City Union Bank Ltd
NSE:CUB
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City Union Bank Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 FY '22 Earnings Conference Call of City Union Bank hosted by AMBIT Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ajit Kumar from AMBIT Capital. Thank you, and over to you, sir.
Good evening, everyone, and welcome to 4Q FY '22 earnings call of City Union Bank. On this call, we have Dr. N. Kamakodi, MD and CEO of the bank; and Mr. V. Ramesh, the CFO. We will start with the opening remarks from the management side first, and then we'll move over to the Q&A. Over to you, sir.
Good evening, everyone, Dr. Kamakodi here. Before starting, it looks like there is some technical disconnect and all. If we get disconnected, we'll be joining back just for -- it may take a few minutes and all, kindly wait. Hearty welcome to all of you for this conference call to discuss the audited financial results of City Union Bank for the fourth quarter and the financial year ended 31 March 2022. Board approved the results today, and hope you all have copies of the results and the presentation. board had recommended for a payment of dividend of INR 1 per share. It is 100 percentage of the face value, INR 1 per equity share of the bank, the payment of which will be subject to the approval of the shareholders of the bank during the coming Annual General Meeting.
As you might have seen from the numbers, the COVID is finally over. Things are back to pre-COVID level almost on all fronts. We hope that the impact of Ukraine war on the economy won't extend indefinitely. But for this [ alone ], everything else seems to be under control.
On the management side, RBI has approved the appointment of Shri M. Narayanan as the nonexecutive part-time Chairman of the bank. Shri Narayanan is a Chartered Accountant by profession, had assumed the office of the part-time Chairman of the bank, effective from 4 May 2022. In the place of Shri R. Mohan, who had successfully completed his tenure of 3 years on 3rd May 2022, as approved of the RBI. Shri Mohan [indiscernible] the Board of the bank on 27th of June 2022, after completing his 8-year term as Director of the bank.
Shri Narayanan joined our Board on 3 May 2016, and has served many committees, including the Chairman of Audit Committee and all. Shri will serve as non-Executive part-time Chairman of the bank for 2 years as per the approval from RBI. Also, we had the Professor. Dr. Veezhinathan Kamakodi, Director of Indian Institute of Technology ,Madras, has been inducted into our bank Board as additional director with effect from today. He had already served the -- our bank's Board from April 2011 to April 2019 and also served as the Chairman of Information Technology Committee in the past. Being a Professor of Computer Science, he will add more value to the bank in the improvement and development on technology front. He just completed his cooling period, and he is also a member of National Security Board as a part of NSB team.
On performance side, we shared with you all following expectations for financial year '22, during our earlier conference calls, we had said that we would be achieving mid- to high single-digit credit growth for financial year '22. We closed the financial year '22 with a double-digit credit growth of 11 percentage or so. We had said that gross and net NPA percentage for the financial year '22 would be lower than that financial year '21. Our gross and net NPA percentage has come down below the top financial year '21 as on 31 March 2022.
We had said that recovery operations were back on full swing following the full functioning of ports and all. And we said we could even see collections more than the slippages. Our Q4 recovery is INR 277 crores, comprising of INR 211 crores from live accounts and INR 66 crores from technically written-off accounts, crossing the Q4 slippages of INR 221 crores. This is the highest recovery happened in any quarter in the history of our bank.
We had earlier said that the ROA to reach the level of pre-COVID ROA of 1.3 percentage towards the second half of the financial year '22, '23. The current quarter ROA is at 1.4 percentage. We are on track to achieve the ROA of 1.5 percentage sooner.
The highlights of financial performance for FY 2022 are as follows: deposits recorded a growth of 7 percentage from INR 44,537 crores to INR 47,690 crores. Credit grew by 11 percentage from INR 37,021 crores to INR 41,156 crores. Business grew by 9 percentage and stood at INR 88,846 crores, that is INR 88,846 crores as on 31st March 2022.
CASA recorded a growth of 20 percentage to INR 15,529 crores from INR 12,981 crores, and the CASA percentage to deposits improved to 33 percentage in financial year '22 from 29 percentage in financial year '21.
Net profit increased by 28 percentage from INR 593 crores to INR 760 crores for the entire financial year. Net profit for the Q4 '22 is at INR 209 crores, which is the highest in any quarter for the first time, we had crushed INR 200 crore part in the quarter. Had the COVID not happened, probably our annual net profit, we should have achieved somewhere closer even in the financial year '20. The impact of COVID delayed that achievement by maybe about 2 years.
The return on FX stands improved to 1.35 percentage in financial year '22 for the year as a whole against 1.15 percentage in financial year 2021. And for the fourth quarter, it stands at 1.42 percentage. Net interest margin for the Q4 financial year '22 is standing at 4.01 percentage and 3.98 percentage for the financial year '22. I understand after the publication of the results, we got a few calls saying that their calculation shows a different number. Basically, the net interest margin, what we calculate and declare is basically the daily average basis. If you calculate on a quarterly basis with the available numbers, the numbers may show some aberration and all.
The -- so the net interest margin is stable for the fourth quarter at 4.01 percentage, which is calculated based on daily average basis. The gross nonperforming asset is at 4.70 percentage, and net NPAs standing at 2.93 percentage as of 31st March 2022. Both sequentially reduced by 51 basis points and 49 basis points, respectively, in the fourth quarter.
The progress made so far is even better than quarter we had expected and communicated with you all in the past. Until third quarter, we were growing only through Gold Loans and ECLGS as there was a less confidence on general economy. With improvement in economic situation, we started to push for growth in a slow and steady manner, starting from fourth quarter 2022.
During the last con call, we stated that we could see improved credit growth, and we look beyond the Gold Loan and ECLGS. We will continue to push for credit growth, and we should be having low to mid-double-digit growth for financial year '23 also. There could be, as always, quarterly aberrations and all, but overall annual expectations we should be having low to mid- to double-digit growth for the current financial year.
Out of INR 4,135 crores credit growth for financial year '22, we got INR 2,463 crores, growth came from the Gold Loan. In fourth quarter financial year '22, out of INR 2,469 crores credit growth, only INR 834 crores. That is about 1/3, less than 1/3 actually came from Gold Loan and INR 1,933 crores came from other regular advances. We hope to see the similar trend for the year as a whole, but there could be always quarterly aberrations.
The slippage during Q1, Q2, Q3 in the financial year 2022 were at INR 482 crores, INR 297 crores and -- I mean INR 275 crores, respectively, which is a steady decline from first quarter to second quarter to third quarter sequentially. As expected, the slippage of our fourth quarter continue with the same trend, and it was at INR 221 crores, which is lower than the -- much lower than the earlier quarter.
We had also stated that we will be reaching to a level where the recoveries will be more than the slippages. As explained earlier, Q4 total recovery surpassed the slippage during the quarter. We hope the recoveries will show improvement in the financial year 2023 also as a whole, though there could be quarterly operations.
As explained earlier, in Q4 '22, we recorded a total recovery of INR 227 crores comprising INR 211 crores from live accounts and INR 66 crores from the technically written-off accounts compared to 228 accounts comprising -- INR 228 crores comprising of INR 186 crores from live account and INR 42 crores from technical written-off account in the third quarter, the current quarter recovery being the highest in the history of our bank, surpassing the Q3 recovery by INR 49 crores. And still, we expect this to improve from here.
For financial year '22, the total recovery was INR 794 crores, and this is a live recovery of INR 606 crores, and the collection through technical written-off accounts were at INR 188 crores against INR 221 crores from the live account and INR 103 crores from the technically written-off accounts during the financial year 2021. We expect that this trend will continue going forward in the coming quarters.
The improvement in the recovery, coupled with the reduction in the slippages, will make more significant contribution to the ROA improvement in the coming quarters and coming years.
During our last con call, we had briefed about the status of Airline company, SpiceJet. We wish to provide an update on the same. The cash credit account of SpiceJet was not renewed, and we had recalled the advances, and they should have been classified as NPA on 2nd May 2022. That is Q1 of the financial year '22, '23. Even though they are continuing to service the interest amount, let's say, since we have recalled the account, if the 90 days default, means it becomes NPA. But SpiceJet had filed a case against the bank before the district magistrate to Gurgaon, insisting that their account should not be classified as the NPA among other things, since they are paying the interest and all such things.
In the meantime, District Court issued an interim stay for classifying the accounts as NPA. Till third quarter financial year '22, we had earmarked a contingent provision of INR 40 crores. And we made an additional contingent provision of INR 45 crores in Q4 '22, taking the total provision available to INR 85 crores for this contingency against the total outstanding of, let's say, INR 100 crores. So the -- our account is not NPA on 31 March 2022, because 90 days has not passed. And even now, though the 90 days had passed because of the court injunction, we had -- we couldn't declare it as an NPA, though we have decided to build the contingent provision, keeping that in the mind for the future.
As I said already, we have, let's say, a fixed deposit collateral for this entire amount, which is into a few technical issues as discussed in the third quarter conference call. So we don't expect any large on this front, although we may have to briefly declare it as an NPA provided. And once the technicalities and all are taken care of, this provision will be reversed in the future quarters and all. So we -- but we wish to make a contingency -- keep a contingent provision allocated for that.
Overall outstanding balance of borrowers who availed ECLGS as on 31st March 2022, is INR 14,366 crores as against INR 13,644 crore as on 31 [ December ] 2022. ECLGS portion on 31 March 2022 is at INR 2,656 crores. The SMA 1 and the SMA 2 portion as of 31st of March 2022, was INR 213.95 crores. That is 1.49 percentage and the INR 68.41 crores that is 0.48 percentage, respectively. So only 1.49 percentage and 0.48 percentage in terms of SMA 1 and SMA 2, respectively. All these accounts are continuing to repay their regular term loans -- term loan installments as there is no moratorium given to them for the regular installments.
As of 31 March 2022, about 1,913 borrowers amounting to INR 2,184 crores remain as restructured category, of which the repayment was, let's say, started for accounts amounting to INR 1,308 crores, constituting 60 percentage of the restructured book, remaining INR 876 crores, the repayment is to commence. Out of those accounts where the repayment demand has not yet started, that is out of that INR 876 crores, which are still under moratorium; accounts with about 59 percentage of the outstanding, that is INR 517 crores, have already started paying their monthly installments in advance, before the commencement of due debt for more than 3 months; and the 24 percentage outstanding, that is INR 210 crores, have already started making installments before the due date of our [indiscernible] 2 months, leaving only 17%, that is INR 149 crores of this INR 876 crores, which are effectively availing the moratorium and the waiting for the duty date.
The outstanding portion of SMA 1 and SMA 2 is INR 249 crores and INR 138 crores, respectively, for out of the total restructured advances of INR 2,184 crores. Overall, restructured portfolio currently stands at the 5.3 percentage against the 5.74 percentage in the third quarter.
We have discussed many times about the SMA 2 numbers, which used to be in the range of 5 percentage to 7 percentage during the pre-COVID days, which have got reduced to 3.04 percentage in Q1 '22, 2.59 percentage in Q2 '22 and 1.98 percentage for Q3 '22.
The current SMA 2 figures further got reduced to 1.36 percentage, which includes account from ECLGS, restructured advances and also regular advances. As stated earlier, overall improvement in the economy post-COVID as well as the constant follow-up and monitoring efforts, which we took in the pandemic period has resulted in the reduction of SMA numbers.
We have to wait and see if the economic uncertainty caused by the Ukraine war, whether they will have any impact and all. Hopefully, we feel we should be able to tide over that period also.
During our Q3 con call, we stated that we do not foresee any significant contribution from domestic treasury profit due to unfavorable yield movements. For Q4 '22, we had a trading profit of only INR 11 lakhs. For the full financial year, it was INR 62 crores against the INR 232 crores in financial year '21.
The treasury profit on the whole declined to INR 246 crores for the financial year '22 against the INR 309 crores in financial year '21. The percentage changes in the monetary policy is leading the yield momentum to upwards. And we may not have favorable income from the domestic treasury operations during financial year 2023, till such a time other income will be compensated to some extent by the improved recoveries.
At the same time, the proper management of duration, we expect minimum mark-to-market provisions for [ AFS ] HFT going forward. In fact, during this period of increasing yield, the treasury management was very tight. So we did not increase our deposits. So we ensured that the deposits were, let's say, the further augmentation was specified. That's why we need not go for government securities so that -- which could -- on that 150, 200 basis point increase, whatever that has happened from the loss, which could have probably created MTM losses in the [ AFS ] and all, we have, to a greater extent, managed well.
Also that we had a low-cost borrowing, which we used in the integrated treasury, where we had opportunity to make profit in the integrated treasury. So we are trying to manage it in such a way that, let's say, we will be getting the best return out of that taking into consideration the changes in the yield momentum going forward.
Cost-to-income ratio for Q4 '22 and FY '22, respectively, we are at 37.49 and 40.37 as against the 49.17 percentage and 41.72 percentage in Q4 '21 and financial year '21. The operating expenses had sustained at the earlier level. And on the other hand, the increase in [indiscernible] recoveries has improved the other income, which had resulted in the marginal reduction in the cost-to-income ratio.
Because of the expected poor profit from the treasury, cost-to-income ratio for the current year may slightly get elevated to 42 to 45 percentage range. The capital adequacy of the bank stood at 20.85 percentage for financial year '22 and 19.52 percentage for financial year '21. We have not diluted any, let's say, capital or issued any fresh share in the last 7 years. On the last term, we have raised the funds for during -- July financial -- July 2014 through QIP route to the tune of INR 350 crores. Rest all issue of fresh shares were through, let's say, wherever the conversion of e-shops to employees, higher capital adequacy ratio is mainly because of the growth from Gold Loan, which carries zero risk weight.
For financial year '22, we have earned an insurance income of INR 21 crores against INR 15 crores in financial year '21. Apart from LIC of India, we have identified 6 more partners for doing bank assurance business on all life insurance, general insurance and health insurance some things like that.
After the tie-up, let's say, gets better, we could see an increase in the contribution from the bancassurance income going forward. During the last 2 quarters, we had opened about 23 branches, taking our total branches to [ 737 ].
We are planning to open another 50 to 75 branches across different states during the current financial year. The operating profit of the Q4 2022 was INR 440 crores compared to INR 299 crores during the corresponding period last year. For financial year '22, it stood at INR 1,595 crores against INR 1,458 crores in financial year '21. The total provisions made during fourth quarter '22 was INR 231 crores against INR 188 crore in Q4 '21.
For financial year '22 year as a whole, the total provision was INR 835 crores against INR 875 crores in financial year '21. The net profit for the financial year Q4 '22 and financial year '22 was at INR 209 crores and INR [ 750 ] crores against INR 111 crores and INR 593 crores for fourth quarter '21 and the financial year '21.
For the asset development for the first time, we have crushed INR 200 crores start in the quarter. If COVID has not struck, they should have been achieved in the, let's say, fourth quarter and year as a whole financial year '20. The net interest margin currently stood at 4.01 percentage for Q4 '22 compared to 3.72 percentage in Q4 '21. The net interest margin for financial year '22 stood at 3.98 percentage, and it should stay around the current level, plus or minus, may be 10 to 20 basis points.
The margin is very stable. So we are -- we will be sharply increasing our rates, both on loan book trade and also on the deposit front for which the calculations are already underway. The margin is -- by and large, is stable. We had -- for the financial year 2021, the -- it was 4 percentage and the current year is 3.98 percentage. The first quarter, it was 3.86 percentage; second quarter, it was 4.03 percentage; third quarter, it was 4 percentage; and the fourth quarter, it was 4.01 percentage.
As I told you, the calculations are based on the daily average. So if you do the quarterly average, your numbers may look different. This is the number which we file with the regulators. So the margins are pretty much stable, and we hope it will stay around in this range in the foreseeable future.
With the contribution of improved recovery management, coupled with the reduced slippages, we hope that we will achieve 1.5 percentage ROA as soon as, let's say, possible as we have been stating in our earlier conference calls. Already for the fourth quarter, it has crashed 1.4 percentage ROA. So for the financial year '20, we closed at 1 percentage ROA over and above that, which we took at the COVID contingency provision. And it improved to 1.15 percentage of our financial year '21 and 1.35 percentage for the financial year '22. And in that, the fourth quarter, it is already above 1.4 percentage, and it should be inching towards the 1.5 percentage for the -- going forward is what is -- we are expecting.
On Security Receipts trend, the outstanding is at INR 143 crores as at 3-point -- as of 31 March 2021. We have received a payment of INR 54 crores in financial year '21, '22. And the outstanding is at -- for 31 March 2022 stood at the INR 92 crores. We hold a portion of INR 64 crores against the same. At peak level, we had security received to the tune of INR 323 crores as on March 2015, and we recovered about INR 205 crores from that. The different, let's say, the recovery rate, once again, has been about 60 to 70 percentage basically from that SR portfolio also.
During the last con call, we had discussed in detail about the latest digital initiatives, whatever we are taking like collection neo banking initiatives, open banking, introduction of contactless payments solutions through variables -- through CUB Easy Pay, CUB Keychain Debit Card and CUBFit watch debit card and offering Application Programming Interface, API, looking into partnering with IBM and all.
Also, we have launched like the -- as you know, the -- on cloud and all, many of our, let's say, data is already on the private cloud. So we are waiting for, let's say, the cloud and all, how the industry will go looking into the latest developments in the -- what you call your regulations and all.
We have also launched, let's say, fixed retail platform for customers, for which they can now finalize the buying selling rates themselves. Apart from that, the submission of import LC application is enabled through the net banking. So that the convenience is improved for the customers.
The credit card is one missing product in our offering. We tied up with ASBA Cards for giving co-branded cards to our customers. Unsecured credit has not been our core strength in the past. We feel that it is time to launch our own credit card at the same time having eye on the -- our risk appetite.
The general consensus is that the ratio between debit card and credit card issued by the bank is at 3:1 also. We are currently having about 26 debit cards, meaning that our customers should have around 9 lakh debit cards. You might have also observed some of our peer banks who are not having their own credit cards, have tied up with the company for giving credit cards and all.
In the meantime, we received a proposal from a company called [ 42 Sears ] led by [indiscernible] and team, which has managed the credit cards for multiple banks in India and other markets in the past and mentored by Sir P R Seshadri, former MD, Karur Vysya Bank. We are exploring the possibilities of having them as the third-party service provider for the bank providing the technology and operational services on the profit-sharing basis. We will start slowly and steadily covering our existing customers.
Final integrities on the profit sharing and risk sharing and other operational guidelines are being worked on. Soon, we will be linking the variables to the credit card [indiscernible]. First customer will be keen in using more availing all benefits to the credit cards and all.
I want to reemphasize, there is no change in our risk appetite. And we will be extremely careful in building the business. And let's say, the -- we are very -- let's say, I want to be very categorical about it. So the -- all the discussions and all are going on, and we will be taking a call shortly.
As suggested in the earlier calls, we are saying our best to be on par with the best in terms of our digital initiatives. And it may have seen as being the pioneer in many digital initiatives like robotics, wearables and all. You can be rest assured that we will do everything to be on par with the best. We are not making any big fuss about it. It doesn't mean that we are outdated in digital and all. So I'm repeating the statement because I like since we are not talking too much about it. Let's say, when I discuss with few from the analyst community and all, I understood that this was a perception in the past.
That's why I spoke at length about it during our second quarter conference call. So I just want to make sure that we are at par with the best and we are continuously working on that. So no need to, let's say, worry about that, and we have -- we are continuously demonstrating that we are trying to be at par with the best option and we got our latest. We are continuously evaluating and whatever changes we are ensuring that we also do, let's say, always one of the leading banks in terms of the digital initiatives. I have explained about that in detail in the past on this way. I'm not getting into the details now.
To sum up for financial year 2022, 2023, the COVID is behind us and hope uncertainties of the Ukraine war will not last indefinitely, let's say, blocking this, let's say, the positive outlook, whatever we are seeing now. The credit growth for the financial year '22, '23 should be lower to middle double digit. The expected overall slippages for the current year should be in the range of 2 to 2.3 percentage, which is -- which should be getting back to the pre-COVID level. The -- I am talking about the annualized slippage. The slippages should come down from the current level, which is 3 percentage plus annualized. And it should improve from the current year resulting in the gross and net NPA significantly reducing to -- reducing by the year-end.
The net interest margin to stay around the current level, maybe plus or minus 10 to 20 basis points, as I discussed. We are working towards reaching the ROA level -- pre-COVID ROA level of 1.3 percentage plus as quick as possible. The cost-to-income ratio should hover between 42 to 43 percentage because of the absence in the treasury income. So we have, let's say, consistently ensured that, let's say, all the efficiency and profitability parameters are intact.
The COVID impact, was in fact, let's say, we were to, let's say, had some surprises and all and the entire episode is now behind us. So hopefully, going forward, on growth front, on efficiency and the profitability parameters, asset quality and all, things should be pretty good. As I explained with the numbers and all, the asset quality is pretty -- the risk levels have come down as I explained that the -- even SMA 2 numbers, whatever we are seeing, are very substantially lower than whatever we saw during the pre-COVID days, which includes ECLGS, restructured and other regular advances.
So overall, let's say, things are looking good. The only uncertainty is the economic impact because of the Ukraine war, the way that impacted the oil prices or the changes in the policies of exports of agri commodities, cotton or steel or whatever are things that are happening. But we hope all those things will not extend indefinitely, and the year should be good as we move forward.
With these opening remarks, I open the floor for questions. Over to you all.
[Operator Instructions] The first question is from the line of Rohan Mandora with Equirus.
I missed the comment around treasury income that you gave because as per the presentation, you have around INR 50 crores of income booked. So if you can just repeat that? What was it for 4Q? And how are we looking at for FY '23 in terms of what will be the period end March and unbooked MTM gains on losses on the investment book? That's one. And the second question would be...
Yes, we'll go one by one. So what is that number you want exactly?
Yes, for the treasury income, what was the comment that you mentioned for 4Q income as per presentation that roughly gross profit -- and 15% year-on-year growth.
See, the point what we are trying to say is that from the domestic treasury, income will not be available. Whatever the income, the INR 50 crores which is booked, is coming from the integrated treasury when we take the money from here and invest in the overseas deposits along with the, let's say, arbitrage opportunities and all through the forward contract and all.
So the going forward, the whatever profitability we had in the domestic treasury, we will not be having. So the way how we -- the point what we are trying to say is we had, let's say, if you take the financial year 2021 on securities trading from the domestic treasury, we had [ INR 70 crore ] in the first quarter; INR 51 crores in the second quarter; INR 103 crores in the third quarter; and only INR 12 lakhs in the fourth quarter. Overall, we had INR 233 crores from the securities trading.
Against that in first quarter current year, we had INR 49.66 crores, INR 10.95 crores. But in the Q3 and Q4, only INR 1.38 crores and INR 0.11 crores, a point, I mean, which means INR 11 lakhs. The overall profit from the domestic treasury is only INR 62 crores against INR 233 crores, whatever we had in the last year. So this is the opportunities from the domestic treasury is declining.
Sure, sir. And sir, you had any quantification on what were the MTM gains or losses which are unbooked as of the yields right now?
It's -- let's say, the up to 31st of March, it is booked. Post the 31st of March, it is still in the single digits.
Sir, second question was around -- with the raw material inflation that we are seeing recently. Are there any pockets of the portfolio which would see an adverse impact on asset quality? And also, if you can comment on the cotton /steel [indiscernible] because the cotton prices have increased and there were some strikes in Tamil Nadu.
See, the cotton prices, let's say, the motion has already started and we got a short-term spike. So let's say, these sorts of things, they happen. Only thing what we have to continuously ensure is that they don't, let's say, build a huge start at high cost and they get into the mark-to-market losses. So far, we have not come across any situation currently during the, let's say, last 6 weeks or so because of the erratic movement in the raw material cost, both in steel and cotton.
Sure, sir. And sir, lastly, there is a sharp increase in the borrowing in second half. So almost 2/3 of the incremental funds have come from borrowing. And while, sir, in the commentary indicated that deposits, we are not taking this venture that we don't pass in investment. If you could explain why the increase in borrowing, but not specifically on buying.
Yes. We had some opportunities on refinancing from the financial institutes at a lower interest rate. And we had opportunities to make arbitrage through the, let's say, ForEx market in the integrated treasury. That's the increase, let's say, for ForEx. That only explains to that INR 50 crores, whatever that is being made. So that opportunity was placed and all. When you get to the, let's say, fixed term refinancing facilities, you don't have the headaches of SLR and CRR. And whenever we see opportunities, the sort of arbitrage opportunities, we actively use this as well as our integrated treasury policy. That's how we had, let's say, whenever we were told that we had eligibility for the refinancing. At the same time, we were able to link it with the integrated treasury thing. We had made -- we are utilizing those opportunities.
The next question is from the line of Prashant Kumar with Sunidhi Securities & Finance.
And congratulations for the good set of number. And especially on the OpEx side, the bank has performed very in a controlled manner. And on the last call, as you have mentioned, just as it continues and what is the status of the migration to CTC basis remuneration structure. And also, the branch has increased -- the number of branch has increased by around 25. But at the same time, in last 1 year, the employee number of headcount has decreased by around 500. So if you could give some color on this.
Yes. As I explained during the earlier conference call, the CTC remuneration is starting only from the, let's say, July 2023. We are about 1 year away from that transformation. And basically, as I told, the -- what you call, during the COVID, the digitization and utilization of alternate channel by the, let's say, customers, it increased many fold. During pre-COVID time, we had about, let's say, 12 percentage of our transactions going through the branch channel. And it suddenly got reduced to 4 to 5 percentage. At least the internal operational load came down by, as I say, 1/3 or so.
So -- and we conducted a time and motion study and found out, let's say, surpluses there. And we ensure that, like, say, the -- whenever the attrition happens and all, we did not refill, which has we identified about 700 to 800 such positions and all. So now we will be -- once again, we have now understood what is that and all.
So going forward, taking into -- so we did not go for campus interview for 1 year and all. We -- let's say, we reduced our, let's say, fresh intake in the last financial year. But this year, let's say, we will be back. But whatever cost advantage we have received to a greater extent, they will be continuing.
So just on continuous and on the same, are you going to hire or in a new digital era that is going -- that already has been started? So are you going to hire on that new generation and on sales side actually to increase your business?
Yes. We had on, let's say, all sort of -- let's say, specialists and all. Last year, we had 1 senior level person who joined from IBM, let's say, to be the part of our systems technology. I mean, technology department and all. Basically, the thing is like almost for the last 5, 6 years, bulk of our recruitment are through campus interviews and particularly from the, what you call, Tier 2, Tier 3 management institutes from the [indiscernible] areas and all, who are reasonably skilled in the modern level digital initiatives and all extraordinary people.
So we had aligned the sort of, let's say, requirement in the skill sets over a period of decades. And that's why, let's say, the -- we were able to achieve whatever progress on, let's say, digital and alternate channel front, whatever we have done. And we are conscious of this and doing the fix rates on a continuous basis.
Okay. Okay. On the -- one other question on the provisioning side. Are you going to improve further on PCR ratio and at considering a restructured book and other summer stress book like?
See, the answer is yes and no. On one side, we have already said we have identified, let's say, one account even before it becomes NPA. We are building the, let's say, contingent provision and all. On the other side, about the other regular book, as I have been repeating for many years and all.
Let's say, our recovery rate is about, let's say, 60 to 70 percentage. So yes, we are comfortable. I mean, I'm talking this number, taking into account the technically written-off book also. So we are comfortable. We feel 40 percentage, let's say, friction coverage ratio will cover the entire losses and 60-plus percentage, whatever we have is more than enough. So with that in mind, we don't -- like we are not -- we are -- if you had a chance to look into our last 15 quarters and all, our coverage ratio had always stayed between -- taking into consideration the technical written-off books, 60 to 70 percentage, 70 percentage also, we went only when it came as an RBI vector. Otherwise, we are comfortable with the 60 to 70 percentage as we have done in the past. And we don't have any specific thing because we don't feel any need for that.
The next question is from the line of Mona Khetan with Dolat Capital.
Congratulations on a good set of numbers. Sir, firstly, there has been some reclassification from corporate to SME. Also what is the average ticket size of this corporate book that has been moved?
Please repeat the question.
So there has been some reclassification of where corporate book has moved to SME -- sorry, some SME -- some corporate book has moved to SME, correct? So what is the average ticket size of book that has moved from corporate to SME?
Yes. It is basically based on your, let's say, the earlier RBI circular, where the definition of micro, small, medium and all were aligned in tune with the SME Act. So these -- let's say, earlier, let's say, you had a turnover and all, you had the fixed assets and all were taken into account in the earlier classification. So those things have now become the part of turnover currently and based on the registration in the -- what you call Udyam portal and things like that.
So whatever exposure say, for example [indiscernible]. say, the gray area has been in the range of turnover of INR 20 crores. Those accounts will migrate because earlier, the classification was based around the fixed assets. And now like the changes began through the turnover as per the MSME Act. So the overlapping portion will be in that range.
Okay. And what would be, say, a range of the ticket size for these accounts that have moved if you could give me a broad term.
Yes, if it is 20 crores [indiscernible]. The accounts with the INR 20 crore turnover, they should be having share INR 3 crores to INR 4 crores of cash credit, so maybe INR 5 crores, INR 6 crores of exposure or whatever.
Okay. Okay. Got it. So which were earlier lines in your...
You can't give an exact number for this because it is the total change of definition, some accounts, they may be fulfilling the criteria of fixed assets but taking higher exposure or lower exposure. So the measurement definition itself changes but you can broadly take this as a tubular a broader number, but you can't have this as an apple-to-apple basis.
Got it. And so what was the earliest classification for MSME? I mean, was it based on ticket size? Or was it still based on turnover, but that has changed because of RBI?
Earlier, it was investment in plant and machinery. So there was dichotomy between the RBI definition and the MSME act definition. They have no aligned -- I don't have the exact numbers with me. You can very well check up with the circulars which are in the public domain.
Sure, sure. I got it. Secondly, how is the pricing environment in the MSME segment. Because while we saw some traction in the growth side for SME this quarter, if I look at your yield and yield on advances, it continues to remain suboptimal versus your own history. So earlier, one of the reasons you had cited was that because growth is coming from agri gold loans that is impacting the yields. But despite traction here, we are not seeing. So how is the pricing environment?
See, even now 1/3 of the incremental advances in the fourth quarter is from the gold loan, which is below the average yield [indiscernible]. So the -- we were going in the decreasing interest rate scenario and that's why the 30, 40 basis point reduction in the yield has happened through the cycle. So the interest rate will start moving upwards with some lag.
So maybe 1 or 2 quarters, this amount of, let's say, the interest rate movement will go southwards before it actually goes northwards. In fact, I told you that we are contemplating increasing the yield for the existing portfolio, both on deposits and advances from the current level.
The pattern is that whenever the increasing interest rate scenario happens, the yields for the -- what you call, asset side corrects quickly. And it was the cost -- on cost to say for deposits, it goes through -- particularly on the term deposit, it has a lag effect. So that is -- with that context, we should be looking into the, let's say, cost and yield at this point of time.
Okay. But at your end, you're not seeing any irrationality in the pricing environment?
The -- I won't say that there is no pricing pressure. While there is some pricing pressure, but not to the extent that it is being, let's say, asked by many of your peers as if big thing is happening and let's say, it is crushing things and all. This 15, 20 basis points per quarter changes and all least of the past in tune with the, let's say, interest rate cycle movement and all, those pressure we are always seeing.
And I would rather say that this time, whatever pressure we are seeing, it is even lower than the pressures, what I have seen in the earlier interest rate cycles.
Okay. Okay. Got you. And just finally, what would be the share of EBLR linked loans in your book?
[Foreign Language] 70. I understand it is 70%.
The next question is from the line of Nikhil Agarwal with VT Capital.
First of all, congratulations on a very good set of numbers. So my first question is that with such good recoveries and reduction in slippages and write-offs, sir, what would explain the huge increase in the incremental provision for bad debts?
So I explained about the, let's say, contingency provision because of the, what you call, we have for SpiceJet for which we have already made 85 crores, which is the of the, let's say, incremental things which we have taken.
For the nonperforming assets as in the INR 115 crores that we have seen in this quarter.
Yes, it is basically the -- that's what I explained to you. Basically, I have to also keep into account the reduction of net NPA percentage. So the -- having the recovery, let's say, more than the slippages and also the incremental provisioning only, let's say, slowly and steadily brings down your net NPA percentage. The net NPA percentage came down by, let's say, 20, 30 basis points because of that, 50 basis points because of incremental provision.
Okay, sir. Sir, another question is, so with regard to the new accounting theme that is not including the recoveries from technically written off accounts, in the income line, but the provision line. When are we going to -- when are we planning on implementing that? Within the next quarter?
Which one? Which one?
Sir, the accounting effect that is not taking the recoveries from technically written off accounts into our income line.
No, no, no. Income from the technically written-up account, there is no change because it is not in...
[indiscernible] Appreciation.
No, no. The live recovery will change, which we have already interpreted. See the technically written off account, the old accounting continues even as per the latest RBI. For live NPA accounts only, we have already incorporated that.
Okay, sir. And sir, with regard to investment depreciation, will it continue to be seen in other income?
Investment depreciation, also it is already we have -- let's say, it is as per the existing guideline only.
Okay, sir. Sir, from the ECLGS number that you have mentioned, INR 14,366 crores, how much of that has already been classified as NPA?
See, the 14,000 number, whatever you are seeing, is the total exposure of all accounts who have taken ECLGS. The ECLGS portion per se is only INR 2,000-odd crores. And the total NPA, even that is there in the disclosure, NPA that has happened from the -- let me -- if you ask the specific number and all, I have to take out exact number for [indiscernible]. It is there in that ECLGS 1, which is the maximum one, other the disclosure declaration [ year gap ].
Sir, it's okay with the total number would do, so I don't want the bifurcation, sir.
That's the number to a greater extent is there. The exact -- the sort of data points, you can get in touch with Mr. Jairam, whose numbers are already given in the presentation.
Sure. Sir, with regard to the increase in yield that you -- that is a function in advances and deposits, so would it be able to quantify any kind of impact that we will be seeing in our books in the coming 2, 3 quarters?
Please repeat the question.
Sir, with regard to the increase in rates, that increase is rates that we are looking at that we are anticipating in the loan book as well as deposits, is there any quantifiable impact that we can anticipate right now for the coming quarters?
See, the -- I will give you the, let's say, first time whatever we have seen in the, let's say, earlier interest rate cycles, whenever we increase by, let's say, x basis points, yes, you will be in a position to see in the next to full quarter, about 50 to 60 percentage of the x percentage increase getting transferred into the system. On liability side, for the term deposit side, it normally takes 1 full year to see entire impact of the cost.
Okay. Sir. So one last question, sir, with regard to the unsecured lending and credit cards. So until now, we haven't focused on unsecured lending per se. But going forward, what are we -- what proportion of the portfolio would we be looking at in terms of unsecured lending? And is there any timeline in place for the credit cards tie-up that can take place? When can that happen?
See, basically, the -- as I told you, we are not changing our risk appetite or whatever it is. All the, let's say, the -- even I mentioned about a few of our peers who have gone with other companies and all, the credit risk is basically taken by these providers. So they -- and they give you -- the bank guarantees or deposits to the tune of x percentage of the portfolio or whatever it is. And revenue is shared under the, let's say, debt proportion takes care of this share in the bad debts also. Theoretically speaking, let's say, the final risk we are taking the company alone comes into. We are not getting into the unsecured lending and all, let's say, directly. Theoretically, there is a one buffer in between in the range of these companies who are providing this service. This is, at this point of time, we are not anticipating any major change in the risk appetite or whatever it is. We are looking into the nitty gritties. Probably some clarity will emerge when I discuss with you the first quarter results.
Sure, sir. And sir, credit cards, is there any timeline in place as to when we can see that happen?
Well, before our first quarter results.
The next question is from the line of Renish Bhuva with ICICI Securities.
So sir, just 2 strategic questions, nothing related to Q4 results. So sir, in terms of the cross-sell and upsell, I mean, since we are almost 100-year-old institution and almost 80% sort of having the sole customer base. So sir, where do we stand in terms of cross-selling and upselling to the existing customer base?
Honestly speaking, though the results are not to the full potential, things are, let's say, already started. I mean, we have, let's say, infused to these things over a period of time. The larger, let's say, the conversions will happen after the migration to the CTC basis.
As I told you, the -- let's say,I also discussed about my numbers in the LIC business and all. We are one of the, let's say, reasonably top players from the LICs point of view in terms of the bancassurance and the partnership and all. And we have already finalized the tie-ups with a few couple of other life insurance companies, and we expect the further initiatives on that insurance.
Dear conference members, we have lost the line for the management. Please hold while we reconnect them.
[Technical Difficulty]
We have the line for the management reconnected. Thank you, and over to you, sir.
Yes, Renish, just to continue, we have, let's say, started this cross-selling and all a few years back. And as I told you, we are one of the, let's say, important bancassurance partners for LIC of India. The -- like -- and we are also, like, say, finalized the tie-ups with a couple of more insurance companies, which will also be improving the income from the insurance and all.
Similarly, on the investment side and all,we have made the tie-up online, and we have communicated for the sale of mutual funds and things like that and all also there. See, basically, all these things will culminate, and this is basic [indiscernible], which will not happen overnight.
The incentive structure and all will get drastically different when we get into it because we -- our current system, we are not able to make full justice to the efforts of cross-selling and all. But once the CTC thing comes over a period of time, we both -- let's say, the way the system things and all will also undergo. And it is a process, we are on them.
And at the same time, I am also very clear that the cross-selling, up-selling things are -- may not, let's say, impact your ROA more than 10 basis points and all. Overall, the importance given by the system on that is disproportional to the contribution to the ROA. So we hold that, but at the same time, whatever that is incremental thing, we are okay with it, and we are making those changes on that in regard to this.
Got it, sir. Got it. And sir, just a follow-up on that. So to maybe market this journey of cross-selling, do you foresee we need to sort of beef up the management team who can lead this journey. Also, do you foresee any incremental investment to set up for, let's say, whatever technological gaps we have, if any?
Those things are already happening. We have recruited at the middle management level and the product head level people from the new generation banks, which have experience on all these things. Those things are already in place, and investment in technology is also happening on a continuous basis. And the results have started coming. And even though it is at suboptimal level, we are seeing growth over there. And the optimalization will start, let's say, the -- it will improve as we move forward.
Got it, sir. This is very helpful, sir. Just a last question from my side on the product bucket we have. So of course, we talk about the credit card product. But is there any other product that where you feel we might get to -- get into, let's say, over 9, 6 to 12 months?
See, the timeline, I cannot immediately say. Once these things settle, probably the concept of wealth management and all actually saying whatever way it is possible, certain payers will be needed. It will also be forming the part [indiscernible].
But on technology front, requirement of the customer trend and all, we are continuously evaluating what are all the services driven by the other new generating banks. Any new products or services, which is given by other banks, we are taking steps to, let's say, get into our book as big as possible. So that from the customer side, they will not be having any -- feel any gap or whatever it is. That is, for example, I spoke about the ForEx thing, our LC opening and things like that and all, those things we are becoming -- let's say, when we learn that these things are getting upward and all, like the banking has become a commodity business. And whatever you are -- other players view that, we should patch up those gaps and all, which we are continuously doing.
Thank you. The next question is from the line of Jai Mundhra with B&K Securities.
First, sir, I mean you [indiscernible]
Can you come closer to the mic, please?
Yes, sir. So I was saying, sir, on your growth -- is this any better, sir?
Pardon?
On your loan growth, sir, you had -- in your opening remarks, you had mentioned low-teen to mid-teen kind of growth to middle double-digit kind of a growth. If you can bifurcate, sir, between gold loan and non-gold loans, I mean do you think gold loan, which has grown by around -- this year, gold loan has grown by around, I think, 35% plus. Would this continue or this should moderate?
See, the -- we have a saying in Tamil what is called [Foreign Language], meaning the money you got from selling the dark own bark. We are happy with getting our profitability business from any business line, wherever the opportunity is available. See, the thing is I will be like trying to grow -- I mean what I can, let's say, philosophically see is that the proportion of non-gold loan will increase going forward.
See, it is not something like that. I start immediately pushing things and all so that tomorrow and not I'm changing the direction. We never do such things whenever we take a part.
So we will continue with the, let's say, gold loan growth. We will look into the opportunities. We will look into other risk parameters, gold price, all such things. Simultaneously, we will look into the, like say, okay, we had reservations support to growing the non-gold on business, which is now not there.
We have already started slowly pushing further growth. The alignment will take a few months. Once the alignment comes to enter, the reorientation will start and the growth from the loans will start picking up. So the -- you will see -- we have already started seeing that in the fourth quarter. And normally, the first quarter, I'll say, we will have all sort of transfer sitting and all. It is a little bit slow. It will -- things will once again start from the second quarter.
But the gold loan should not be having any impact because of the sort of aberration and all. So we will see how things move forward. It is not that I can only directionally say, in the current financial year, the proportion of non-gold loan growth in the overall credit growth in the financial year '22, '23 will be more than whatever we saw in the financial year '21, '22.
Right. No, that point is well taken, sir. I was -- when I look at growth for this year, if I exclude gold loan growth, right, then the non-gold loan portfolio has actually grown at around 5%, whereas the total growth -- and I mean, in the last 1 or 2 quarters, you have been indicating that gold is slightly opportunistic.
Yes. Yes, yes. In fact, I have also told when I spoke today, the growth from the non-gold loan is almost 2/3 in the fourth quarter, and the growth from the gold loan is only 1/3. That is also I spoke. So I am keeping all the -- I don't want to restrict myself to gold loan or non-gold loan. I'm keeping all the options open.
What I am again and again saying is that going forward, I'm let's say, seeing, let's say, incremental opportunity in the non-gold loan compared to what I saw in the earlier couple of years. As in the earlier couple of years, I was not very comfortable. I have taken my leg off the growth pedal. That reservation has now -- seems to be over as we are out of that COVID mindset or whatever it is.
Depending upon the opportunities and depending upon the potential as we see, we will be growing. And the opportunities on non-gold loan looks higher compared to whatever we have seen in the past. That is where I want to stop, more on how much it happens quantitatively, all this happens, we have to wait and see.
Right. And secondly, sir, on the growth again. So you mentioned ECLGS-linked borrower loans is around INR 14,300 crores roughly. Now a lot of these people would have got accelerated disbursement. And do you think that there could be more than normal repayment in this portfolio? And so what do you think would be the behavior of these borrowers? Would they accelerate repayment or would you be having similar growth outcomes in this book?
As I told you, let's say, almost 80 percentage of the people here have started the repayment ahead of their due date, which I have already shown that. So it will be there. No doubt about it, let's say, and our -- whenever I project a growth rate of, let's say, low to mid double digit. I have taken this also into my consideration before giving you the expectation.
No, no. So your number is fairly okay, sir. I wanted to understand from a system level also, the set of borrowers should see lower than normal growth, right? Because they would have some accelerated repayment?
Yes, I have taken that into account. When I said our growth rate will be low- to mid-double digits.
Sure. Understood, sir. Secondly, sir, on your liability strategy. So compliments to you, it looks like CASA growth has been very, very -- I mean, very strong and much stronger than your previous trends and term deposits have been very, very contained. So just wanted to check, sir, what did we do differently in the last, let's say, 1 or 2 years to drive this CASA growth?
To answer your questions more honestly an upfront, the percentage CASA increase is more than the actual growth rate in the, let's say, CASA. The important reason is our pricing strategy on containing the term deposit growth. So we -- let's say, we make some calculations on the expectations of the asset growth. And then we start our liabilities. This is the way we work at it. So we ensure that -- let's say, like say, we repaid some bulk deposits and all such things. And we ensured that the rates are at a level that, let's say, there won't be any negative growth.
At the same time, there is not extra positive growth, which will make us to once again invest in the government securities and loss on the mark-to-market and things like that. So it was a tightrope strategy, which we normally run.
But in absolute terms also, sir, the CASA growth is good. I mean the SAAR growth is much stronger than previous run rates.
I won't say much strong. It is, let's say, on a -- it is a plan as well.
Understood. And last thing, sir, on your restructured book, sorry if I may have missed it, how many of those loans are also out of moratorium and they have started repaying? You said about ECLGS, but on...
Restructuring also I have told, maybe like it -- I thought I said that with more clarity than ECLGS, but anyway, how it goes is that, let's say, out of restructured portfolio of INR 2,184 crores, about INR 1,308 crores have already started the repayment. That is 60 percentage of the loan book has already started. Their regular repayment has started. For the remaining INR 876 crore, that is, let's say, about half of that, about 59 percentage or INR 517 crores have -- their regular repayment has not started. But I mean, that view has not started, but the 59 percentage or INR 517 crores have already made monthly repayments in advance before the commencement of their due date for their more than 3 months. And this 24 percentage of that INR 876 crores for which the due date for repayment has not started in restructuring advances, they have already paid install advanced installment to the tune of 1 or 2 months are they have already started, which means only INR 149 crores or 17 percentage of the respected portfolio currently are effectively still availing the moratorium.
And in the overall restructured book both, let's say, a repayment had started and repayment had started, the SMA 1 and SMA 2 portion is INR 249 crores and INR 138 crores, respectively. And overall restructured portfolio currently stands at INR 531 crores. So you can make a note of this number. You can also -- if you want more, you can -- for the data points, you can get in touch with Jayaraman. Otherwise, the same presentation write-up will be there in the website soon, you will be able to get these numbers clearly.
The last question is from the line of Darpin Shah with Haitong Securities.
A couple of questions from me. And first in on growth. Over the course of the call, a few times, you have mentioned that we are back to pre-COVID levels on various things. So why still we are talking about mid or a lower double-digit kind of a growth? We have already done that in FY '22.
See, the point is that these things are improving. So the current year will be definitely better than the last year in terms of the growth. some uncertainties because of the -- what you call, Ukraine thing and all are also there. Keeping everything into account, definitely, we are now accelerating. This is what we expect. If, let's say, the wave, the helpers -- we may even -- what I can definitely say is that I will not restrict my growth because I said you mid to -- low- to mid-double digit. If things are like, say, becoming conducive in the thing, we will try to take it further. So we are keeping all the options open under the positive mindset we are able to see. So we are -- we hope we will be improving from whatever we have, wherever we have in last financial year and to move forward. This is what I'm trying to say.
[indiscernible] had roughly around COVID related and such INR 40 crores out of that 10 was marked towards the airline exposure. So that INR 30 crores of traditional COVID provisions still that means you have not utilized anything during the quarter.
No, we have not utilized. We -- as I told you, let's say, INR 30 crores plus INR 15 crores, INR 45 crores in the third quarter, we had -- okay. 40 in the, let's say, last quarter and the 45 in the current quarter, we have got only 15 unprovided and that 2 even before account actually becoming back.
So that was clear, but I was additional INR 30 crores, which we had in terms of...
They're just to stay there.
Yes. If anybody else in the queue, you can take -- we need not cut at this point of time to [indiscernible]. Anybody still in the queue?
No, sir. No one in the queue. [Operator Instructions] So we don't have anyone in the question queue, sir.
Okay. Go ahead. Yes.
So as there are no questions, I now hand the conference over to the management.
Thank you. AMBIT team and Ajit and [ Alexa Cores ], everyone who made this conference call possible. And thank you all, the, let's say, analysts and investors who are participating in this thing.
So I say, I just want to reiterate, let's say, almost all the stigma for COVID is actually behind us. Things are turning positive, and we are looking for, let's say, further things from over there. And hopefully, the -- what we call the things also support to the economy even the global trends and things like that. But overall, we are, let's say, positive about what, let's say, we will be achieving in the financial year '22, '23.
Hopefully, as done in the past, we should be in a position to, let's say, as the -- as in the past, we were able to fulfill all the expectations. Whatever we share with you, even in the current year, we expect that we should be in a potion to be, in God's grace, fulfilling whatever things we have been sharing with you all.
Once again, if you have any doubts or any data point and all, you can get in touch with Mr. Jayaraman, who's number is there in the presentation. Thank you all. And hopefully, we should be having better financial years, giving us better ratios. Thank you all.
Thank you. On behalf of AMBIT Capital, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.