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IDBI Bank (IDBI) Q4 FY22 Earnings Concall Transcript

IDBI Bank  (NSE:IDBI) Q4 FY22 Earnings Concall dated May. 02, 2022

Corporate Participants:

Divya PurohitInvestor Relations

Rakesh SharmaManaging Director and Chief Executive Officer

P. SitaramExecutive Director and Chief Financial Officer

Analysts:

Chintan Shah — Analyst

Bunty Chawla — Analyst

Pranav TendulkarRare Enterprises — Analyst

Jai MundhraB&K Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the IDBI Bank Q4 FY ’22 Results Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Ms. Divya Purohit, from ICICI Securities. Thank you, and over to you, ma’am.

Divya PurohitInvestor Relations

Good evening, and welcome everyone on behalf of ICICI Securities. I welcome you all to IDBI Bank Limited results call. Today, from the management we have with us in Shri, Rakesh Sharma, Managing Director and CEO; C.J. Samuel Joseph, Deputy Managing Director; Khatanhar, Deputy Managing Director; Siri, P Sitaram, Executive Director and CFO. Thank you, and over to you, sir.

Rakesh SharmaManaging Director and Chief Executive Officer

Thank you, madam, and good evening, ladies and gentlemen, and welcome to the IDBI Bank quarter four financial year ’22 and financial year ended 31st March ’22 conference call. So, I’m Rakesh Sharma here. Just to begin with, of course, the detailed presentation will be made by our CFO, Mr. Sitaram.

Just want to say some few words. One is that this last two years were affected by COVID as all of us know, and as far as IDBI Bank specifically is concerned, from May 2017 it was placed under PCA, and that PCA was lifted in March 2021. So that way, this last year was the first year when we were out of PCA. So, first half was affected by COVID also, that’s why performance was affected to some extent. But today when we are out of PCA and we are discussing about the financial results for financial year 2021, ’22, I’m happy to say that the Bank has achieved the turnaround and now turnaround has rehappened.

During this fours years period when we were under PCA, we have taken lot of measures both financial and non-financial. Non-financial. When I say, in as far as this organization restructuring, revision of all the policies, credit policies, risk management policies and strengthening the compliance part and strengthening other various measures, follow-up mechanism, collection recovery, EWS and all these things, which has helped us achieving the turnaround and which is reflected in the year ended results, which as I said, detailed presentation will be made by CFO. But main factors I will like to invite your attention that is the Bank has achieved net profit for the continuous two years. And during the current year, the net profit has increased Y-o-Y 79% and the ROA, we have been able to achieve 0.84% of ROA and 13.6% of ROE.

And the main issues during the last four years we facing was that our balance sheet was degrowing because we were under PCA, especially because of that the corporate advances, there was reduction in the advances level, though in retail we were growing at a robust pace, but the mid corporate and large corporate was showing decline. But now, for the first year, we have been able to show growth in all the sectors, retail as well as corporate and the overall growth has been 14%, retail has grown by 7.06%. So that way you know the growth momentum has started. Now our emphasis was also on reducing the cost of deposit and cost of funds, because we knew that since our — the advances side was not growing, rather it was degrowing and as a result, it was affecting our aggregate interest income and due to the declining interest rate scenario also, the overall aggregate income was affected, but we were able to reduce the cost of deposits substantially by increasing the low cost deposits. The CASA deposits have increased to 56.77%, which is I think one of the highest in the industry. And the cost of deposits also it has declined to 3.56%. So the savings bank at CASA, that current account, both have shown growth of 14%, both in percentage wise and amount while there is increase.

Net NPA which was around 17.30% as of 30th September 2018, it has come down to 1.2, 7%. And the GNPA also, which was 31% as on 30th September ’18, has come down to 19%. Of course, I will agree that the GNPA level is high. But the main reason is that we have not been doing technical write-off for the last three, four years because of some tax reasons. If you know the, our — do the technical write-off, all are 100% provided accounts, while GNPA will also come down below 2%.

The provision coverage ratio has increased to 97.63% and the capital adequacy also is quite robust at 19.06%, CET1 is 16.68. If you see that last time when the LIC and Government of India, they have given us capital in September 2019. So after September 2019, now two and half years, we have not raised except that QIP of INR1435 crores, which we had raised in December ’20, after that we have not raised capital. So whatever the growth improvement in capital adequacy has happened, it has happened through internal generation of resources. So we have been quite proactive in making the provisions, even the CFO will explain that stress asset stabilization fund which I had mentioned in the last year.

We had made assessment that how much shortfall is expected to be and accordingly we had made a short provision of INR2000 crores, and I can mention that out of INR2000 crores, 17 under provision was made when we were earning profits, so otherwise the profit would have been higher by that amount. But now this quarter also what we have does as a proactive measures, whatever is the balance securities are remaining, those recoveries may happen, we have made to the full provision, although the time for SASF is up to 30th September 2024, two more years are there. We have made full provision for the outstanding security and whatever recoveries happen in the next two years or if we decided to pre-close the SASF, so that the recoveries will add to the bottom line. So that way, like you know the; number, one proactive provisioning has been made, the balance sheet has been strengthened, turnaround has happened, and now since we have started growing also in the total revenue also you will start seeing the increase from this year onwards.

So with that preliminary remarks, I will hand it over to Mr. Sitaram, CFO, who will give you the detailed presentation. Thank you.

P. SitaramExecutive Director and Chief Financial Officer

Good afternoon, everyone. So if we go to Slide number 5, the major highlights for the financial year. The profit after tax has improved by 79% to INR2,439 crore, operating profit has increased by 7% to INR7,495 crore, NII has also improved by 7% to INR9,162 crore, NIM has improved by 35 basis points to 3.73%. And if we exclude the impact of interest on income tax refund, the NIM stands at 3.59% for the year, which is also a similar improvement, in fact a bigger improvement of about 73 basis points over last year. The ROA has gone up to 84.84% and the ROE stands at 13.6%. Overall the cost to income is at 45.89%. This includes the impact of the entire amortization that we had taken for family pension of INR266 crores. If we had restricted ourselves to only the period charge-off, then it would have been lower to about 43%.

Capital adequacy, as already mentioned is quite comfortable and arguably is control, in fact there is a marginal reduction. Overall, it stands at about INR1, 54, 000 crore. Cost of deposit and cost of funds have improved, not only in tune with the movement in the market interest rates, but also due to improvement in the composition of funds for us in terms of CASA. Within that, both CA and SA have shown improvement. CA had dipped in between the RBI mandated correction. But after that, again CA has also started showing improvement and now SA is also improved. Overall, both in terms of amount and percentage it has reached to 56.77%, and that is a growth of about 6.3% compared to last year. And now the Retail Corporate is steady at about 63.37. This is more or less where we had targeted it to be. And going forward also we are looking at it more or less, plus or minus a few basis point here and there, it will be on this line. The net NPA has improved significantly to 1.27%, GNPA without any technical write-offs has improved by about 3% to 19%, and PCR as somewhere improved by 70 basis points or so to 97.63%.

So coming to the next slide, so I think I have covered all this. As I mentioned, the family pension effectively if we remove, then the cost to income would have been even lower than this. However, we were committed to RBI to maintain a cost to income below 50, and we are well within that

Now just coming to the Slide 7. So, here again, as I said, the net NPA, the GNPA and the PCR that I’ve already mentioned, have shown significant improvement and capital has consolidated to 19%. There is a reduction in the RWA by about 185 bps year-on-year. On Page 10, the Slide 10, we have a snapshot of the P&L. The improvement if we compare March ’21 to ’22, in the NII, there is an improvement of 7% in the total income of about 6% and in the operating profit of about 7%. In this, if we exclude one-offs, that is INR1,300 crores interest on refund of income tax received in fourth quarter of last year and correspondingly INR350 crores in the third quarter of this year, then the improvement is even better and NII has improved by 22%. The net total income is 15% and operating profit has actually gone up by 25%.

Coming to the next one, a little more detail on the NII. One can see that on a year-on-year basis there is an improvement in the interest on advances. However, the interest on investments has come down. This is largely because we have capitalized on the interest rate in the Q1 and we have sold off to record our valuation gains. And other interest income, there is a reduction. That is mainly because of the movement and the interest on refund of income tax. The interest expenses have moved in line with what I have said, that is both in line with the market rate and also the change in composition of the liability profile. Overall, the NIM percent which is with and without that effect of the interest on the IT refund we have given here, in whichever way you look at it, there has been a meaningful improvement in the performance of the Bank.

So that next slide, it gives us just how the buildup has happened, what’s the PAT for the quarter as well as the PAT for the full year. And on the PAT for the full year, you can see that the NII and there is a reduction in provisions and contingencies have been the major contributors to that 79% improvement in the PAT for the financial year.

We come to Slide number 12, there is the breakup of the other income. Again, more or less in terms of commission fee and brokerage, we have maintained the trend of the last year and with actually our entire post PCA activity commencing towards the second half of the year, we look forward that this contribution from the commission and exchange and brokerage will come now not only from a growing retail, but also from enhanced activity on the corporate side. Profit of investment, as I said, we had recorded along with the industry at the time when the top opportune. Now, possibly going forward, that would be a little muted.

Other things, on the Forex, of course, it is recovering from written off cases, we have done well this year. But going forward, a number of large ticket cases would be less. Therefore, one can expect that recurring from written-off cases would taper off a little over the next year. [Indecipherable] will maintain around the same level that we have.

On the next slide is the provisions and contingencies. Here, the main feature we have done, I think the main feature that I would like to point out here is that we have — we had pointed out — we’ve made full provision for the outstanding amount of the bonds, representing our interest in the SASF. The reason that we have done this till last quarter, what we are doing is estimated in the remaining possible recovery for the three years of the residual period and providing for the balance. However, we took a call now, so that we could have our hands free to decide on the future course of action on what we can do with the SASF. With this, now we are on much more flexibility and to take much more pragmatic decision to ensure that the value which is deciding in the SASF, we capitalize on it in the best way possible. We will explore all avenues now that it has been fully provided.

We have not done any technical write-off in this quarter, so whatever bad debts written-off is right up to December, plus whatever on the — what has essentially required on the retail and SME side. Other than this, we have done every provision that is required as per RBI norms both for the non-performing standard asset as well as the restructured asset.

So just coming to the next slide on the yield ratios, yield has improved a little for the financial year. If you see that both on quarter-on-quarter and year-on-year, it has improved. However, having said, these trends will reflect the movement in the market rate as we go along and as we improve our corporate book activity.

Now on the NIM, we already mentioned that it has improved to 3.73%, it includes the impact of that interest on refund — without that it is about 3.5%. And the cost to income has also improved. As I mentioned, it includes the impact of the one-time write-off on family pension benefit. Now coming to the next slide, this is the trends in the cost of funds, cost of deposits. These are figures already known to you, you are tracking the Bank. It’s in line, as I said with the movement in the industry as well as the changing in composition of liability profile. Coming on to the balance sheet, this is basically, this time we have crossed INR3 lakh crore as balance sheet size and the advances overall have grown on a net basis by about 7% and gross advances by about 10%. We will discuss the future trend at the end.

Then coming to the next slide on the business performance. This again summarizes what we have, MD and I have stated till now, that is the total deposit has grown and the composition in that deposit in terms of current account, in terms of savings account, also in terms of retail term deposit has has grown. Overall term deposit seems to have declined from 49 to 43, but that term includes the bulk part of, sorry, in the bulk now it has come down from 11% competition from last year to 5%.

Coming to the next slide again quickly, I’ll say that the book of savings and the book of retail, book of current all have grown and the return to the overall deposit profile has also improved.

Coming on to the subsequent slide, this is the gross advances pickup. More or less as I said that we had stabilized at about the mix of corporate and retail, and I think that’s where we’ll be maintaining, plus or minus some 3% to 4% on either side. This would be the trajectory going forward. On the structured retail asset, we continue to be heavy on the home loan, the mortgage and the sectored home loan, bet we will, as we had said earlier, we have put in place systems and we are also looking to activate various other products both on the MSME and the Agri and on other retail loans to widen the portfolio base and also to enhance the growth from all possible component.

Gross advances, as I said, have grown by about 10%, and largely we now have advances booked in the GIFT City as a result, its all domestic. Breakup of these advances, you can see that first of all, on the corporate and retail as I mentioned, while it is fairly steady direction in which it is going, standard gross advances also. More or less the composition is stabilized now and so the ratio between corporate to retail is also on a very — even and net advances have shown an improvement of about 7%.

Priority sectors, which is the next slide, we have achieved all our targets and overall of the PSLC, which has bottom sold, we are net positive, and which has contributed to our P&L. On the treasury operations, again in terms of modified duration on the AFS book, we are well placed to the meet the rising interest rate scenario and overall modified duration results are fine. Even in terms of PV0 and also, we are quite comfortable. So here we will go on to the next slide, that is on Slide 26, the COVID-19. An this, as far as the restructuring is concerned, we are maintaining all the required provision. As per the outstanding balances, we are maintaining that INR415 crore provision. And then in the earlier provisions that we had made, out of that two components we had taken out and on that now, as I said that, we have also made new provisions that I already described here, both in terms of family pension full amortization, also in terms of SASF full provision.

On the asset quality, nothing much to add. There is — we have not done any technical write-off, so beside that that based on the recovery that we have achieved and other settlements, the gross NPA has improved to 19% and net NPA has significantly improved to 1.27%.

So the next slide is on the NPA movement where we had given our achievements in terms of settlements, upgradation and the written off. The advances portfolio includes this time of an amount of about INR9,000 crores under reverse term repo. This is as per the recent RBI master circular. We had given the some of those figures with and without all this so that you people can analyze the way you would prefer to.

Now coming to the NCLT, this is the position. More or less, I mean, NCLT now, as of now that things are stabilizing, we can expect that in this year there will be a little more movement in expectations pertaining to NCLT and perhaps some amount of recovery is possible, but big ticket cases are not so many there. In terms of volume perhaps it will increase, but in terms of amount it will be not as significant as it was earlier. On the SMA, it is an improvement overall to about 3% of the portfolio now total, out of which the SMA zero is quite small. And this is of course taken into account the restructuring that we had done under RF1 one RF2. We’ll be watching that portfolio as we go ahead and as of now it is not possible to say exactly how that portfolio will behave. Definitely requires to to be looked at and watched closely and which will be monitoring quite closely.

The capital slide, I have nothing to add. We already discussed it. Shareholding pattern, again, there is no, nothing much to mention, it is more or les the same. This is just bit about the digital footprint that we are having. In financial year 2021, out of the customer-induced financial transaction, about 91% were digitally routed and in this year it has improved by 3% to 94%. And you can see that out of that, the large set to share has been taken by UPA, which is no surprise. I mean, there have been so many paper reports upon this is phenomena.

And now coming to the next slide, this is the overall digital footprint of the Bank, which is improving. Now that we have come out of PCA and everything, we do have much more freedom now and we’ll be working a lot more to improve this footprint through various other emerging means to engage the customers and improve our business. A snapshot of all the digital products that we have introduced and are introducing. And you will continue to see some more announcements and actions on this side as we go forward into this year.

On the Financial Inclusion, I think that need not spend too much time on this, suppose like both the mudra or achievement on the. So we come down the subsidiaries, all our reported profits and improved profitability. I think just on the last slide on the guidance. Going forward, next year we are looking at a growth rate of about 10% to 12%. And as I said that, 63:37 [Phonetic] can go to even 60:40 [Phonetic], a little here and there, but around — this is the balance that we would like to maintain. The credit cost and net slippage, we expect the credit cost improve to about 1.5% and slippage also we expect it to improve to about 2.5%. This 2.5% is also because of that. RF1 and 2 book that we have, which — that we have to see how that plays out.

On the ROA, we expect now to 1% next year, they’re poised to do that. And ROE, of course, above 14%. And CRAR, we’ll definitely maintain above 15%. On the GNPA, one is of course there is a possible transfer to NAFCL, both the size. That and plus recovery altogether, I think we would be looking to bring down the GNPA to about 40% to 40%. And on the NIM, we’ll be looking to maintain at least 3.25%. On the retail offer, as I mentioned, we are — much more detail color will be given by DMD and MD. But, we’ll be working on many fronts to improve and broaden our retail portfolio. Cost to income, we want to maintain below 48% and that’s it I think as far as the coming year is concerned, these are some of the highlights that I wanted to mention. I will stop here and we can [Technical Issues]

Questions and Answers:

Operator

Thank you very much. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] First question is from the line of Chintan Shah. Please go ahead.

Chintan Shah — Analyst

Yeah, hello on Thank you for the opportunity. Yeah, Sir, so just one question largely on the recoveries brand. So, sir, given that the momentum has been strong on the recovery front, so any guidance what we are expecting recovery for FY ’23?

Rakesh SharmaManaging Director and Chief Executive Officer

Now this, like you know, last year as you know, we had made a target of INR4,000 crores. As against that, we have been able to recover INR5,320 crores. So this INR5,320 crores includes everything, recovery in cash and the recoveries in DW account and some part which has gone to interest. So this year again, because now most of the big accounts mostly have been settled, there are small accounts are there, but still we are expecting a total recovery of INR4,000 crore during 2022-’23.

Chintan Shah — Analyst

Okay, okay got it, and probably sir this might even break on the higher side, but chances of breaking on the lower side is less, right? It can even be more than 4.

Rakesh SharmaManaging Director and Chief Executive Officer

In fact, so far if you seen, last year whatever guidance note we had given, we had you on 0.7, up to 0.7, but we are 0.84. Most of the [Speech Overlap]

Chintan Shah — Analyst

Yeah, I think on most of the parameters we have over shooted the guidance.

Rakesh SharmaManaging Director and Chief Executive Officer

We have shown the better performance.

Chintan Shah — Analyst

Yeah, and this is likely to sustain in the coming year as well, right?

Rakesh SharmaManaging Director and Chief Executive Officer

Yes, hopefully, yes.

Chintan Shah — Analyst

Yeah, and, sir so just one thing, largely on the macro part. So probably we are — banks are saying that growth is likely to come back, capex is likely to drive growth back. So I just wanted to get your thoughts on when are you expecting the capex cycle to kick in and whether it would be driven by government or by private capex or who will take the lead, and any guidance on when it can start? If we, if we look at the data, the macro data is not that strong on the industry, the credit growth is not strong for the industry, it is growing on the retail front, but industry growth is not picking up.

P. SitaramExecutive Director and Chief Financial Officer

Yes, Chintan, you are right. The private sector investment cycle which was expected to kick start in 2021 has got delayed for various reasons, COVID to begin with and later on some uncertainties around the war. But given the push on infrastructure by the government and also the PLI scheme approvals given by the government for various sectors, we expect the private sector capex cycle to restart because there has been hiatus of around 4 to 5 years on price sector capex and capacity expansion. But we are already seeing green shoots, if you are aware. In Q4, we started marquee projects have already got funded. They were funded in no time at all, like the Navi Mumbai Airport or the coastal road project. So we are seeing green shoots in private sector capex investments, so to say. But other than that, as a bank, we will take a very calibrated approach on such large infrastructure projects because our book already has a slight concentration on these large infrastructure projects. But our concentration will be the core sector which we expect to revise the capex cycle and also light manufacturing like pharmaceuticals, auto components, so on so forth.

But another point in favor of corporate credit growth, will also be working corporate — working capital drawdowns, which are already started to — we are already seeing drawdowns increasing in Q4 itself. For instance, highly rated corporates which were barely drawing fund-based working capital limits from the banking sector as a whole, this is for the sector as a whole. We have seen drawdowns increase in Q4 mainly because of the input costs going up. For instance, a lot of these core sector companies import coal or stopped coal. Coal prices have gone up. So the working capital holding has gone up and drawdowns, in fact we are seeing even request for enhancement in sanction limits happening. So overall we estimate ’22-’23 to be — to see, banking sector will see a pickup corporate sector credits. Overall that should happen in ’22-’23.

Chintan Shah — Analyst

Okay, okay So sir, I mean basically, so you are on discussion with the bank, means your clients that suggest that capex is likely to start. So but then any, it means our, so are there any reason that why, in that it can be deferred further from here on. So for example, due to some macroeconomic issues or geopolitical, lenders are differing from doing the capex, is that the case or now they ready, okay we’ll go ahead and do the capex.

P. SitaramExecutive Director and Chief Financial Officer

Lenders are not deferring. There was no push back from the lenders, but price structure was not investing in the last couple of years for reasons of lower growth and so forth.

Chintan Shah — Analyst

So, I mean, so you have private sector, so now is the private sector still deferring it or still deferring the same or now they are ready to invest.

P. SitaramExecutive Director and Chief Financial Officer

They are ready to invest now. There are still uncertainties in the macroeconomic front, especially on the global front on the war and other measures. There could be unforeseen things which could develop in the capex front also because wherever there is uncertainty, private sector will defer their capex plans. But as of now we see projects taking off from the drawing board stage and coming to the bank for financing. So we are seeing that trend already.

Chintan Shah — Analyst

Got it sir. And sir, one thing on this housing loan dilemma, so if I look at our housing loan portfolio it has grown roughly 10% during the year and if you look at the RBI housing loan data, so that is also showing roughly 9%, 10% growth for the housing loan. But in here in case of some banks, some private sector banks, they are reporting a very high number of growth, very high number growth in housing loan. So where is the confusion, I think each and every player is reporting 10% or above, so who is under growing in terms of housing loan? Any clue on that, or why RBI data is showing only 9%. Could it be higher?

P. SitaramExecutive Director and Chief Financial Officer

So, Chintan, there is complete liquidity play in this market. So all those Bank who are flush with the liquidity have lowered their rates and they mostly they’re [Indecipherable] to use this term in this balance transfer happening. So overall if you see, there is a growth of about 9% to 10% and our, the growth is also in line with that for home loan product. So only there are some few Bank where because of the liquidity and the interest rate play, this shifting in some pockets. Otherwise, the overall economic growth is like this.

Chintan Shah — Analyst

Sure. Got it. That it from side, I’ll come back in the queue for a follow-up. Thank you.

Rakesh SharmaManaging Director and Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Bunty Chawla. Please go ahead.

Bunty Chawla — Analyst

Thank you, sir. Thank you for giving the opportunity. Just one query. As we see the provisioning in line item as you have shared on Slide 13, so it seems to be there has been a high depreciation on the investment part and we got a reversal in the provisioning on that NPAs as well as the standard asset. How one should see this number because I believe there is a — still there has been a Q1, 2 stability in the loan book. So why there is a decline or reversal in the standard asset on the provisioning part?

P. SitaramExecutive Director and Chief Financial Officer

The decline in the standard asset provision, as I mentioned, see, we held COVID provisions in the slide that we gave, which we have now — we did utilized those provisions as and when the stress came, whether from COVID or from other sources. We continue to make provision from the — directly charging it to P&L. So as on March now, we have taken a recording, now that in terms of the RBI circular — the status of the COVID. We have retained that extra provision that we had made of about INR116 crores and the remaining thing is what we have taken back to P&L. That is why you will see some amount of credit on the provision. On the investment side, the additional provision is coming because of the items that I explained that is the — the full provision for the securities representing our interest in stressed asset stabilization fund. So that is the main aspect of that movement there.

Rakesh SharmaManaging Director and Chief Executive Officer

But that whatever provision has been utilized has been used for additional provisioning on assets and the family pension and other in that. So, in fact, that has not — the profit is coming from the operations only. So this is [Speech Overlap]

P. SitaramExecutive Director and Chief Financial Officer

In fact, the provision that we have made is more than that what we had taken out, that INR2.66 crores additional write-off, it will reflect in opex. So that that also you can take into account. So overall for that we had done additional provision.

Chintan Shah — Analyst

No, so in short can you say there is no COVID as of FY ’22, All the COVID provision has been completely utilized.

P. SitaramExecutive Director and Chief Financial Officer

No, first of all, there is a provision of about INR415 crores, that is the provision mandated for resolutions framework 2 and resolution framework for the 2, 3 percentages that RBI has mentioned in the respective circular for the assets that have been restructured under those two frameworks. Over and above that, we had made certain additional provisions which are put in shape, again it starts off with RBI circular. So the first one that we had made INR116 crores was what based on that RBI circular, but we continued to add to that on a voluntary basis which are related to about INR833 crore. Out of that which was not against any specific assets, we have retained the INR116 crore and the remaining amount is what we have taken out. So we do have COVID provision still, INR415 crores for the restructured assets and INR116 crores which we have continued to hold against the initial COVID provision.

Bunty Chawla — Analyst

Thank you, thank you for the color.

Operator

Thank you. Our next question is from the line of Pranav Tendulkar from Rare Enterprises. Please go ahead.

Pranav TendulkarRare Enterprises — Analyst

Hi, thanks a lot, sir. Sir, just a query. So in your slippages data or in the movement of asset quality data, you have said that there is a INR160 crores write-offs, but in provisions data on the write-offs, bad debts written off is INR529 crores. So can you just reconcile to because I think that the bad debts written off provisions should be less than the loans written off during the quarter. So is there something else there?

P. SitaramExecutive Director and Chief Financial Officer

Just a second, okay, we’ll get back.

Pranav TendulkarRare Enterprises — Analyst

Yeah, yeah.

P. SitaramExecutive Director and Chief Financial Officer

This INR160 crores for the quarter 4.

Pranav TendulkarRare Enterprises — Analyst

Right.

P. SitaramExecutive Director and Chief Financial Officer

Okay. Now as against INR160 crores, you’re referring to our P&L.

Pranav TendulkarRare Enterprises — Analyst

Correct. In the provisions in the P&L, the bad debts written off provisions is higher numbers, its around INR529 crores for quarter ended March ’22 yes, on slide — I think Page 13 or Slide 14.

P. SitaramExecutive Director and Chief Financial Officer

So that the INR529 crores write offs, saying this, that includes settlements. So that technically is not a write-off that, so what we do voluntarily is what we have shown as write-off in the NPA movement, but in terms of accounting even if 100% provided case, I recover something, what I do is I have to show on gross basis that the entire principal has gone up to the extent not recovered, I have to show it as a gross write-off, and correspondingly there is a gross reversal of provision held against write-off.

Pranav TendulkarRare Enterprises — Analyst

Okay, okay, okay. So that will be in the standard assets or provision for NPS in the P&L.

P. SitaramExecutive Director and Chief Financial Officer

In the provision for NPA.

Pranav TendulkarRare Enterprises — Analyst

Okay, got it, got it Sir. Sir, also can you, can you just guide on net interest margin going forward.

P. SitaramExecutive Director and Chief Financial Officer

We are expecting to make at least 3.25%, that is the guidance we are giving.

Pranav TendulkarRare Enterprises — Analyst

All right, right.

P. SitaramExecutive Director and Chief Financial Officer

This is without one-offs, and when I’m comparing with that 3.5 that we achieved.

Pranav TendulkarRare Enterprises — Analyst

So also any monetization from the subsidiaries or [Indecipherable]

Rakesh SharmaManaging Director and Chief Executive Officer

So like you know, now as you have seen our capital adequacy ratio is quite comfortable, we are at 19%, and even Tire 1 is 16.68%. So as such, for raising capital or for strengthening capital, we do not need any monetization now. But at the same time, for like some legal statutory requirements. So like this RCL, we are in the process because and NARCL now we have invested so that RCL we will be doing partly, so this may materialize during the current financial year. Same way that our IDBI mutual fund because LICs is our holding company, they are holding 49%, and they also have mutual fund. So that’s why as per SEBI requirement both the — both of us, we cannot have mutual fund. So that also is under process.

So then third one is that it all this and NSDN, we are holding 26% share. But now as per their requirements, SEBI requirement we cannot hold more than 15%. So 11%, we will have to dilute. There is a time limit for that. So that only we will be monetizing. And fourth, and the last one is that it Ageas Federal life insurance where we had earlier diluted 23% that time there, but as the same time the Ageas, our joint venture partner, they had opted for that collocation. So whenever they will exercise that collocation, so that the remaining 25% will be monetized. So these are basically like for these type of requirement. So this subsidiary, so we may monetize during the current financial year.

Pranav TendulkarRare Enterprises — Analyst

Perfect, perfect. Thanks a lot, sir.

Operator

Thank you. The next question is from the line of Jai Mundhra from B&K Securities. Please go ahead.

Jai MundhraB&K Securities — Analyst

Yeah, hi, sir, good evening. I have couple of questions. So first is sir, on your write-offs…

Operator

May I request you please use the handset mode. You not audible clearly.

Jai MundhraB&K Securities — Analyst

Is it any better now.

Operator

Yes, it’s good. Thank you.

Jai MundhraB&K Securities — Analyst

Yeah, so, good evening, sir. I have couple of questions. One is on your write off policy, so we have continue INR22,500 crores of loss assets which are 100% provided and this of course moves the — in the reported write-offs as a much higher number. And in this quarter we have done a very miniscule write-off. So wanted to check, sir. What is the write-off policy. These assets are already loss assets, 100% provided. So, I mean what stops you from writing of these assets and bringing down your GNPA and what is the thought process there?

P. SitaramExecutive Director and Chief Financial Officer

Thought there is that we are carrying certain amount of deferred tax asset, which is significant and the component there — for the larger component is towards the provision. But we also have business loss there. So any technical write-off that we do will move the deferred tax asset from the provision to business loss category. As you know that the business loss category has a limited life, where as provision has got a unlimited life. So any call that we take here will have an effect on the average life to utilize this. So that is the main consideration which is there.

Jai MundhraB&K Securities — Analyst

Okay, and I at least have understood some portion of it, okay. And sir, like you said that there is some accumulated losses that we are getting, we may have set it off against the securities premium from a dividend perspective, but we are still carrying some business losses, right? but we are still paying income tax. So for this year we have paid around INR1,100 crores of at least tax provisions. So why are we still paying tax? I mean, how does this work?

P. SitaramExecutive Director and Chief Financial Officer

Two things, one is that set off has not yet happened, it is subject to NCLT, that is yet to come. But yes, the proposal is at the final stage. Second, on the provision for income tax, it is basically a reversal of DTA. So we are utilizing the DTA. So if you see the balance sheet side also, the DTA drawdown has been reflected [Speech Overlap] So there is a small amount of provision of course, that is because some earlier years as and when appeals and further appeal get settled. So sometimes we have to reverse the provision, sometimes we have to make marginal additional provision. So those cannot be set off against DTA. For that we have to make a small provision, but was a minor mainly. Mainly it is a DTA utilization, which has happened. Not a fresh payment or anything.

Jai MundhraB&K Securities — Analyst

Okay. Sure. And sir, on your CET1, so in absolute terms, this quarter CET1 has increased from 21,000 roughly to 25,700, 25,800, so around 4,500 kind of increase. I think you had mentioned that there is some portion coming out of re-well, and of course, you would have had full-year profit into this, but if you can still explain that, what are the moving parts here. So how much has come from re-well, how much has come from PAT, and is there any other third portion here.

P. SitaramExecutive Director and Chief Financial Officer

[Indecipherable] will contribute only marginally in the Tier 2, okay. The main increases because till December we cannot recognize year-to-date profit, that can be taken into account only when we reach the year end. So as on March now, the entire year’s profit has got added to the Tier 1. So I had mentioned in December also in September that the capital adequacy that we are reporting is without taking into account the year-to-date profits.

Jai MundhraB&K Securities — Analyst

No, but, sir, even if I were to add the profit, it will add around INR2,500 crores.

P. SitaramExecutive Director and Chief Financial Officer

Utilization of DTA. Now, DTA there is a slightly complex formula, some part of it is reduced from Tier 1 and some is left as residual as a discounted asset at about quarter, 625% or 325%. So what happens is as we utilize the DTA, the amount of deduction from Tier 1 keeps reducing. So that augments Tier1 straight away.

Jai MundhraB&K Securities — Analyst

Understood. So the DTA unwinding is helping capital increase. Understood. Okay and thirdly, sir, on your guidance, right. So I don’t know, it looks, does not look very coherent in the sense that we are saying that credit cost will be below 1.5% and slippages will also come down. But this year we have a credit cost of around 89 basis point. This is what you reported in your presentation and you are saying that it will be below 1.5%. You are saying that this year we have done INR5,300 crores of recovery and next year we’ll do 4,000 crores, despite the fact we have, you know if I were to take the GNPA plus TW, this is like INR70,000 crore worth of stock of NPE. So I mean, are we under, I mean, it does not look very coherent. So you may say that you are sort of under promising, but still wanted to get your thoughts here on why are you saying that credit cost would be below 1.5%, but this year you’ve done only 89 basis point.

P. SitaramExecutive Director and Chief Financial Officer

That 89 is the rest of the COVID provision reversal that we have done. So we should look at it from that perspective. And that’s secondly, sir. [Speech Overlap] Secondly, of course, now we have to monitor that RF1 and RF2.

Rakesh SharmaManaging Director and Chief Executive Officer

Actually, you are right that it is quite conservatively that we are saying that it will be below 1.5. See if we have the credit slippage level is around 2.5%, technically the additional first year the provision should be 15%, so that should be around flat 4%, quite 4% or something and then some aging provision there, but at the same time we are also saying that in our guidance that you know our provision coverage ratio will continue to be above 95%-96%. So that’s why, like you know some accelerated provisional we may make, that’s why we are showing 1.5%. But technically if you go, you are right, it should be somewhere around 0.75%. 0.5% we are — further we are adding because of some maybe accelerated provisioning. As you know, over the years, last 4 years you have seen, we have been doing quite aggressive provisioning. So that is why it is there. But technically, yes, it will be around 0.75%.

Jai MundhraB&K Securities — Analyst

Right, and sir, if you can detail what is the restructured assets outstanding. I could not get that number, including COVID and earlier SBR525 everything.

Rakesh SharmaManaging Director and Chief Executive Officer

Yeah, that effectively total restructured assets including COVID at the old that S4A, 525 and everything. Total, for both retail corporate it is INR4,620 crores, which amounts to 3.16% of our standard gross advances, which is around INR1,46,000 crore. So it is quite reasonable. And we have made a provision also for that. Like you know, you see the INR4,600 crore as against INR4,620 crore, we have made provision of INR697 crore. And if you see the SMA, because you are question can be that there, what is the stress level. If you see the SMA level it was 5.08% in March ’21, and when I am saying SMA level because some of the banks are reporting only more than INR5 crores, but we are reported on in each and every account whatever is SMA. And if it is an SMA, not only fund-based, but non-fund based outstanding is also added. Despite that, my SMA level is 5.08% as on 31st March ’21, which has now come down to 3.12%. So I don’t see much stress is that. But yes, that is why despite the fact that my quarter four slippage if you see has come down quite substantially, but I’m keeping my slippage ratio conservatively at 2.5%, but it will be, it is likely to be much below that.

Jai MundhraB&K Securities — Analyst

Right. Okay, sir. On restructuring, I think in the last quarter the number was some INR7,900 crore. So is it, is it the right like to like numbers, so INR7,900 crore has come down to INR4,600 crore?

P. SitaramExecutive Director and Chief Financial Officer

INR7,900 crore is the number of [Speech Overlap]

Jai MundhraB&K Securities — Analyst

Okay. So sorry, so what was the quantum sir last quarter, if you have just for.

Rakesh SharmaManaging Director and Chief Executive Officer

I think it was in the same range only. I remember I had mentioned this, the percentage of 3%, 3.25% by or something. So it was in the same range only. Because after that I think roughly it was, if I remember correctly, it was INR4,200 crore or something. So I don’t INR300 crore, INR400 crore has been added back because of that extended provisioning, the extended restructuring. Otherwise, you know of the, it has not gone up drastically. It’s only may be around INR300 crore, INR400 core has been added. This INR4,620 crore is exact number.

Jai MundhraB&K Securities — Analyst

Understood. So Sir, other banks have seen a drop in the restructuring because Shapoorji Pallonji has been upgraded or as they repaid. So I was thinking if you have also got benefited?

P. SitaramExecutive Director and Chief Financial Officer

We had a very small fund based exposure.So it didn’t impact our books. In fact, is very, very small, double-digit margin.

Rakesh SharmaManaging Director and Chief Executive Officer

In fact if you see my — out of INR4,620 crore, if we take a breakup, my LCD restructuring is, corporate is basically 1,200 only LCD 1,000 mid corporate 220, so 1,200. So 3,000 is coming from retail. But what I seen our other bank I should comment, but it is perfect then why it in the same ratio. So my corporate restructuring is not much, it is only 1,266 crore.

Jai MundhraB&K Securities — Analyst

Right, right. And sir, on, so this is a slightly clarification. So on — we are showing provisions — in the provisioning slide, we are showing provision MTM and there is another negative line item in the other income INR48 crores, profit loss on revaluation of investment. So just wanted to check what is that, I mean I thought all Standard Assets, MTM, you either run it through other income or you provide in provisions as earlier, but you had mentioned that subject to RBI, I mean consequent to RBI direction change you have put in something in other income. So what is that INR48 crore.

P. SitaramExecutive Director and Chief Financial Officer

Its a simple matter. If there is a performing investment, you have to do mark-to-market. The mark-to-market if there is appreciation, RBI says you cannot take into account. If there is a situation, then you have provide for that. So what we show in other income as valuation loss is the MTM which comes on performing investments.

Jai MundhraB&K Securities — Analyst

Right. So this is not GSEC, this is some corporate investment.

P. SitaramExecutive Director and Chief Financial Officer

It can it can include GSEC also. It can include any treasury investments that we have, that would have to be passed through a mark-to-mark formula as required way of Reserve Bank.

Jai MundhraB&K Securities — Analyst

Right, so entire standard assets, standard provisions MTM will be routed through other income. That is what the policy is.

P. SitaramExecutive Director and Chief Financial Officer

We don’t use the word standard because again further confusion will come. I mean, just as an MTM valuation is there in the other income. But where it is required as per a prudential norm due to some, whatever the trigger that RBI has specified, then that comes under provisions and continues.

Jai MundhraB&K Securities — Analyst

Right, no, so just hypothetically. I mean, does this include MTM on GSEG. So let’s say if you.

P. SitaramExecutive Director and Chief Financial Officer

It includes the MTM and GSEG.

Jai MundhraB&K Securities — Analyst

Right. So, sir, if you can tell me the quantum there?

P. SitaramExecutive Director and Chief Financial Officer

And out of that, one sec, we’ll give…

Jai MundhraB&K Securities — Analyst

The reason why I’m asking is, Sir, I remember you have already IFR at above 2%. So I was wondering why will you do MTN through this line item versus using RBI leeway in setting it off from IFR.

P. SitaramExecutive Director and Chief Financial Officer

So what’s wrong in doing that.

Jai MundhraB&K Securities — Analyst

Nothing wrong, but you are one of the few banks, which already have 2% plus IFR.

P. SitaramExecutive Director and Chief Financial Officer

I’ll take that as a complement.

Jai MundhraB&K Securities — Analyst

But in going ahead if you have, let’s say MTM, but you can — theoretically you can adjust in IFR without routing it through P&L.

Rakesh SharmaManaging Director and Chief Executive Officer

But anyway, we have not considered that. We would like to be the tradition that we are.

Jai MundhraB&K Securities — Analyst

Okay, sir. I have one more question. If you want I can ask right now or I can come back in the queue.

P. SitaramExecutive Director and Chief Financial Officer

No, sure, go ahead.

Jai MundhraB&K Securities — Analyst

So, sir, on on NII, right. So we have mentioned the margins, but somehow on quarterly basis it becomes very volatile because of that NPA recovery that we include here in NII, right? The, I mean the NPA recovery you would be adding in principal fee or in interest income, if you were to go only, let’s say business NII, if you have that number, maybe for full year that you…

P. SitaramExecutive Director and Chief Financial Officer

That’s 3.53 for the full year business NII. And that is a improvement of about 70 basis points over last year, 2.8 business NII last year.

Jai MundhraB&K Securities — Analyst

No., but sir, that business NII will also include the normal recovery from NPA that you would be going through interest income, is that right?

P. SitaramExecutive Director and Chief Financial Officer

Okay, okay. It will knock of this one If we take out last ticket recovery, then with NIM excluding all this, both the interest on income tax refund, as well as the major recoveries is 2.79% last year. Okay.

Jai MundhraB&K Securities — Analyst

Last year FY 22, right?

P. SitaramExecutive Director and Chief Financial Officer

FY ’21, 2.79. Against that this year on the same parity, 3.26. So that’s it.

Rakesh SharmaManaging Director and Chief Executive Officer

That’s why 3.25 we have the guidance.

P. SitaramExecutive Director and Chief Financial Officer

Any way you look at it, we have achieved an improvement in the floor NII.

Jai MundhraB&K Securities — Analyst

Correct. Great sir. And last thing sir, just a small clarification. When you report your data to RBI on a monthly basis, I mean the data which comes out in sectorial deployment of credit, do you report gross number or do you report net number, because for you, I mean, I just wanted to understand because for you there is a large difference in gross advances in net advances. So what is the number that goes to RBI in sectorial data.

P. SitaramExecutive Director and Chief Financial Officer

As far as I remember, I’m sorry, I cannot effectively say that, but I’m sure that somewhere or the other RBI is collecting both data. And it is up to them to utilize the way they desire. So we don’t know exactly what goes into it, but both the gross as well as the setups are available to RBI, right.

Jai MundhraB&K Securities — Analyst

No, so there is a large difference in your net advances growth and gross advances growth, right. So I was just checking, from RBI the data that RBI gives, is that gross or net or is there any way to find out that.

P. SitaramExecutive Director and Chief Financial Officer

With about the 70% confidence I will say RBI is sing net advance. But I’ll need to recheck again to make it very sure sure.

Jai MundhraB&K Securities — Analyst

Sure, sure. Great, Sir. Yeah, thanks a lot for answering all these questions, sir. Thank you.

Operator

Thank you. Ladies and gentlemen, that was our last question for today. I now hand the conference over to the management for their closing comments. Thank you, and over to you.

Rakesh SharmaManaging Director and Chief Executive Officer

So thank you very much ladies and gentlemen for attending this conference. So after this also if you have I think questions, so the entire top management and the CFO will be available for answering your any specific queries or any other questions. So thank you very much for attending this conference. Thank you. And thanks ICICI Securities for arranging this conference.

Operator

[Operator Closing Remarks]

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