- Profit Before Tax (excluding treasury): INR140.80 billion, up 11.8% year on year.
- Core Operating Profit: INR154.12 billion, up 11.0% year on year.
- Profit After Tax: INR110.59 billion, up 14.6% year on year.
- Total Deposits: Up 15.1% year on year and 0.9% sequentially.
- Term Deposits: Up 19.9% year on year and 3.1% sequentially.
- Average Deposits: Up 17.8% year on year and 3.3% sequentially.
- Domestic Loan Portfolio: Up 15.9% year on year and 3.3% sequentially.
- Retail Loan Portfolio: Up 17.1% year on year and 2.4% sequentially.
- Business Banking Portfolio: Up 35.6% year on year and 8.9% sequentially.
- SME Portfolio: Up 23.5% year on year and 4% sequentially.
- Rural Portfolio: Up 16.9% year on year and 3.4% sequentially.
- Net NPA Ratio: 0.43% at June 30, 2024.
- Total Provisions: INR13.32 billion, 8.6% of core operating profit.
- Net Interest Income: INR195.53 billion, up 7.3% year on year.
- Net Interest Margin: 4.36% in this quarter.
- Non-Interest Income (excluding treasury): INR63.89 billion, up 23.3% year on year.
- Operating Expenses: Up 10.6% year on year.
- Employee Expenses: Up 12.5% year on year.
- Non-Employee Expenses: Up 9.2% year on year.
- Branch Count: Increased by 64, totaling 6,587 branches.
- Consolidated Profit After Tax: INR116.96 billion, up 10% year on year.
- Capital Adequacy Ratio: CET-1 ratio of 15.92%, total capital adequacy ratio of 16.63%.
Release Date: July 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Profit before tax excluding treasury grew by 11.8% year on year to INR140.80 billion.
- Core operating profit increased by 11.0% year on year to INR154.12 billion.
- Profit after tax grew by 14.6% year on year to INR110.59 billion.
- Total deposits grew by 15.1% year on year.
- Retail loan portfolio grew by 17.1% year on year.
Negative Points
- Net NPA ratio slightly increased to 0.43% from 0.42% in the previous quarter.
- Gross NPA additions were INR59.16 billion, up from INR51.39 billion in the previous quarter.
- Recoveries and upgrades from gross NPAs decreased to INR32.92 billion from INR39.18 billion in the previous quarter.
- Operating expenses increased by 10.6% year on year.
- Net interest margin decreased to 4.36% from 4.40% in the previous quarter.
Q & A Highlights
Q: My first question is on deposit and loan growth. Are you still comfortable targeting loan growth of mid to high teens? And would you be comfortable increasing your Loan-to-Deposit Ratio (LDR) since it's already lower than peers?
A: We don't target any particular level of loan growth. We have grown our deposits quite comfortably during the quarter, with an average deposit growth of 17%. The deposit flows are quite strong in supporting loan growth. We don't see the deposit market as a constraint. As for the LDR, we have historically operated at low to mid-80s and don't see any big change in that.
Q: Do you have any rough calculation on the impact of the new Liquidity Coverage Ratio (LCR) guidelines? And do you see retail recoveries slowing down due to customer leverage?
A: The LCR impact is estimated to be between 10 to 15 percentage points. On retail recoveries, the pace may vary and not continue at the same rate as we were still collecting from NPAs created in fiscal '21 and '22. Credit costs will normalize upwards, but NPA ratios and provisioning coverage are fine.
Q: How do you see the asset quality outlook for the cards portfolio, given the rise in delinquencies in the system?
A: The cards portfolio is less than 5% of our loan book. We see it as a growth business and are investing in it. The credit cost for the overall portfolio is around 50 basis points and may normalize gradually. It will be better than historical levels.
Q: The yield on advances has come down this quarter. How do you read that?
A: Part of the decline is due to non-accrual on the Kisan Credit Card (KCC) portfolio. There is also competition, particularly on the corporate side. Overall, the yield movement is stable.
Q: Can you provide details on the higher treasury gains this quarter?
A: The gains came from our proprietary trading businesses, security receipts portfolio, and mark-to-market on the fair value through P&L portfolio. The treasury profit number is a small component of the P&L.
Q: Despite the increase in the share of higher-yielding retail, SME, and business banking, the yield on advances has not gone up. Why?
A: The yield on advances has been stable. Market pricing has not increased significantly. The SME and business banking segments are operating at the upper end of the quality spectrum, so they are not inherently high-yield businesses.
Q: How should we think about OpEx growth for the full year relative to balance sheet growth or income growth?
A: We don't give guidance on expenses, but OpEx growth has been coming down over the quarters. The adjusted growth for Q4 was between 12% and 13%, and this quarter it is around 10%. This should be a fair indicator.
Q: Do you think any additional tightening is needed for cards and personal loans (PL)?
A: We are not looking at any material tightening. We had taken actions last year on PL, and the growth rate has come down. Cards is an ongoing refinement, but we want to grow the business.
Q: Could you explain the quarter-on-quarter movement in net worth?
A: The revised investment guidelines became applicable this quarter, leading to an AFS reserve plus retained earnings of about INR32 billion net of deferred tax. Additionally, some capital and reserves get added every quarter due to stock option exercises.
Q: Can you quantify the impact of the penal charges circular? And do you expect faster normalization of credit costs?
A: We have not put out any number for the penal charges circular. On recoveries, our credit costs have been steady, around 50 bps. There will always be some variability in additions and recoveries, but nothing specific to comment on.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
