Release Date: May 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Business of the bank grew by 7.72%, with advances up by 6.15% and deposits increasing by 8.89%.
- Non-interest income grew by 29% during Q4, with core fee income showing a steady growth of over 21%.
- Gross NPA and net NPA numbers significantly reduced to 5.43% and 1.63%, respectively.
- Capital adequacy remains healthy at 17.16%, with a CET ratio of 14.74%.
- The bank has invested heavily in technology, with plans to invest another INR500 crores over the next three years.
Negative Points
- Advance growth is muted and below industry standards, partly due to technological upgrades and competition from private sector counterparts.
- Operating expenses for the year increased significantly due to wage revisions, impacting the cost-to-income ratio.
- The bank faces challenges in the MSME segment due to geographical skewness and aggressive competition from private sector banks.
- The penalty of INR2 crores imposed by RBI on the bank is a significant amount given the bank's size.
- The bank's credit growth target for FY25 is modest at 10% to 12%, which may not be sufficient to catch up with industry benchmarks.
Q & A Highlights
Q: What is the OpEx growth? And can you quantify how much is staff expenses and other expenses? Second, what is the loan-to-deposit ratio for Q4? And what is the target for FY25?
A: The CD ratio of the bank was 71.99% in Q4, and we intend to bring it to 73%-74% going forward. The operating expenses for the quarter were INR766 crores, down from INR824 crores in December '23. For the entire year, the operating expenses were INR2,931 crores. The establishment cost for the quarter was INR513 crores, down from INR547 crores in Q3. Overall, the establishment cost increased from INR1,544 crores to INR1,944 crores due to wage revision.
Q: What are the growth prospects of the bank, especially in the RAM segment and MSME?
A: We are rebalancing our credit portfolio, moving from corporate to RAM segments. Structural changes like moving the RAM segment portfolio to the back-end processing center and migrating to Finacle 10 have slowed growth temporarily. We are targeting a 10%-12% credit growth for FY25, with RAM segment growth around 14%, MSME at 13%-14%, agriculture at 8%-10%, and retail at 15%.
Q: What is the total written-off pool, and how much is NCLT and non-NCLT?
A: The total written-off pool is INR7,200 crores. We don't have the exact figure for NCLT and non-NCLT at the moment but will provide the data separately.
Q: What are the initiatives for capacity building and human resource integration with technology?
A: We have recruited four CXOs and are focusing on training staff both in India and abroad. We are also recruiting specialized positions at various levels. We are revamping our call center and focusing on capacity building to ensure sustainable growth.
Q: How are we positioned to capitalize on the treasury book and manage inflows?
A: We have rebalanced our portfolio as per the new RBI guidelines and shifted some securities to the trading book. We are observing market trends closely and building capacity in our treasury department to capture more opportunities.
Q: What is the impact of recent RBI draft guidelines on project finance?
A: The overall impact in terms of provisioning is estimated to be around INR150 crores. The book involved is around INR6,500 crores. This is a back-of-the-envelope calculation, and more granular calculations will be done.
Q: What is the target for recovery from written-off accounts?
A: The overall TW portfolio is around INR7,200 crores. Last year, we recovered INR758 crores. This year, we aim to recover INR500 crores from TW accounts and a total recovery upgradation of INR1,500 crores.
Q: What is the plan for improving the cost-to-income ratio?
A: The cost-to-income ratio has been high due to wage impacts. We aim to bring it below 60% in the next two years.
Q: Is it possible to move to a lower tax regime for FY26?
A: Moving to a lower tax regime is optional. We will consider it when profitability can absorb the impact, depending on future figures.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
