Wholesale segment which my colleagues will take you through as we go forward. The net interest margin on the back of high CASA of 59.9%, again, continuing to be pretty healthy at 4.6%. Our fees and services has continued to be a good growth area a 33% rise on a year-on-year basis coming on the back of improved revenues both on the distribution front, as well as in the general banking area. Uday talked about the mark-to-market book, we have our bond book duration is at 1.58 years, but a large part of our book is a non-HtM. Our HTM portfolio is 38% as a result, the non-HTM book we had to take up a mark-to-market hit as of the end of December on the back of the rise in interest rates. That has meant that we’ve taken a knock of INR484 crores on the MTM loss for this quarter.

We have seen the employee cost go up this quarter on the back of a family pension provisions, which came out of the Bi-Partite settlement which the IBA entered into with the bank unions that has been a hit of INR100 crores for this quarter. And again, as Uday talked about, we have continued our push for growth, and that has meant continuing to have expenses in certain areas. Apart from growth of employee cost this has meant rising cost on the customer acquisition side, both on the liabilities and assets. We also had increased advertisement and promotional costs, as well as cost increase in the whole tech spend.

And as we saw, the the customer increase this quarter at INR21 lakh is significantly higher than what we did a year ago, which was INR8 lakh. Our asset quality has improved for this period, our absolute the GNPA went down from INR7,658 crores to INR6,983 crores. Our slippages during this quarter was all of INR750 crores whereas, against that we saw recoveries and upgrades of over a INR1,000 crores, and this is a second quarter in succession where we’ve seen a slippage is lower than recoveries and upgrades. Our credit cost down to 35 bps without taking the COVID write back provision.

Our SMA2 continuing to be low at INR298 crores, our overall restructuring again we’re being careful. And if I look at the standard restructured book, whether it was to go with one COVID-1, COVID-2, MSME resolution framework all put together is 0.54% of our overall book. On the back of improved realization on the problem assets, we took stock and we have written back COVID provision of INR279 crores. We continue to carry INR1,000 crores of COVID provision on our book still, and overall provision numbers today are higher than what we see as the GNPA number.

So after all this we end the quarter in the bank with the post-tax profit INR2,131 crores, which by 15% higher than the same period last year. I would request money end to take up the corporate bank assets updates please.

KVS Manian — President, Corporate, Institutional and Investment Banking

Hi. As we usually do, let us look at the corporate assets in two parts. The SME part and regular corporate bank side. On the SME side, as you can see the momentum of growth continues Y-o-Y growth is about 21%. Our NTB acquisition remained robust through the quarter, and we can see this momentum carrying forward. On the corporate side, you need to look at the number along with credit substitutes figure that is reported there. If you look at a combination of the two, the assets have gone up from INR77,581 crores to INR86,659 crores the some of the two that’s close to 15.5% kind of growth. So overall, the segments, the Corporate and SME together have grown at about 16.5% Y-o-Y. In the case of SME while the NTB was good we also saw some small uptick in the utilization numbers. However, we are not yet seeing any pickup in term loan kind of products and we are still seeing traction on the working capital side. At the top end of the corporates, which is the conglomerates growth has been driven more by credit substitutes than by advances purely. Advances growth is muted but the combination of the two was quite healthy, and even there, we are seeing growth driven more by working capital than by long-term loans. Even the next ones of corporates what we call large corporate they seem to be following the trend that the top end corporates and conglomerates followed. Relatively we have seen uptick in the credit substitute side there as well.

In times like this when pricing pressures are high, we find credit substitutes as a better method to do some of these lending. Overall within corporate bank NBFC as a segment saw some uptick again, probably because mutual fund, credit funds were not available as a source to them and they came back to banking sector for borrowing. On the CRE side while we remain cautious on the commercial side, we have seen very good traction on the residential real estate. And as you can see the Q-o-Q on this has been significantly better than the Y-o-Y the residential real estate side. And it is more than 80% of our new disbursements are on the residential sector.

Between the sub and the bank I think this segment credit has revived, and we see growth going forward. Of course, we are keeping our focus on the top end and there are a lot of new customers we are able to add in this segment. Apart from these our focus on transaction banking continue. We went live on our online trade book. We created a new CMS platform and migration of customers onto the new platform is in progress, and is progressing quite well.

Several new features were launched during this last quarter. And overall trade FX, CASA and the CMC all the non-risk revenue have done quite well through the quarter. We are also, our custody business during these times and there has been an IPO string of IPOs has also done extremely well to help our CASA growth. Overall, the health of the business remains good the ROE and risk-adjusted returns RaRoCs remain good, and the asset quality of course Jaimin already talked about, remains quite healthy and in all segments of the business. And we look forward to a good momentum carrying forward. Thank you. Can I hand over to kannan. kannan will you please take on?

Operator

Please unmute your line from your side.

D kannan — Managing Director

Thank you, Manian. I will start with the I mean, commercial vehicle financing business. Many commercial vehicle sales further improved during the quarter, as compared to the previous quarter. Capacity utilization in the Goods Transport segment was better than the previous quarter, cash flows for the transport operators was better due to a combination of better utilization lower fuel prices, as well as stable freight rates. Our disbursements are in line with the better performance of the vehicle sales. Passenger transportation, staff transportation and School Bus segment continue to be impacted. Collection efficiency on demand in this business has been good during the quarter, and it’s been by then even the previous quarter.

Demand for construction equipment is good both in the roads and the mining segments. It continues to be good driven by government contracts. Demand for smaller equipment at the retail level has been a bit muted during the quarter. The retail customers or smaller customers have been impacted by the long receivable cycle and hence addition of new equipment is a bit slower there. Capacity utilization of equipments again has improved over the last couple of months, which should lead to improved cash flows for the entire industry as a whole. Collection efficiency is on demand, again here has been good and it’s as good as normal time.

Tractor sales during the quarter has been better than the quarter though lower than the same quarter last year. Rural cash flows continue to be strong though a bit delayed in parts of the country due to the prolong monsoon. Our disbursements on the Tractor Finance segment has been good, and we continue to maintain our leadership position in this segment. Strong cash flows should lead to continued good demand in the coming quarters. Transaction efficiency on demand has been good again in the segment. The Agri Finance segment, demand for credit, both working capital and capex in the agri SME and the agri value chain continues to be good, aided by good monsoons and increasing commodity prices.

Collections during the quarter has shown an improving trend, as compared to the previous quarters and this further good as normal times. Our Microfinance disbursements grown as compared to the previous quarter, demand for credit from micro and small entrepreneurs continue to be strong in the markets in which we corporate, collections in the market we operate are improving in collection efficiencies are as good as normal time. I will now hand it over to Shanti to take you through the consumer bankers.

Shanti Ekambaram — Group President, Consumer Banking

Thank you, Kannan. In continuation I will start with lending. Consumption saw a good uptick in the quarter being a festival quarter, all our retail lending businesses showed robust growth in Q3. This helped us gain market share in many products. At a consumer asset aggregate level we grew 29% Y-o-Y and 10% Q-o-Q this is on the back of a 10% Q-o-Q growth in Q2. Mortgages, we had our best ever quarter on fresh volumes for home loans, our price leadership campaign of 6.5% during the festival season helped us acquire quality customers and strengthen our market share across all the Customer segments. We continue to strengthen and widen our distribution in this very key focused business area.

As the business momentum picked up we also saw good volumes in LAP. We saw a pickup in some commercial, but more on industrial property purchase for self use, we continue to consolidate our market share in LAP. Mortgages grew at 38% Y-o-Y and 12% quarter-on-quarter. Unsecured rating, we’ll start with cards. We had one of our best quarter on cards with acquisition at 3.9 lakh cards bulk of the sourcing has been from existing customers. We rolled out attractive offers to our customers in marketing alliances across e-commerce and physical partners across the country. Our Khushi Ka Season Campaign and brand tie-up with Apple and OnePlus has helped to deepen our engagements with our customers. We operationalized our co-branded partnership with Indigo.

We continue to invest in technology, distribution and strong product propositions to grow in this space.

Personal loans, we had our best ever quarter with monthly originations of 1.7 times of pre-COVID levels, a large part of the new loans which sold digitally. We saw increased demand as normalcy the turn from segments like weddings, home, renovation, travel, etc., we have scaled up our new acquisition in both traditional and data-led digital space. We migrated to our new sales platform for origination in this quarter and in Phase II a DIY and STP journeys will go live in the upcoming quarters.

Consumer finance, one of our best quarters, thanks to the effective season demand across physical and digital distribution. We continue to scale in this space to widening distribution and relationship with key partners, and a strong data-led digital bid. Overall, unsecured retail business saw a Y-o-Y growth of 12% with a strong quarterly growth of 16% on the back of 12% Q-o-Q growth last quarter. Working capital in business banking this quarter saw an increase in credit demand due to better business volumes and capex demand from select pockets, Export segment continue to see demand from specific market clusters. We focus some new quality client acquisition, both in the secured and unsecured space in the MSME segment 85% of the book qualify the priority sector. We will continue to grow in the MSME space by expanding distribution footprint, multiple and deeper channels in technology enabling.

Collection, our bounce rates and resolutions, continue to be better than core pre-COVID levels. As we shared last time, we launched our digital customer I mean collections platform, where we saw higher customer adoption and over time this should help us reduce our collection cost. We have invested significantly on the customer and consumer assets business across distribution, technology, data and analytics and aggressive customer offers and propositions we will continue to invest in this space. Now to deposits, average savings deposits grew year-to-date, Y-o-Y 11% current account at 32% and sweep term deposits 20%. The focus on acquisitions as you saw the aggressive customer acquisition continues on granular retail customer growth across digital and physical channels, and 811 continues to contribute successfully through our digital customer acquisition. The bank have 30.7 million customers as at December ’21 versus 25 million last year. Our CASA ratio was at 59.9% as at December ’21. Our TD below CASA and TD below INR5 crores comprised 88% of the deposit TD sweep deposits was a 7.6%. Our cost of SA was at 3.5% this quarter versus 3.81% in Q3 last year. Our asset cross sell in Q3 through the channels were very strong across all retail products both in consumer and commercial asset space.

Fee income showed good growth including in insurance investments and brokerage. We have increased our market share issuance in issuance of FASTag with 10% for December ’21 one on a monthly incremental basis. We launched a co-branded debit card with PVR during the quarter, we are seeing increased customer engagements.

Now to the digital part of our strategy. As outlined in the previous quarters our digital strategy and initiatives are centered around our customers across acquisition, engagement and service and across our value proposition of saving, lending, payment, investment protection powered by AI & ML. We continued on each of the aspect of technology infrastructure, applications and DIY customer journey with scalability, agility and reliance. In the digital channel, we will be going live with all our key consumer asset DIY STB journey in the coming quarters providing a seamless, frictionless and convenient experience for our customers, and this investment in our tech stack will be a continuous journey, and the backbone of our digital study.

Mobile first has always been a key strategy. The last two years we upgraded our mobile app significantly by providing customers more functionalities and a greater choice across banking, payments, loans and cards, in Q3 we launched many functionalities across assets, payments, lifestyle, protection and risk. Our customer-centric experience and functionality has allowed us to be consistently amongst the top-rated banking apps in both iOS and Android. We have seen significant increase in monthly average users which has grown 37% Y-o-Y transaction volumes which has grown 126% Y-o-Y and value, 53% Y-o-Y through our mobile banking channel.

In retail assets we have been working on enabling mobile first and in Q3 launched several functionalities across home loans, cards and revamped the entire loans’ modules in the app making it easier for access to customers. On the payment side UPI transactions have grown 3 times December ’21 over March ’20 — over April ’21 including P2P and P2M transaction Pay Your Contact continues to see rapid adoption and we saw a 6.6 times growth in transaction in December versus April this year, that was when we had launched this.

In merchant acquiring, we embarked in the path of delivering a complete bouquet of e-services with the launch of our merchant app Kotak biz in Q2, this helped us on board merchants for payment and collection services digitally, serve them digitally and deliver targeted offers from multiple banking in value-added services. In Q3, we enriched the digital onboarding by extending it to our existing current account customers and added new features. We have gone live in a partnership with EasyTap to increase our merchant acquisition footprint and service their merchants.

To help our merchants in managing the cash flows, better we have introduced the same day settlements in this quarter. And we in this quarter continue to leverage our partnership with PineLabs for new acquisition. Ecosystem, the strategy on ecosystem is in three part Orchestrate, Partner & Participate. In Q3, we had a new four new partners KayMall including Myntra in the in-app shopping mall. In Q3, we continued building on our API stack for partners we have 391 APIs live. As of now, we have 298 registered partnership some key names include Pine Labs, Vivifi, Setu amongst others. We are rapidly expanding our FinTech partnership network and are experimenting use cases and business model. We we plan to leverage the regulatory network of account aggregator and open for retail and SME lending in the upcoming.

Now to the corporate and business banking stack. We’ve upgraded our transaction banking stack towards transforming customer experience in trade and cash management products. Trade portal, we launched a paperless end-to-end seamless trade portal creating significant differentiation to meet our customers’ unfulfilled needs, customers can transact the outward remittances import LCs and collection export LCs in collections. We will be going live with an inward remittances pre and post shipment finance soon. We have seen active adoption by customers and have received very positive views.

We migrated 14,000 plus customers to our new CMS portal which is simple to operate a superior interfaces and customer experience. We offer full stack digital capabilities on a host-to-host and API solution basis, which again has created a significant differentiation in meeting our customers’ needs. On the transaction banking side, we introduce many services with enhanced user experience. Talk about some, our corporate mobility app 2.0 saw 7 plus lakh transactions which is a 46% Y-o-Y growth for YTD December.

We introduced BBPS Click Pay a new feature in BBPS which speeds up the transaction processing with a one-click journey. We introduced CMS 24/7 for corporates via APIs and it’s advance payment architecture allowing them straight-through processing. We introduced paperless supply chain financing on EV data verification. We partnered with a FinTech for international acquiring Bin sponsorship of cross-border transaction that helped us provide a superior international payments gateway to key e-commerce customers. We will continue to invest in the tech stack for a superior experience for our business banking customer.

Digital transactions to mobile continue to grow across deposits, lending, service and transaction 97% of our savings volume transactions were in digital on non-branch mode even in this quarter. I’ll now request Gaurang Shah, to take you through the insurance business highlights.

Gaurang Shah — Group Head – Asset Management and Life Insurance

Yeah. Thanks, Shanti. Let me take you through the financial performance of Kotak Life this quarter. A quarter with more normalized environment for life insurance business. Our gross written premium for the quarter increased to INR3,108 crore from INR2,223 crore in the previous year showing an increase of 18.5%. We continue to maintain a balanced product mix between participating and non-participating products, and then mix of agency and bank assurance and also between the individual and group business.

Individual APE growth for the quarter was 31.6% against the private industry growth of 27.5%. Group busines for the quarter was up by around 28% on the back of protection business growth of over 60%. Overall, clean experience continues to be in line with the excess mortality claim, we estimated in June ’21 we carry adequate provision to cover future expected claims if something arises out of Omicron. Overall a INR600 crore excess mortality rate for the year net of reinsurance that has been the hit, which we have taken.

Our net worth has crossed INR4,000 crores with strong solvency margin of 2.66% — the 2.66 times. Now, I handover to Jaideep to take the presentation forward.

Jaideep Hansraj — Chief Executive Officer

Thank you, Gaurang. The top line for Kotak Securities is INR656 crores for the quarter ending 31/12. This is comparable to INR613 crores for the previous quarter and INR474 crores for the same quarter last year. The profit before tax for this quarter is at INR359 crore, this is again comparable with INR325 crores for the previous quarter and INR245 crores for the same period last year, and the PAT for the quarter ending 31/12/21 is to INR270 crores this number INR243 crores for the quarter ending September ’21 and for the quarter ending December ’20 it was INR184 crores. We clocked a market share of 10.4% in the Cash segment for the period — for the quarter December ’21 this is a tag lower than 11% which we got in September of ’21. Some sense of the market ADV, the total daily volumes for this quarter was at INR38,75,000 crores out of this derivatives the options market with up INR37.3 lakh crores cash at INR51,000 crores and future at INR92,000 crores. The growth has been the biggest in the options space whereas cash and futures has seen marginal or flat kind of numbers. I’d also like to share some information on some of the digital initiatives taken at Kotak Securities. But the DIY journey of account opening for account in Kotak Securities has been enhanced significantly. We’ve reached a level of an account being opened in close to 6 million. The second big thing which we introduced in the quarter was a pre-login application of IPOs which were allowed to be done which was not there in the previous quarter. This made a reasonable difference to our market share in the IPO space and we see this going ahead as well.

For derivative trades the launch of the NEST platform has helped a lot in A, the stability of the platform and reasonably large enhanced customer journey and experience. We launched our new trading website with the latest technology stack with cutting-edge in UI and UX. From a service initiatives a multilingual chatbot in nine languages 15- self service options were launched and we migrated our telephone into cloud with again multi-lingual IVR capability enhancing customer inbound call experience. With this I’d hand over to Manian to talk about investing bank.

KVS Manian — President, Corporate, Institutional and Investment Banking

HI. Yeah, Kotak Mahindra Capital company clocked for the first time in its history a profit after tax of over INR100 crores, this quarter it was involved with marquee IPO transactions in the market, and we remained a go-to bank, go-to Investment Bank in the ECM side of the business. What is more, even more important is that our advisory business is also in very good shape, and we have built a good franchise on the advisory side. In fact even on advisory we should end this year at close to record levels last year was a record year, this year again, we could end almost at the same levels.

So the investment banking business, both on the ECM side, as well as on the advisory side, seems to be in good shape and we have mentioned some of these market transactions there for all of you to see. Coming to Kotak Mahindra Investments, this is a company which is largely into real estate, a real estate lending business, corporate real estate lending business or structured corporate lending transaction. As you can again see, this has grown significantly. I made an earlier comment on good momentum on the real estate lending side and part of the real estate lending gets done in the bank and part of it gets done here.

As you can see, a robust growth here of close to 30% in the asset book, this is driven by residential real estate transactions, as well as some other structured corporate lending business. We have also been able to maintain balancing quality year, and as you can see, the net NPAs have dropped to the 0.4%. Basically our lending policies in terms of focusing on cash flows and the right security and choosing the right projects has really shown results here. In this, in this NBFC we have been also able to reverse COVID provisions tot the extent of INR7 crore given the fact that some of our assets which were — in the — at risk have actually been recovered. I’ll now hand over this to Kannan to take you through Kotak Mahindra Prime.

D kannan — Managing Director

Thanks, Manian. Kotak Mahindra Prime had a profit after tax of INR254 crores, this quarter as compared to INR149 crores in the same quarter last year. Disbursements during the quarter has been better than the comparable quarter of the previous financial year, but continues to be slightly impacted by supply constraints faced by the manufacturers. Collections during the quarters shown further improvement and its collection efficiencies on demand are closer to normal times. During this quarter Kotak Mahindra Prime acquired the retail car finance portfolio of Ford Credit. I’ll now hand it over to Nilesh to take you through the presentation.

Nilesh Shah — Managing Director

Thanks Kannan, good evening friends. Let t me take you through our asset management business for December ’21 quarter. Our total average AUM grew 32% year-on-year to INR2.87 trillion our equity average AUM supported by market bounce back grew 67% year-on-year to INR1.41 trillion. Our total AUM market share increased to 7.4% and our equity AUM market share increased by 40 basis points to 5.4%. Our SIP registrations as on December 31 ’21 were INR9.1 billion and SIP inflows for the month of December were INR6.65 billion. Our SIP book and average AUM growth continues to outpace industry. We continue to serve investor requirements by launching active as well as passive funds, focused on local, as well as offshore markets across debt, equity and commodities.

We also remain focused on ESG investing as India’s first signatory to United Nations principles of responsible investing. Consequently, our profit before tax has grown 20% year-on-year to INR146 crore excluding non-recurring gains of rupees INR46 crore. Our total AUM across mutual funds, PMS, offshore, insurance and alternate assets grew 23% year-on-year to INR3.86 trillion. Our relationship value across wealth, priority and investment advisory grew 73% to INR6.49 trillion. I will hand it over to Jaimin Bhatt.

Jaimin Bhatt — Kotak Mahindra Bank — Analyst

Thank you, Nilesh. Time for any questions, clarifications the explanations the whole team is here.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session [Operator Instructions] First question is from the line of Rahul Jain from Goldman Sachs. Please go ahead.

Rahul Jain — Goldman Sachs — Analyst

Thanks. Good evening, everyone. Just a couple of questions on the provisioning policy. The reversal that you’ve done, can you just elaborate and explain the thought process? Is it led by the recoveries and upgradation that we’ve had or you generally feel that it’s the kind of worst is behind us and from here on it should be a more normalized?

Uday Kotak — Managing Director and Chief Executive Officer

Jaimin you want to go?

Jaimin Bhatt — Kotak Mahindra Bank — Analyst

Rahul it’s like this. Yes, as we saw the realizations have certainly continue to improve the gross accretion of NPA has slowed down and actually the realizations upgradation continuing to increase quarter-on-quarter. The restructuring requests coming lower, as well as the fact that as we saw the SMA2 numbers very much in the control. So we follow the process and if you look at the background of how the provision on COVID was created it was based on a set of accounts, which had gone for moratorium and whatnot.

A lot of those accounts, which are under stress actually had are no longer with us they’re actually paid up all their dues into what was due at that point of time. So continuing to carry some provisions on that was something which we work, we were not necessarily required. Especially on the back of what’s happening on the market with respect to collections. So we looked at the overall thing and we’ve not taken up, taken back all of what is possibly we felt at this stage. Also considering the fact that there is the way Omicron which is the way three, which is going around in the market. But though it is like virulent we did keep a cushion for that. And as we’ve seen as against what we had INR1,279 crores, we will continue to keep a thousand crores at this stage and of course we’ll keep taking stock of this every period.

Rahul Jain — Goldman Sachs — Analyst

Thanks, Jaimin. Thanks and I have some follow-on. Given that now we are focusing even on the unsecured businesses which generally have a higher loan loss through the cycle. Let’s say, a year out or two years out, as this book start to become more meaningful, subject of course your growth trajectory would we then take provision as and when it’s sort of happen or you think building a buffer from now on would be sort of a relatively more what prudent?

Jaimin Bhatt — Kotak Mahindra Bank — Analyst

Rahul it’s like this. While we are growing the unsecured book, the unsecured book even today, like the unsecured retail, which is your cash credit cards and personal loans, business loans consumer durables is still about 5% of my advances book. Even that while that is growing on a lower base. If that is a newer thing goes bad we certainly end up providing that and our provision requirements, all as a policy on the unsecured is far more aggressive than what the regulatory requirements are. So we’ll take those if it comes, but right, now it’s looking fine.

Rahul Jain — Goldman Sachs — Analyst

Great, thanks. And I just squeeze in one more question, more on the franchise side. The customer has been pretty impressive. Can you just talk about the customer profile that you’re on-boarding? And also in the home loan business, is it all organic or you’ve had some balance transfer business also coming? Thanks, that is it from my side?

Uday Kotak — Managing Director and Chief Executive Officer

Shanti?

Jaimin Bhatt — Kotak Mahindra Bank — Analyst

Yeah. So, as far as the customer acquisition is concerned, we continue to attract a lot of millennials and people in, let’s say, from 25 to 40, but we are not restricting any customer. So across our channels, whether it is physical, digital 811 we go and look for customers across all segments. But we are seeing a flow, like I said, if I were to put 25 to 40 is a good range to sort of look at the customer profile. On the home loan side, I don’t know what you call inorganic as balanced transfer, but that is also acquisition for us.

What balance transfer has always been about 30% of our business historically, as well as now. But we continue to see the primary market business flow is very strong. Manian had talked about the fact that residential sales are being really good and we see that in the demand in our home loan business. So we have a combination strategy of primary market, customers buying ready-made property, secondary market sale and balance transfer it is a mix of all of it.

Rahul Jain — Goldman Sachs — Analyst

Great, thank you for questions.

Operator

Thank you. The next question is from the line of Sumeet Kariwala, Morgan Stanley. Please go ahead.

Sumeet Kariwala — Morgan Stanley — Analyst

Yeah, hi team. Congrats on a strong quarter. I’d wanted to get some perspective on loan growth in the current cycle from a two, three-year perspective. So there are two sub-segments, that I’m trying to get some views on. First is on corporate banking. And if I look at Kotak Bank this time it’s very differently placed in the sense that there is a sharp improvement in funding franchise, and one could — one maybe is better place to accelerate growth in corporate banking also digital capabilities with the FDA different. So should one expect that as the pricing normalizes, which should happen as in technical terms this time Kotak Bank would see much more the market share gains in Corporate Banking. So that’s, that’s part one of the question, please.

Uday Kotak — Managing Director and Chief Executive Officer

Okay. So, Manian? You said that’s part one. Is there a part 2?

Sumeet Kariwala — Morgan Stanley — Analyst

Yeah, which is on all unsecured loans. maybe I should do it up your reply. That’s fine.

Uday Kotak — Managing Director and Chief Executive Officer

Okay. Okay, fine. Manian you want to go for those this first?

KVS Manian — President, Corporate, Institutional and Investment Banking

Yeah. Sumeet, we have always stated that as if the risk return trade-offs work well we are always open to growing the corporate book at the pace that the market offers opportunity at. Our key metrics has always been the right risk return trade-offs. Our relationships are fairly wide. I don’t — we have fair presence in most corporates right from the top end-to-medium-sized corporates. Our coverage and the presence is fairly wide. And we are fairly confident that if the secular growth in the corporate credit requirement goes up, we will be able to capitalize on that. And as I mentioned, we — our transaction banking franchise is also growing very well, and Shanti, also took you through the couple of slides where in the corporates we have used our new digital products. New online portal, new CMS platform all of that is making a lot of difference. And we are quite confident that we can grow this franchise if the market opportunity allows us to do that.

Uday Kotak — Managing Director and Chief Executive Officer

Yes. Second question you asked.

Sumeet Kariwala — Morgan Stanley — Analyst

Yeah. Second on unsecured loan growth. And if I look at Kotak Bank’s market share in unsecured with personal loans and cards there is some moderation of the past two years, and maybe rightly so because the macro was not good. How should we think about this loan mix, unsecured loan mix going forward? And if I compare this to some of the large private banks Kotak was relatively lower. So over the next three, four years should we expect a meaningful jump. Yeah, that will be my second question.

Uday Kotak — Managing Director and Chief Executive Officer

I am going to ask my colleague Deepak Gupta to really specifically answer on unsecured retail and the mix, overall, as a part of our strategic going forward. Deepak, would you want to give a shot at it?

Deepak Sharma — Chief Digital Officer

Well, you know, Sumeet, there is no number which one has. All one is trying to do is, there is a great opportunity within our existing customer base. We have engaged with at this point of time, only a small percentage of that customer base. And there is a massive opportunity for us to use analytics and expand that base through the unsecured side. And that is what we are after and it will be progressively done. And remember on the unsecured side there are two seperate sides.

One is your unsecured the unsecured, which is really the personal loan and the consumer durables financing and the business, so that’s one type of unsecured. The other side is really the credit cards side, and that’s a very different opportunity. Because that is not just a pure lending opportunity it’s a very significant payment, engagements and for some of them unsecured. But it’s a very significant engagement also. So we will drive all of that and obviously we’re using a fair amount of analytics combined with some amount of experimentation to drive that.

Sumeet Kariwala — Morgan Stanley — Analyst

Okay, got it. Maybe I should stop there. But thanks a lot, Deepak.

Operator

Thank you. The next question is from the line of Adarsh Parasrampuria, CLSA. Please go ahead.

Adarsh Parasrampuria — CLSA — Analyst

Yeah. Hi, again, Deepak. Question is on growth again. Just wanted to understand, the last few years, we’ve been, we’ve consolidated and now we have the benefits of cost of funds and lower share. Would now system credit be a constraint for us or we are at a point where that one-and-a-half-times or wherever the multiple is you’ll be comfortable consistently growing above that? And under what circumstances there you would want to put a break again?

Uday Kotak — Managing Director and Chief Executive Officer

I think, I’ll take that question. We feel actually, we are coming into our sweet spot. I think our base case is we are moving into an endemic from a pandemic. We are very light in terms of the current risks we are carrying on our balance sheet, we don’t have baggage. We have finally, begun to get our analytics pieces in place. Our digital engines and a lot of the technology initiatives, which was started are coming in place actually in the first half calendar ’22. So between now and June ’22 a lot of our technology and digital initiatives on the lending side are also coming into place. And we actually feel that it’s a good place to be. Our risk management skill are something we have got reasonable confidence in. And as this cycle moves, as inflation comes back steadily, as interest rates start moving up with the positioning on our cost of funds and everything else we have the ability we have an accelerator going. And I want to very clearly say that we are not constrained by the market size or the credit growth in the marketplace. We will be constrained by our what we think is the right parameters. And because as long as those parameters of our Matrix get met we will go whatever it takes to grow our loan book and assets.

Adarsh Parasrampuria — CLSA — Analyst

Got it. No, that useful. And the second question is on the opex side. If you just observe most large banks including us there’s been a pickup in opex, partly do to the low base partly to do with business momentum coming back, but there is some accelerated expenses as well. So if you take two to three years time that added tech and spends in various projects what would be and good accelerating growth? Would you still expect cost income to moderate or just come to a point where cost income for industry for us remains where it is in spite of better growth?

Uday Kotak — Managing Director and Chief Executive Officer

So I think ultimately cost to income will get corrected. But we are very clear at this stage. There are three clear engines, which we are growing. First is on retail loans. And there are front end acquisition costs. First think about home loan. If there is a fee for acquisition on distribution to be paid home loan which has say average life of the 7, 6, 7 years or 8 years though the loan maybe 15 years average life is 7, 8 they’re paying the fee cost upfront.

And the banking regulation, you have to take the full distribution at the point of time you underwrite the loan. And that doesn’t bother us because we are driven by underlying value creation not necessarily what it does to my pre-operating profit in the quarter. That is not something, which is the basis on which we take decisions, if we believe substantively it is going to add value we are ready to take those costs upfront. But that is one. Second, I think you got to keep in mind we have dramatically increased our customer acquisition from 8 lakh in the last year same quarter 21 lakhs in this quarter. And we see that engine continuing to fire.

Again that takes content cost. And we of course are very focused on unit economics of our acquisition cost and customers but we think acquisition cost upfront it is not something which is going to deter us as long as we believe underlying unit economics are strong so that is point number two. And point number three is with the opportunity in the marketplace which is coming in with our overall balance sheet metrics we will drive growth. And we believe, the cost to income ratio will be an outcome rather than a target. Therefore we think about getting the right outcomes which will improve the cost to income ratio because a lot of our costs are front end.

And also keep in mind that as we get more and more digitized the actual straight through processing digital lending transactions will ultimately reduce the effective intermediation cost as well. But these three or four parameters are what is going to drive us. And in simple language first is really I think the front end costing we are ready to take. Second, is we are growing our customer base at a very high speed keeping in mind the economics versus front-end costs. Digitization will ultimately make straight through journeys significantly lower operating costs and fourth, cost to income for us is an outcome not a target.

Adarsh Parasrampuria — CLSA — Analyst

Thanks, Uday. And I’ll just squeeze in one last question. In the last two, three years as our liability franchise has improved and cost of funds have like drastically come down, these kinds of having advantage of growing slowly. So the pressure on branches to raise resources financial resources has been low, right. Where you get to high growth and it is now run rates is north of 20% growth we need to raise more money. It kind of books more pressure offer more than TDs at some point. So how does that equation change? From almost zero growth no growth getting to 20%, 25% growth that adds to some pressure on margins or cost of funds, both on absolute and relative basis.

Uday Kotak — Managing Director and Chief Executive Officer

So I think we are confident about our liability franchise and the strength of it. And that does not mean we can afford to be complacent. We are driving the liability engine. We know the gaps as I speak to you, and there is a significant internal focus, energy any introspection going on how we get that liability engine and firing much faster as we go forward. And we are quite confident that we will get our execution on that as well, including Digital is a very key part of our medium-term strategy, even on the liability side.

Adarsh Parasrampuria — CLSA — Analyst

Got it. This is very useful. Thanks, Uday for all your comments.

Operator

Thank you. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead.

Kunal Shah — ICICI Securities — Analyst

Yeah, so in terms of the growth, maybe in terms of the capital allocation or in terms of the opportunity, and now almost home loan and LAP is equivalent to where the corporate banking is, and both of them are equally competitive. We were hearing that large part of those is coming from NBFCs and most of them are doing it. So when we get to RaRoC or maybe even in terms of the cross-sell opportunities in corporate banking, as well as with the home loan customer, which would be the preference and where should we see a relatively higher growth?

No doubt it’s coming in from the home loan and LAP we have scaled it up, but here on how should we see between both these product segment?

Uday Kotak — Managing Director and Chief Executive Officer

Kunal. Let me just reiterate to you. Yes. home loan and LAP in absolute stock term is high, but on a growth rate basis there are other pockets, which are also catching up significant space. If you look at our unsecured retail though of a small base is growing at about close to 15% Q-on-Q that’s on the — on a very small base, but that is catching up. So yes the mix is still very low, which enables us to grow at a much faster rate. And that does not mean we don’t like home loans. We like it a lot. We like the wholesale banking business, and you have to look at horses for courses risk adjusted return. And we have a mix of 60% CASA our cost of funds is a significant competitive advantage I would like to believe probably best in class. And we will hammer that cost of funds advantage get significant customer engagement and produce our risk-adjusted returns in totality.

And keep in mind that in the COVID period 2020 a lot of our assets were actually in treasury assets, which were earning 4, 4.5 and as that mix changes to even 6.5, 6.6, 6.7 it’s still a significant mix change in favor improving NII and NIM. So we think, we will be able to get the right mix. And one of the most important things we have learned in risk management is if you get your risk adjusted metrics on a well balanced portfolio with high focus on individual Product segments the outcomes can be significant and sustainable while dramatic as well.

Kunal Shah — ICICI Securities — Analyst

Sure. But currently, which one would be giving us a better return if I have to look at say home loans and corporate banking at this juncture on a RaRoC basis?

Uday Kotak — Managing Director and Chief Executive Officer

So the home loan and corporate banking. Kunal, let me also give you this. Say on corporate banking, when we look at returns and home loans, we look at customer return. For example in corporate banking as Manian mentioned. In addition to spread in the lending business we make significant flows on foreign exchange, transaction banking, deeper customer engagement, translating into a broader relationships including with our investment bank so there are a whole host of linkages in the corporate banking business beyond just the lending product.

Trade, Is another very major part, current account growth all that is deeply interconnected and integrated to the lending piece of the corporate banking. And therefore I would request, look at some of these as engines for customer returns similar for home loans we think home loans is one of the most sticky products in a customer’s journey, and the ability to cross sell a variety of products to a home loan customer is also a significant opportunity. A home loan customer who has got a core mortgage is a much safer customer to add a credit card or a personal loan.

Our home loan customer who has a engaging bank account that again gives us a deeper engaging relationship with that customer. So we look, we are getting significantly more focus on customer engagement and customer return in addition to making sure that the product makes economic sense.

Kunal Shah — ICICI Securities — Analyst

Sure. And second, in terms of ECLGS pool. How the behavior has been so it’s been 9-12 months. So if you can highlight and any risk or we are seeing a much better connections equivalent to the overall portfolio? How is the overall behavior out there?

Uday Kotak — Managing Director and Chief Executive Officer

Manian you want to go for this?

KVS Manian — President, Corporate, Institutional and Investment Banking

Yeah. No. So, the ECLGS portfolio we are not seeing any significantly differential behavior compared to our normal portfolio, and there is therefore no perception of any enhance coming out of this.

Kunal Shah — ICICI Securities — Analyst

Sure. And one last question, in terms of our investment portfolio. Given the size and the movement yield the NOK seems to be slightly on a higher side. So have we protected ourselves for any for the moment or maybe have we reduced the duration during the quarter and it was relatively higher in Q3. How should we look at it? And maybe any further movement of 30, 50 bps how could be the impact now on?

Uday Kotak — Managing Director and Chief Executive Officer

Kunal, we have put down on paper, what our duration is. We have put down on paper, what our HTM is. Okay. We have put down our balance sheet in front of you. It is pretty straightforward that the pain is behind and we are actually in a pretty comfortable zone as we go forward. Of course, it depends on the amount of yield that was even in a one-year paper if the yields move up 150 basis points there will be some impact. But at duration of around one-and-a-half year, we think we are in a very sweet spot in a rising yield environment with the CASA ratio of 60%.

Kunal Shah — ICICI Securities — Analyst

Sure. Thanks. Thanks a lot.

Operator

[Operator Instructions] The question the next question is from the line of Gaurav Kochhar Mirae Asset. Please.

Gaurav Kochhar — Mirae Asset — Analyst

Yeah, hi, good evening. Thanks for taking my questions. Just extending the question that Adarsh asked earlier regarding pressure on NIMs if the growth comes back. Just wanted your thoughts around SA balance especially in the last 18 months. Ever since we’ve cut down on rates? I mean the SA traction has slowed down a bit. So, and given that we have been spending on tech and on liability acquisitions for the last 18 months what kind of outcome do o you expect from this. Given that in last 18 months the SA traction hasn’t been very or the growth has tapered off a bit. So outlook on SA in the next maybe two years.

And in that context if I look at the new growth in overall balance sheet was just 2.5%. So it seems optically because the overall growth in interest earning assets has been lower than loan growth. There was a positive uptick on margin. So, going ahead given that part of excess liquidity is gone how should we look at margins? Should we assume that the deposit growth would broadly mirror the loan growth and hence would have some impact on margins? Just wanted your thoughts around it.

Uday Kotak — Managing Director and Chief Executive Officer

I will answer the second first, and then ask the first to be answered by Shanti. So, on the second question it is a wonderful. It’s the way you need to look at it is we have gone for what I saw as the asset mix in the last 12 months. The asset mix was first when COVID hit us in April 2020 we loaded up on income government securities assets, okay.

And of course they were lower yielding, and we were carrying huge amount of surplus liquidity. We are now it’s a very clear mix change, it has gone into customer assets and loan assets from treasury assets. So that mix changes taken place. So you may not see the same level of growth in the balance sheet as you seen advances, because it’s a mix change in the asset our profile which we are getting so that is point number one. And that actually is a big positive for our earning and spreads. Because or even if you take the lowest field assets in that spends on the retail side, which is say a home loan 4.5 asset is moving to a 6.5 asset as a very simple mix change which is happening.

And we are still carrying as you can see 130% to 140% LCR. Therefore, we are still in a very comfortable liquidity position, even now. Now, as far as your first question is concerned on savings accounts I will ask Shanti, to answer that and give you a perspective what we are doing as we go forward. Shanti.

Shanti Ekambaram — Group President, Consumer Banking

Thank you, Uday. When we dropped off 6% we sort of dropped it off in a relatively short period of time and it has taken us time to replace the value proposition for the customers, like many other banks had. And if you saw some of the opex, we have sort of stepped up our engagement through offers, propositions so tie up with Apple, Flipkart, Amazon, etc., which has increased the engagement layer the customer. So the increase in engagement layer is something that we have stepped up. It has taken us in the last 6 odd months to build it and we are well on that journey.

Yeah. Last year our new to bank customer acquisitions was impacted because of COVID, but that has picked up and we have again gone for very aggressive acquisition, which is what gives you the pick up. We missed out the pick up, we would have got last year on the NTB as I call it, which we have restarted the program. The third thing is that we are still very largely retail-focused, and we don’t have a large institutional business particularly the government business.

As you now know agency bank has been extended to all. We have got approvals for GST for CBDT for PPF and a lot of other things. So, we are building the whole government business model including at the wholesale and the retail end to be able to sort of our support the Group. It’s a three parts to the strategy. Our retail model continues with aggressive acquisition but deeper engagements to replace the 6%. Second is really the aggressive NTBs which will build value over the period of time focusing on building the institutional business now with the agency business, hadn’t opened up and these are some of the steps that would sort of focus on getting us back to the SA growth, which has been relatively slower in the last three quarters.

Gaurav Kochhar — Mirae Asset — Analyst

Understood. And my next question is on the MTM loss. Just wanted to clarify, is there any provision or security receipts from our security to see in this quarter? Because that number of INR484 crores so taking 62% AFS with a duration of 1.5 it doesn’t add up to the investment portfolio.

Uday Kotak — Managing Director and Chief Executive Officer

Jaimin? Jaimin.

Jaimin Bhatt — Kotak Mahindra Bank — Analyst

Sorry, it was on mute. The INR484 crores doesn’t really have any as SR-related hit, that’s entirely coming out of the non-SR and SR1 book.

Gaurav Kochhar — Mirae Asset — Analyst

Because if I look at FY ’21, the entire profit from treasury was INR270-odd crore and in this quarter the loss is around INR484 crores, which is almost 2 times of profit last year. So this number seems a little higher. Has the modified duration changed versus FY ’21 for this book as a result of which the loss seems high or I just wanted to see the changes.

Jaimin Bhatt — Kotak Mahindra Bank — Analyst

Yeah. I think we have definitely moderated duration that is clear. We have moderated duration.

Gaurav Kochhar — Mirae Asset — Analyst

Okay. No, my question was if the duration was high in FY ’21 and moderated ideally the loss should have been lower. But.

Jaimin Bhatt — Kotak Mahindra Bank — Analyst

It has been moderated over time in the last few months. So that is, so obviously rate started going up, as you know, October, November onwards. So we have moderated the duration. We have taken that call and second, I think you got to keep in mind that there is a concept of pull to par. Therefore, if I bought a security say originally government issued security of 7% coupon. And which last year was trading at 4.5% there is a pull to par impact while the NII on that comes in my top line, so that pull to par impact is also a part of beef MTM provision. I hope you get the point. Because that security was bought at a premium therefore a 7% security, if it’s not at a 4.5 yield the security is not at a premium to the premium to par. So the premium to par has to be passed down on that security, which is also a part of the reason why INR484 crores has hapened.

Gaurav Kochhar — Mirae Asset — Analyst

All right. Understood. Okay, thanks, that’s it from my side.

Operator

Thank you. The next question is from the line of Abhishek Murarka from HSBC. Please go ahead.

Abhishek Murarka — HSBC — Analyst

Yeah, good evening, everyone, and congratulations for the quarter. So two questions. The first is on NIM. So, when we’re starting with the cost of SA that you’ve reported, it’s down 19 bps Q-o-Q. I’m assuming this is the impact of the SA rate reduction that you probably did around October. But how much more repricing is there to go in the SA book, that’ one. And the second part is, you’ve been — you’ve raised your TD rates a bit and generally your concentration of deposits is more in the less than one year and one to three-year, bucket how soon or how much time can pass before it starts showing up in your cost of funds and your cost of fund starts going up?

Uday Kotak — Managing Director and Chief Executive Officer

So first of all on SA now the rates we have are uniform 3.5.

Abhishek Murarka — HSBC — Analyst

Yeah.

Uday Kotak — Managing Director and Chief Executive Officer

We believe that, if you look at some of the larger banks they are 2.75% and 3% at less than 50 lakh. So we believe that as interest rates start moving up we don’t need to increase our SA deposit rates particularly since our lowest is 3.5%. There are banks at 2.75% there are banks at 3%. So we think the pressure on SA in terms of just rates will not impact us for a while that is point number one in terms of we need to be doing anything on SA.

And I think on TDs we are quite comfortable with. TDs you just have to do. I mean, our view is that a 10 to 20 basis points nice big difference and you start getting a reasonably good flow on TDs when we need to open the tap. And we will consider it appropriately. We have also, I mean just to share with you, we have taken significant fixed rate refinance on some of our liabilities in the last three months. So at about average maturity of two to three years so some of the institutions. So we have actually a conscious decision in the last couple of months to step up on our refinance or fixed-rate refinance from the institutions on the book and simultaneously the duration of our bond book has also got significantly lower. So what we think we are reasonably comfortable on managing margins and getting growth.

And you also keep in mind even if there is some shift in the mix of our loan book. In one from treasury assets to customer effort and second is some change in the mix on unsecured retail that will also be to kicker to our NIMs.

Abhishek Murarka — HSBC — Analyst

What you’re essentially saying is that you’ve got enough levers to keep NIM at 4.6 and that should be a sort of run rate.

Uday Kotak — Managing Director and Chief Executive Officer

I’m not saying that. I’m saying that we have enough levers to have a very good NIM management ability.

Abhishek Murarka — HSBC — Analyst

Okay, understood. And my second question is on fees. I just wanted some granularity on this other fees. So the reporting is minus INR132 crores and the loss in MTN was INR484 crores. So that gap of INR350 crores what are the component of that gap?

Uday Kotak — Managing Director and Chief Executive Officer

Jaimin?

Jaimin Bhatt — Kotak Mahindra Bank — Analyst

I mean yeah, I’m sorry, I didn’t get you.

Abhishek Murarka — HSBC — Analyst

No. What are the components of that? So one thing I want to explain is that provisioning brand.

Jaimin Bhatt — Kotak Mahindra Bank — Analyst

Okay, I’ll come to that. So there would be things like there’ll be prop activity relating to the whole area of fixed income, as well as the derivative side. So that’s the fixed income side. The other income, which also include what we sell on priority sector certificates. And there are pockets where we have excess and we actually trade in PSLC. While there is when we buy there would be an expense item, but the entire gross amount of what we sell is sitting in the other income that would be a positive number.

And also there are stressed asset division buys and sells assets so there is some income coming from the stressed asset division. So if you look at the corresponding number in the previous year the minus INR132 crores was something like INR170 crores positive. So INR132 crores negative is after the hiccup for INR484 crores which is on that count.

Abhishek Murarka — HSBC — Analyst

Does dividend also sit there? Dividend and corporate agencies.

Jaimin Bhatt — Kotak Mahindra Bank — Analyst

There is no dividend from subsidiary in this quarter.

Abhishek Murarka — HSBC — Analyst

Yeah. But it would come in that line.

Jaimin Bhatt — Kotak Mahindra Bank — Analyst

If it would come in that line. Yes, I mean, there will be something. If you look at the 9-month numbers in quarter one, but not in this quarter.

Abhishek Murarka — HSBC — Analyst

And forex and derivative income also comes there?

Jaimin Bhatt — Kotak Mahindra Bank — Analyst

That will come here. That’s correct.

Abhishek Murarka — HSBC — Analyst

Okay. Got it. Thank you so much, Jaimin. And all the best to everyone for the next quarter.

Jaimin Bhatt — Kotak Mahindra Bank — Analyst

Thank you.

Operator

Thanks. The next question is from the line Nilanjan Karfa of Nomura. Please go ahead.

Nilanjan Karfa — Nomura — Analyst

Hi thanks. So brought two sets of question. One is on IPO financing. Now that’s something that’s going to go away from March onwards. Could you talk about how I’m guessing that’s a reasonable part of the book, and definitely gives you good margins and income. So how are we trying to sort of mitigate that impact, if any? Does that also have some kind of impact on your overall deposit or average deposit? So that’s one.

Uday Kotak — Managing Director and Chief Executive Officer

Manian you want answer that?

KVS Manian — President, Corporate, Institutional and Investment Banking

You said, you had one other question, so go ahead sir.

Nilanjan Karfa — Nomura — Analyst

No, I can take it later.

Uday Kotak — Managing Director and Chief Executive Officer

Manian?

KVS Manian — President, Corporate, Institutional and Investment Banking

So as you know RBI had asked bank-owned subsidiaries to not the loan against shares and IPO financing of that and therefore there is no IPO financing props built into this quarter’s results. They have been stopped in the main bank or its subsidiary. The associate had company Infina does loan IPO financing and that comes in the consolidation as part of the Infina’s profit being consolidated into this. Otherwise the main bank and its subsidiaries have no IPO financing business.

Nilanjan Karfa — Nomura — Analyst

It’s not their current year at all.

KVS Manian — President, Corporate, Institutional and Investment Banking

No, not at all.

Nilanjan Karfa — Nomura — Analyst

Okay. But it does it impact the deposit side also or because of the way it is easily structured?

KVS Manian — President, Corporate, Institutional and Investment Banking

No, not too much. Nothing significant.

Nilanjan Karfa — Nomura — Analyst

Okay. Right. Second.

KVS Manian — President, Corporate, Institutional and Investment Banking

As you know IPO financing business had moved to term deposit model if you know.

Nilanjan Karfa — Nomura — Analyst

Yeah.

KVS Manian — President, Corporate, Institutional and Investment Banking

The money was lying in term deposits. And very short-term term deposits so it doesn’t have too much implication in the deposit side.

Nilanjan Karfa — Nomura — Analyst

Right. Okay. Second question goes back to this in the unsecured piece that we are talking about. I mean, look, I think we are reasonably smaller player, but the market is also very well penetrated. How do you think you’re going to gain market share? Is it going to be more organic, is it going through more penetration? And already we are taking in a lot of cost, so is there something that will continue over the course of next two, three years?

Uday Kotak — Managing Director and Chief Executive Officer

Once again, I will ask Deepak Gupta.

Dipak Gupta — Joint General Manager

No, I mean that’s pretty easy given our small base I think it is really comfortable to grow from that small base. And like I said earlier, we are really looking at the whole unsecured piece essentially from our existing customer base. And within our existing customer base our penetration on the unsecured side is practically negligible. So that basically means that we don’t really have to go out, we get the growth, which we are talking about. So I don’t think it’s a problem there.

Nilanjan Karfa — Nomura — Analyst

Dipak, just want to clarify. I mean it is generally said that our salaries franchise is a little less or at least the market perception is the salaried unsecured piece is something where you earn your margin and have lower losses. Are we sort of disadvantage on that front?

Dipak Gupta — Joint General Manager

That’s a misconception. We have reasonable new salary accounts which keep coming in and the stock of salary accounts is pretty large. But the unsecured is not only to corporate salary customers of which are acquired through that route. Yeah, there are large customer acquisitions, which are happening which are salaried customers with their corporate salaries with other banks also.

Nilanjan Karfa — Nomura — Analyst

Okay, fair enough. And a quick question to Jaimin. Jaimin could you clarify at least either now or anytime in the call. The items of MTM provision on AFS the trading or treasury gains, and the recovery from written off items. These three, I think that’s for the last let’s say at least on a Y-o-Y basis or the previous quarter as well. And net interest margin and total deposits on a consolidated base. Thank you.

Uday Kotak — Managing Director and Chief Executive Officer

Hello. Jaimin?

Jaimin Bhatt — Kotak Mahindra Bank — Analyst

Sorry. I can share that with you separately that should be fine.

Nilanjan Karfa — Nomura — Analyst

Sure. Thanks.

Operator

Thank you, ladies and gentlemen, that was the last question. I would now like to hand the call over to Mr. Uday Kotak for closing comments.

Uday Kotak — Managing Director and Chief Executive Officer

Thank you very much. Colleagues we’ve have spent nearly 1.5 hours. I really appreciate your time, and a very frank and candid discussions. And I do look forward to hopefully, better situation in the post Omicron period as most people seem to be getting it, and at the current lethality of that much lesser than any other earlier forms of COVID. I do feel that we are getting into 2022 with new risks and new opportunities and there are some things which are changing. And from a Kotak point of view, if there are three most important things in terms of our driving for the future it is customer acquisition and customer experience, which is number point number one. Second is significant investment and growth in the technology piece. And the third, and I think the most important is getting the right talent for a new future in financial services. And all three are very major focus areas and I would like to a share with you that we are moving in all these three areas at great speed. Thank you very much and have a wonderful weekend. And good bye.

Operator

[Operator Closing Remarks]