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Bank of India Ltd
Earnings Call Analysis
Q1-2025 Analysis
Bank of India Ltd
The company reported an 18% rise in interest income, driven primarily by an increase in credit advances. Despite a 26% increase in interest expenses, the company was able to sustain a 6% year-over-year growth in net interest income, reflecting a solid performance in their core business.
The net interest margin (NIM) improved from 2.92% in March 2024 to 3.07% in June 2024. This is a notable achievement in light of prevailing economic challenges. For the fiscal year 2025, the company has set a guidance of maintaining NIM at around 2.90%.
Operating profit saw a sequential increase from INR 3,557 crores in March 2024 to INR 3,677 crores in June 2024. However, the year-over-year comparison shows a slight decline due to a significant income tax refund in the previous year. Removing this anomaly, the year-over-year operating profit actually increased by nearly 10%.
Net profit for the first quarter of FY 2025 stood at INR 1,703 crores, reflecting a 10% year-over-year growth. This figure could have been higher if it were not for the provisions totaling INR 2,384 crores made during the quarter.
For the fiscal year 2025, the company issued clear guidance: a 13% growth in net interest income and maintaining a NIM of 2.90%. Additionally, the company is targeting a yield on advances around 8.5%.
The company reported significant improvements in asset quality, with a reduction in both gross and net Non-Performing Assets (NPAs). The gross NPA ratio decreased by 205 basis points year-over-year to 4.62%, while the net NPA ratio improved by 66 basis points to 0.99%, marking the first time it has fallen below the 1% mark.
The Current Account Savings Account (CASA) ratio improved, contributing to the company's strategy to focus on low-cost deposits. The domestic credit growth is projected at 13% to 14%, while domestic deposits are expected to grow between 11% and 12% for FY 2025.
The company is engaging in several strategic initiatives, including tie-ups for solar rooftop projects and launching new products like the BOI Star MSME Thala and commercial vehicle loan. These initiatives aim to diversify revenue streams and leverage emerging market opportunities.
The Return on Assets (ROA) for Q1 FY 2025 was 0.70%, with a year-end guidance of 0.80%. The company's focus on improving their market position includes maintaining a robust balance sheet with planned capital raising and investments in digital initiatives.
In response to various economic challenges, including rising deposit costs and increased regulatory requirements, the company has taken a cautious yet proactive stance. This includes maintaining a prudent provision strategy and ensuring sufficient capital to meet future demands.
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Very good afternoon, ladies and gentlemen. On behalf of Team Bank of India, I extend a very warm welcome to all the esteemed analysts who have joined us today here in this auditorium and also an extra special welcome to all those analysts who have joined virtually from different cities of India. We are pleased to announce the financial results of Bank of India for quarter 1 FY 2025.
As you all can see, our top management has already taken the dais, our respected Managing Director and CEO, Shri Rajneesh Karnatak-ji; flanked by the Executive Directors Shri M. Karthikeyan, Shri Subrat Kumar; and Shri Rajeev Mishra. Gopal sir, our Executive Director, sir, is on the way. So he will be soon joining us any moment.
So we'll begin this analyst meet. To start I'll just brief, it will be commenced with the address of our MD and CEO, sir, followed by question-and-answer session. So it's my proud privilege to invite our MD and CEO, sir, Shri Rajneesh Karnatak-ji for his address. Thank you.
Okay. So we are audible. We are visible to them? Should I start? Yes, so good afternoon, everyone. So present at the hall and also through VC. So good afternoon to all the members of the press, electronic media and here presently, the analysts. Ladies and gentlemen, it is my pleasure to welcome you all for today's interaction and share with you the financial results of the bank for Q1 for FY '25.
On the Indian economy side, the Indian economy has shown remarkable resilience in FY '24 and achieved 8.2% GDP growth amidst geopolitical uncertainties. India has emerged as one of the only 2 major economies where GDP constant prices is 20% above the pre-pandemic level. IMF has also revised the growth projections of India for FY '24, '25, at 7%, very close to RBI estimate of 7.20%.
The economy is enjoying twin balance sheet advantage with sound and stable banking sector and strong corporate sector. In light of the prevailing optimism, the bank is focusing on inclusive and consistent growth to become the catalyst in the government's vision for Viksit Bharat 2047, and will formulate strategies to be the key drivers, such as financing MSME, agriculture and expanding the net of education loans and PMAY as outlined in the union budget 2024-'25.
The focus area will be strengthening liability franchise through augmentation of low-cost deposits and retail term deposits to fund credit growth. Maintenance of asset quality will be priority by improving the collection efficiency and NPA recovery along with slippage containment. Our endeavor will be enhancing customer experience by adopting more STP journeys of our various products with safety, security and compliance.
In this direction, we have taken a few initiatives, which I would like to highlight to you. Number one, on the business side is the introduction of the innovative MSME product, namely the BOI Star MSME thala. Thala meaning that we are going into the hotel industry, tourism and logistics sector under the MSME units. Number two is the co-lending tie-ups, which we are doing. Number three is the Bank of India along with other 6 banks have come together and invested in the CCIL IFSC Limited for providing foreign currency settlement system to the FCSS in the GIFT City Gujarat.
The new SCRO product, BOI commercial vehicle loan has also been launched during this quarter. On the IT and other initiatives that we have taken, 25 products have been made live on the e-platform under RAM segment, with 15 products more under development, which will be launched during the current financial year. In line with the PM Surya Ghar Muft Bijli Yojana, we have made solar rooftop products live on our e-platforms.
Under the MSME Mudra loan, STP for seamless renewal cum enhancement up to 10 lakhs are made live. With this, customers can renew and enhance their loans through the website from anywhere and anytime. Portable UPI QR sound box has also been introduced to provide real-time audio confirmation for successful UPI payments. The bank has enabled its ATM acquiring switch for NFS, UDIR, which is the unified dispute and issue resolution to reduce the TAT in handling various disputes. E-commerce facilities made live through debit cards in all our 3 RRBs. CRM next compliant management module and service management module have been made live for all our branches.
UPI functionality has been integrated in the mobile app, for instance, payments, scan and pay, group payments, collect requests from peers for convenience and accessibility, secure transactions and reducing the cash dependency. We have published and shared the financial results of the bank for Q1 for FY '24, '25 on today in the afternoon, the main highlights are as under.
On the business side, the global business has increased by 12% plus on a year-year basis from INR 1,214,000 crores in June '23 to INR 13.64 lakh crores in June '24, with incremental growth of INR 1,49,000 crores. Global advances have increased by 15.82% Y-o-Y basis from INR 5.18 lakhs crores in June '23 to INR 6 lakhs crores in June '24, with incremental growth of nearly INR 82,000 crores.
Global deposit has also increased by 9.7% from INR 6,96,000 crores in June '23 to INR 7,64,000 crores in June '24, with incremental growth of INR 67,000 crores. CASA has increased by 5.5% on a Y-o-Y basis from INR 2.6 lakhs crores in June '23, to INR 2.74 lakh crores in June '24, with incremental growth of around INR 14,000 crores and a CASA ratio of around 42.68% for this June quarter.
Domestic advances have increased by 17.29% on a Y-o-Y basis from INR 4,33,000 crores in June '23 to like INR 5,08,000 crores in June '24, with an incremental growth of around INR 74,000 crores. RAM advances have increased by 18.78% on a Y-o-Y basis to INR 2,84,000 crores in Q1 FY '25. Retail advances have also increased by 20% and agriculture advances by 22%. And finally, the MSME have also grown by 13% plus during this quarter.
As regards to the profitability and asset quality is concerned, net profit in Q1 FY '25 stands at INR 1,703 crores, witnessing a Y-o-Y growth of 19.80%. Global NIM has improved by 4 basis points to 3.07% from -- in Q1 FY '25 as against 3.03% in Q1 FY '24. The domestic NIM improved by 6 basis points to 3.43% in Q1 FY '25 against 3.37% in Q1 FY '24.
Return on assets stood at 0.70% in Q1 FY '25. Net interest income has increased by 6% on a Y-o-Y basis and stood at INR 6,275 crores in Q1 FY '25 as against INR 5,915 crores in Q1 FY '24. There has been improvement in asset quality with a reduction in both gross and net NPA. Gross NPA ratio stood at 4.62% improved by 205 basis points on a Y-o-Y basis for Q1 FY '25 and net NPA ratio at 0.99%, improved by 66 basis points on a Y-o-Y basis. And for the first time, we have been able to reduce the net NPA to the below 1% number.
As far as our guidance is concerned, in line with the growth of the economy, the domestic credit will be growing at around 13% to 14% and domestic deposit growth we will be showing at around 11% to 12%, which is projected for FY '25. We will be concentrating on acquisition of new customers consistently to improve our CASA ratio and retail term deposits for funding sustainable credit growth.
Going forward, the emphasis will be on strengthening the bottom line by improving the asset quality through better underwriting standards with increased digitization initiatives and minimizing the fresh slippages and recovery in NPA accounts shall continue to be the thrust area for FY '25. I would like to thank you for all of you for showing your faith and coming here today and also for your continued support all through this time. The floor is now open for the discussion and question and answer. Thank you so much.
Congratulations for a good set of numbers in the first quarter of FY '25. And in fact, some of the concerns which were there in the last quarter, like especially there was an increase in the provision of INR 1,800 crores. Now it has come to the reasonable level which you had promised in last quarter.
Sir, our only -- my concern is that so many new norms are being announced every day in some guidelines paper by RBI. There are 2, 3 such thing. So going forward, number one, what would be the impact on us, including even this online deposit mobilization on that, the increase in the provisions or the other doubling the provisions as well as -- there is a pressure on the deposit side. And every bank, we are seeing it.
So how do we answer as a Bank of India to address that problem and mismatch in the credit, 13% to 14% and the deposit 8% to 9% from the capital adequacy point of view and from underwriting point of view, the demand which is there in the market. So what are your views on that going forward? Would you like to revise some of the guidance or targets given in the last quarter or towards retail on the higher side?
And something on the asset quality also that, yes, we have come down net NPA below 1%. Gross was already below 5% even in the last quarter also. There also, there is a reduction. One point was there on the recovery on the -- from the written-off account, I think we had about INR 40,000 crores, if I remember correctly, in the last quarter, it was said that total return of account figure. So what are the recovery targets from that in percentage terms or in absolute, we can convert it. So this is just a few.
Request you to kindly introduce yourself. [Operator Instructions]
I'm Ashok Ajmera, I am the Chairman of Ajcon Global Services Limited, and I have been tracking the banks, especially public sector bank, for the last 20, 25 years.
As regards the recent guidelines which have come in the recent past, one which is the latest is the -- on the LCR guidelines, the dark circular of RBI, basically, which is effective from 1 January -- 1 April 2025. However, for these guidelines, they have called for certain feedback and observations of the bank, we will be giving the feedback to Reserve Bank of India directly and also through the IBA also. The ballpark calculation that we have done on these numbers and what the industry has also done is that the LCR may come down by between 10 to 15 percentage with this kind of thing.
And because the RBI guidelines also says about the digital banking impact also, which will be -- have to be factored in into these guidelines. So 10% to 15% is the number on the impact of the LCR. Due to that, definitely because of that, some pressure will be there on the margins, definitely because of the impact of the LCR, and we'll have to keep more SLR and other securities aside for maintaining those kinds of margins. So that would be the first impact. But this is our -- these are all ballpark numbers, all banks are working on it.
And once we submit our feedback and suggestion to RBI, definitely, we're hopeful the RBI will come out with some more nuanced guidelines in the final circular, which will be effective from 1 April 2025.
As regards to the DCCO circular, which was earlier circulated in which the banks have already given the feedback to Reserve Bank, and we have also submitted our feedback to RBI through the IBA. We definitely feel that, again, there will be some nuanced guideline, which will be coming after taking into account the feedback which has gone from the entire banking system, not only from the stakeholders like banks and financial institutions, but also from the borrower side, the industry people also and also the infra guys who are there in the system.
So there also, we have done some ballpark computation over there. On the CET1 side, the impact will be at around 10 to 15 basis points on the CET1. Because overall, the guideline is such that it will not impact the CRAR. So CET1 impact will be around 10% to 15%. And on the credit cost side, it will be also at around 15 basis points. Not much of it will be there, only that much would be there, on that. As far as we are concerned, it will be there only for the new accounts, the full impact, which will come in the new accounts. Very little portion is there, which will be for the existing accounts where most of the things have already been taken care in the existing accounts.
As regards to your third main point with respect to the resource issues, challenges in resources side is concerned. If you see our balance sheet also, we have grown our advances by around -- on a Y-o-Y basis around INR 80,000 crores and deposits have grown by around INR 65,000 crores. So there is a gap of around INR 15,000 crores between the deposits and the advances. So INR 15,000 crores, let me tell you very frankly, we have re-strategized ourselves in the June quarter itself. And we have started raising deposits -- resources, I would say, through CDs.
So CDs we have raised in the Q1 quarter and also some borrowings we have done in the Q1 quarter. So this is how we have breached this gap and the borrowings have been done through our excess SLR, which is with us. That also we have done. Few of the borrowings also we have done through SIDBI and NABARD also. There also we have done as a strategy. So going forward, the strategy will be that we'll be trying to raise as much as CASA as possible and also retail term deposits.
Let me tell you one more thing is that as far as Bank of India is concerned, we have a very strong franchise. And if you see our presentation also, you will see, Ajmera-ji that only 14%. It is, in fact, 13.6% of our total domestic deposit is bulk deposit, which means that nearly 86% of our deposit is either CASA or retail term deposit, which is helping us to maintain our cost of deposit and overall cost as far as the interest income and interest expenses are concerned.
So that is some part which is there. And we will be strategizing, already, we have raised INR 5,000 crores of infra bonds in the first week of July. The advantage of these infra bonds will be for the bank debt. We don't have to keep SLRs and CRR on this. And number two, the interest to be payout is once in a year, annualized interest rather than a quarterly interest. So that advantage will be there for the bank. So that is one advantage that we will be -- we have taken a Board approval for INR 10,000 crores. We may be, again, hitting the market sometimes in the month of September for another round of INR 5,000 crores of infra bonds that we think.
And CD is always another revenue, and then we'll be also borrowing from SIDBI and NABARD and other institutions wherever we feel that the rates are lower than the rates at which the bulk deposits are coming in the market at present. Apart from that, what we have done is as a part of the strategy is that we have 69 zonal offices and 13 FGM offices. In all these offices, 82 offices, a separate resources officer has been placed now who's only duty and the KRAs with respect to raising of resources, whether it is retail deposit, whether it is for CASA and also for bringing government accounts.
So a lot of tie-ups, we have given them the targets to do tie-ups with the corporates, tie-ups with the central and state PSUs, tie-ups with central and state governments so that a lot of saving and current account, we are able to garner. Along with that, we'll be able to get some retail term deposits and also retail loans also like personal loan, housing loan and other kinds of things. So a whole lot of strategy we have already formulated for improving our resources franchise in the remaining 9 months of this quarter, and you will be seeing the results coming out as we go to the September quarter.
Thank you very much, sir.
[indiscernible]
So see, if you see the recovery side, the recovery number has also been very good for the bank. This time, if you see one of the slides, we have given a clear presentation now that we have done 1.4% of the recovery of the slippage which has happened. So that is the kind of number we have already achieved. That is for the first time we have achieved this kind of number. And going forward, again, what I would clarify here is that on the return of account, we have already launched a campaign, special OTS scheme on the return of accounts. That has already been passed on the field and has started working on it. We will be seeing good traction in the coming 2, 3 quarters in this recovery in return of accounts.
And some of the big accounts also, we will be seeing some recovery in the coming quarters. So return of account is a clear strategy for us. So we are targeting at least 5% recovery from return of account during this financial year. That is the internal target we have kept for the field. So of INR 40,000 crores, 5% we do, at least INR 2,000 crores we will be getting. And this amount -- entire amount would be going to the P&L of the bank. So that is the internal target we have kept for ourselves.
Sushil Choksey from Indus Equity. Congratulations to team Bank of India for excellent performance in the quarter and best wishes for time to come. Sir, dramatic changes have happened in this week on a global front, whether it's interest rate, bond market, the scenario on rates and challenges despite many other situations led by war may emerge or not, we don't know. Oil is down.
Now based on second half seems to be very conducive in interest rates on the global scenario and domestic interest rate would agriculture crop expected in the monsoon. Would you revise your ROE, ROA, gross NPA, net NPA advances despite all the challenges, which are visible on the CASA front and the deposit front. Maybe the second half is very positive where deposits are concerned compared to the first, by government as well as the public market deposits.
Yes. You are right that a lot of challenges are there. Yes, we have fine-tuned our guidance to a certain extent over there. So as you know that there are a lot of challenges on the CASA side and on the resources side. And the interest rates on deposits have started moving up and bulk deposits and other deposits, it is difficult to raise. And in fact, the 1-year rate at which we are getting bulk deposit is now coming at around 7.5%. That is the fact.
Another fact is that if you go for AAA advances, there also, there are a lot of challenges on the pricing side. So a lot of undercutting is happening within the banks also, like banks are lending at 7.8%, 7.6% to these AAA advances where the RWA is only 20%. So that kind of challenge is already there. And with this global international scenario, if we keep aside the war, which may happen or not happen. But otherwise, also on the interest rate side, as you rightly said that there are certain challenges, which may come because now interest rate scenario is also changing globally at the international level.
So definitely, though we have shown good net interest margin in this quarter. In fact, it has been better than what we had shown in the sequential quarter in March '24. It is better for this June quarter. In fact, we have touched this number of 3 point, if I tell you that net interest margin is for us 3.07. And for domestic, it is 3.43. And for the international, it is at 1point. Yes, so we have improved. But on the guidance side, what we are saying for March '25, NIM, we are seeing a guidance of 2.90%, considering the fact that the cost of deposit is going up and the yield on advances is not coming to that extent. So that is the NIM guidance we are keeping for March 2025.
Sir, but your focus moving towards RAM and retail, would you not be able to hold margin at the level which you achieved in Q1? Or we rather be conservative is the answer?
No, RAM will not impact much on the margin side.
Positive side?
Positive side, it will help rather. It will be on a positive side for the simple reason that it is externally benchmarked and the pricing is better over there than a AAA advance on the corporate side. So RAM book, we will continue as I said earlier also. Our continuous focus on the credit side will be that 65% will be booked on the RAM side and 45% on the corporate lending side -- 35%, yes.
Based on the new accounting standard, visibility of the profit in treasury may not flow to P&L, but looks like bond market may hit 75%, 7 later. In such scenario, would you capitalize on those profits and deploy it to credit retail, which is possible at 9% or approximate range? Or you'd rather remain conservative and hold bonds in the challenges led by the deposit mobilization?
See, Choksey-ji, all depends on how the resources journey pans out. So if you see the present June numbers for us, I will not talk anything on July, June numbers. Our credit growth on domestic side has been at around 17%. And our deposit growth is only around at 10%. So there is a gap of 7% [Audio Gap] and deposit growth is happening at around 11% to 12%. Definitely, as a strategy if we sell those bonds, we'll have to deploy them for credit growth only. So that will be all seen how the thing pans out. and how the credit growth finally keeps the pace with the deposit growth, which is coming.
Sir, kindly -- yes, we'll give you a chance. So apart from those who are present here, we are also joined by many analysts virtually. So I'm getting questions from them as well. Mr. Deepak Gupta from SBI Pension Fund has raised a query that there has been a sharp rise in SMA accounts in retail and corporate accounts. Could the management provide some information on it? And second part of his question is that, any lumpy recoveries from NCLT referred cases?
So as regards to the SMA is concerned, the point is well taken that there has been a rise in the SMA numbers. SMA numbers, in that, if you see that there is some corporate numbers also. In those corporate numbers, we have shown numbers of some [Audio Gap] why this number is there. If you remove that 30th number of those corporate numbers, the actual SMA [Audio Gap] If you compare it to the previous, but the typical thing in this Q1 was on the RAM side, especially on the retail side, was that one, there are a lot of transfers in the system.
Another thing was a lot of our staff was deployed in the election duties during Q1. And also the heat wave, which was there. So collection efficiency in the entire system got impacted, including Bank of India. So that is where -- that is the basic reason why the SMA numbers have gone up in retail for our bank also, so has in the entire industry.
But definitely, now what we are seeing from July onwards, the SMA numbers are now coming down, and it will normalize in this quarter in September quarter. As regards the recovery is earned, that recovery numbers have been already good, and we are expecting a good recovery in the big ticket size of around INR 500 crores, if I give my ballpark number in this quarter itself on the large ticket NPA accounts. That is the guidance, yes.
Thank you, sir. Can we have questions coming up from you, gentleman?
Indian bank specifically, does a lot of arbitrage in FX and shows a profit of almost INR 2,000 crores to INR 3,000 crores. I'm sure you're aware of the scheme being earlier present in Indian banking. Do we do something of that kind? Or we avoid those kind of products?
No, no. Sorry, if I can answer?
Yes, please.
Yes. So we also do a lot of this arbitrage transaction in FX also. Nowadays, I think now, again, market has started becoming favorable. So you would have seen that in the recent past, the forward rates were very low. So that's why there was not much of arbitrage opportunity. Now I think there is an opportunity. And as and when it arises, we definitely take advantage of that.
So keeping in that mind, how do you see this accounting or profit goes to treasury, I suppose, does it?
Right.
But on international book, Subrat-ji, how do you see future shaping up because most of the large corporates, which are present in overseas market, and the large corporates from India are again showing some signs of stability and expansion, be it in auto, steel, renewable energy, hydrogen, various things. How are we shaping up on that front?
No, so far as international book is concerned and advance is concerned rather. So syndicated loan market is quite active there. And we are -- definitely, we are looking for even Indian originated, any companies operating in India because they are also tapping the overseas market for raising fund. So definitely, yes, we are participating actively in the primary as well as secondary market, in the syndicated loan market. Apart from the trade finance where margin is very thin based on the requirement and wherever we can make more money and the margin is better, there only we are participating. So it's very selective. So ultimately, the bottom line is that we don't want to compromise on NIM. So that is the idea.
In terms of international book, what will happen is as far as the industry, once our finance and credit finance proportions is still very high. So it is 57%. Now it has already come down [Audio Gap].
Just to supplement what both the EDs have said that we have also [Audio Gap] giving loans at the loan level also, even in the New York center, in Tokyo center, even in Hong Kong center, Singapore center, even London center, we have started some transactions on the syndicated loan side on the local corporates also. That calls also we have [Audio Gap] we will be diversing our international book, as already said, from credit finance more towards the structured loan products.
Recently, I saw a tie-up we have done with Tata Power for this rooftop solar scheme. Can you elaborate what kind of growth numbers we are seeing? Because very few banks have tied up. And this is a big market, which is likely to explore not only for domestic, globally also, it's possible on EPC. So if there's any thought process because companies like REC, PFC and IREDA are flying high. I'm sure with a book of INR 10,000 crores, they may get a much better multiple too.
Yes, it is there. But see, solar rooftop is also something which will be a big paradigm game changer in the country. It has been with the government guidelines. So a lot of solar rooftop things will also be coming and we have done also a tie-up on that. We'll be also going for that apart from the Tata tie-up, which is there. So a lot of traction, both on the wholesale corporate, solar side will be coming and also on this solar rooftop funding already put a mechanism over there. The product has already been sanctioned and approved, and the field has already started working on it.
Basically, you will tie up with more EPC players who borrow under your...
Definitely.
[indiscernible]
There's another question coming up virtually is from Abhishek Kashyap from SA Arthur Securities Private Limited. Sir, he has three parts to his question. The first being, your top line numbers are constantly improving, the numbers, [Audio Gap] shall I read the other part also?
Yes, please.
Then can you provide any guidance with respect to the trajectory of net factors, BOI valuation find its peers. How confident the management is with respect to catching up to the peers?
So as regards to our income profitability is concerned. So see, if you see in detail, our interest income has increased by 18%. So that is all because of the increase in credit advances, which have gone up. Though interest expanded has also gone up by 26%, we have been able to maintain our net interest margins and net interest income has gone up by 6% on a Y-o-Y basis. Net interest margin [Audio Gap] June '23, which has now improved to 3.07 in June '24. That is one number which is there.
And in the quarter ended March '24, it was only 2.92%. So some improvement definitely has come as far as our NIM is concerned. As regarding the operating profit, which you said that the top line is improving, but the bottom lines, there is [Audio Gap] profit side, if I give you the number, it is that our operating profit, we have touched the operating profit of INR 3,677 crores in this quarter. On a sequential basis, it was in March '24, only INR 3,557 crores. So there has been an increase over there. As regards to the Y-o-Y, it is a minus by 2%, but that minus is only because of the fact that there was an income tax refund which had come during the Q1 of FY '24 in June '23, which was at around INR 450 crores.
If you remove that number, the net number then comes to around INR 3,200 crores of net profit -- operating profit in Q1 of FY '24, which means that on y-o-y basis, actually, our operating profit has gone up by nearly 10% if you remove that income tax refund. So there is no challenge as far as operating incomes are concerned and operating profit is concerned. That is a number which is there.
As regards our net profit bottom line is concerned, there also if you see, we have shown a profit of INR 1,703 crores [Audio Gap] March, we have given a profit of [Audio Gap] FY '24, in June '23, it was only INR 1,551 crore. So Y-o-Y also has grown by 10%. So definitely, as the top line is improving, our bottom lines are definitely improving, and the numbers are there. But had we not done the provision which we have done in this quarter of INR 2,384 crores total, the net profit would have been much better. So there is a challenge as far as the operating profit and these are concerns. And what was the third part?
It is -- margins.
Yes. As far as the margin is concerned, on the guidance side, the net interest margin, if you see the net interest income growth has been at around 13% in FY '24. And on the guidance side, we say that the net interest income guidance will again be at 13% for FY '25. Net interest margin, which we have already touched as I said, 3.07%. We say that the guidance for March '25 would be considering all the scenarios of tightening of interest rate and other kinds of things, 2.90%, as I said earlier, would be the guidance. So -- and as regards to the yield on advances is concerned, there also our guidance presently at -- we are at 8.60%.
And we feel that at around 8.5% plus the guidance will be there as far as that is also concerned. As regard to the share price is concerned, you would appreciate that the share price has improved over the last 12 months. And definitely, other -- with other peer banks, it is -- I would not say it is lower side, but the benchmark is that we are below the book value. Book value is at INR 132 presently, and the share price at around INR 125. There some gap is there, with these good numbers, which we have given for Q1. And the even better numbers, which we'll be able to give for Q2, this challenge shall also get obviated.
[Audio Gap] 3.47. So that is continue to happen. So naturally margin improved, then naturally will translate into catching up with the book value. The marginal difference between the book value and the market value will get -- I mean will catch up with that without any problem in the coming 2, 3 quarters.
Thank you, that's sir. I hope the queries raised by Abhishek Kashyap is satiated to the fullest. Any questions coming from this side, gentlemen?
Just one question I had.
Your introduction, please.
Himanshu from Aditya Birla Mutual Fund. Given there's some slight rise in the SMA trends, how do you expect the slippages trend to be in the coming quarters, although it has improved on a Q-o-Q, but where -- how the slippage trajectory will be? And second part to it, how the -- how one estimates the credit cost? Third, if any calculation would you have done in terms of giving any guidance if -- as and when the ECL guidelines comes in, how do you expect?
Yes. Okay. So as far as this SMA number is concerned, so if you see -- I'll give you more details over there on the SMA side. On June above INR 5 crores SMA, if you see our slide, our SMA has increased to INR 9,600 crores as against INR 7,131 crores. Further, if you see within that breakup, the corporate number is INR 6,783 crores. So if you remove that INR 6,700 crores of that corporate book, which consists of only a few accounts, predominantly, which is from one state government PSUs. 3, 4 PSUs are there in that.
So the SMA number is only around INR 3,000 crores, INR 5 crores and above. In that also, the maximum increase has happened in the retail SMA, which has touched INR 1,200 crores as against the number which was there in June, which was at around this one -- at March '24 at around -- for retail, INR 183 crores, it has become INR 1,200 crores. So retail, I told that, as I explained that it was because of the issues of the Q1 wherein there was a lot of transfers happening within the bank and then electioneering duty was there.
And overall collection efficiency has got impacted over the -- across the industry, not only from the bank side, but also in NBFCs, collection efficiency are impacted. But however, it has normalized now as we speak on 3rd of August in this quarter. And we do not see any much of concern going over there in this -- in the coming quarters in Q2 and Q3. As regards to the credit cost is concerned from there itself, the credit cost presently, as we have shown in this quarter is 0.85% and it has increased from 0.78%, which was there in the entire financial year.
Sequentially, it has also gone up from 0.78%. But as I said, clarified earlier also, because of it is the excess provision we had prudently made during this quarter. Other than -- otherwise, we would have shown better net profit, which would have been there. On the guidance side, we would say that the credit cost would be at 0.70% for the current financial year.
As regards to slippage ratio is concerned, the present slippage ratio is only 0.35%, which was 1.58% for the entire year and 0.42% for the March quarter. And in the last year, it was 0.53. So as against Q1 of FY '24, 0.53%, we have come to 0.35%. So if you multiply it into 4, like it comes to 1.40%. But, however, we are confident that we'll be able to keep the slippage ratio at 1.20% only during the current financial year, which will be much better than what it was in the financial year '24. So that is the guidance which we are giving at 1.20% for the slippage ratio side.
And the third part was on regard to the ECL. On the ECL also, we have done a ballpark calculation. Over there, we are expecting when the guidelines come, it will be spread across the 5-year period. Once it is spread across the 5-year period, we have sufficient cushion with respect to the profitability, which we'll be achieving improvement in the CRAR, which will happen. And also with respect to the capital raising in form of Tier 1 or Tier 2 bonds, which we will be doing, which will take care of the ECL provisioning, which will become to us.
This year also, we have a plan to raise around 5,000 in capital in form of Tier 1 and Tier 2. Tier 1, we will be raising in this current quarter, and Tier 2, maybe in the quarter 3 or quarter 4. So with both these things, profitability and the capital being raised, we'll be easily be able to manage this ECL extra provisioning, which will be coming in the next 5 years.
One more thing, regarding the role forward our segment show, we have also improved their role backward we have increased from 22% to 29%. And then role forward, which should be low, here categories from 26% to 22%. That is also coming down. So these are positive trends happening in SMA controllers.
Thank you, sir. There is one gentleman by the name Jai Mundhra, who is going to join us on an audio call for his question. Yes, who's putting me through?
Sir, my question is on this standard asset provisioning that we have done. If you can share some more details here. I think you also said that we have done more provisioning more than needed provisioning. If you can elaborate some more details? Is it like corporate -- is it versus some corporate stress that you're seeing? Or what is it pertaining to?
Yes. So if you see the standard asset provisioning in our presentation also, we have done INR 359 crores of standard assets and others provisioning. Out of that, it was only INR 111 crores in Q1 of FY '24, which was June '23, and it was a negative INR 189 crores as on March '24. So in this quarter, what we have done is that when we were seeing more of SMA numbers coming in retail and MSME, as you see in the SMA numbers, we thought it prudent to have more provisioning for the standard assets which are there.
Wherein we can have some delinquency in the coming quarter, which is a normal delinquency, which is there. However, as I said earlier, the credit cost and the slippage ratio guidance, which we have given will continue, and there will not be a concern. It is only a prudent decision on these accounts, which we have taken. And it is none because of any of the corporate accounts.
Okay. And secondly, sir, if I look at your yield on advances, right, somehow it is very volatile. This quarter, it has gone up I would have thought that first quarter is slightly poor in terms of higher slippages. But nonetheless, I mean, how should one -- and you have said that your yield on advances for the full year should be 8.5% plus. But I still wanted to check, sir, if you can share maybe the dummy account -- dummy interest booked in this quarter? And what could have led the higher uptick in the yield on advances this quarter?
So yield on advances in this quarter, Jai, has been at 8.6% for this quarter. For the entire year in the last quarter, it has been 8.38%. And for Q4, it was 8.47%. So it is not that it has suddenly jumped up in this quarter. So if you see our Q1 of last year, it was 8.1%. In Q4 of the last financial year, it improved to 8.47%, and now that has improved by 13 basis points to 8.60%. If you see the Bank of India trajectory of the MCLR, we are the first to increase the MCLR.
During the last 15 months, if you see, we have increase the MCLR by 7 to 8x. And we are the first one to increase the MCLR. This time also in the last ALCO effect from 1st of August, we have increased our 1-year MCLR by 5 basis points. So we are very proactive as far as increasing in the MCLR is concerned. If you see our presentation also, there you see that 46% of our book, 40% plus of our book is on the MCLR side. And another 40% plus book is on the EBLR side. So the moment we increase the interest rate on the MCLR, immediately the interest income starts coming on for us.
So that is the kind of thing, and we are very conscious on the pricing also. We have in fact, left some of the transactions in AAA where the pricing was low. Another very conscious call the management has taken in the bank. As far as the pricing is concerned, that we are not giving any external benchmark rate pricing of loans which are above 180 days. So up to 180 days only we are giving repo advances, RBLR advances. All other advances on the corporate side are all linked to the MCLR.
So our lowest MCLR is the overnight MCLR 8.15. So there also the book is not very large. Majority of our transactions which are happening is on 3 months, 6 months or 1 year MCLR. So we are very conscious on improving the yield on advances. Though we are -- I am saying that on the guidance side, the yield on advances for the full year will be 8.5%. And with the kind of increase in interest rate that we are seeing, the yield on advances definitely will be at a number which will be somewhere around 8.5% for the entire.
Jai, another thing, Rajagopal here. Just add to what MD sir had said, if you look at the numbers, if you look at interest income, it is almost INR 16,000 plus crores for this quarter. And if you look at my dummy ledger that I have booked is only INR 649 crores. And there is a marginal increase on a sequential basis in dummy ledger. So naturally the percentage, the proportion of dummy ledger that is becoming part of the yield on advances is very, very insignificant. So actually, the yield on advances has gone up by 13 bps because of the mix going up.
If you look at my RAM mix, it is slowly going up. It is now 56%. So naturally, the RAM mix has been giving me a little uptick in terms of yield on advances. It is going to go up like this because our long-term trajectory, including the medium-term trajectories is that we should be at least 60%, 65% RAM book and entire book will come down. So naturally, the top line that we have here, we have sub 8 advance, so sub-8% advances will get automatically tap out over a period of time and then we'll have better yield on advances. So that's what we are looking at very seriously. If you look at most of the peer banks, who have 60% plus RAM, their yield on advances is at 9%. So we'll be reaching it very shortly. It may be another coming 2, 3 quarters. That's what we are planning.
Thank you very much, sir. This is another gentlemen who has joined virtually is Mr. Rakesh Kumar. Is he still there?
So the first question was, sir, with respect to this, the ROA guidance, sir. So what is the full year ROA guidance that we have, sir?
Yes. So ROA as far as the return on asset is concerned, so presently, our ROA is at 0.70% as on June '24, which was, again, on the entire financial year at 0.74%. For the guidance, we are giving at 0.80% for FY '24 for the entire financial year for FY '25.
And the second question was with respect to the market risk weight. So certainly, there is a decrease in the market risk weight on a sequential basis. And that we have seen in case of other banks also, but the decrease in case of our bank is relatively lower as compared to other PSU banks, sequential drop in the market risk weight.
So I would request if the CRO can give the details here. So Hari is our CRO. So he'll be responding.
Yes, the decrease in market risk weight assets is lower because the quantum of securities that we have shifted to his team is also on the lower side. It's only INR 9,700 crores. That's the only reason why the risk weighted asset so far as the market risk is concerned has come down only by INR 10,000 crores.
The HFT book is relatively higher actually for us.
The HFT book was moved on the AFS to HFT so there is [indiscernible].
Ashlesh from Kotak Securities. Sir, two questions from my side. One is on the personal loans book. You have a decently sized book of more than INR 10,000 crores now. What is the trend on GNPA in this book? If you could share the numbers for this quarter as well as last quarter. That is one. And secondly, can you share the movement of your net worth on the first of April? Because if I add your net worth as on March and add the profit which you have had in first Q, the net worth until June is meaningfully lower than that.
Okay. On the -- so on the personal number side, GNPA side, I will ask my request my CGM, Recovery to give the numbers. Just to give you a flavor and color on the personal book, which has now touched INR 10,000 crores as against INR 7,000 crores, which was there on a Y-o-Y basis. So the increase is around 40%, though it is because of the low base and the incremental growth of 40% is there. But just to clarify, the entire personal loan book is having secured in the sense with cash flows.
So predominantly, this personal loan book is to the salaried class. And salaried class, where the salary is coming in the Bank of India saving accounts. That is one thing. Another thing which is there is that we are giving these personal loans to mostly to CIC score of more than 700. So that is another guardrail, which we have placed in our system.
And the third thing which is over there is that we also have a personal loan for the housing loan customer. There are also good traction is coming that where the housing loan has been given to the borrower, we are offering them a personal loan product where the house is already mortgaged to us, though we are not extending the charge on that, but definitely, there is a cushion with us that there is a long-term housing loan available with us. So Prasanth-ji, if you can just share what is the NPA numbers in the personal loan book.
Sir, exactly the numbers in personal loan, I don't have as of now. But if we see the slippages for this year, it is very, very miniscule. The total slippages of personal loan out of the total slippages is only 1%, sir, for this quarter only. So the numbers I can't give.
So just to clarify further that we are not seeing much of a stress or any of the stress in these personal loan numbers. And within that, there is the credit card outstanding also, which is there. Again, that number is not very high. It is only INR 500 crores to INR 600 crores. And whatever the NPA is there in credit card is 100% provided for.
Sir, the second one on net worth. Just one clarification before you move on to the second one. Can you share what is the definition of your net slippage, which you shared in the presentation?
Net slippage, which we are seeing the SMA?
So just the definition of net slippage.
Yes, it is like this. For example, the NPA calculation is always on an annual basis. So when you do the -- when you actually jot down the amount of NPA that we have at the end of the financial year, you have a particular amount that is called outstanding at the end of the financial year, that is called gross NPA, okay? Now what happens is during the quarter, the standard accounts, as he rightly pointed out, our Karthikeyan-saab, there may be a role forward, okay, from SMA to NPA.
So they become NPA say in April. They may become NPA in May. And in May, some account may get upgraded again because there is a recovery that is coming because the RBI circular says, the upgradation has to happen on the basis of record of recovery. So if record of recovery is as per the guidelines, it gets upgrade. So what happens is gross slippage is the total slippage during the quarter minus the accounts that are upgraded during the quarter. So that is net slippage.
These are essentially recoveries which happened intra-quarter?
Intra, yes, intra during the quarter. And respect to the net worth question, see, what happened was last year, we have given a dividend to government of India around INR 1,200 crores. That has been accounted for this slide. So naturally, there is a drop in net worth, okay? And apart from that, because of the new valuation guidelines of investments, there is a general reserve adjustments that have happened.
The reserve adjustment has been negative on an overall?
Negative, yes. Naturally, for all banks -- ours is not a big number. But most of the banks is negative because of the new FVTPL coming in.
Another question, virtual question by Mr. [ Dheeraj Singh ]. So first of all, he has congratulated you for the good numbers that you've shown. The question is, what is the full year guidance for NPA? And your impact of Japan rate hike on our financial markets.
As regards to the Japan rate hike on the financial market, see it will impact when other countries also start doing that like U.K. and U.S.A. So till that thing happens, not much of global impact will be there on the market. We also have a branch in Japan. Definitely, there the cost of fund raising will go up. That will be sure. That will be the local impact as far as our branch is concerned.
As regarding the gross NPA, net NPA is concerned. So we have presently, as you are aware, that we have reduced our gross NPA to 4.62% as against 4.98%, which was there in the month of March for the full year ended. As regards the guidance is concerned for FY '25, we are saying that we'll be at around 4% by March '25 on the gross NPA numbers. On the net NPA, we were at 1.22% in March '24. We have now closed at 0.99%. On the guidance side, we are saying that we will be at around 0.90% by March '25. That is a conservative number, but we are sure that we'll be improving that on this number.
Sir, some color on NARCL accounts transfers, like a lot of things have happened in this quarter also and last quarter also some traction was there. So one is that what is your status there? And secondly, how much amount of the SRs, which we have received in this quarter from NARCL because we might have provided 100% like any other SR. But here, this is guaranteed by the government. So that will help us in like understanding that this is basically a standard thing on which also the provision has been made.
Yes, yes. So a lot of activity happened in NARCL, that activity mostly happened in the month of March and April. So no new activity has happened in the last 2, 3 months on the NARCL side. So only a few accounts have been shifted to the NARCL. So I don't think much of a thing happening in the immediate...
This quarter?
This quarter, we have not shifted any account, yes.
No account to NARCL?
So any recovery is expected, Prasant-ji from NARCL accounts in this quarter?
Nothing is expected.
I tell you what has happened. Whatever accounts that we have shifted, they are old legacy accounts, right? So in those old legacy accounts where resolutions were not happening. So it was decided by all banks to shift them to NARCL, then NARCL will start finding the resolution through the process which is there. Now in all the accounts the status which we get on a monthly meeting is the process has started. So it will take now some time, at least 2 to 3 quarters for that process to get completed. But then finally, the resolution to happen.
Does it goes off from our gross NPA?
No, no, no. It'll be with us only.
It will move to NARCL. It will move to investment. What happens is, this is a 15% and 85%. So 15% is the cash recovery, which we get it. 85% moves from this book as an investment to the NPA book.
Which we make 100% provision.
So for that we make 100% provision. But then as you rightly said, it's a government-backed guarantee is there. So where the recoveries will -- are assured for that recovery. But then still the provision is being made. And we expect that the resolutions will start to be coming, with NARCL being very active.
My question was that in this quarter...
This Quarter Q1, we did not have any account, and there were no recoveries as far as the recovery against the SRs, which is concerned. We did transfer a good number of accounts in the last quarter, that is Q4 of previous financial year.
But the Q4 accounts which we had transferred that already have been accounted for. The money has been received.
That's all accounted.
That's all accounted for, yes.
And some last, sir, some color on the digital transformation, like it's going on for the last 2.5 years, 3 years, and you have achieved a lot of things out of that maybe 60%, 70%. And out of that INR 2,000 crores of the original, that budget. I think 75% was spent up to the last quarter. So what is the status now? Any fresh budget on digital spend? And where do we stand on that? How many verticals are still pending to be introduced?
So as we have given and I said in my speech also, that 15 products will be digitized in this financial year also. Already, 20-odd products we have already digitized. They are on, right from liability side to the asset side on retail lending also on MSME lending also and agricultural lending also and also on the liability side, like saving current account and FD, those have been digitized.
Another thing that important thing we are doing is we are in the large stages, UAT stages for digitizing for the current account. So that also will get opened on the digital mode. That is another thing which we'll be doing in this quarter itself. That is another thing. And on the expenditure side, as far as the digital and IT is concerned, this year, also the budget is around INR 2,000 crores. And we expect that good amount of money will be spent both on the digital and the IT side for this year also.
And we are also on the final stages of onboarding on one of the leading consultants in the industry, one of the big force for transformation of the IT and the digital stack in the bank. So that would also happen to my understanding by end of this quarter, that onboarding of the new vendor for that. And that will help and give us a long way in taking the transformative journey on the IT and the digital side, making the bank open architecture as far as the digital stack and IT stack is concerned.
And the integration plug and play with the APIs and the fintechs which are there. So that is -- we are committed to that, and we are very sure that in the next coming 3 to 4 quarters and that our IT and digital stack will further improve. A lot of improvement has already happened. It will further improve. And this cybersecurity issue also, which is coming in the last few days. It has not impacted our bank because all the ring-fencing and the work on cybersecurity that the bank has come -- and the spend that the bank has done on the cybersecurity side also. So these are the things which are already there. And definitely, there will be some much better things happening on the IT and digital side in the bank in the coming days.
[indiscernible] has raised a question. [indiscernible] at the end of Q4 likely to be sub 3.75%. What is the values around staff cost?
Yes. So as far as the NIM is concerned, you rightly observed that the present NIM is grow 3.07% on a global basis. And we are giving a guidance of 2.9% considering the fact that the challenges which we are facing as far as the resource mobilization is concerned and the costing which is going up as far as the resources are concerned, so deposit prices are going up and it is a challenge to get the resources and with the kind of credit growth which is happening. If we have to keep pace with the deposit growth on the -- with the credit growth, definitely, we'll have to raise some high cost deposit. That is one challenge which is there because of which we are saying that the NIM should be for the entire year at 2.90%.
And when -- you have calculated rightly that it will be at around 2.75%, 2.8% for the Q4 because the average for the entire year we are giving at 2.9%, already that we have touched at 3.0% for this financial year. It is keeping in mind the liquidity position, which is there presently, the LCR guidelines which have been issued by the Reserve Bank, that is also we have kept in mind while we are saying that 2.90% will be the guidance for the current financial year because the LCR guidelines will also impact the overall profitability in the banks. So what was the other thing regarding?
Value around staff costs.
So staff costs will remain the same for the simple reason as per the bipartite settlement, whatever amount had to be paid and the provision which had to be done has been done. So no more provision to be done, all actual costs has been taken. So there is no additional cost on the staff side has to be done. So whatever is the number is the running number on the staff cost side. So no incremental increase will be there on the stuff cost side.
Thank you management. I think we've had enough questions and can we call it a day? I would request -- thank you the top management for enlightening the -- our strategy on Q1 results. And also, I thank all the gentlemen and one lady sitting here, for having spared your precious time to be with us on our big day. Thank you very much, all of you. And I'd like to request all of you to join for light tea. Thank you.