State Bank of India (SBIN) Q1 FY23 Earnings Concall Transcript

State Bank of India  (NSE:SBIN) Q1 FY23 Earnings Concall dated Aug. 06, 2022

Corporate Participants:

Sanjay Kapoor — General Manager, PPR

Dinesh Kumar Khara — Chairman

Alok Kumar Choudhary — Managing Director, Retail Business and Operation

Analysts:

Mahrukh Adajania — Edelweiss — Analyst

Unidentified Speaker —

Mona Khetan — Dolat Capital — Analyst

Jai Mundhra — B&K Securities — Analyst

Kunal Shah — ICICI Securities — Analyst

Adarsh — CLSA — Analyst

Abhishek Murarka — HSBC — Analyst

Ashok Ajmera — Ajcon Global Services — Analyst

Nitin Agarwal — Motilal Oswal — Analyst

Aushi Shah — — Analyst

Anand Dama — Emkay Global — Analyst

Jignesh Shial — InCred Capital — Analyst

Prakhar Sharma — Jefferies India — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to State Bank of India Q1 FY ’23 Earnings Conference Call. [Operator Instructions]

I now hand the conference over to Mr. Sanjay Kapoor, General Manager, PPR, from State Bank of India. Thank you, and over to you Mr. Kapoor.

Sanjay Kapoor — General Manager, PPR

[Foreign Speech] Good evening, ladies and gentlemen. I am Sanjay Kapoor, General Manager, Performance Planning and Review. On behalf of the top management of SBI, I extend a warm welcome to all joining us today on SBI’s Q1 FY ’23 earnings conference call.

On the call today, we have with us our Chairman, Mr. Dinesh Kumar Khara; Mr C.S. Setty, Managing Director, International Banking, Global Markets and Technology; Mr. Swaminathan J, Managing Director, Corporate Banking and Subsidiaries; Mr. Ashwini Kumar Tewari, Managing Director, Risk, Compliance and SARG; Mr. Alok Kumar Choudhary, Managing Director, Retail Business and Operations; Ms. Saloni Narayan, Deputy Managing Director, Finance; Mr. Pawan Kumar Kedia, Chief General Manager, Financial Control; Mr. Charanjit Attra, Chief Financial Officer.

Before I request our Chairman to give a brief summary of the Bank’s Q1 FY ’23 performance and the strategic initiative undertaken, I would like to read out the safe harbor statement. Safe harbor provision, certain statements in these slides are forward-looking statements. These statements are based on management’s current expectations and are subject to uncertainty and changes in circumstances. Actual outcome may differ materially from those included in these statements due to a variety of factors. Thank you.

Now I would request Chairman sir to make his opening remarks.

Dinesh Kumar Khara — Chairman

Good evening, ladies and gentlemen. Welcome and thank you for joining this conference call. I start by thanking all our stakeholders, including our customers, analysts and employees for their unhindered support and trust reposed in us. I also express my gratitude to our shareholders and other financial market participants who have supported and valued the bank through the challenging times in the past few quarters. The affect of the pandemic has subdued to a large extent. Thanks to the government’s massive vaccination program, with doses administered to more than 200 crore persons, an astounding milestone. The economy is almost on track with resumption of air travel and removal of other containment measures by most of the countries. However, the volatile geopolitical situation still poses a downside risk. The Indian economy remains resilient despite global headwinds resulting in rise in inflation, rise in crude prices, increase in commodity prices and disruption in supply chains. The global output has contracted in the second quarter of this year owing to the downturn in China and Russia.

RBI has already raised the repo rate by 140 basis point this financial year to bring down the inflation in its most recent monetary policy statements on other Swift 22. The RBI continue to remain focused on the goal of accommodation so as to ensure that the inflation remains within the target while supporting growth. Further hike in interest rate and resultant tightening of liquidity can’t be ruled out to tackle higher inflation, increased commodity and energy prices, which are putting pressure on global supply chains. The increase in urban consumption, improvement in rural demand and agriculture and the likelihood of a normal monsoon will help the economy in gaining traction going forward.

The government’s capex program and improved capacity utilization will support investment activity. The economic activity has continued to move forward as per the data available for the quarter first of financial ’23 despite global risk. The GST collection at INR1.49 trillion in July ’22 has been the second highest ever remaining above INR1.4 trillion for the fifth consecutive month, showing the strength of the economy.

I now present some of the key highlights of our performance in quarter one of financial year ’23. The balance sheet size of the bank has crossed the milestone of INR50 lakh crore, which is a reflection of the continued trust and faith placed on us by our esteemed customers. We are committed to adding value to our stakeholders by continuously improving our product and services. As regard business, the bank’s advances grew by 14.93% and deposit grew by 8.73% on Y-o-Y basis. Our International Banking witnessed a robust credit growth at 22.39% on Y-o-Y basis, 15% in dollar terms and deposit growth at 30.63%, 23% in dollar terms.

The net interest income has increased by 12.87% Y-o-Y and net interest margin has increased by 8 basis point Y-o-Y to 3.23%. The non-interest income has declined by 80.44% Y-o-Y mainly because of MTM losses. This has resulted in reduction in operating profit by 32.79% Y-o-Y. However, the core operating profit after excluding MTM impact has increased by 14.39% Y-o-Y. The MTM losses have also impacted ROA of the bank, which has come down by 9 basis point Y-o-Y, to 0.48% and ROE of the bank, which has declined by 203 basis points to 10.09% due to consequent decline in net profit. However, if we recalculate the profitability after excluding the MTM losses, the notional ROA and ROE would be 0.89% and 18.57% respectively, which is on the expected lines and on track of our medium term guidance. Our AFS book stands at INR631,530 crores as of 30 June ’22 with 60% in GSAC SGMs and 23% in highly rated corporate bonds. We saw a hit on account of MTM losses amounting to INR6,549 crore. We do not see any actual in this book, and as the rate soften, the MTM losses will be recovered.

During the year, we have the redemption of INR84,000 crores on the AFS book which will also bring down the MTM losses. Further provision of INR1,503 crores were made for the investment depreciation during the quarter. The momentum in retail advances continues to show a growth of 18.58% in quarter one of financial year ’23 on Y-o-Y basis. Corporate SME and agri advances shown a robust growth of 10.57%, 10.01% and 9.82% respectively on Y-o-Y basis. Our leadership position in home loan continues. The individual mortgage portfolio for the bank has the best quarter one performance ever. The home loan application registered a 3 times jump sanction in value terms doubled over the same period last year. The end user mortgage portfolio registered its highest quarter one growth of INR13,425 crores despite the industry witnessing a hike in interest rate from the historical lows. The home loan portfolio grew by 13.77% on a Y-o-Y basis. As far as asset quality is concerned, the bank’s gross NPA and net NPA as on June ’22 was at 3.91%, and 1% respectively, which is an improvement of 141 basis point and 77 basis point respectively on Y-o-Y basis

The slippage ratio for June ’22 is 1.38%, which is an improvement by 109 basis point Y-o-Y. We have been able to contain the credit cost at 0.61% as against 0.79% in June ’21. The net NPA of the bank has been brought down to 1% which is a result of focus and continuous attention in this area. We have been constantly trying and strengthening to maintain the bank’s loan asset quality. The digital leadership journey of the bank is continuing. More than 96.6% of the transactions are now routed through alternate channels. The registered users on YONO have already crossed 5.25 crores, a big milestone and which has created a significant value for the bank. 65% of the new savings accounts are opened through YONO. We have now more than 100 online marketplace partners for YONO. The bank will soon come out with only YONO, which is YONO 2.0 with many more advanced features and functionality. The bank is leveraging its analytics in a big way for taking forward its strategic goals.

Before I conclude my opening remarks, I would like to thank you all for your consistent support to the bank. We remain committed to reward your trust in us with superior sustainable returns over the long term. My team and I are now open to take your questions. Thank you.

Questions and Answers:

 

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Mahrukh Adajania from Edelweiss. Please go ahead.

Mahrukh Adajania — Edelweiss — Analyst

Yes. Hello, good evening. Sir, my first question is on international loan. We do have a breakup of domestic corporate loans in the presentation. But there is an strong growth in international loans as well. So which are the sectors that have contributed to international growth, like maybe the top two to three sectors which is — it is the oil company’s borrowing, which are the sectors?

Dinesh Kumar Khara — Chairman

Actually when it comes to international book our — see our major growth would have come from the syndicated loans. So we would not have the sector wise, per se, but nevertheless, the growth is essentially coming through, I think we can come out with some kind of a detail relating to whether it is syndicated loan or interest rate finance, those kind of details we can certainly provide, but majorly it is coming from the syndicated finance that. And also trade finance, syndicated loans and the trade finance are the two major products in which we have witnessed our growth. And it is also — these are the geographies where these syndicated loans have come in from. And also, I would also like to mention that both the places USA and UK, both the places have got decent trade finance growth also, because there are many platforms, which are available, which helps us in sort of really ensuring that we underwrite decent loan growth from this particular product.

Mahrukh Adajania — Edelweiss — Analyst

Yes, sir I’m asking because other PSU banks have also seen a very sharp rise in international loan and this has been happening in general for the segment for the last two to three quarters, so suddenly, why has there been higher focus on overseas loan because they’re growing faster than domestic corporate?

Dinesh Kumar Khara — Chairman

No, I would — I am unable to comment about others but as such, we are concerned, we had introduced a product by the — which is a factoring product was introduced by us about a year, year and a half, almost two years back and that is something, which has helped us to participate on their platforms, which are available in USA and UK. And so I think that is one of the major reason for the growth, which we have witnessed in the International Banking Group and I think, we have witnessed similar growth last year also, but if you look at it, our growth in dollar terms is actually 15% when it comes to the international book.

Mahrukh Adajania — Edelweiss — Analyst

Okay. And sir, most of the incremental growth in this quarter will be syndicated not trade finance, is that a fair assumption?

Dinesh Kumar Khara — Chairman

It would be syndicated as well as trade finance.

Mahrukh Adajania — Edelweiss — Analyst

Okay, so both would be kind of equal?

Dinesh Kumar Khara — Chairman

Yes.

Mahrukh Adajania — Edelweiss — Analyst

Okay. And sir, the other question is on provision, so the standard asset provisions are negative and the flow chart that you gave on the breakdown of provision that are not directing for calculating net NPAs, that stock of cumulative provisions have also declined sequentially, sir has been a drawdown of existing provisions, why are standard asset provisions negative during the quarter?

Dinesh Kumar Khara — Chairman

Just one sec.

Mahrukh Adajania — Edelweiss — Analyst

Sure.

Dinesh Kumar Khara — Chairman

Let me get the details.

Mahrukh Adajania — Edelweiss — Analyst

Yes sir.

Unidentified Speaker —

What is her question?

Dinesh Kumar Khara — Chairman

Standard asset provisions. See, this is actually the writeback of INR1,295 crores, which is essentially attributed to.

Unidentified Speaker —

It’s a combination of…

Dinesh Kumar Khara — Chairman

It’s actually a combination of write back, write back taken from presence of COVID restructuring, which is essentially attributed to the reduction in the exposure under the restructuring and additional normal provision of INR300 crores were made for the credit growth, so net of that is actually getting reflected in INR1,295 crores.

Mahrukh Adajania — Edelweiss — Analyst

Okay. So basically, there was a write-back of INR1,595 crore?

Dinesh Kumar Khara — Chairman

Yes.

Mahrukh Adajania — Edelweiss — Analyst

Because of COVID restructuring.

Dinesh Kumar Khara — Chairman

Yes.

Mahrukh Adajania — Edelweiss — Analyst

I mean drawdown. Okay. And sir, my last question is on personal loan. Sir, what would be the maximum and average ticket size and what will be the share of private versus government?

Dinesh Kumar Khara — Chairman

This express credit — the average ticket size is INR5.97 lakh is the average ticket size and out of this 95% is given to the customers who are maintaining their salary accounts and when we look at this 95% almost about 85% would be for the government employees only and the remaining is for defense forces, government employees and the quasi government would be about 90%. Out of this 95%, 5% would be large corporates, which are of wellrated corporates. So that’s how it is stacked up.

Mahrukh Adajania — Edelweiss — Analyst

Got it. And the maximum ticket size would be?

Dinesh Kumar Khara — Chairman

About — almost about INR6 lakh — INR5.97 lakh is the amount.

Unidentified Speaker —

That is the average.

Mahrukh Adajania — Edelweiss — Analyst

Okay. That’s the average ratio [Speech Overlap]

Dinesh Kumar Khara — Chairman

That’s the average. Maximum will be — will go up to [Technical Issues]. We have actually recently launched another product which is RTXT but which is yet to really grow well. So there the maximum ticket size can go even up to INR30 lakh. But as of now, our maximum ticket size would be in the range about INR20 lakh — INR25 lakh.

Mahrukh Adajania — Edelweiss — Analyst

Got it. And sir, my last question on — this thing is that the business development expenses are the highest component of other operating expenses by value. So these agents will be sourcing what loans? The express credit or some other loan? I’m assuming is their DSA commission.

Dinesh Kumar Khara — Chairman

Actually when it comes to business acquisition expense, it is essentially on account of the home loans — home loans are the one and also the PSLC certificates which you buy. For that also whatever, I mean fees will — whatever premium is paid that will also come under this.

Mahrukh Adajania — Edelweiss — Analyst

Got it. Thank you.

Dinesh Kumar Khara — Chairman

On our interest credit, we are not using any of the outsourcing agents for excess credit.

Mahrukh Adajania — Edelweiss — Analyst

Okay, sir. Got it. Thank you. Thanks a lot.

Operator

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

Mona Khetan — Dolat Capital — Analyst

Yes, hi, sir, good evening. So my first question is on slippage, if you could share the breakup of slippages and if there was any one-off in terms of interest reversal this quarter?

Dinesh Kumar Khara — Chairman

Breakup of slippages, you need?

Mona Khetan — Dolat Capital — Analyst

Yes.

Dinesh Kumar Khara — Chairman

Okay. Just a second. See when it comes to the breakup of slippages. Break up of slippages are essentially about INR9,700 crores, which is coming from SMEs INR3,000 crores, agri is about INR2,700 crores. Per segment is INR2,353 crores, so which is — which actually add up to INR8,070 crore. Then CAG was INR320 crore and CCG was INR1,335 crore. So that’s for this. And out of that we have already recovered INR2,800 crores already has been recovered till now.

Mona Khetan — Dolat Capital — Analyst

Okay, and were there any one-offs in interest reversal from say the agri book or something?

Dinesh Kumar Khara — Chairman

No, no, no, there is no one off.

Mona Khetan — Dolat Capital — Analyst

Okay. Sure. So what was the reason behind the decline — sequential decline in margins?

Dinesh Kumar Khara — Chairman

The sequential decline in?

Mona Khetan — Dolat Capital — Analyst

Margins, net interest income…

Dinesh Kumar Khara — Chairman

Yes absolutely, yes. There was a — as far as the last quarter was concerned, we had some INR600 crore worth of income tax refund, which are interest on the income tax refund, which is not available this year. This quarter it is not available.

Mona Khetan — Dolat Capital — Analyst

Sure. Got it. And secondly on the reset of EBLR loans, so what is the basis of this reset? What is the time period of reset?

Dinesh Kumar Khara — Chairman

Sorry, I could not [Speech Overlap]On what basis are the EBLR loans reset, the repo linked loan rest [Technical Issues]

Mona Khetan — Dolat Capital — Analyst

On what basis are the EBLR loans reset, the repo linked loan rest [Technical Issues]

Dinesh Kumar Khara — Chairman

Actually it happens on the first of the quarter.

Unidentified Speaker —

Following month.

Dinesh Kumar Khara — Chairman

First of the following month. Most of our EBLR loans are repo linked loan. Okay. And suppose the repo is at — increase this month, any day of the month this month. And first of the subsequent month the reset that is reset.

Mona Khetan — Dolat Capital — Analyst

Okay. Sure got it. And just finally on the BB and below book, we notice that there was a rise in the share of BB and below book from 11% to 13% Q-on-Q. Anything, any, if you could give some color on it? What is leading to those…

Dinesh Kumar Khara — Chairman

Majority of them are the state government loans, which are not rated. So that is the reason why this kind of a wave we are seeing.

Mona Khetan — Dolat Capital — Analyst

Okay. So there was a rise in state government loans essentially?

Dinesh Kumar Khara — Chairman

Not really. Actually if you look at it, it has come down directly, it has come down from 14% to 13%. So BB and below are essential, those are the loans which are there.

Mona Khetan — Dolat Capital — Analyst

Okay. Sure. Just finally, on the retail and SME, how is the underlying demand then, do you see any risk to it from the elevated inflation levels?

Dinesh Kumar Khara — Chairman

See we have, till now, when it comes to retail, we are not seeing the demand tapering off. We have a decent visibility of the demand. And I hope that it will continue. When it comes to SME, SME also there is a reasonably good pipeline, if I may say so. This year in the first quarter, perhaps, after many, many years we have seen the SMA segment witnessing a growth. So that way, I think it has — I don’t — I hope that we’ll continue to see the decent trajectory of growth in the SME segment too.

Mona Khetan — Dolat Capital — Analyst

Sure. Thank you. That’s my queries. And all the best. Thank you.

Dinesh Kumar Khara — Chairman

Thank you.

Operator

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

Jai Mundhra — B&K Securities — Analyst

Yes, hi, sir. Good evening, and thanks for the opportunity. The first question is regarding your savings account rate. So SBI Savings rate is linked to repo and now with yesterday rate hike, the SAR rate by formula is very, very — I mean almost similar to the floor of 270 that we offer. So just wanted to check, is it safe to assume that incremental repo rate hike would now be flowing to the savings account card rate? Is that safe to assume?

Dinesh Kumar Khara — Chairman

No, I think it is not a right assumption because our savings rate is not linked the repo.

Unidentified Speaker —

So more than INR1 lakh, it is linked with external benchmark. But the stipulation is that it will be 2.75% below the repo rate. So under these circumstances, even if the repo rate is on 5.40%, minus 2.75% it comes to 2.65%. So it is still more than the derivative number, right? We are giving 2.70% up to INR1 lakh and technically by going by this formula, we should have reduced this number to 2.65% or even below. But because we value our franchisee, that is why we do not use this formula, to the disadvantage of people and even if repo has been enhanced, the wage bill remain same.

Jai Mundhra — B&K Securities — Analyst

Thanks. No the question is, sir, incrementally, now that your formula derived rate and your floor of 2.70% are almost similar. There is only 5 basis point gap. So whatever incremental repo rate hike, should one assume that the savings account rate will also be reflecting that?

Dinesh Kumar Khara — Chairman

No, I think we will be very mindful of our repo, yes please.

Unidentified Speaker —

See 2.70%, we have giving irrespective of whether it is INR1 lakh or more deposit. If you had gone by the formula, then this for more than INR1 lakh, the rate would have been lesser than 2.70%. So we have already been incurring 2.70% in the entire balance. So even now despite the incremental increase, this cost is not going to increase neither it will reflect in the saving loan interest rate.

Jai Mundhra — B&K Securities — Analyst

Even going forward, right? So do you…

Unidentified Speaker —

Even going forward at this rate. This increase has happened.

Jai Mundhra — B&K Securities — Analyst

Going forward in case repo rate moves at 5.45%, also then what happens is my question?

Unidentified Speaker —

Yes, if the repo rate…

Dinesh Kumar Khara — Chairman

We can always calibrate the spread according to what the actual demand would be.

Jai Mundhra — B&K Securities — Analyst

Understood. Second question is, sir, on EBLR, so in last three months or less than three months there is cumulative 140 basis point rate increase and the card rate on all floating-rate loans on retail SME, they clearly would have increased by 140 basis point rise. So do you think the credit demand is healthy enough to absorb this increase 140 basis point rate? Or do you think that irrespective of 140 basis point rate hike in EBLR, the effective interest charged to the customer could be lesser than 140 basis point on a floating rate?

Dinesh Kumar Khara — Chairman

I think this is a part of the market dynamics. We will — we are taking a call but nevertheless, the kind of trend, which you are seeing, I — we don’t envisage the demand tapering off even if because you know actually when it comes to the retail loan book, retail loan book it is linked — directly linked to the actual number. And when it comes to the corporate loan book, it is all linked to the various benchmarks and also spread over whatever the benchmark is, risk spread over the — risk premium over the benchmark. That’s how it is — it is worked out. But when it comes to the final pricing, the risk spread accordingly gets adjusted depending upon the risk appetite and the market dynamics. So that’s how really it works out.

Jai Mundhra — B&K Securities — Analyst

And last two things, sir. If you have the ECLGS number outstanding disbursement in NPA there?

Unidentified Speaker —

Yes. ECLGS we had INR32,000 crore was the total amount in both restructuring one and two. It has already come down to about INR28,000 crore and out of this INR28,000 crore, this INR4,000 crore worth of reduction is about INR2000 crores is on, I would say is essentially on account of the repayment and INR2,000 crores is the NPA which at that point.

Jai Mundhra — B&K Securities — Analyst

So this is about restructured, right?

Dinesh Kumar Khara — Chairman

Yes restructured.

Jai Mundhra — B&K Securities — Analyst

So I was asking on ECLGS?

Dinesh Kumar Khara — Chairman

ECLGS also I think INR41,000 crore was the total disbursement at 1.91%.

Jai Mundhra — B&K Securities — Analyst

Okay. And lastly, sir. The credit growth it is running at 15% Q-o-Q, it is also healthy, but it looks like that — part of that is because of the low base of last year on Y-o-Y basis. Sir how confident you would be to sustain this 15% growth for the rest of the financial year?

Dinesh Kumar Khara — Chairman

I’m quite hopeful. The reason behind is kind of a term loan and also the underutilization of the working capital, which is all aggregating to almost INR5 trillion. And the pipeline is almost INR1 trillion — INR1.2 trillion. So I’m quite hopeful that we should be in a position to sustain this in the subsequent quarters.

Jai Mundhra — B&K Securities — Analyst

And finally the last question…

Operator

Sorry to interrupt you, can I request you please come back in the queue.

Jai Mundhra — B&K Securities — Analyst

Sure. Thanks.

Operator

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

Kunal Shah — ICICI Securities — Analyst

Yes, hi, sir. So firstly, on this decline in yield on advances on a quarter-on-quarter basis So in fact we have hiked MCLR there would have been EBLR linked loans as well. Plus, sequentially the growth is largely from the retail side. Sir what is actually leading to this decline in yield on advances? Is it like more competitive rate pressure, which is coming in on the corporate and the SME front and with the revised EBLR, how should we see the trend in next couple of quarters?

Dinesh Kumar Khara — Chairman

I think sequentially perhaps may not be a right way because normally towards the end the financial year, there are multiple other channels of revenue, which are available for various accounts. And maybe that may not be the right way and that is the reason why we are comparing on a sequential basis. And on a sequential basis, which is an improvement, actually if we look at it. I mean Y-o-Y basis, it’s an improvement, though sequentially, it looks like to be a reduction because invariably, we have seen that yearend there are multiple other of — I mean multiple other sources, which actually improves the — which are the yield enhancers.

Kunal Shah — ICICI Securities — Analyst

Okay. So how should be the trend maybe with this EBLR hike and the MCLR hike. How should we look at it from year-on-year?

Dinesh Kumar Khara — Chairman

We hope it to be improving going forward. July onwards it should start looking up. If we look at this graph also you will probably see. This trendline also very clearly indicates, June is low and it does peaked to the — towards March. Quarter after quarter, it went up. So it’s a similar situation. We hope that we should be in a position to have a similar trend or maybe better towards the — in the coming quarters.

Kunal Shah — ICICI Securities — Analyst

Sure. And overall, in terms of the deposits growth, so I think it is slightly below the system average as well now. So, definitely in terms of the hikes — our hike on the deposit side has been lower compared to that of the other private bank. So what would be the stance out there? Is it like still 69%, 70% odd of CD ratio is comfortable and we can further allow it to expand without freaking too much on the deposit side? Would that be the call or maybe we will see some action on the deposit rates as well to maybe garner the higher deposit mobilization here?

Dinesh Kumar Khara — Chairman

We are very closely focusing on the NIM and within that boundary condition, if at all we will get a chance to shore up our deposit, we will certainly do. But nevertheless, as of now, our credit deposit ratio is at about 63%. And if we look at the redemption which has happened during the current financial year, both from our AFS and HTM book, it will be almost at about INR1.5 trillion. So we will be very closely looking at couple of variables. One, of course, as I mentioned, the availability of liquidity. Second, we will be very mindful of our franchise into the liability sector and also thirdly, that what are the deployment opportunities, which are available and the price at which we can deploy this money. So these are some of the variables which we’ve kept in mind for deciding the interest rate increase in the deposits.

Kunal Shah — ICICI Securities — Analyst

Sure. And one last question on miscellaneous income. So there is recovery from AUCA but still miscellaneous income is significantly down. So what is the element, which is actually leading to that impact? On an average it used to be like INR2,000 crore, INR3,000 odd crores and this time it is only INR475 crore.

Dinesh Kumar Khara — Chairman

Miscellaneous income is essentially.

Kunal Shah — ICICI Securities — Analyst

But there is a sharp decline both year-on-year as well as quarter-on-quarter.

Dinesh Kumar Khara — Chairman

Also, we’ll have a situation where quarter four would normally have the kind of dividend incomes which we get and also derivative is the other component. So either. I mean, last year we had dividend income of about. Yes, so last year we had a dividend income of about INR500 crore. But this year, it is negative. And also when it comes to recovery in return of account, last year we had a one-time recovery of INR4,692 crore in Kingfisher, which is not there this year. So that is the reason why this is behaving like this.

Kunal Shah — ICICI Securities — Analyst

Okay and derivatives also would be a part of it?

Dinesh Kumar Khara — Chairman

Yes derivative is the other component.

Kunal Shah — ICICI Securities — Analyst

Some knock on derivative, which would have been there in this quarter?

Dinesh Kumar Khara — Chairman

Yes.

Kunal Shah — ICICI Securities — Analyst

Okay. Okay. Yes. Okay. Thanks a lot. Yeah.

Operator

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

Adarsh — CLSA — Analyst

Congrats on good numbers. I have two questions, first on margins. When we were having the last quarter…Okay. Hopefully this is better. Sir just checking on margins. Our outlook presented last quarter was that given how things are panning out. If can you just update, how do you see them? Just a question, sir. What would be your margin outlook incrementally?

Dinesh Kumar Khara — Chairman

We are hoping it to be in line with the kind of trend, which you have seen in the past and also what we have already recorded till now.

Adarsh — CLSA — Analyst

Sir. Is there a change because if you go back to the fourth quarter, clearly the margin outlook look a lot more stronger, so is there anything that you are seeing in the market, which makes you believe that margin now should be like flattish rather than going up?

Dinesh Kumar Khara — Chairman

No. I think, I would rather expect the margin to improve of 3.23%.

Adarsh — CLSA — Analyst

Got it. Sir. And sir, second question is on capital. While we are better in regulatory requirements, growth has certainly picked up in the last few months. Do you anticipate that bank may need to shore up a little bit of capital now? Given how well the stock has done and number two, growth certainly is holding up a lot better. See we have already got the approval from the Board for raising 81 and 82 towards about INR11,000 crore. In the current. In fact, in this month itself, I think we have already reduced about INR2000 crore. So about INR9,000 crore is the incremental, which is available, which will be using. So I think, hopefully, we will very closely watching the situation and if need be, we will look at the options what all can be tapped to see to it that we have adequate capital available.

Dinesh Kumar Khara — Chairman

See we have already got the approval from the Board for raising 81 and 82 towards about INR11,000 crore. In the current. In fact, in this month itself, I think we have already reduced about INR2000 crore. So about INR9,000 crore is the incremental, which is available, which will be using. So I think, hopefully, we will very closely watching the situation and if need be, we will look at the options what all can be tapped to see to it that we have adequate capital available.

Adarsh — CLSA — Analyst

And sir, what will be the threshold to consider equity raise, because we are close to 10%, many banks operate at better CET-1s and obviously the growth is better than what we’ve seen in the last few years. So what is the threshold when you would think about seriously looking at equity raises?

Dinesh Kumar Khara — Chairman

Well, actually, we have got couple of other options. But we have not really deliberated at the Board level, so it is — it will not be in order for me to really share those plans in this call.

Adarsh — CLSA — Analyst

Got it, sir. This is helpful, thanks a lot.

Dinesh Kumar Khara — Chairman

Thank you.

Operator

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

Abhishek Murarka — HSBC — Analyst

Hello, good evening, and thanks for taking my question. So just a couple of data keeping questions. What is your LCR right now?

Dinesh Kumar Khara — Chairman

It’s about 130%.

Abhishek Murarka — HSBC — Analyst

Okay. And currently, how much excess liquidity would you be carrying? I know you said that there is about a INR1.5 lakh crore of redemption coming from the investment book, apart from that?

Dinesh Kumar Khara — Chairman

No, we will — excess liquidity will…

Unidentified Speaker —

Sorry, I think you may not have been able to hear me. I was on mute. So we have sufficient liquidity in terms of our excess SLR, number one. Number two, I think there is about INR83,000 crores worth AFS portfolios coming up for redemption this year — the rest of the year. So I think, there should not be any problem in terms of funding any credit growth which is likely to happen. And there is no — absolute no liquidity concerns even if the liquidity in the market tightens.

Abhishek Murarka — HSBC — Analyst

Yes. Sir, how much excess SLR did you say?

Unidentified Speaker —

SLR is about 3% — 3.8%.

Dinesh Kumar Khara — Chairman

3.8%

Unidentified Speaker —

INR3.8 lakh crores.

Abhishek Murarka — HSBC — Analyst

Okay.

Unidentified Speaker —

In fact we have got the total redemption for HTM and AFS aggregating to about INR150,000 crore.

Abhishek Murarka — HSBC — Analyst

Right. So isn’t there enough liquidity?

Unidentified Speaker —

Which is actually coming up in the current financial year.

Abhishek Murarka — HSBC — Analyst

So you could actually hold off any increase in TD rates for a while, while this liquidity gets deployed, that is what I was trying to understand.

Dinesh Kumar Khara — Chairman

That’s a various call. As I mentioned that deposit is a franchise also. So we have to keep that in mind, but nevertheless, what you mentioned that very clearly reflects that we have got the power, if at all resource to say.

Abhishek Murarka — HSBC — Analyst

Got it. And sir. Just a couple of questions on express credit. One is, what is, what would be the mix of new versus repeat customers there? And broadly these higher NPAs in the quarter that would have come from given you have 80% 85% government or quasi government, that would have come from that same cohort?

Unidentified Speaker —

No actually this is — express credit NPAs is, I would say, it’s more of an aberration because whenever, some of the state governments are unable to pay some salary at a point of time, then it really turns out to be NPA but as when the salary gets paid, it gets adjusted also. So that would be the scenario. About your other question relating to how much would be the new versus how much would be the existing? I would — we will not have that data right now available with us, we have not looked at it from that lens.

Abhishek Murarka — HSBC — Analyst

Okay. But every time you would — somebody — if some customer wants to roll over an express credit loan, what could be the rules around that? How much would you have to pay back or something to roll over?

Dinesh Kumar Khara — Chairman

It all depends upon what is their salary and depending upon that we are extending. Its a EMI NIA ratio, which we really look at it.

Abhishek Murarka — HSBC — Analyst

Okay. Okay, I’ll take it offline. Thank you. Thanks for these clarifications.

Operator

Thank you. Next question is from the line of Ashok Ajmera from Ajcon Global Services.

Ashok Ajmera — Ajcon Global Services — Analyst

Hello?

Operator

Yes, sir, you are audible.

Unidentified Speaker —

Yes sir, Ajmera ji?

Ashok Ajmera — Ajcon Global Services — Analyst

Sir while we appreciate, sir, that the operating profit but for this MTM losses would have been INR19,302 crores, does it mean that we can assume that the operating profit for the whole year of the bank would be in the range of about INR78,000 crore to INR80,000 crore?. Number one.

Unidentified Speaker —

Just hope that. Let us hope, Ajmera sir.

Ashok Ajmera — Ajcon Global Services — Analyst

Yes, sir. We hope so. And secondly, sir. This is a loss on sale and revaluation of investment the INR6,549 crores, so is it, what is the component, I mean of the loss, which you have already booked? And the MTM on the revaluation out of this INR6,549 crores?

Unidentified Speaker —

It is according to the account of MTM. We have not really incurred any loss, it’s all revaluation.

Ashok Ajmera — Ajcon Global Services — Analyst

Okay so heading only says that the loss on sale/revaluation of the investment.

Dinesh Kumar Khara — Chairman

That is a format. So that’s why it is mentioned like that.

Ashok Ajmera — Ajcon Global Services — Analyst

Yes, no. I understand, I understand sir. So, sir. Now going forward, now with this 50 basis point again further rise, how do we — what do we expect on the treasury front going forward in the next three quarters? Any estimate of further likely MTM or how much we are cushioned for further MTM losses on the treasury front, sir. Including the trading…

Dinesh Kumar Khara — Chairman

We are cushioned for 5.45%, sorry 5.74, no 7.45%. And if I may say so, the way the situation stand, you will observe that yesterday when the rate hike was there for 50 basis point, the yield moved up from 7.10% to 7.30%. So that is something which is, I mean if I read into that kind of a trend then you know, even if the next hike happens from RBI, which will be somewhere in September, 28 to September 30th, it’s too early to say that what will be the interest rate hike because they normally get guided by the inflation trajectory. And if at all passes the guide for the future, we have seen that about two months back, the inflation was trailing at around 7.9% about two — two and half months back and from that level it has already come to about 6.7%, so what will be the situation from now onwards, if at all the past trend continues, then, one may expect the inflation to be within 6% and who knows if at all, it is something, it may not really lead to any kind of interest rate, but it is all subject to various assumptions. So having said that, we are, as I mentioned that we have already booked the MTM losses to the extent of 7.45%. So we hope that we should not have any more such a chances of providing for — for the depreciation on the AFS book.

Ashok Ajmera — Ajcon Global Services — Analyst

Okay. Sir coming to that — this provisioning, we said that we have taken the benefit of some of the buffers of the provision which are there in this quarter, how much buffer is the left, which can be utilized in case the higher provisions required in future.

Unidentified Speaker —

That INR7,800 crores is a provision, which is available for the restructured assets, so that can always be used. And whatever we have used is essentially wherever the repayment has happened. So to that extent only we have used, we have not used otherwise, INR7,800 crores is the additional provision for the restructured accounts.

Ashok Ajmera — Ajcon Global Services — Analyst

Got it sir. Sir, on the advances front, credit front, our credit growth especially in the domestic book is muted if you take the corporate book, except that your international book is grown very healthy. Well, the margins are, but very less or limited. So going forward when you say that we are aiming 15% of the growth, it means in the next three quarters, including the August now which is going — July-August also, we may grow our total credit to about 12.5% for the remaining three quarters now?

Dinesh Kumar Khara — Chairman

We hope so. Because when we — if I look at under-utilization of the working capital limit in the corporate accounts, which is almost as high as over INR2.5 trillion. Similarly, when it comes to term loans which are unavailed, it is also to the extent over INR2.5 trillion. And proposals in pipeline are about INR1.2 trillion. So that is how it is stacked up even if the term loans will not start availment immediately or may not get disbursed immediately. Still I expect that we should have a situation where we can easily think in terms of growing to the extent of about 2.5 — INR2 lakh, INR3 lakh crores into the corporate book, so we are at about 8.75 that’s as the corporate book is concerned. So that is the kind of expectation, which I have. If at all that comes and the kind of growth which you would have witnessed into the retail side that I think will continue, even SME also we have started seeing that direction and the pipeline is also there. So I think all put together, I expect that there should be a decent sustainable growth in the remaining three quarters.

Operator

Thank you. Mr. Ajmera, I’ll request you to come back in the question queue for a follow-up question. The next question is from the line of Nitin Agarwal from Motilal Oswal. Please go ahead.

Nitin Agarwal — Motilal Oswal — Analyst

Yes, hi, good evening, everyone, and thanks for the opportunity. So this quarter like many other PSU banks have reported control treasury losses and some of them have reported profits as well. So just wanted to check if we have done any transfer of securities from AFS to HTM during the quarter? And just related to it, do you think that the mix of AFS portfolio, which is like, still look high, needs be reduced given how the rate cycle is played out?

Dinesh Kumar Khara — Chairman

We had done the transfer of securities, but unfortunately, we could not avail the benefit. Soon thereafter, there is a 40 basis point increase announced by RBI which led to the units moving up. So we really could not take much of benefit. We did — we went for the further transfer of securities also. And also we have got it — I mean as of now, we have got a decent elbow room available in the HTM and whatever securities are maturing in AFS and whenever we are buying new securities, we’re only putting in the HTM book.

Nitin Agarwal — Motilal Oswal — Analyst

Right. And this mix of AFS which is 42% is doesn’t seem like comfortable or any thoughts around reducing this mix?

Dinesh Kumar Khara — Chairman

Sorry. What — I’m sorry, I could not get your question.

Nitin Agarwal — Motilal Oswal — Analyst

In terms of mix of AFS investments, the mix of AFS investments in the total investment book at over 40%. This number it seems comfortable or any — there have been any thoughts to reduce this number also.

Unidentified Speaker —

Yes, if I can respond, sir. I think, so we have adequate room in the HTM portfolio. Maximum of 23% is what we can put in HTM. Our strategy would be that whatever maturing portfolio is there, it would be directly going to the HTM. See primarily, I think most of the credit growth will now be funded. So the investment book may not grow as much as it has grown in the past two years, even if we have the invest, I think we have adequate room to move to HTM. So to answer your question specifically, I think, our AFS portfolio probably will be coming down.

Dinesh Kumar Khara — Chairman

Yes, otherwise also if you look at the industry level number, the advances book is growing at about 14% and the deposit growth is at about 8.4%, so which very clearly means that the rebook of the banks will not probably grow as it has grown in the past.

Nitin Agarwal — Motilal Oswal — Analyst

Right sir. And sir second question is like, typically we have seen that in line with approval slippage trajectory from first quarter to fourth quarter, our credit cost also improves. Now in this quarter we have reported a credit cost of 61 basis points. So how do you see the trajectory now going ahead for FY ’23 and any color for FY ’24?

Unidentified Speaker —

Actually when it comes to macro, though we keep on reviewing it very closely, but there are always the element of uncertainty. More so in the current kind of a scenario, but nevertheless, our effort will be to bring it down to the extent possible. I mean that be the threshold — we will not be in a position to give any kind of guidance on this particular asset.

Nitin Agarwal — Motilal Oswal — Analyst

Thanks so much and wish you all the best.

Operator

Thank you. The next question is from the line of Aushi Shah from Individual Investor. Please go ahead.

Aushi Shah — — Analyst

Hi, sir. Congratulations on a great quarter. Sir. In the beginning of the presentation, you have mentioned that you were planning on increasing your CASA book by focusing on the savings account part of things, so I just wanted to get an overall idea about it, how exactly do you plan on doing that because like there is such intense competition in the market going on right now. So how do you plan on ensuring growth?

Unidentified Speaker —

We will be trying to beat out the competition.

Aushi Shah — — Analyst

Sir by — basically by raising rate?

Dinesh Kumar Khara — Chairman

No, no, we are — actually digital is something which is actually growing very well and almost about 65% of our account are getting opened digitally. So which means that we are in a position to offer the convenience to the customers, and also the kind of product bouquet which we offer it is complete in all respects. There is no reason for us not to be really sharing the mind share of the customers and getting their accounts. And TSV is one of our focus effort and we will continue to extend then that going forward. Maybe a low — May be Alok wants to add something.

Alok Kumar Choudhary — Managing Director, Retail Business and Operation

Yes. So, in CASA, what exactly if you find last couple of years, there was a huge increase in saving bank deposit as well as TDR. So on the ground, it was being conceded that whatever is coming is fine. But with the competition intensifying, we have also now told — communicated with the bank that CASA has to be a priority, and that is why on a daily basis, the opening of accounts as well as increasing contact with the premium customers or high value customers.

So that they can deposit more and transact more in our account. So that the balances also increase. So it is two pronged. One, acquisition of new valuable customers. So that we will open accounts where there is higher possibility of increase in balances. Number two, with whatever customers we have, making relationship more rich, so that the balances in the account increase, there — we will also try to increase product for customers, so that the stickiness as well as the float around it that also increase. So it is both acquisition strategy as well as the relationship strategy, which will lead to better CASA.

Aushi Shah — — Analyst

Okay, sir. Sit hat is very good to hear. And sir, is there any guidance about like the CASA ratio that you would have for the coming two to five years?

Dinesh Kumar Khara — Chairman

See, in this case, what we’ll do is we understand the importance of CASA and even the bank understands, so the endeavor will need to increase as much CASA as possible. We have our internal say, benchmark, our internal aspirations as to where we should go, but there is a single, say, structurally as a bank, we are a bank where people trust a lot. So they bring a lot of term deposits to us and the growth rate of CASA as well as — and growth rate of TDR is normally updated, because we have higher growth in TDR because of customer’s trust. So then, percentage may not increase much but in absolute numbers, it will clearly increase.

Aushi Shah — — Analyst

All right, sir. Thank you so much and all the best.

Operator

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

Anand Dama — Emkay Global — Analyst

Yes. Sir, thank you for the opportunity. Sir, again, a question on the treasury front. So, we said that basically there is a redemption of about INR1.5 trillion of investment. So whether that could lead to higher realized losses going forward? Number one. And number two is that, what is the status on our investment fluctuation reserve? Where does it stand? Do we have a shortfall over there and whether that is also to be made up for going forward leading to higher provisions over there?

Unidentified Speaker —

See when it comes to INR1.5 trillion, which I mentioned, this is a redemption, which is during the normal course in the current year. So which means that we will not book any loss in this redemption book. It is actually, yes — and it is something which — and we don’t have any such NPA in the book as of now. So that is one thing which will happen. And the second question is relating to — sorry I missed out the second question.

Anand Dama — Emkay Global — Analyst

Investment fluctuation reserve, sir.

Unidentified Speaker —

Investment fluctuation reserve, we are in the process of…

Anand Dama — Emkay Global — Analyst

Sir, what is the outstanding in the IFR? And is there any shortfall over there?

Unidentified Speaker —

No, there is some shortfall. But we are actually building up that shortfall also.

Anand Dama — Emkay Global — Analyst

Okay. So what would be the quantum of that shortfall? If possible to…

Unidentified Speaker —

Sorry. There is a Board approved guide path which is in line with the RBI directions and we are strictly following that. And we will try and see that, that gets — if that gets completed in the current financial year.

Anand Dama — Emkay Global — Analyst

Sir, any quantum basically — what is the kind of shortfall that we have?

Unidentified Speaker —

I will not have that number, but see, the number is available in the balance sheet, but we can share with you. We will share you offline.

Anand Dama — Emkay Global — Analyst

Sure sir. Sir, secondly is the — on the opex front. So our opex certainly has been lower whereas most other banks have been reporting very high opex for — during this quarter. So one benefit that we have is the staff cost, which is largely stable. How about the other opex, whether we will have meaningful branch addition over next nine months and that will lead to a higher opex during the nine months going forward?

Dinesh Kumar Khara — Chairman

See, when it comes to our — see employee costs etc is given, there is not much which can be done, but of course we are trying to shore up our income. So that cost to income ratio gets addressed. And in that direction only we have come out with a — we have been given approval to set up the new subsidiary, which is operating, the whole subsidiary, and the intention is that this subsidiary will help us in reaching out or rather supporting our rural branches to garner quality wages and also to ensure that the renewal etc also happens on time. So this is something which will be — which it will be put to use, and which will help us in reducing the NPA in the agri sectors and also will help us in booking the quality wages, which is available in the rural economy. So this is what the plan of action is, which will eventually address the cost to income ratio.

Operator

Thank you. Anand, may I request you to come back in the question queue for a follow-up question. The next question is from the line of Jignesh Shial from InCred Capital. Please go ahead.

Jignesh Shial — InCred Capital — Analyst

Yes, hi. Am I audible?

Dinesh Kumar Khara — Chairman

Yes. Please go ahead.

Jignesh Shial — InCred Capital — Analyst

Okay. So, sir, I had a few question. One on your margins basically, which has basically have come out on a sequential basis. So I agree that Y-o-Y basis it has been pretty high. I mean it has improved. What trajectory basically you’re seeing it up for the full year? Though you have already indicated that you will see an improvement happening, but if you can give us some guidance and the roadmap, how you are seeing it up, the improvement will be coming in, that is one. And second, obviously on the growth front with the rate hike already being there and inflation remaining high, do you remain confident that the growth would be, you will be able to benchmark it. But where — what exact would be the momentum and which areas, you think will be a better one, that the growth will be coming up, retail, corporate or international book that you are seeing it for the next three quarters, you can give some clarity on it. That would be really useful. Thank you.

Dinesh Kumar Khara — Chairman

That trajectory as such the NIM is concerned, I would say the kind of trend, which you have seen in the past, we expect to be a repeat of the similar trend going forward also, though we are starting at a little high base as compared to where we were last year in the first quarter of financial year, ’21. As well as your second question relating to which are the areas of focus? I think irrespective of the interest rate hike etc which has been talked about, now our retail engine is continues to adhere to its promise.

And we hope that we will have a decent growth in the retail going forward as well. Rather, when it comes to the corporate growth. We are quite hopeful this year, we’ll have a better traction in the — as for the corporate book is concerned and even SME also is one of the special focus for the bank, you would have observed that we have moved up in the SME from about INR2.20 trillion to about INR3 trillion plus, it has already moved. And this is all we are getting into supply chain some kind of balance sheet lending also. But we are very mindful of the risk which are inherent in SME. We are ensuring that we should underwrite the best of the quality of SME also. So I would say that retail, corporate, SME all will grow. And as far as agri is concerned, our focus is going to be high value agriculture, our focus is going to be SHG financing. So this will be our focus. So that the agri-book should also improve in terms of quality, that is what our endeavor would be.

Jignesh Shial — InCred Capital — Analyst

Okay. All right. Thank you, sir. And all the best.

Operator

Thank you. Next question is from the line of Prakhar Sharma from Jefferies India. Please go ahead.

Prakhar Sharma — Jefferies India — Analyst

Thank you sir, for taking my question. Just two bits, first on the SMA 1 and 2 loan. The balances have gone up from INR3,500 crore to about almost INR7,000 crore, could you just help us understand what is the reason for this?

Unidentified Speaker —

SMA 1 and SMA 2.

Prakhar Sharma — Jefferies India — Analyst

Okay sequentially you are saying. Yes.INR3,500 crore to INR7,000 crore?

Dinesh Kumar Khara — Chairman

Of course, out of the 7,000 also, if you will really look at the significant component — just one second. Yes. SMA — essentially, invariably, we have seen that in the first quarter, there are always some peculiar behavior, which we see. And that is one of the reasons why sequentially it looks on the higher side. But almost about INR2,000 odd crores has been pulled back out of this. So if at all we look at that INR2,800 odd crore, so then actually it comes almost in the same range as it was as on December ’21, so that’s how the — I mean that partly explains the behavior.

Prakhar Sharma — Jefferies India — Analyst

Sir, second question is on the interest on tax refund for the March quarter, could you please clarify what was the amount in the previous quarter?

Unidentified Speaker —

INR600 crore was the amount, interest on tax refunds.

Prakhar Sharma — Jefferies India — Analyst

Yes. For the March quarter?

Unidentified Speaker —

Yes. For the March quarter.

Prakhar Sharma — Jefferies India — Analyst

Okay, thank you, sir. Thank you.

Unidentified Speaker —

Thank you.

Operator

Thank you very much. Ladies and gentlemen, due to time constraint, that will be the last question for today. I now hand the conference over to the Chairman sir for closing comments.

Dinesh Kumar Khara — Chairman

Thank you very much to all the analysts who are taking out time on a weekend, on a Saturday evening. I wish all of you the very best. As I — as we have explained, that our endeavor is to keep on delivering better outcomes. Hopefully, it will be the scenario going forward, but for the situations, which are actually beyond our control in terms of GSAC etc, we have to be — we have to play in the broader macro and our effort will be to navigate through the turbulent times in the most professional way. Thank you very much. All the very best.

Operator

[Operator Closing Remarks]