ICICI Bank Ltd (ICICIBANK) Q4 FY22 Earnings Concall Transcript

ICICI Bank Ltd (NSE:ICICIBANK) Q4 FY22 Earnings Concall dated Apr. 23, 2022

Corporate Participants:

Sandeep Bakhshi — Managing Director & Chief Executive Officer

Rakesh Jha — Group Chief Financial Officer

Anup Bagchi — Executive Director

Analysts:

Mahrukh Adajania — Edelweiss Group — Analyst

Mona Khetan — Dolat Capital — Analyst

Suresh Ganapathy — Macquarie — Analyst

Manish Ostwal — Nirmal Bang — Analyst

Nitin Aggarwal — Motilal Oswal — Analyst

Sameer Bhise — JM Financial — Analyst

Anand Dama — Emkay Global — Analyst

Adarsh Parasrampuria — CLSA — Analyst

Presentation:

Operator

Good day and welcome to the Q4 FY 2022 Earnings Conference Call of ICICI Bank. [Operator Instructions] Please note that this conference is being recorded.

I’ll now hand the conference over to Mr. Sandeep Bakhshi, Managing Director and CEO at ICICI Bank. Thank you and over to you, sir.

Sandeep Bakhshi — Managing Director & Chief Executive Officer

Thank you. Good evening to all of you and welcome to the ICICI Bank earnings call to discuss the results for Q4 of financial year 2022. Joining us today on this call are Vishakha, Anup, Sandeep Batra, Rakesh and Anindya. We hope that you are safe and in good health.

In January, we saw a sharp rise in the number of COVID-19 cases that resulted in a moderation in the pace of economic activity. However, the impact of the third wave of the pandemic was mild, and with the decline in the number of new COVID-19 cases economic activity gained momentum in the months of February and March.

This was visible in the bank’s ultra-frequency index, comprising several high frequency indicators tracked by our economic research group which rose from 112 in January to 114.9 in February and 124.4 in March. Some of the major factors leading to improvement in this index were increase in power demand, rail freight revenues, e-way bill generation and GST collections. We extend our gratitude to the medical and health workers fraternity for their tireless efforts in this fight against COVID-19.

At ICICI Bank, we aim to grow the core quarter operating profit within the guardrails of compliance and risk to our 360-degree customer centric approach and focus on opportunities across client and segment ecosystems. We focus on growing our loan portfolio in a granular manner with a focus on risk and rewards with return of capital and containment of provisions below a defined percentage of core operating profit being the key imperative. We follow a micro market-based approach to create an efficient distribution and resource allocation strategy by using analytics to identify opportunities.

We aim to steadily grow our business within our strategic framework and strengthen our franchise, delivery and servicing capabilities backed by a range of digital initiatives. Coming to the quarterly performance against framework, growth in core operating profit in a risk calibrated manner through the focused pursuit of target market segments. The core operating profit increased by 18.7% year-on-year to INR101.64 billion in this quarter and 22.3% year-on-year to INR383.47 billion in financial year 2022. Excluding dividend income from subsidiaries and associates, core operating profit grew by 21% year-on-year in Q4 of 2022. The profit after tax grew by 59.4% year-on-year to INR70.19 billion in this quarter.

For the fiscal year 2022, the profit after tax increase by 44.1% year-on-year to INR233.39 billion. The board has recommended a dividend of INR5 per share of financial year — for financial year 2022 subject to requisite approvals. 2022 subject to requisite approvals further enhancing that strong deposit franchise. Local deposits grew by 14.2% year-on-year at March 31, 2022. During the quarter, average account — average current account deposits increased by 23.6% year-on-year and average savings accounts deposits by 22.7% year-on-year. The liquidity coverage ratio for the quarter was about 30%, reflecting continued surplus liquidity as total deposits continues to be amongst the lowest in the system.

Growing the portfolio in a granular manner with a focus on risk and reward, the retail loan portfolio excluding rural loans grew by 19.7% year-on-year and 6% sequentially at March 31, 2022. Disbursements across various retail products increased in Q4 2022 compared to the previous quarter. The business banking portfolio grew by 43.2% year-on-year and 10.2% sequentially at March 31, 2022. Yet semi-portfolio grew by 33.6% year-on-year and 11.3% sequentially.

The growth in our SME and business banking portfolios has been driven by our digital offerings and platforms like InstaBIZ and Merchant Stack. The domestic corporate hopefully grew by 9% year-on-year and was flat sequentially at March 31, 2022. The domestic loan portfolio grew by 17.5% year-on-year and 5.7% sequentially. The overall loan portfolio grew by 17.1% year-on-year and 5.5% sequentially at March 31, 2022.

Leveraging digital across the business. Our various digital platforms such as iMobile Internet banking platforms in stock base and trade online, provide end-to-end seamless digital journeys, personalized solutions and value-added features to customers, and enable more data-driven cross-sell and up-sell.

In line with the philosophy of open architectures of our digital platforms, recently we made our InstaBIZ interoperable that has all the benefits of the app are now available to all merchants, including those who do not have current accounts with us. This initiative enables merchants to instantly create digital clicks and collection solutions like UPI ID and QR code and start collecting money from their customers. We have shared some details on our technology and digital offerings in slides 18 to 22 of the investor presentation.

Protecting the balance sheet from potential risks. Net NPAs declined by 24.2% year-on-year and 5.2% sequentially to INR69.61 billion at March 31, 2022, from INR73.44 billion at December 31, 2021. The net NPA ratio declined 0.76% at March 31, 2022, from 0.85% at December 31, 2021. During the quarter, there were net deletions from gross NPAs of INR4.89 billion excluding write-offs and sale. The provision coverage ratio on the NPAs was 79.2% at March 31, 2022.

The total provisions during this quarter were INR10.69 billion or 10.5% of core operating profit and 0.53% of average advances. This includes contingency provision of INR10.25 billion made on a prudent basis. The bank holds contingency provisions of INR74.5 billion or 0.9% of total loans as of March 31, 2022. Maintaining a strong capital base; the capital position of the bank continued to be strong with a CET1 ratio of 17.6% at March 31, 2022, after reckoning the impact of the proposed dividend. The Tier 1 ratio was 18.35% and the total capital adequacy ratio was 19.16% at March 31, 2022. Further, the market value of the banks investments and listed entities of the group is about INR840 billion.

As has been announced, Vishakha has decided to pursue opportunities outside the group and will step down from the board effective May 31. We thank her for her outstanding contribution to ICICI and wish here all the very best. Anup will take over Vishakha’s responsibilities at the board level. The board has to be approved the elevation of Rakesh as an Executive Director and he will take over Anup’s responsibilities. Anindya will take up the role of CFO and will report to Sandeep Batra who will continue to head our corporate centers.

At ICICI Bank, we strive to build a sustainable and responsible business and make a positive impact on the economy, society and environment. The bank has focused on various aspects of ESG and its business as well as CSR activities. We have adopted a board approved ESG policy along with governments and oversight framework for ESG.

Looking ahead, we see many opportunities to grow our core operating profit in a risk calibrated manner. We will continue to focus on our objective of catering to all the banking and financial needs of the customers with the focus on risk and reward. Our ecosystem based approach and creation of multi-functional teams that’s helped in nurturing relationships and offering the entire [Indecipherable] 00:09:48 services of the bank to customers.

We continue to be guided by the twin principles, One Bank, one ROE, emphasizing the goal of maximizing our share of target market across all products and services. And Fair to Customer, Fair to Bank, emphasizing the need to deliver fair value to customers while creating value for shareholders. We remain focused on delivering consistent and predictable returns to our shareholders.

I now hand the call over to Rakesh.

Rakesh Jha — Group Chief Financial Officer

Thank you, Sandeep. I’ll talk about the balance sheet growth, credit quality, P&L details, growth in digital offerings, portfolio trends, and performance of subsidiaries. Starting with the balance sheet growth, Sandeep covered the loan growth across various segments. Up to the last quarter, we used to report rural loans as part of the retail portfolio. From this quarter, we are reporting the rural loans separately. The retail loan portfolio, excluding the rural loans grew by 19.7% year-on-year and 6% sequentially at March 31.

Coming to the growth across retail products, the mortgage portfolio grew by 20.3% year-on-year and auto loans by 11.3%. The commercial vehicles and equipment portfolio declined by 1.3% year-on-year. Growth in the personal loan and credit card portfolio was 31.9% year-on-year. This portfolio INR879.35 billion or 10.2% of the overall loan book at March 31. The rural loan portfolio increased by 6.5% year-on-year and 4.3% sequentially. Retail and rural portfolio together grew by 17.6% year-on-year and 5.8% sequentially. The overseas loan portfolio in US dollar terms grew by 5.9% year-on-year and was flat sequentially at March 31.

The year-on-year increase in the overseas loan portfolio was primarily due to increasing the India-linked trade finance book. The overseas loan portfolio was 4.8% of the overall loan book at December 31. The non-India-linked corporate portfolio reduced by 48.2% or about $597 million year-on-year and 6.8% or about $47 million sequentially. Of the overseas corporate portfolio, about 82% comprises Indian cost risks, 10% is overseas corporate with Indian linkage, 4% comprises companies owned by NRIs or CIOs, and balance 4% is non-Indian cost risks.

Our direct exposure to Russia and Ukraine is negligible. We have exposure to an Indian oil refinery rated AA- externally where a sanctioned Russian entity owns 49% stake. The exposure is largely non-fund in nature. The oil refinery’s operations are largely in India. Coming to the funding side, average savings account deposits increased by 22.7% year-on-year in Q4 and 23.5% year-on-year for the full year. Average current account deposits increased by 23.6% in Q4 and 31% year-on-year for the full year. Total term deposits grew by 9% year-on-year at March 31.

Coming to the credit quality, the net deletions from gross NPAs were INR4.89 billion in the current quarter compared to INR1.91 billion in the previous quarter. There were net additions of INR1.23 billion to gross NPAs in the retail, rural and the group banking portfolio, and net deletions of INR6.12 billion with gross NPAs in the corporate and SME portfolios. The gross NPA additions were INR42.04 billion in the current quarter compared to INR40.1 billion in the previous quarters. The gross NPA additions from the retail, rural and business banking portfolio was INR37.36 billion and from the corporate and SME portfolio was INR4.68 billion.

Recoveries and upgrades from NPAs excluding write-offs and sale were INR46.93 billion in the current quarter compared to INR42.09 billion in the previous quarter. There was recoveries and upgrades of INR36.13 billion from the retail, rural, and business banking portfolio and INR10.80 billion from the corporate and SME portfolio. Corporate and SME recovery and upgrades include a power sector account, which was upgraded post implementation of a resolution plan under IBC. The gross NPAs written off during the quarter was INR26.44 billion. The non-fund based outstanding to borrowers classified as non-performing was INR36.4 billion at March 31 compared to INR36.38 billion at December 31.

The bank holds provisions amounting to INR20.51 billion at March 31 against this non-fund based outstanding. The total fund based outstanding to all standard borrowers under resolution as per various guidelines declined to INR82.67 billion or about 1% of the total loan portfolio at March 31 from INR96.84 billion at December 31. The sequential decline was mainly due to prepayment by a borrower in the construction sector. As the total fund based outstanding under resolution at March 31, INR60.43 billion was from the retail, rural and business lending portfolio, and the balance was INR22.24 billion was on the corporate and SME portfolio.

The bank holds provisions of INR25.30 billion against the borrowers, which is higher than the requirement as per RBI guidelines. Coming to the P&L, the interest income increased by 20.8% year-on-year to INR126.05 billion. The net interest margin was at 4% in this quarter compared to 3.96% in the previous quarter and 3.84% in Q4 of last year. The impact of the interest and income tax refund on net interest margin was 1 basis point in Q4 of this year compared to 6 basis points in the previous quarter and 1 basis point in Q4 of last year. The domestic NIM was at 4.12% this quarter compared to 4.06% in previous quarter and 3.9% in Q4 last year. The cost of deposit was 3.48% in this quarter, compared to 3.47% in the previous quarter. Of the total domestic loans, interest rates on 41% loans are linked to repo rare and 7% to other external benchmarks.

Noninterest income, excluding Treasury income, grew by 11.4% year-on-year to INR46.08 billion this quarter. Fee income increased by 14.4% year-on-year to INR43.66 billion in this quarter driven by growth across various segments. Fees from retail, rural, business banking and SME customers grew by 14.3% year-on-year and constituted about 77% of the total fees in this quarter. The dividend income from subsidiaries and associates was INR2.32 billion in this quarter, compared to INR3.57 billion in Q4 of last year. The dividend income in Q4 of last year included interim dividend from ICICI General and ICICI Securities CD.

The bank’s operating expenses increased by 17.4% year-on-year this quarter. The employee expenses increased by 21% year-on-year. The bank had about 105,800 employees at March 31. The employment had increased by about 7,000 in the last 12 months. Employee expenses in this quarter include an impact of INR0.69 billion due to fair valuation of ESOPs granted to all employees post April 1, 2021, for the current quarter as required by RBI guidelines.

Nonemployee expenses increased by 15.6% year-on-year in this quarter primarily due to retail business and technology related expenses. The technology expenses were about 8.5% of our operating expenses in FY 2022. The core operating profit increased by 18.7% year-on-year to INR101.64 billion in this quarter. Excluding dividend income from subsidiaries and associates, the core operating profit grew by 21% year-on-year. The core operating profit grew by 22.3% year-on-year to INR383.47 billion from the full year. There was a Treasury gain of INR1.29 billion in Q4 compared to INR0.88 billion in Q3 and a loss of INR0.25 billion in Q4 of the previous year.

The total provisions during the quarter were INR10.69 billion or 10.5% of the core operating profit and 0.53% of the average advances. During the quarter, we made contingency provision of INR10.25 billion on a prudent basis. The bank continues to carry COVID-19 asset provision of INR64.25 billion as a contingency provision at March 31st. Thus, the bank holds contingency provision of INR74.5 billion at March 31st.

The provision coverage on NPAs continued to be robust at 79.2%. In addition, we hold INR25.3 billion of provisions on borrowers under resolution. At March 31st, the total provisions other than specific provisions on fund base outstanding to borrowers classified as nonperforming was INR179.18 billion or 2.1% of the loans. The profit before-tax grew by 63.1% to INR92.24 billion in this quarter. The tax expense was INR22.05 billion in this quarter compared to INR12.54 billion in the corresponding quarter last year.

The profit after-tax grew by 59.4% year-on-year to INR70.19 billion in the quarter. The profit after-tax grew by 44.1% year-on-year to INR233.39 billion for the full year. The consolidated profit after-tax grew by 58% year-on-year to INR77.19 billion in this quarter, and the consolidated profit after tax grew by 36.6% year-on-year to INR251.10 billion for the full year.

Coming to the growth individual offerings, leveraging digital and technology across businesses is a key element of our strategy of growing the risk calibrated core operating profit. We had seen significant increase in the adaption of our mobile banking app iMobile Pay. There have been 6.3 million activations of iMobile Pay by non-ICICI Bank account holders as of end March. The value of transactions by non-ICICI Bank account holders in the current quarter was 4.9 times the value of transaction in Q3 of 2022.

The value of credit card spends grew by 77% year-on-year in Q4, driven by higher activation rate through digital on-boarding of customers, including Amazon Pay credit cards, automated effective portfolio management for growth banks amongst existing card customers, and diversification through commercial cards. The bank has issued more than 3 million Amazon Pay credit cards since its launch.

The bank has recently tied up with Emirates Skywards, the award-winning loyalty program of Emirates and FlyDubai to launch a range of co-branded credit cards that enable customers to earn reward points on travel, lifestyle and everyday spends. The value of financial transactions in InstaBIZ grew by about 44% year-on-year in the current quarter. The value of transactions on the supply chain platform in the current quarter was 2.7 times the value of transactions in Q4 last year.

The proportion of end-to-end digital sanctions and disbursements across various products has been increasingly — increasing steadily. About 34% of our mortgage sanctions and 44% of our personal loan disbursements by volume were end-to-end digital this year. The bank has created more than 20 industry specific stacks which provide bespoke and purpose-based digital solutions to corporate clients and their ecosystems. The volume of transactions through these solutions in FY 2022 was 3.7 times the volume of transactions last year. The value of transactions done on trade online increased by about 80% year-on-year this year.

Coming to some portfolio information; we have provided the details on our retail business banking and the SME portfolio in slides 43 to 46 of the Investor Presentation. The loan and non-fund based outstanding to performing corporate and SME borrowers rated BB and below was INR108.08 billion at March 31, compared to INR118.42 billion at December 31. The amount of INR108.08 billion at March 31 includes INR23.89 billion of loans under resolution.

The sequential decline during the quarter was mainly due to prepayment from a borrower in the construction sector where resolution had been implemented as per RBI COVID Resolution Framework. The details are given on slide 41 and 42 of the presentation. Other than two accounts, one each in power and telecom sector, the maximum single borrower outstanding in the BB and below portfolio was less than INR6 billion at March 31. At March 31, we held provisions of INR12.32 billion on the BB and below portfolio compared to INR15.75 billion at December 31. This includes provisions held against borrowers under resolution included in this portfolio.

The builder portfolio, including construction finance, lease rental discounting term loans and working capital loans was INR269.48 billion at March 31, compared to INR257.53 billion at December 31. The builder portfolio is about 3% of our total loan portfolio. Our portfolio is granular in nature, with a larger exposure being to well-established builders and this is also reflected in the sequential increase in the portfolio. About 9.5% of a builder portfolio at March 31 was either rated BB and below internally or was classified as non-performing compared to 11% at December 31.

Coming to the subsidiaries and key associates, the details of the financial performance of subsidiaries and key associates are covered in slides 53 to 55 and slides 76 to 81 in the presentation. The VNB margin increased from 25.1% in FY 2021 to 28% in FY 2022. The value of new business increased by 33.4% year-on-year to INR21.63 billion in FY 2022.

The profit after tax of ICICI Life was INR7.54 billion in FY 2022 compared to INR9.6 billion in FY 2021. The embedded value increased by 8.7% year-on-year to INR316.25 billion at March 31. The profit after tax was INR1.85 billion in this quarter compared to INR0.64 billion in Q4 of last year. The gross direct premium income of ICICI General was INR179.77 billion in FY 2022 compared to INR140.03 billion in FY 2021. The combined ratio was 108.8% in FY 2022 compared to 99.8% in FY 2021.

The profit after tax was INR12.71 billion in FY 2022 compared to INR14.73 billion last year. The profit after tax was INR3.13 billion this quarter compared to INR3.46 billion in Q4 last year. Prior period numbers are not comparable due to the reflection of the general insurance business of Bharti AXA in the current period numbers. The profit after tax of ICICI AMC was INR3.57 billion in this quarter compared to INR3.48 billion in Q4 of last year. The profit after tax of ICICI Securities on a consolidated basis increased by 3% year-on-year to the INR3.40 billion in this quarter from INR3.29 billion in Q4 of last year.

ICICI Bank Canada had a profit after-tax of CAD4.3 million in this quarter compared to CAD5.1 million in Q4 last year and CAD11.5 million in Q3 this year. Profit after-tax was higher in Q4 last year and Q3 this year due to write-back of provisions. ICICI Bank Canada repatriated CAD220 million of equity capital to the bank in Q4 this year. ICICI Bank UK had a profit after tax of $3.1 million this quarter, compared to $2.8 million in Q4 of last year and $3 million in Q3 this year. As for India, ICICI Home Finance had a profit after tax of INR0.53 billion in the current quarter, compared to INR0.15 billion in Q4 of last year and INR0.48 billion in Q3 this year. The year-on-year increase in profit tax is mainly due to declines in cost of funds and lower provisions.

With this, we conclude our opening remarks and we will now be happy to take your questions.

Questions and Answers:

Operator

Thank you very much, sir. [Operator Instructions] The first question is from the line of Mahrukh Adajania from Edelweiss. Please go ahead.

Mahrukh Adajania — Edelweiss Group — Analyst

Yeah. Hi. Congratulations. My first question is really on the margin outlook. I know you don’t give any specific guidance, but given intense pricing competition in some segments, you know unsecured salary and then within mortgages, do you think repo rates hike will benefit margin?

Rakesh Jha — Group Chief Financial Officer

Mahrukh, it will be a function of, you know — so the net interest margin, you know, difficult to give an outlook. I think, you know, in addition to the competitive pricing, you know, that you talked about, like you rightly said, it will also be a function of, you know, the repo rate movement, you know, through the year and the timing of it. So we do have a reasonable part of our book, you know, which is linked to external benchmarks now, like, most other banks as well.

So, you know, like we always say, you know, our target would be to try and see, you know, how we can, you know, maintain our margins. But it will be a function of, you know, what is happening in the market. If you look at the current quarter Q4, our margin was about 4%. If you look at it, you know, in the past years also, Q4 traditionally for us has, you know, margins to be about 8 to 10 basis points higher, you know, that’s because, you know, of the fact that the quarter, you know, has lesser number of days. So the annualized, you know, competition gives a slightly higher margin.

On the core basis, I would say between Q3 and Q4, the margin was, you know, kind of flat. And you also saw the fact that the cost of deposits, you know, kind of have now, you know, bottomed out, you know, at 3.47%, 3.48%. So we’ll have to kind of, you know, navigate through this period before the repo rate starts to increase. And then thereafter, definitely, you know, the existing rupees will go up, but the incremental lending rates will still be a function of how much liquidity uplift continues in the system.

Mahrukh Adajania — Edelweiss Group — Analyst

Got it. And just in terms of mortgages. So, your mortgage book has been growing very well. But if you see the sectorial deployment, sector loan growth is just 8% or whenever you are talking about a very good real estate cycle and very good registration. So, what kind of a scheme is that?

Rakesh Jha — Group Chief Financial Officer

So, if you look at — if you look at the last, you know, actually several quarters, growth has been, you know, at similar levels of around 20%. I think the focus that we have had on the entire retail business in terms of the Customer 360 where we are, you know, looking at the entire set of products and services to be provided has really helped us in growing, you know, both the asset book that you have seen as well as the strong growth on the liabilities that we have seen. Of course, in the mortgage market also, you know, the lending rate has declined. There have been a fair degree of balance transfers also that have been happening. So, those are the reasons that we have seen a lot. Anup will add if anything missed.

Anup Bagchi — Executive Director

No, I think, Rakesh, you have broadly covered it. Our focus on micro markets and our focus on just making sure that we have decongested many of our processes and make it easier for customer onboarding. And added to that, our micro market and go-to-market focus is increasing our share, and that actually is leading to this kind of growth.

Mahrukh Adajania — Edelweiss Group — Analyst

And my last question is that we have some master directions on credit and debit cards. Would your Amazon Pay ICICI Bank card be fully compliant with those master directions?

Anup Bagchi — Executive Director

Yes. So Mahrukh, glad you asked this question, because I’m sure subsequently, many would have asked this question because it’s a very recent development. As far as we are concerned, we have read through the guidance. We are looking at it more finely. But at the first reading, we will be quite unimpacted by these guidelines. These guidelines seems to be on co-brand, but there are various aspects of co-brand, particularly data sharing and revenue sharing and all of it. So we will be unaffected largely by this circular. But we are also going through it with toothcomb if there are any issues, but prima facie, it doesn’t seem to have any. In fact, of course, there is another bucket on customers on activation after 1 year. And if somebody requires for deactivation within seven days, we have to reactivate. I think those are very, very good customer service measures that are coming. So I would put it in two buckets, co-brand and customer service-related issues. We seem to be good on both so far.

Mahrukh Adajania — Edelweiss Group — Analyst

Thanks a lot. Thanks.

Anup Bagchi — Executive Director

Welcome.

Operator

Thank you. The next question is from the line of Mona Khetan from Dolat Capital. Please go ahead.

Mona Khetan — Dolat Capital — Analyst

Yes. Hi. Good evening. So firstly, on the SME and business banking book. What are our incremental yields? And if you could give some color on in terms of growth, is it led by increased working capital demand due to higher commodity prices or higher inflation?

Rakesh Jha — Group Chief Financial Officer

So we don’t separately disclose yields by portfolio segments. But like we were responding to earlier question from Mahrukh, indeed, the business banking and SME segment is also extremely competitive. And we continue to focus on the entire customer 360. So it’s not just about the loan, but also the float income on the current account side, FX and trade and all the other income that we get from the customers. We have been seeing pretty strong growth in this portfolio for the last few years. I think it is a combination of the purpose that we have had on this segment, plus, of course, all the investments that we have made on digital and technology in terms of for servicing the customers in this segment, which has really helped with this growth for us.

Mona Khetan — Dolat Capital — Analyst

Okay. And I mean, would you be able to give some color on whether a large part of this incremental growth is also driven by increased inflation in commodity prices, etc.?

Rakesh Jha — Group Chief Financial Officer

If you look at it, if you go back, say, six months, even then the portfolio was growing at broadly this kind of a pace. So I don’t think there is any specific delta impact of inflation per se. But of course, in this segment, most of our loans are working capital loans. The amount of term lending will be much more limited.

Mona Khetan — Dolat Capital — Analyst

Right. And I’m assuming that on the margin front, there is no one-off in terms of income tax refund or anything this quarter?

Rakesh Jha — Group Chief Financial Officer

No. I talked about the income tax refund that was like 1 basis point or something. So there is no one-off per se. But like I mentioned, in Q4, typically, we have the margin, which is about 8 to 10 basis points higher than Q3. That’s how it comes out. And Q3 was 3.96%. That included about 6 basis points of the income tax refund benefit. So if you look at it, I think 3.9% is where we were in Q3, broadly around that level in Q4 on a core basis. And full year also, we are in that region of 3.9%, 3.95%.

Sandeep Bakhshi — Managing Director & Chief Executive Officer

Just to add, Rakesh, on that. On the SME portfolio and the BLG portfolio, our ticket sizes largely are similar. It is enhanced coverage and decongestion of processes, which has, I would say, put more weighted on leading to the growth on balance sheet.

Mona Khetan — Dolat Capital — Analyst

Sure. That’s helpful. And just finally on the credit card book. Where would our revolve rates be versus the pre-COVID levels?

Rakesh Jha — Group Chief Financial Officer

We don’t disclose that separately. But yes, it would be somewhat lower than where we were pre-COVID.

Mona Khetan — Dolat Capital — Analyst

Sure. Thank you.

Operator

Thank you. The next question is from the line of Suresh Ganapathy from Macquarie. Please go ahead.

Suresh Ganapathy — Macquarie — Analyst

Yes. So my questions are all related to credit cards. Anup, do you explicitly share data with Amazon. That’s the first question on the co-branding, or any of your co-branded partners? The second question is that the credit card book is up 10% Q-o-Q. So Q2, have you seen any change in the revolve rates? If you can tell us because, obviously, the credit card outstanding is up Q-o-Q. And finally, there is one school of thought with respect to these new guidelines of credit cards is that the Reserve Bank of India could be a bit more open to give licenses to NBFCs or credit cards, considering that there are severe restrictions imposed on co-branding. Do you subscribe to that view? Thanks, Anup.

Anup Bagchi — Executive Director

Firstly, as I had mentioned earlier to Mahrukh’s question, we have read through the guidelines. There doesn’t seem to be any impact on us prima facie. We’ll of course go through the guidelines more closely to see if there are any impacts. So that will cover the data and all of the effects that you sort of asked about. I think the other important question that you asked is that now if there are restrictions on co-brand, will NBFCs be allowed to issue their own cards, etc. I think this seems — again, this all securely seems that it points more towards other fintechs rather than an NBFC-bank type of tie-ups. It looks more fintech than other things. So from that perspective, I will say that competitive intensity might come down instead of up from a bank’s perspective.

There are a lot more guidelines around customer service and being fair to the customers, which I think are very positive. So that is also a positive to us. Will other NBFCs try to get a card? Actually, when we saw, there was an old guideline of RBI where RBI could have given permission or approval to issue a card, but you had to have an issuing bank, but you could, which is not co-branded, but nobody has launched, but I’m sure many people might be open to launching those things, we’ll have to see. But the large players who might be open to launching such a thing, they already had co-branded cards in one way or the other. So let us see how it evolves. But overall, at this point of time, for our co-branded, there doesn’t seem to be much impact or, in fact, any impact from the first reading.

Second, on the competitive intensity, I think it is going to be equal to, less than equal to; doesn’t seem to be greater than equal to. Of the larger players coming and issuing or having their own credit card, that was always an option, but has not fortified. It might happen. It is good. But it’s a large market, Suresh. So increased competition, etc., we have to basically play our own games. Competitive intensity does impact. But at the end of it, finally, we’ll have to play our game well, only then we’ll win.

Suresh Ganapathy — Macquarie — Analyst

And just one clarification. Q-o-Q have we seen increase in revolve rates because your outstanding book is up versus 10% Q-o-Q?

Anup Bagchi — Executive Director

So for Q-o-Q also, as you know, there are revolve rates and there are transaction portion also, because Q3 was very good for us. Our spend was very good because we also focused — because we have festivals, we focused on spends, we focus on ads, we increased our spends, etc. Part of it is that as well.

Suresh Ganapathy — Macquarie — Analyst

Okay. Thanks so much, Anup.

Anup Bagchi — Executive Director

Thank you.

Operator

Thank you. The next question is from the line of Manish Ostwal from Nirmal Bang. Please go ahead.

Manish Ostwal — Nirmal Bang — Analyst

Yes. Thank you for the opportunity. I have only one question on your FY ’23 loan growth outlook. So where do you see the growth rate given the inflation related demand pressure?

Rakesh Jha — Group Chief Financial Officer

So like we always say that we don’t have any specific loan growth target or outlook. I think our focus is entirely on growing the risk-calibrated core operating profit. So we will grow in line with the market opportunities which are there. We will look at the risk and the return parameters to be within our thresholds. In terms of the opportunity, if you look across the portfolio, we have seen pretty consistent growth across retail, business banking, SME, corporate, and to the extent, we do calibrate our growth, where we find that the pricing is not in line with what we expect. And the entire focus is to not look at just the loan book or the loan growth and look at the entire operating profit contribution coming from the customer, coming from the ecosystem. So that is how we will continue to evaluate these opportunities on a market basis.

Anup Bagchi — Executive Director

On the loan growth part, just to add, Rakesh. See, our market shares in individual micro markets are still not fully saturated. And so we have the option today to pick up more profitable growth, profitable pools, etc., and using data analytics and our reach and understanding of micro market, we will certainly strive and we are, of course, in pockets also able to pick up those profit pools and those growth in the market. So we focus on growth, but we try and focus on profitable growth and more sustainable growth and certainly, a risk managed growth.

Manish Ostwal — Nirmal Bang — Analyst

Thank you so much.

Operator

Thank you. The next question is from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead.

Nitin Aggarwal — Motilal Oswal — Analyst

Yes. Hi. Thanks for the opportunity. I have three quick questions. First is, again, around growth. What sort of growth opportunities are we looking at in the wholesale business as growth trends over there have been quite modest, and especially in context to the trends being reported by our peer bank? And second question is, if you can share some color on the kind of business bank is garnering from non-ICICI bank customers who have used ICICI’s mobile banking services. And third is around the provisioning expenses. If you can share more color on it. Ex of contingent provisioning, the provisioning is almost negligible for the quarter. So some color on this and also the outlook on the provisions to keep up guidance. Any thoughts around that over FY ’23?

Rakesh Jha — Group Chief Financial Officer

Yes. Just to — maybe I’ll talk about the provisions first. So as you said, for us this quarter, largely the provisions were the contingent provisions that we made of INR10.25 billion. On the rest of the NPA and the restructured book, the provisions were negligible. That reflected on the net dilution in NPAs that we had during the quarter. It also reflected the prepayment of corporate restructured loan that we talked about that would have reverted in write-back on the provisions that we held for that restructured loan. And we’ve continued to recover well on both the corporate side and, of course, on the retail side as well, especially on the retail side, the high level of addition that we have seen in the last four to five quarters, those recoveries have been coming in. So I don’t think we should be extrapolating this quarter from a go-forward perspective.

I think in the past, we have talked about the fact that we would always want our provisions as a percentage of core operating profit not to exceed 25%. That is, of course, through a cycle, and it will vary up and down depending on the stage of cycle where we are and also the composition of the portfolio. So there’s no specific guidance that we can give there in addition to what we have already said.

On the wholesale banking opportunities, I think the good thing is that we get to look at pretty much all the deals that are happening in the market. And wherever it is franchise business, which is adding to our overall core operating profit, we are happy to do that business. Wherever it is standalone lending opportunities at very fine pricing, where the only objective would be book growth and does not really contribute to the core operating profit, we are very happy to stay away from that. And to some extent, that is what is reflected in the loan growth for us. And as we have said in the earlier calls, I think the entire corporate banking team is also focused on the ecosystem approach towards business. So we don’t look at just the loans, we look at all other potent services for the corporate client.

We look at all that we can do with the employees of the corporate in terms of our retail businesses, as well as the dealers and vendors from an SME perspective, and we track the profitability in absolute terms and the ROE for the corporate client as well as for the entire ecosystem. So that is the approach that we have, and we’ll continue with that. We will be competitive wherever required from a franchise purpose. That’s how we look at the market and the opportunity is there in terms of growth. And as long as it comes within our risk and return parameters, we are happy to grow. I missed your third question.

Nitin Aggarwal — Motilal Oswal — Analyst

The third question was that what happens to the non-ICICI Bank customers.

Rakesh Jha — Group Chief Financial Officer

So first, I think we should start to really look at it from a point of view that who are our customers. And we’ll have to start to expand our way of how we think about our customers. We would think that it is not just deposit customers or asset customers who are our customers. Anybody who is using our services becomes our customers. So if it is iMobile Pay, they may not have deposits with us today, they may not have assets with us today, but if they start using iMobile Pay, they become our customers. Similarly, FASTag, for example. FASTag, there are many FASTag customers. They’re all good customers. They’re all affluent customers. They may not have deposits with us, and they may not have assets with us, but they are also our customers. So I would say that nondeposit customers and non-asset customers. Because that today is one of the largest flows of good quality leads for banks like us. And our experience with that is very, very good, because they’re turning to the brand. They get to see an experience adjunct services that we provide and more data footprint they leave with us, better is our ability to preapprove them, better is our ability to understand them, and better is our ability to, in a sharp focused manner, give them proposition that will give them a reason to start overall 360 banking with ICICI Bank.

So our experience is good, and I thought I’ll just expand it a little bit to just share with you what is our general approach. So the so-called non-ICICI Bank customers, they’re all ICICI Bank customers. They are service customers. They are not deposit customers. They are not asset customers.

Nitin Aggarwal — Motilal Oswal — Analyst

Sure. Thanks a lot and all the best, Rakesh for the new role.

Operator

Thank you. The next question is from the line of Sameer Bhise from JM Financial. Please go ahead.

Sameer Bhise — JM Financial — Analyst

Yes. Hi. Thanks for the opportunity. Just wanted to get a sense on the AFS portfolio. Can you share the duration here because we still have a small trading profit this quarter?

Rakesh Jha — Group Chief Financial Officer

So we don’t share the duration separately. But overall, again, our approach has really never been to take high duration into the AFS portfolio, even if we have some strong view on interest rates going down, that view would be taken in the HTM book per se. The AFS and trading book is very actively managed and treated by the operating group. If you look at the current quarter on Treasury, I don’t think on fixed income side, we would have made money or any other bank would have given how the yields have moved. For us, it would reflect more FX and other revenues.

Sameer Bhise — JM Financial — Analyst

Sure. And secondly, I think this one is for Anup. Are you seeing pickup in the spend levels on the credit card or large part is driven by new acquisition spend? Or how are you seeing like the fee item on the credit card side? How should one read this on a sequential basis?

Anup Bagchi — Executive Director

So we certainly see that the spends are slowly increasing. Now as you know, in credit cards, it is you get a customer, then they activate, and then they start spending, and then they start revolving. And there are many, many facets of this life cycle and you have fees somewhere and you have interest rates somewhere and all of it. So we are certainly seeing consumption coming up as COVID normalizes, and it has normalized quite a bit, almost fully. So we are seeing now spends coming up, and revolve also slowly moving up, and that will make all other downstream things, which is revolve and fees and all of, it should start to look healthier.

Sameer Bhise — JM Financial — Analyst

Any comment on spend behavior for customers who are probably acquired through last year or have been with you for years?

Anup Bagchi — Executive Director

Yes. Spend behavior is improving. And because many of you are interested in Amazon card, so I’m happy to share that actually, the non-Amazon spends on Amazon has been quite healthily growing. So that is a very happy thing for us. And that was the desired outcome as well from us. And what we are seeing is that across categories now, spends are increasing. And it is evident through other part, and as our MD also shared with you, on the ultra-high-frequency index also, if you look at the components of the index, you will see economic activity everywhere. And finally, these economic activities only reflect in the card spends and on the commercial spends. So, so far, so good. Let’s see.

Sameer Bhise — JM Financial — Analyst

Thank you and congrats on the strong growth.

Anup Bagchi — Executive Director

Thank you.

Operator

Thank you. The next question is from the line of Anand Dama from Emkay Global. Please go ahead.

Anand Dama — Emkay Global — Analyst

Yes. Thank you for the opportunity. Sir, my first question is that we’ve been focusing a lot on the core profitability growth. So this year and in this quarter, we have dropped somewhere about 19-odd percent core profitability growth. Now moving into FY ’23, where margin expansion will be a challenge. So what could be the levers of core profitability growth that you can talk about, that will be great.

Rakesh Jha — Group Chief Financial Officer

So from a core operating profit perspective, I think the yield and the cost, the margins that you talked about, that is, of course, a prime driver. In addition to that, in terms of the fee income, the business sourcing cost and the other expenses. So we look at all the levers and we have to manage all those levers optimally to get the desired outcome on the core operating profit. You are right that this year we have seen an increase in our margin by close to 25 to 30 basis points on a Y-o-Y basis, which has definitely helped us in the strong core operating profit growth. And as I said, we will have to navigate through this coming year, especially with the interest rate scenario also changing, and we will do the best that we can do in terms of optimizing on all these levers and continuing to focus on doing granular good quality business, as we do this.

Anand Dama — Emkay Global — Analyst

So do you think that the fee income actually can improve from here on? And what could be the levers for improvement in this?

Rakesh Jha — Group Chief Financial Officer

So the way we look at it is not fee income, say, in aggregate. So as Anup also earlier mentioned, I think it’s all about the focus on the micro markets and customers. So we don’t target an overall fee income growth or something like that. What we are focused is to look at the customer level, the ecosystem level, at the micro market what we can do, and it can be, if margins are higher, lower fees is fine, or if margins are low, we would need to look at more fees. So it is something which optimally each of the business teams looks at on what needs to be done from the point of view of what works the best and the most fair for both the customer and the bank. So in the aggregate, it is not something that we are focused on. And there can always be ups and downs in some of these metrics going forward as well.

Anand Dama — Emkay Global — Analyst

Sir, next year and maybe over the next two to three years, there is a peer bank which is going to look at deposit mobilization to the extent of about INR5 trillion or so. Deposit is an area where there is going to be a lot of competition. So how do you see, basically, in terms of your branch expansion, customer acquisition, and deposit rates going forward?

Rakesh Jha — Group Chief Financial Officer

So at any point of time, it is a competitive market on deposits, on lending, and we don’t see that changing over the next two or three years. So I think there is a certain approach that we have in terms of our liability franchise and the growth that we look at and then how we deploy those funds. So I think we will continue with our approach. Again, in terms of number of branches and all of those things, they are decided by the respective businesses in terms of what they are seeing on the ground in their respective micro market, and if they believe, addition of branches, addition of people, will help them grow their deposits, and more importantly, the core operating profit, then they’re absolutely happy to go ahead and invest. That is how we look at it. And if there is more competition, I guess we will have to just live with that and see what best we can do.

Anand Dama — Emkay Global — Analyst

You could see an acceleration in the branch expansion finally because of the competitor going crazy.

Rakesh Jha — Group Chief Financial Officer

That may not be the only factor. As long as we are seeing opportunity in the micro market for us to grow, we will be happy to add branches. And of course, the type of branches have also evolved a lot. So there are various format branches. So branches is not the only thing. It’s an important thing. We will definitely look at adding branches, but it’s not just as a reaction to any competitor that we look at it.

Anand Dama — Emkay Global — Analyst

And sir, at any point of time RBI has asked our housing business to be merged with the bank? Though it is very small in the overall scheme of things, but —

Rakesh Jha — Group Chief Financial Officer

No, not really.

Anand Dama — Emkay Global — Analyst

Thanks.

Rakesh Jha — Group Chief Financial Officer

Thanks.

Operator

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

Adarsh Parasrampuria — CLSA — Analyst

Yes. Hi. A couple of questions. First is, we are firmly like a benign credit cost cycle, including what you see with your results in the last six months. So do you expect — do you think that we are in a structurally lower credit cost mix of book. And hence, over the medium term, does the price reflect that, and both lines, both margins and credit costs are just lower, because we are clearly undershooting what we’ve ever mentioned as a guidance on provisions.

Rakesh Jha — Group Chief Financial Officer

Yes, I think we’ll have to see that over a slightly longer period. Clearly, our focus has been on what we call as return of capital in all our lending, and that should result in lower credit cost for us through cycles. But it is just too early to kind of talk about that. And of course, in the last couple of quarters, like you mentioned, we have also had the benefit of significant deletions, upgrades from NPAs coming because of the larger additions that we have had in the earlier periods because of the COVID. But overall portfolio, definitely, if you look at the rating profile on the corporate SME side, which we disclose every quarter, you look at the retail portfolio, how the NPA additions there have been moving, it does give us a good amount of confidence. But we don’t want to kind of right now talk about how low or high these numbers could be. Our approach would always be to see how we can have it at an optimal level from a growth perspective.

Adarsh Parasrampuria — CLSA — Analyst

Got it. And Anup, one question. You did mention, when we look at how much the retail products have penetrated within our customer base, it’s still not optimum and there’s a lot of leeway. Any sense and direction you can give as to how you all look at it, where you are in the next three to five years, where you all want to get, either some numbers or any sense of quantum or direction?

Anup Bagchi — Executive Director

So 2 things we have certainly strengthened over a period of time. I think over a period of time, last three, four, five years, there is more and more and more digital footprint that the customers have kept with us because of our very strong digital properties. So that helps us also in understanding them better and also figuring out from various other public sources and then CIBIL and other places. You know if they are — and of course, autodebit on our liabilities, their deposit, where are they banking with. And then we have to give them a very strong reason why they should shift to our bank and bank with us in a more holistic manner. I mean the onus is certainly on us. That is one. So there itself saturation is okay, but we can certainly make it better.

The second place is at the micro market level itself, we have a reasonable sense of what is the profit pool in a micro market given the kind of business that is happening, given the kind of economic activities that end up in the micro market. And generally, a reasonable idea — I’ll not say it is exact, but a reasonable idea of what is our percentage share of that profit pool that is there. There, we use — so in both cases, we are very, very extreme and very good quality outcome focused data analytics. And so we have got a good share there. And there, we see that there are many micro markets we are quite under-penetrated. And so it is our endeavor to put the processes, put the proposition, reach out to the customers and try and crunch the time line from the opportunity to conversion. That is really the big job every day full teams are focused on. So these are the two clear opportunities; one, customers who are with us; second, customers who are not with us, but in the micro markets.

Adarsh Parasrampuria — CLSA — Analyst

Got it. Anup and Rakesh, thanks for your answers. All the best.

Operator

Thank you. Ladies and gentlemen, we take that as the last question for today. I now hand the conference over to the management for their closing comments. Over to you, sir.

Rakesh Jha — Group Chief Financial Officer

Thank you, everyone, for spending the Saturday evening with us. We’ll be happy to take any residual questions separately. Thank you.

Operator

[Operator Closing Remarks]