CSB Bank Ltd

NSE:CSBBANK

Earnings Call Transcript 2023-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to CSB Bank Limited Q1 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Manish Shukla from Axis Capital Limited. Thank you, and over to you, Mr. Shukla.

[Manish Shukla]

Thanks, Neto. Good evening, everyone. And on behalf of Axis Capital, I welcome you all to this earnings call. We have with us Mr. Pralay Mondal, MD and CEO; Mr. B.K. Divakara, our CFO; and senior management colleagues to help us understand the results better. I would request Mr. Mondal to make some initial remarks, after which we can open the floor for Q&A. Over to you, Mr. Mondal.

[Pralay Mondal, executive]

Thank you, Manish. Good evening, everybody, and thank you for joining the call. Let me just briefly tell you our perspective on the global as well as what's happening in the macro, followed by how the bank has performed. And then our CFO, Mr. Divakara will take you through the numbers, and then we'll open it up for the Q&A.

So on the macro side, I think we all know that the world is going through a very difficult phase of inflation and tightening of financial conditions and among elevated financial vulnerabilities. And FOMC is expected to increase the fed reps again anywhere between 75 to 100, the debate is announced within 75 to 100, there's no doubt about another high, which means RBI may have to look at also a hike between 35 to 50. The key question is in the Central Banks we've a soft lending, and we'll wait and watch how it works out. But mostly, it is expected the front-loading of rates will be used as an instrument to have a soft lending of the huge key challenge, which is facing the global economy today.

On the domestic market side, I think most of them actually on the Indian domestic side, things are looking a lot better. Some of the high presence indicators like GST collections, railway, flight, electricity, et cetera, is looking better. The IP numbers were better on a higher base the inflation is also stabilizing a little bit. Rupee, of course, we know that it has touched 80. RBI yesterday also said that I think that they will use whatever instruments possible within 10% of their Forex reserves to stabilize the rupee, which means around -- we should see somewhere between INR 79 to INR 81. The monsoon has been good. We are seeing a pickup in manufacturing activities and hopefully, the commodity prices has come down, and hopefully, it remains there though the oil prices have gone back a little bit back to around INR 105 levels.

So broadly, when we look at the global as well as local macro, some amount of uncertainty will always remain in the CAT. Also, hopefully, you should be able to continue in 3%. So broadly, that's where we are today. On the credit side, I think the bank ecosystem is growing between -- on the land it's around 10% and on the asset side, it's growing around 13%. In Phase B, of course, as you have seen the result that we have grown our liability by 9% and assets around 17%. So we are broadly in line with where the market is, maybe assets we have grown marginally higher, but on our small balance shifts a little bit here and that doesn't matter. We have to look at a slightly longer-term perspective, what we need to do.

Specifically on CSB, I'm not going through the detailing of the numbers, Mr. Divakara will look at it, but broadly, operating profit has improved by 9% on a Q-on-Q basis. Net profit has gone up on a Y-o-Y basis by 88% at INR 214 crores. We also have significant provisioning buffer close to INR 200 crores over and above the regulatory repayments, of which the COVID provisions itself is at INR 106 crores. We could still maintain the NIM, though last quarter, I have said that NIM will be under pressure, but we could still maintain the NIM around 5% because our cost of funds still were able to hold at -- in fact, it has come down from 4.21 to 4.10 this quarter. That may not sustain for long because obviously, cost of deposits are going up in the ecosystem. Average CASA growth has been 10% Q-on-Q. 15% Y-O-Y. This is a good story gradually evolving because the average CASA is something which was well for us. Net advance, as I said before, grew by 17%, gold portfolio did very well, 26% year-on-year and 8% Q-on-Q. So it continues to do well. And yield on advances has remained at a similar kind of level of 10.2 percentage.

The asset quality, like most other banks who are coming out with results similarly we have also done well, pretty well, I must say, we are well on all indicators, GNP and NPA. PCR is almost 90%, and if you take the COVID provision, it crosses 100. Excess standard asset provisioning is harder than in NPA, and we are continuing with our accelerator NPA provisioning, as I said before. On the CRAR, I think we are one of the highest in the industry, 25%, a low proportion of risk-weighted assets compared to the industry primarily because of gold loans and book value per share has been elevated to INR 151, EPS, 26.8% and ROE close to 18.5% to 19%, which is -- which was 12.65% in Q1 FY '22.

So I think on ROE side also, we have improved a lot. We plan to, as I said before, we plan to open around 100 branches every year. We are trying to frontload that this year in the first half, 52 locations have already been approved. And on the technology side, we are making significant process -- progress, whether it's corporate LOS, retail LOS, LMS looking at how we want to look at the core system, everything is changing because if we have to add more products, which I promised last quarter, we first has to create the basic foundation, and once we have all these things right, then scaling up the retail businesses, et cetera, because that requires technology leadership process and channels, partnerships, everything. And because we'll focus a lot on the partnerships for customer acquisition, we will ensure that our technology is up to the mark to scale these things up, and that will take a little time. So we will see gold on continuing to do well for us for the next 12 to 18 months. And then also it will do well.

But as a ratio, other products will start picking up after that. And launch of credit cards will happen very soon. And gradually, we will launch most of the other products. The last thing I would say before I hand over to Mr. Divakara is that everything which we are working on a planned manner for the next 2 years, 5 years and 8 years kind of a scenario of going up to FY 2030, almost everything is on track as per plan. Our -- we will not move away from investing into the franchise to build a full service bank. And we will continue to focus on leadership, technology, distribution, products and partnerships. And more importantly, we need to add a lot more customers. And you will see almost every year at least for the next few years, we will be doubling our acquisition base of customers because our primary focus will shift to liability as we grow, I think asset growth will happen.

To support the asset group, we need to build up granular and stable liability, and that requires a lot of customer acquisition, which in turn will also help us in building our cross-sell on fee businesses, retail asset businesses, on the SME side, supply chain everywhere. And also, you'll see that the core fee business, which is things like insurance, processing fee, asset-related fees, commission fees, LCBG fees, all of these core income, which I said last time also will continue to grow, and this quarter also we have grown and will continue to be our mainstay going ahead.

Of course, we have some challenges on the -- like most banks have, but our challenge is much lesser on the treasury side. And also, as Mr. Divakara, when he takes his commentary, he will share that how the PSLC income, we took a very tactical view of not having -- of not selling our PSLC book in this quarter, but buying as much as we could on the -- as much as we could on the PSLC side we bought so that we could take care of the full year PSLC requirement on the micro side, but we are still sitting on our entire PSLC book, which we can sell. So we will maximize those revenues in the next 2 to 3 quarters.

So with that, I assure everybody that whatever we said that we will do to build our franchise, we'll continue to do that. And I hand over the conference to Mr. Divakara to take you through the numbers.

[B. Divakara, executive]

Good evening, friends. I will be making a brief presentation about the performance of the bank for the quarter ended 30th June 2022. Unaudited financial results of the bank for the quarter ended 30th June 2022, which is subject to limited review by the statutory central auditors, was taken on record by the Board of Directors of the bank at its meeting held today. Friends, June 2022, yet another good quarter for the bank in terms of capital ratios.

As you may be aware, capital adequacy ratio is one of the best in the industry at 25.46%. Asset quality, so NPAs are at a historical low at 0.60%. Liquidity, so LCR is much above the RBI stipulation and stood at 147%. Earnings is consistently growing and profitability track record is maintained. Our primary objective of building the balance sheet for the future continued in this quarter as well. The buffer provisioning built during peak COVID times remains untouched at INR 106 crores.

Whatever precious slippages that have happened, so it has been provided from out of our current year's profits. Bank continued with its policy of making accelerated provisions for NPA much above the regulatory requirements. We reckon these 2 additional provisions made, PCR will go even beyond 100%. Accumulated losses in the balance sheet is gradually coming down and expected to be wiped out completely during this year. Deferred tax assets created on account of accumulated losses has already been wiped out. So we continue to follow conservative accounting policies and SR level has substantially been brought down. All these measures have strengthened the balance sheet to a larger extent.

Now let me take you through the main highlights of the published working results. Net profit of the bank increased from INR 61 crores for the quarter ended 30th June 2021 to INR 114.5 crores during the quarter ended at 30th June 2022. On the back of lower provisions, provisions for NPAs has come down drastically during this quarter. In other words, net profit increased by 88% on a year-on-year basis. As I said earlier, it is on account of lower provisions that has been provided during this quarter. Last year, during this period, we had provided INR 97 crores. That second which we were required to provide only 1.20 -- it's reversal of INR 1.20 crores during this quarter. Sequentially, though it looks net profit has fallen from INR 130.7 crores in March 2022 to INR 114.5 crores in June 2022, it is on the back of a higher reversal of provisions during the last quarter.

Operating profit of the bank stood at INR 154.7 crores during this quarter. While operating profits have decreased on a year-on-year basis from INR 174.7 crores to INR 154.7 crores, sequentially, it has increased by almost INR 13 crores over March 2022 level. Excluding treasury profits and PSLC premium operating profits, in fact, have increased by INR 10.50 crores on a year-on-year basis.

Net interest income for the quarter stood at INR 311 crores, plucking a year-on-year growth of 16%. For March 2022 quarter, the growth of net interest income is 2%. NIM improved from 5.04% in June 2021 to 5.27% in June 2022 or by 13 bps. On volume side, average advances grew by 10%, on mix side, average CD ratio improved from 75.8% to 79.50%. Average yield on advances remained at 10.62% for both the quarter that is June 2021 and June 2022. Yield on investment reduced from 6.38% to 5.79% during this period. The impact of reduction in yield has been offset by reduction in cost of deposits from 4.48% in June 2021 to 4.10% in June 2022.

From Q4 position of 5.42%, NIM has reduced by 25 bps to 5.17% due to reduction in yield on advances from 11.19% to 10.62% or by 57 bps. It is fifth quarter in a row that NIM is in excess of 5%. Time lag of 1 quarter for resetting the interest rates has since been changed to T+1 day, effective from 1st of July 2022. This will effectively take care of passing on the cost to the customers instantly. As against the treasury profit of INR 19.50 crores in Q1 of the financial year 2022, treasury profit of Q1 of financial 2023 stood at INR 5.2 crores, impacted by the upward trend in interest rates.

Due to reduced PSLC premium in the market during the June quarter, we have adopted a wait and watch policy and decided not to book any PSLC income this year as against INR 12.50 crores booked in Q1 of financial year 2022. Excluding treasury profits and PSLC premium, other income has increased by INR 10 crores on a year-on-year basis, powered by growth in commission income by INR 7 crores. Sequentially noninterest income, excluding treasury profits, has decreased by INR 7 crores, annual savings bank account and debit card related charges of INR 15 crores is accounted holding Q4, and this has caused the decrease quarter-on-quarter basis.

Stock costs during the quarter has increased from INR 97 crores to INR 122 crores or by INR 25 crores. Payroll cost has gone up by INR 14 crores as the headcount increased from 4,508 as on 30th of June 2021 to 4,780 as on 30th of June 2022.

AS 15 provisions increased by INR 11 crores, which increased provision for DA for pensioners in view of the CPI increase. Compared to Q4 of financial year 2022, soft cost is lowered by INR 21 crores as Q4 of financial year 2022 included annual [indiscernible] of INR 13 crores and onetime ESOP costs related to previous MD and CEO provided. Other operating expenses has increased from INR 67 crores to INR 89 crores year-on-year.

Between June 2021 and June 2022, number of branches have increased from 514 to 603 in and this has caused the increase in rent and other expenses. DC type costs increased by INR 5 crores. Further, we had bought PSLC for meeting the shortfall micro enterprises target causing a premium payout of INR 3.70 crores. Cost-to-income ratio has increased from 48% to 58% on a year-on-year basis and decreased from 61% to 58% quarter-on-quarter. As we are on the expansion mode, cost will go up in the short run, but eventually, it would taper down over the year.

Credit cost provision for NPA during the quarter has been a reversal of INR 1.20 crore as against additional provision of INR 97.3 crores in Q1 of financial year 2022. While there was additional provision requirement of INR 16 crore on account of precious leakages, our migration of existing NPA accounts to a higher provision category.

The same has been offset by recoveries in technically written off accounts of equal amount. For Q4 financial year 2022 reversal of NPA provisions stood at INR 37.3 crores. ROS increased from 1.03% to 1.75%. Book value per share has increased from INR 144 as on 31/3/2022 to 150.7 as on 30th of June 2022 or by 5% quarter-on-quarter basis. Year-on-year basis, it has grown by 26% from INR 120. Gross NPA at INR 293 crores or INR 1.79 has remained more or less flat as on 30th of June 2022 compared to 31/3/2022. Net NPA has come down below INR 100 crores more to INR 97 crores as against INR 107 crores as on 31st of March 2022 and INR 444 crores as on 30th of June 2021. PCR now stands at 90.5% up from 89.7% as on 31/3/2022 and 70.2% as on 30th June 2021. Capital adequacy ratio continues to be comfortable at 25.46% as on 30th June 2022, as against 21.63% as on 30th June 2021 and 25.90% as on 31st of March 2022.

Liquidity coverage ratio stands comfortable at 147%. Leverage ratio stands at 9.27%. M duration of AFS portfolio stands at 0.83. Total advances grew by 9% year-on-year basis, and CASA ratio stood at 35.14% as on 30th June 2022, as against 33.09% as on June 2021 and 33.6% in March 2022. Advances grew by INR 2,324 crores to INR 16,142 crores on year-on-year basis, registering a growth of 16.83%. Gold loan grew by an impressive 26.30% year-on-year basis and 8.17% on quarter-on-quarter basis. With this share of gold loans to total advances now stands at 41.6%.

To conclude, I can say bank has done well under most of the parameters, we will build on this position further during the coming quarter.

Now I will stop here. Thanks for hearing me patiently. We are happy to receive your questions.

[Operator]

[Operator Instructions] First question is from the line of Mona Khetan from Dolat Capital.

[Mona Khetan, analyst]

Sir, my first question is on the gold -- yields in the gold book, which have declined by about 120 bps Q-on-Q. So I understand that the gold NPA has normalized and to some extent, lower recoveries will also tap the yield. So just wanted to understand this 120 bps decline, how much out of recoveries and how much is owing to the lower yield from [indiscernible]?

[Pralay Mondal, executive]

So let me -- thanks, Mona, for your questions. So that breakup we'll give you, but on a high level, what is happening is that because of the easy liquidity that was available last year, we have seen a little bit of ill reduction on the gold side across the industry. And hence, to remain competitive, we have also done that. But as we talked last month, the industry is normalizing. So we have also taken the interest rate up and also processing fee up on the gold loans.

So we should see in the next 1 or 2 quarters by the time our overall cost of funds starts going up because it is bound to go up, right, given where the interest rates are. By that time, our main portfolio, which is gold loan, which is around 42%, we should see the yields again starting to go up again. So that's broadly at a high level where we are. Mr. Divakara would you like to answer the breakup between?

[B. Divakara, executive]

Yes, yes. So interest reversal is INR 7 crores during Q4 of last year. And this year, in Q1, we have not reversed any income. Last year, we got INR 7 crores, but this quarter, we couldn't get any income.

[Pralay Mondal, executive]

So this is last year, we have not got any income this year because of NPA reversal. NPA has remained -- there are no major slippages. So to that extent, primarily, this is a pure-play yields, which are coming. But as I said, we are already improving our yields, so we should start seeing reversal in gold loan again.

[Mona Khetan, analyst]

Sure. But in terms of bps, if I could understand bps in terms of how much bps contribution is from the recoveries which is not playing out this quarter. The interest reversal component, the INR 7 crore component?

[B. Divakara, executive]

At INR 7 crores from interest recovery.

[Pralay Mondal, executive]

That's what we said, Mona, that interest recovery last year, we had got INR 7 crores. This year, we have got nothing because we didn't have -- nothing to recover.

[Mona Khetan, analyst]

Right. So the 120 bps, how much would be the impact of this INR 7 crores is what I wanted to understand, the INR 7 crores not being there?

[B. Divakara, executive]

It should be between 20 to 30 bps.

[Pralay Mondal, executive]

Maybe 20, 30 bps will be around that, and rest will be probably [indiscernible].

[Mona Khetan, analyst]

Sure, sure. Got it. Got it. That was helpful. So another probably 80 bps or so owing to just natural design means which will normalize.

[Pralay Mondal, executive]

And what I said that we are again changing...

[Mona Khetan, analyst]

Yes. Right, right. I understand that's the industry thing, yes, yes. Got it, got it. And in the SME book, despite it being a key focus for you we are not seeing growth coming by this quarter. So what's really holding you back on the SME group side?

[Pralay Mondal, executive]

So on SME book, what's happening is that we have 2 parts to the SME book. There is an old book, and we also have a little bit of a TAM book in the SME. So what we are trying to do 2 things, the old book is gradually running off. So -- and not necessarily we are renewing many of these, et cetera, and some of the TAM book also runs up. So we -- so that's where the issue is on the SME book. Also, what happened this quarter is the utilization level was slightly lower because some of our SMEs are in textile and all of that, where the input costs started coming down this year, the commodity and input costs, et cetera.

So because of that, I think the utilization came down slightly. But more importantly, I think the TAM loan -- TAM book and the old book is running off. But now we see that it will start growing from there. So we see one of our major growth -- the largest growth will come from gold, followed probably by SME this year. So we see a positive on the SME going from here.

[Mona Khetan, analyst]

Sure, sure. And on the retail book side, in terms of the new products and the rollout of those you mentioned we are on track. But does that imply that by the end of this fiscal most of the retail products will be rolled out or [indiscernible].

[Pralay Mondal, executive]

See, rolled out -- product rollout will happen from a credit and product perspective. But really, in the real sense to roll out products, you need the technology backing. So once we have the LOS, LMS in place and after that, you need to give it another 6 months, 9 months, 12 months to start really see the pickup. So you will see most of the products rolled out by the end of this year. But to see the pickup really in the momentum of that business, it will take another year. So take it another 18 months.

And we don't want to make mistakes because in retail, if you don't have system processes and you roll out products, then you can be challenged because retail is one business where everything should be in place before you place the accelerator. So we are not willing to place the accelerator. But after 2024, retail, and that's exactly our plan next 2 years, 5 years and 7 years, when you look at this, we clearly have retail, which is going to be the primary growth momentum. And as the business mix, we expect by FY '28, '29. The retail to be one of the largest components in our entire asset book.

[Mona Khetan, analyst]

Sure. And last year, we enjoyed, we had a lot of benefits from good recovery. On the credit cost front, we had good benefit from the gold recoveries, which resulted in negative credit costs for a large part. Now that this book has largely normalized, what sort of credit cost can we expect going forward?

[Pralay Mondal, executive]

So see, first of all, we don't want a slippage and then reverse it and feel happy about it. So I think the best way to handle a business is that slippage itself is controlled and managed well. Even in this quarter, we had a marginal negative credit cost, so INR 1.20 crores. It's a marginal almost close to zero, but technically, still it was negative. So the way I look at it is if you do not have slippages, we will not have recovery also. So we are okay with that kind of a model. And then business as usual will take over. So actually, I'm quite happy with that kind of a scenario.

[Mona Khetan, analyst]

Okay. So in general, the credit environment remains extremely benign is what you see at this point?

[Pralay Mondal, executive]

I think we have -- see, for us, it has been -- last few years, we have done pretty well on the credit side, it's just that the gold loan was a very technical kind of issue, right, 90%, 75% LTV. So this -- we had to go through this cycle. We have gone through the cycle. Now we are back to where it is normal. So I think we should not see too much of slippages and at result end we should not see too much of recovery also. I think that's the way it will play out.

[Mona Khetan, analyst]

So got it. And just 2 data keeping questions. So what's the share of PTC-based employees as on today? And what's the floating and EBLR link book in your case?

[Pralay Mondal, executive]

So we have around 4,800 employees out of that IBA will be around 1,300. So rest will be around 3,500 will be around CTC. So that's one. And we will add another close to 2,000 people this financial year, and all of them will be CTC. So this 3,500 will probably go somewhere between 5 to 5,000, and IBA will be around 1,200 or something like that, 1215 something like that. So as a ratio, this will constantly come down because we are expanding our base as well. What was the second question, EBLR, what was the question?

[Mona Khetan, analyst]

What's share of floating rate book? And of that, how much is the EBLR linked?

[Pralay Mondal, executive]

I think we have around 54%.

[B. Divakara, executive]

54% is fixed rate of interest loans only. And the MCLR linked is 31%. And the repo rate, EBLR almost 7 -- 8%.

[Pralay Mondal, executive]

So I'll give you a flavor, Mona. So typically, the repo link is mostly SME. The TB link is mostly wholesale in mid-market and ECG emerging corporates. And wholesale is broadly 50-50 in terms of TAM and floating. And the same is almost on the SME side. Retail is mostly fixed, I think some home loans is there, which is floating. So I think that's where it is. So Mr. Divakara gave you the overall picture, 54, 46, right?

[B. Divakara, executive]

54 is fixed rate. MCLR is 31%. EBLR is that is repo linked is 8%, especially SME advances only and that too working capital loan. And we will continue at MCLR rates only.

[Mona Khetan, analyst]

Sorry, can you just come again on the EBLR and TBL part?

[B. Divakara, executive]

TBL is 5%, 4.89%. EBLR is about 8%. So...

[Mona Khetan, analyst]

Okay. Okay. So repo is just 3% or thereabout.

[B. Divakara, executive]

42% of our advances comprises of gold loans only. So here, more or less, it is fixed rate of interest only, that is why overall, if you can look at it, our fixed rate of loans is high at 54%. Rest is 46% distributed amongst the MCLR, EBLR and treasury-related loans.

[Operator]

Next question is from the line of Nirmal Bari from Sameeksha Capital.

[Nirmal Bari, analyst]

My first question is during the commentary, you said that over 2 years, you will be focusing on liability side and retail, so is this a change that is from...

[Operator]

Sir, sorry to interrupt you, but your voice is breaking terribly. We are not able to hear your question.

[Pralay Mondal, executive]

But I got your question. Let me respond to it. There is no change in strategy. Liability, always we said, is a function of how much. See, there's no point raising liability and not utilizing it, right? So liability has always been based on a need. Now we are seeing a consistent growth over the next many years because we are building our retail, the gold loan is looking consistent. SME is also building up. Wholesale is also building up. So from that perspective, we are more assured of a consistent credit growth.

And in a rising interest rate scenario, we have to be more focused on our liability franchise because otherwise, cost of borrowing can go up, right? So to that extent, when the growth comes back, we have to focus on liability, and when you say look at liability, we have to look at granular and consistent liability. That's why we are saying that focus is on liability just because we are seeing the growth coming back to us right now.

[Nirmal Bari, analyst]

Okay. My second question was during the previous call and post that in some interviews, you talked about that we would be looking to grow at around 1.5x the industry growth rate on the advanced side. So within that, obviously, for the current year and probably next year too gold loan is expected to drive it. But outside of gold loan, what kind of growth should we expect? Should we think of it as a growth closer to the industry growth rate or how...

[Pralay Mondal, executive]

The way it will work out, the way it will work out is when I said that in the commentary, I said on a CAGR for 3 years, we will be around 1.5x of the industry growth rate, okay? I didn't say this year, I said on a CAGR of 3 years. So obviously, we cannot catch up to that level unless we are at least at the industry level basis. So we'll definitely be better than industry level this year, that's one. Coming to composition, I think next 12 months at least, we will -- the primary growth will come from gold loan. But most other negative carry, which we had in retail or SME and some of the -- even some part of wholesale, et cetera, all that will go away, almost every business will now contribute positive so that itself is one -- because we have an old retail book and we have old SMA book where runoff happens to cover that up we have to build retail as well as SME book.

So -- and also because a fair part of our wholesale book is also TAM loan that runs off, so we have to fill it up. So we are doing 2, 3 things. One is we are trying to gradually increase our ratio of working capital in our business, which ensures that runoffs are lesser going ahead. We is -- definitely retail will start picking up. Meanwhile, the filler will happen through SME and wholesale to some extent. And within the SME and wholesale more will happen to SME.

But Agri and microfinance, that book and microfinance is important because that helps us in managing our micro and some of the other PSLC requirements. So that is something we'll return focus and Agri, first quarter, all the banks have suffered on the micro finance because of the regulation change. But now I think things are settling down. So we should be able to see growth from Agri and microfinance portfolio. We will see a neutralization of negative carry on the -- negative growth on the retail, we should be able to see some positive growth in retail this year. We will see definitely positive growth and good growth in SME, and we'll see some growth in wholesale and gold will grow much faster than last year. Probably will grow even faster than where it is right what we saw in this quarter. So we'll grow even faster.

So overall, I think next 12 months, at least I see gold going to almost 45% of our portfolio and then gradually tapering down because some of these other products and businesses will start picking up.

[Nirmal Bari, analyst]

Okay. But can we think of this quarter as the bottom in terms of non-gold book?

[Pralay Mondal, executive]

Yes, I think that's well put. I think that pretty much it is.

[Nirmal Bari, analyst]

Okay. And I had one bookkeeping question on the same lines. In the presentation, you gave a split between gold and other segments. So that number adds up to 17,066 crores, while the balance sheet figure for advances is 16,142 crores. So what is the difference there?

[B. Divakara, executive]

That is technical write offs, that is -- in the balance sheet, what we have shown is net of technical write offs that has been done at [indiscernible] level. Some position, whatever that we have given, it is inclusive of written off accounts also. Net advance -- net of provision, net of written off accounts.

[Operator]

The next question is from the line of Pruthul Shah from Anubhuti Advisors.

[Pruthul Shah, analyst]

My question is with respect to the advances growth. So on a Q-on-Q basis, the advances have grown by 2 percentage. So is it possible that we can grow it in this fiscal at 20%?

[Pralay Mondal, executive]

See, that possibility always remains. That will be our attempt, but depends on how the overall ecosystem plays out. But we are -- I mean that's definitely possible if we execute it well, yes.

[Pruthul Shah, analyst]

Okay. And majorly, the [Technical Difficulty].

[Pralay Mondal, executive]

I told you the major contribution will come from gold, followed by SME and to some extent, wholesale and then Agri and microfinance. And then the negative carry on the retail will be taken care of. So we will start seeing neutral to positive growth on retail.

[Pruthul Shah, analyst]

Okay. Yes. And my next question is with respect to the number of branches. So in March end, we were having 603 branches. And as of June, we are having 604 branches. So there's only increase of 1 branch. So when we are targeting for a year, so I mean there is no momentum in increase in the branches. So are you seeing very much high increase in the number of branches in Q2 or Q3? Where the addition would be happening in number of branches?

[Pralay Mondal, executive]

So what will happen is if you had an equation of saying that what is the average mandate in a branch, this year will be much higher than last year because a lot of our last year's branches came in the last quarter. So this year, we are trying to see that we don't have to wait for last quarter for most of the branches. Most of the branches will come in Q2 and Q3. As we are talking 52 or 54 -- 52 branches already work is on. So they will be gradually rolled out in this quarter itself.

And then Q3, we should be able to see rolling out almost 70%, 80% of the branches. So we'll have very limited branches in the Q4. So we consciously have taken a call to get some productivity in the branch rollouts this year -- earlier in the year. So that's where it will be. On an average, we should have 50 branches in the whole year. If you take a mandates kind of a thing.

[Pruthul Shah, analyst]

Okay. So by the end of this year, I mean, March 23, would that be a net increase of 100 branches?

[Pralay Mondal, executive]

100%, it will be.

[Pruthul Shah, analyst]

Okay. Okay. Got it. And my next question is with respect to CASA ratio. So as of now, [Technical Difficulty] so do we see this ratio going to 40%, 45% in this year or maybe next year, March 24, on a longer-term basis?

[Pralay Mondal, executive]

I hope it was so easy to take CASA ratio by 10% in 1 year. Large banks struggle to even take it by a few basis points here and there. So it will not happen, okay? So in fact, let me -- it's a good question. So let me respond to it a little differently. This percentage is always this thing because your first question was can you grow by 20%. Suppose we grow by 20%, can CASA ratio go up by that much quantity? Answer is no. Because then you cannot -- see CASA is a gradual movement, right? CASA will come over a period of time, it's like a drop kind of a thing that will come.

But if our asset book grows, then we need FDs to cover the liability side. So CASA ratio will be a little volatile for us till we settle down to a steady growth on the asset side, and we settle down to a lot of customer acquisition on the liability side. So I will say that it's a combination of asset growth, correspondingly liability growth and then CASA ratio. We have to see all 3 ratios together.

On a stand-alone basis, CASA will continue to grow the way we are going. For example, you saw average CASA grew by 10% quarter-on-quarter. Year-on-year, CASA grew by 15%. I can assure you that we'll grow faster than that. But if the balance sheet grows much faster than that, then CASA ratio may be stable at the same level. So it's a question of the headline growth of the balance sheet.

[Operator]

Next question is from the line of Aalok Shah from Monarch Networth Capital.

[Aalok Shah, analyst]

Congrats on good set of numbers. I had 2 questions, primarily. One is, when I look at your corporate exposure, the top 3 sectors are textile, construction and infra, we just wanted to...

[Pralay Mondal, executive]

NBFC also is there.

[Aalok Shah, analyst]

Yes, NBFC. Yes, 8.9%. So while we understand the help of NBFCs that we hear from other NBFC players what's your experience of the corporate these 3 sectors, the textile, construction and infra, And maybe if you could add there further between the state-owned construction infra activities and central government owned construction infra activities.

[B. Divakara, executive]

We have not seen it in our wholesale book, if you can look at it though, so we would have substantially increased our exposure to these sectors. We have not seen any major corporate accounts going even it is not under SME position. So maybe at a certain extent, a few SME accounts are falling under this category. But by and large that we have not seen any -- many of these accounts. Our portfolio is robust and it may not cause us any concern as of now.

[Pralay Mondal, executive]

The other side of your question is, how do you see the growth in balance sheet from which segments, et cetera, on the wholesale side. So I look at it this way, almost 40% of our corporate book is NBFC, okay? So -- and I see as interest rates going up, that book will continue to do well, right? I mean in terms of -- they will be dependent on bank credits and things like that because for them, the other funding avenues will dry up.

So banks will be at an advantage on NBFC funding. Having said that, we don't want to take it up beyond where we are. So we are looking at other segments as well. Transportation we are looking at and projects which are in national highway international projects, NHAI. We are looking, and we understand the textile business extremely well. It's almost like the way we understand gold loan business, we understand the textile business well.

So to that extent, we have people who understand this. So that helps us. We know that the commodity prices come down, the cotton prices come down to some extent. So that's why the utilizations have come down, but that's okay. That's good for the industry, so we have no problem. In fact, we have worries when the prices are going up, because at the end of the day, the credit is more important than the growth in the business.

Also, we are looking at very clear segmental approach in terms of health care, in terms of -- so we -- what we are doing on the wholesale side is we are building up our coverage strategy, and we are building a lot more coverage in Western part of the country, northern part of the country and South, wherever we are already strong, we are going to leverage that. So also our securitization book is doing well. So between all of this, I think the wholesale book is very small. So to that extent, it should not be a problem to get businesses from these segments where you're talking about. What we are looking at is basically increasing our coverage a little bit more and creating a little more distribution across the segments.

[Aalok Shah, analyst]

Okay. That helps. I had another question, which is more on the gold loan side, Sir, could you kind of help us understand the client profile because if I look at -- just do a math around the AUM and the number of clients, so it's typically on the high side. So what is the client profile? Is it more an SME client who comes for a gold loan, a bit of some understanding there.

[Pralay Mondal, executive]

Okay. No, our client profile is not so much of SME, that will be very small. Most of these will be retail in nature. There will be some who has in our Kanakadhara gold loan product, there will be some of the businesses which we are talking about. And that also we are consciously not growing, we are bringing it down. But otherwise, most of them are retail. Our segmentation, if you ask me, it will be between where the NBFCs are and between the large private banks are. Somewhere in between is a sweet spot.

And because our operational efficiency and capability is well customers are satisfied with us. For example, as our -- as Mr. [indiscernible] used to tell this again and again, that option is not an option provided we know our customers well. And because we went through and we proved it last year, that we didn't do too much of options still we managed to recover most of the money because this gold is very dear to the retail customers. So these customers -- our ability to renew these customers is very high. The customer loyalty is very high with us and through reference, we get more business.

So overall, in short, what it means is stable product, stable customer franchise, loyal customer franchise, growing customer franchise based on retail reference and SME part is small here and hence, to that extent consistent and the quality of the book is good. And our segmentation is between the top and private sector banks and the NBFCs.

[Aalok Shah, analyst]

Sir, if I could just add 2 more questions. One is the gold loan, is it more to the repeat customers? Or I mean, there is an addition of new customers as well. But you've seen that with a lot of other banks and NBFCs there is an element of repeat customers on the gold loan side. And the second is, so with whatever you talked about, what's the average ticket size of the gold loan customers? Is it is like INR 1 lakh to INR 2 lakh or on the higher side?

[Pralay Mondal, executive]

So first question first, which is the repeat customers. Obviously, you cannot grow our gold loan book of 26% by just doing repeat customers. We get enough new add-on customers. And if you look at it, our tonnage growth has been around 20% and our business growth is around 23%, I mean volume growth. What it means is that we are getting a lot of new gold also to the bank. And most of it will come from new customers, okay?

So to that extent, we have a sales [indiscernible], which is going and getting new customers, also branches which [indiscernible] selling through our own loyal customers, which I've mentioned. The second question about ticket size. I exactly don't have the number, but I think it's around INR 1 lakh, INR 1.1 lakh or INR 1.2 lakh if I remember it correctly. I'm telling from my memory, but it's in that kind of a range around INR 1 lakh. So it is not in thousands either in INR 3 lakhs, INR 4 lakhs, INR 5 lakhs, it is somewhere in INR 1 lakh range.

[Operator]

The next question is from the line of [ Shrish Vaze ] from Moneylife Advisory Service.

[Unknown Analyst]

My question is regarding gold loan yield. So as you had mentioned that the delta between NBFCs and our yield is quite high. So I wanted to understand the reason for this. And secondly, how are we looking at the competition from other larger banks who are also kind of looking at gold loans as a key growth driver going forward?

[Pralay Mondal, executive]

The first question you said is NBFC yields are higher, our yield is not so high. Have I got it right?

[Unknown Analyst]

Yes, sir, I wanted to know the reason for this.

[Pralay Mondal, executive]

The reason is banks will -- are very, very highly governed by RBI and regulator because we are not only in the business of gold loan, we have to do many other businesses, and we have to be absolutely 100% clear on compliance and processes on governance and everything, whichever business we do, right? So to that extent, a lot of ring fencing we have to do in terms of processes and governance. That's why we cannot always do all the businesses, which if you don't have a bank license, you can take those chances, we cannot take those questions.

Also, we are not in those small ticket sizes, where some of the NBFCs play, which is actually the money lender community, where the money lenders instead of that, the interest rates which some of the NBFCs are charging is much lesser. We are not playing in that segment. Coming to your other question, whether it is SBI or PNB or ICICI or some of the other banks, they are also getting into gold loan. See the business is large enough for everybody to have their own share of pie. And for us, the kind of focus, the kind of loyalty base which you have, the kind of markets, it's very loyalty-driven this business, okay?

So they will continue to do what they want to do and once happens is because we'll remain focused on this. Other banks, they will do it and then once our wholesale business starts picking up and all that for their growth, at the end of the day at their balance sheet, even a INR 1 lakh crore is nothing for us, even a INR 7,000 crores is 42%. So the focus which we give to these customers and to this business is very different compared to some of these huge balance sheet large banks. And I actually launched gold loan in HDFC in 2005. And I can tell you that some of these large -- and I was actually running, in Axis also gold loan was part of my retail assets portfolio.

The focus we see in these bank at every branch level, that focus cannot be there in those banks because that's a very small portion of their overall balance sheet. So focus sales and our knowledge, understanding operation all trolls processes is very different. So that does not worry me at all. We should be able to do well in our gold loan and will continue to do well. Having said that, we'll diversify, and we cannot be a single product bank. So we will have all products eventually across the retail bouquet of products.

[Unknown Analyst]

My second question is regarding the demand for gold loans outside of our key geographies of Tamil Nadu and Kerala. So gold loan is a very popular product in these geographies. How are we seeing the demand outside of these geographies as we expand our branch network?

[Pralay Mondal, executive]

Yes. So if you see our gold loan portfolio in Tamil Nadu is as big as Kerala, okay? And it's not more [indiscernible], but it's broadly a similar kind of a range. And we are just kind of getting our distribution right in Tamil Nadu at this point of time. So in the whole of South, I think there is enough opportunity in gold loan, and we are growing our gold loan book faster in outside Kerala, Tamil Nadu and some other locations in the first place when you look at overall South.

Looking out West and North, we will have gold on branches, we will have golden products, but those are the markets also we'll look at liability also, we will look at assets also, we'll look at other businesses, et cetera. And hence, yes, primary growth will come from South, but in other locations, also gold loan is picking up, and we'll continue to do that. That's why I'm saying that as we expand our geography and distribution, the other products will also pick up, and we will continue to do our gold loan growth somewhat -- see what happens is on the base, even if you do much lesser gold loan in a North than the west compared to South, but that's been adding on to the denominator, right? So that itself will help plus the existing base in Kerala, Tamil Nadu and some of these other places, will also have.

[B. Divakara, executive]

So we have 30% Kerala, 36% Tamil Nadu...

[Pralay Mondal, executive]

So Mr. Divakara is giving me the numbers. As we are talking, what I told broadly is correct, the Kerala is 30%. Tamil Nadu is 36%. And West, Maharashtra is around 15%, and rest is equally distributed. But if you look at the time machine, you will see that Tamil Nadu has grown much faster than Kerala on gold loans as well because it has almost bought up with 36% and 38%, there's hardly any difference. So if we execute it right, actually, Tamil Nadu is a very high potential for gold loans as well, and we are expanding there big time.

[Operator]

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

[Pralay Mondal, executive]

Thank you, Manish, and thank you, everybody, for attending our Q1 FY '23 Investor Conference -- Results Conference. And we would be happy to take any further questions. You can always get in touch with us for any further questions, whatever you want to understand. In short, what I can say is that whatever the journey which we have started, we will embark on this journey. And you will see every year our -- the franchise mix is changing. We are looking at growth. We are looking at a lot more profitable customers, and we are looking at leveraging our full service banking franchise and the banking license what you have on a Pan-India basis.

So with that, I think the growth is given and our primary focus will be on growth and quality of the portfolio. These 2 primary focus. At the same time, we'll also try to manage the costs along the way, but we will not shy away from investments and will not shy away from special investments into distribution, into customer acquisition and into technology. That's the most important thing. We will not shy away from there. So thank you very much for attending our results investor meeting and look forward to see you again next quarter.

[Operator]

Thank you very much. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.