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Federal Bank Ltd
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Ladies and gentlemen, good day and welcome to the Q1 FY '23 Earnings Conference Call of The Federal Bank Limited. [Operator Instructions]
Now, I'd like to turn the conference over to Mr. Anand Chugh from The Federal Bank Limited. Thank you. And over to you, sir.
Thank you so much. Good afternoon, everyone, and thanks for joining us on this call to discuss our FY '23 Q1 numbers. I'm here to officially hand over the baton to [ Souvik ], with whom most of you would have interacted by now, just as you would have had a chance to go through our numbers and investor deck for the quarter gone by.
It has been a good quarter for the bank with everything from NIM to asset quality to cost to income ratio to ROA, ROE, improving on a sequential basis. We have on the call Shyam, Ashutosh, Shalini, Harsh, Venkat, along with other senior operations of the bank.
And without future ado, I hand over the mic to Shyam for his opening remarks and we'll follow this up with the Q&A.
Thank you, everybody, and good afternoon. And thank you, Anand, for a great job and all the best in your new role and welcome to [ Souvik ] as he set us into the new role.
Like Anand mentioned, yes, Q1 was good. It was very much along the plans that we laid out for the financial year and I'm happy that we've made a good start. I do think all of you have had a chance to look at our numbers. So, I'll keep it very short and open it up for question and answer. The high points that we sort of wanted to talk about is through all this, the asset quality continues to be strong, and we believe that, that momentum will continue through what may look like a tough period even going ahead.
Credit growth has started picking up. We did see good growth in Q1, definitely better than many years. Quarter one tends to be sluggish and I'm happy that Q1 this year bucked that trend and started seeing a meaningful growth both sequentially and on Y-on-Y. And it was quite broad based, as you may have observed.
Our liability franchise continues to be very granular and growing quite well in areas that we want to be focused on. And I'm hopeful that the environment that we are in today is actually advantage Federal in terms of deposit growth. And that sets us apart for the year and the years ahead. Many of the platform enablers we've been putting in, be it some of the new businesses like credit cards, personal loans, microfinance, gold, business banking, commercial vehicle, commercial equipment, have all started seeing traction through the COVID period.
Some of you may recall in February of 2020, we held pretty much almost a full day conference in Mumbai and shared our plans. And some parts of the last 2 financial years that had to go on to slightly slower gear given the environment that we were operating, happy that, that period is cleared and all these businesses have come back to trajectory and particularly microfinance, commercial vehicle, commercial equipment and credit cards are giving us a good feel about the opportunities ahead. And over the next 2 years, 3 years, those should become a meaningful -- incremented parts of the growth of the bank.
For the quarter that went by, you'd have seen, sequentially, revenue grew, so did Y-on-Y. And these are -- the quarters are no one-off either on the upside or on the downside. If at all, the treasury and the bond market rates had an impact on treasury to some extent, but equally, we benefited to some extent on the employee provisioning costs. So, there were no significant upside or downside and we could smooth land the quarter quite well and happy that we've entered the 6 handle in our net profit and more importantly, our ROA touched 1.1. And this is third quarter sequentially ROA is trending up and we hope and are hopeful that, that should see this progress.
So, I won't belabor much on the environment. I'm sure all of us are living through it. I don't have any unique commentary differently from the market gurus who have a better view. I tell myself and the team let's behave like bumblebees. We don't have to believe that the market is tough and start to hide behind anything. We just have to make sure we flap our wings and we will fly. And we're well positioned to do that. So, I'm going to say that our opening remarks are that we said what at the end of the March quarter, and we do believe this year mid-teens or higher growth is possible. And we will course along to make sure that our ROA commitments are honored and our credit quality remains as strong as it always has been and liability growth will be pretty granular in nature. And of course, fee income trajectory is strong. So barring anything like a treasury gain or a treasury loss, which has not much that you and I can do, we are on course to making sure that FY '23 is on -- is along expected lines or hopefully even better.
So with that, I'll pause. Once again, thank you very much to everybody. I'm happy to take questions. Like Anand mentioned, our entire senior team is on the call. I'm sure all of them will chip in and share their insights as and when required.
So allow me to just open the call, operator. And we are happy to take questions.
[Operator Instructions] We have a first question from the line of Mona Khetan from Dolat Capital.
And congratulations on a good set of numbers. So, I have 2 questions. Firstly, on the margin front. So with about 90 bps rise in repo rate so far, have the yields for EBLR loans also be raised to that extent because on the saving account side, the increase has been much less at about 25 bps?
Yes. You said 2 questions. Anything else?
Yes. The second one was, what's aiding such healthy growth trends in Q1, which is, as you mentioned, is seasonally weak quarter. So, your thoughts on the demand scenario and also sustainability of the current growth trends.
Yes. On the first part, Mona, I think the answer is there. The rate transition has happened in terms of that, which is linked to repos is transmitted almost the day after the repo increase, so whenever the -- yes, also on the next day, T plus 1. And anything linked to any other benchmark is on reset date automatically happens. So, all of the book is getting repriced as an when the reset did happen. And like you pointed out, on the deposit side, we've had a modest increase. We are now caught up with many other banks, which had much higher. We at least matched up SBI to get to [indiscernible] on savings. Otherwise, we haven't increased. And therefore, our terms, we are quite priced quite competitively at quarter end. May I request others to go on mute, please? Those who are not speaking, please go on mute.
And the second part of your question on credit growth, we saw and we noticed fairly all-round growth. I think there is an inherent shift to banks as lenders has increased visibly, combined with, I think, the demand for credit based on inflationary requirement and also the fact that maybe large capacity utilization is probably at peak in most instances. I think there's a demand increase of banks, and we are participating more aggressively.
Our share gain is visible. Our outreach has improved quite substantially. And I think this trajectory will continue. We are at about 1.2% share of the credit, but on incremental credit, our share of gains -- I mean, our share of market is closer to 2%. So, I think we will be able to grow this quite meaningfully and therefore, thereby achieve or exceed some of our growth aspirations.
Sure. But just coming back to the first question. So, you mentioned that almost the entire 90 bps has been passed on or the entire thing has been passed on to borrowers. So is it fair to assume that for a large part of the EBLR book at least for half a quarter, which is probably 1.5 months because the rate rise happened post May, the entire benefit is already reflecting in the margin for Q1?
40% of the book will have a 40-day gain and rest of the book will be sort of measured across periods in time.
40% of the EBLR book?
40% of the book is linked to repo.
Okay. Okay. Sure. Got it. And just one clarification. So, there has been some reclassification in loan book between commercial banking, business banking and retail. What does this reclassification pertain to?
Every year based on the year we reset in terms of businesses that moved to corporate, commercial or business banking depending on ticket size, so some reclassification would have happened within the first quarter. At the beginning of the year, we reset sort of the account focus changes.
Sure, sir.
Can I just comment just to make it clear so that if there are subsequent questions if there are on this particular, the EBLR linked book is 48%, 47.9%. The fixed is 26%, and MCLR is 17%. So that's broadly the distribution.
We have next question from the line of Mahrukh Adajania with Edelweiss.
Congratulations. Sir, my first question is on slippage. So the retail and business banking slippage is higher Q-o-Q. Is there any slippage on restructured in ECLGS or earlier restructured accounts that has led to it? What explains the higher Q-o-Q slippage in retail and business banking? That's my first question, sir.
Did you have a second one, madam?
Yes, I do. I just wanted to get your thoughts on this whole PPI ban and how it affects you, positively or negatively? That's my second question.
Sure. So let me go with the retail one. Slippages for the quarter reported is about INR 200-odd crores. Normally, in the pre-COVID, we were running at about 140, 150 depending on the quarter. And we believe that for the quarter that went by and maybe for the next 2 quarters, you will see roughly about 20% increase from that 140 base, closer to INR 200 crores or INR 180 crores, largely because the restructured book, the demand is -- the demand for the restructured portfolio was on the customers to repay.
And certainly, there is an element of at least between 15% and 18% slippage on the restructured book on retail, and that's where we are seeing it. And it's very much along our guided lines on our expectations and our provisions. If you recall last year when we added up almost INR 530 crores of provision, we had done a reasonable amount of restructuring on retail, and we said we are building out for a 20% to 25% slippage on the restructured portfolio and yet see the 65% coverage. So it's almost to script, and we don't see anything that at this juncture differently from what -- if anything, it may improve. [ On ECLGS ], thankfully, almost nil. And at this point in time, it's in lakhs.
Got it, sir. Sorry.
Go ahead. Do you want to complete something?
No, no, sir. Please go ahead. Then I will ask.
On PPI, I think, as you probably know, we don't do prepaid cards or anything to do with that. So, we see that it may shift through demand to credit card, and that's an area we are putting a meaningful focus. So, I expect credit card to be advantaged and therefore, we may have an opportunity.
Got it, sir. Sir, in your repo book, reprices in the month of the increase or after every 3 months?
Repo book is instant. T plus 1.
We have next question from the line of Aditya Jain from Citigroup.
Yes. I just wanted to confirm. So the EBLR would change on the day of T plus 1, but individual loans might have their own reset date, which as per regulation could be up to 3 months. Is that understanding right? Or are you saying that even the individual loans have T plus 1 repricing?
When you say individual, you mean retail?
Individual, I mean, any loan as per its own contract might have some reset period. So, that recent period itself is one day effectively. Is that what you're saying?
Yes. All repo linked are T plus 1 and anything else is contracted, and the reset is based on the contracted rate.
Got it.
If I may add, entire EBLR is not repo linked. There's T-bill linked also, which has a defined periodicity, so 3 months or annual or whatever it is. That is T-bill linked. So EBLR has 2. One is repo linked. The other one is treasury bills linked.
Right. Got it.
We have next question from the line of Prashant Kumar from Sunidhi Securities.
And congratulations for the good set of number. My question is just on accounting side. On provisioning, for the quarter, there is INR 167 crores [ loss ] and in which loan loss provision is INR 150 crores and other are standard accounts. So in this quarter, I think so the banks need to aim to improve vision. So where has been shown this [Technical Difficulty].
Venkat, you want to go?
[ Aim to improve vision ].
Repeat. Sorry. He is saying where is the M2M provision. Ashutosh, you want to go, please?
MTM provision is separately taken as a provision on investments, not loan loss provision. Loan loss provision is INR 150 crores. Other amount is -- I mean, this thing -- see, in MTM, that amount itself is very small and it is netting off your appreciation versus depreciation, which is what is the regulatory direction. So, we did not have much of an investment-related depreciation because our AFS HFT book was very, very thin.
So it means that MTM provision has not impacted during this quarter, right?
The resulting number [indiscernible] which is marginal.
Okay. Okay. And only the treasury income that is the part of....
The income is impacted only because in first quarter, as you would be aware, there is a tradition of shifting from HTM to AFS, inter-category transfer, I would call it. Inter-category transfer is permitted in the beginning of the year. So, we have not made any inter-category transfers this year. So, our book is -- our AFS HFT book is very, very safe.
We have next question from the line of Nitin Aggarwal with Motilal Oswal.
Congrats on a steady quarter. My first question is on restructured assets. Like if you can share some color as to what proportion is now under in moratorium and any color on SMA overdues of these accounts?
I think about INR 1,300 crores of the restructured book has already been in the demand. Therefore, they are in the....
Sir, may I come in?
Yes. Go ahead, Harsh.
43% has emerged out of moratorium and it was spread across till 2024 it is spread across. In Q4, INR 1,000 crores have emerged and coming 3 quarters it is 300 -- sorry, INR 700 crores, INR 300 crores, INR 300 crores. So that is the split.
Okay. Okay. So when we say that 25% is like the outlook that we carry on the slippages that can happen from this, it includes the non-paying accounts also. And do we have like a little good degree of confidence on these accounts, which are not in moratorium?
Yes. I mean, we have to rely on the experience of the last 2 quarters. Roughly, it's been between 10% and 15%. So at the top end could be 20%. That's where the trend lies.
Right. And the other question is on the RWA growth this quarter. If I look at the loan composition, the corporates has been shared marginally, but RWA growth looks to be a tad higher, which is resulting in a Tier 1 consumption also of 110-odd basis points. Now that we are looking at a much stronger growth in FY '23 versus what we have seen in the prior years, how do you look at this consumption, as well as any thoughts around the capital raise of -- like how do you see that?
On the second part on capital, I'll hold that answer because we will see how the next 2 quarters, 3 quarters shape up and how the environment is. In terms of capital consumption, this quarter, as you break -- you mentioned about 100-odd basis points. About 70 basis points is RWA increase for the credit growth, and there were elements of credit growth, which had businesses that are short-term loans to companies, which have greater than INR 10,000 crores borrowings from the market as you know that RWA goes up.
Even for a highly rated company, the RWA goes up to 100%. So to that extent, the increase in RWA is on consequence of this. And in terms of our unsecured growth, particularly credit cards, while balance sheet growth is yet to sort of pick up, we've seen good line extension already happening, and that also consumes capital. So 2 parts. One, both the credit quality and the credit extension for the segments we want are going well. In terms of how much consumption happens and what we'll be able to add back at the end of financial year, we will see if we dip below say, 13%, 13.5%, we may consider. But at this point in time, it's too premature.
And lastly, just one clarification on the earlier answer that you gave around the loan mix based on how is the mix of floating loans. So, our yields on advances on a sequential basis is pretty sort of static despite like the T plus 1 repricing of repo and we have also [ grown ] across segments. So why is that so? And how do you see the repricing playing out in the coming quarters?
It will come through. There are some businesses like actually where the slippages also means the revenue offset, right? So to that extent, you will see that play through. But over 2 quarters, that should stabilize. And I think we have guided for somewhere in the 3.25%, 3.27% NIM and we think we're at 3.22%. Another 5 basis points, 7 basis points will happen.
We have next question from the line of Kaushik Poddar with KB Capital Markets Private Limited.
Yes. Shyam, your advance growth has been good, but deposit growth was not keeping pace. So to that extent, what's your strategy for upping the dividend -- sorry, deposit growth, I'm talking about deposit growth. Your deposit growth was not keeping pace with your advance growth. So how do you plan to up your deposit growth?
So, I think, Kaushik, the deposit growth elements you have to see, we can pay more in growth. Terms is very price elastic. So, we are focused on growing the granular retail CASA, which has grown 15% Y-on-Y. And CD ratio being at about 82%, we are reasonably comfortable even if it went up to 84%, 85%. That said, in Q2, you may see that our deposit rates now for both domestic and NRI deposits are in top quartile.
So, you will see a pick up on deposits. Repo, to some extent, is dialed up, dialed down depending on how the CD ratio is and what you want to do with growing term. If you notice in FY '22 and consciously, we didn't grow term because there was no great point in pricing up and taking term. As we see opportunities, we're doing that. But our more structured CASA is growing quite well, domestic and NRI.
What you just now said is that you have upped your term deposit rate, is it?
Yes. In Q2, you may have noticed our term deposit rate is in the top quartile.
Okay. Okay. And about the relaxation that RBI has made regarding that FCNR deposit, so do you see some opportunity there also?
Materials. Again, there, we are very, very competitively priced, probably amongst the better banks. And we have 7% of India's non-resident deposit market share. About INR 10 lakh crores is the deposit share of non-resident deposits. We had about INR 80,000 crores as settlement right? So, we are about 7%, 7.5%. So if India gets $2 billion, which is what most people believe will come in the next 2 months, 3 months or through the window of this dispensation given, we should get our share or higher.
Okay. And as far as capital raising goes, I mean, you are holding the back book by another 3 quarters or something, that's what you said?
No, I said there is no plan at this point in time. When people said there is a likelihood of consumption of capital and therefore, they need to go to the market, I said, we'll wait to see how the year shapes up and then we will decide timing opportunity and price. At this juncture, there are no plans.
Okay. And on this ROE, what is your target rate? I mean, if I remember correctly, you were aiming for something like 1.25. Is that what you have in mind? And if that be so, when do you plan to reach that?
So, we said we will exit FY '23 between 1.10%, 1.15%. And happily we are at 1.10%. We'll take that 1.15%. We can exit FY '24. We will be 1.25%. I think we are on course for that at this point in time, unless something dramatically changes.
We have next question from the line of Rakesh Kumar from Systematic Shares.
And very good set of numbers. Quite hot surprises on treasury operations, though we had close to around one-fifth of investment in AFS and HFT. So, this is a quite surprise there. So some queries that I have. Firstly, related to the PSLC and like overall PSL shortfall that we have. So like just calculation, I did that what the purchase we have done of the PSLC, investment in RIDF and then IBPC that we have on the net basis in this like for year FY '22, that is quite a sizable number of the total PSL outstanding. So why that we have so much of dependence on PSLC?
Ashutosh, you want to go?
May I come in, Shyam?
Yes. Please.
See, PSLCs were available at 1 basis point, 0.01%, 1 basis point towards the end of the previous quarter. So, I think that's one part. So whatever shortfall was there, we have fully taken care of that, and there is something called average PSL and all for every quarter and all. So whatever earlier quarter shortfalls were there, those also were taken care of in the March quarter, but we are not into PSLC in this quarter. You would not have seen the same one because it has a quick mortality. On 31 March, it all expires, becomes 0. So in this quarter, you would not have seen that.
Sir, I was referring to...
Are you talking about PSLC certificates?
Yes. So, I was talking about what we have done in FY '22, entire FY '22 as per the annual report. So what purchases that we have done. So, I was referring to the annual report numbers, not this quarterly number.
That's exactly what Ashutosh said.
That's what -- I was telling about the FY '22. FY '22, we had a shortfall -- cumulative shortfall going on for the first 3 quarters. In fact, most of it was H1. The third and fourth, we took care of it, mainly in fourth by having the PSLCs done and PSLCs were available at a very -- I mean, the least possible price, 1 basis point, that's the least. We don't have a price below that. So it was good economics also to do that.
Got it.
Rather than acquiring portfolios -- rather than acquiring portfolios and other things. These are other options. This was the cheapest option available.
So based on the industry weighted average premium, would we have spent close to INR 170 crores on the entire year FY '22 for PSLC purchases?
I don't think our number is that.
INR 170 crores is the cost of acquiring PSLC.
Did you say the cost of it?
No, not even a fraction of that.
Not even a fraction of that.
Nowhere close to that, no.
And secondly, sir, in the annual report, we have discussed about expanding our branch network, which has been so far kind of a standard still. So what is the change in the strategy there we have?
Before I'll just complete the question -- earlier question, I just want to add that in this financial year, month-on-month, we are on target. PLSC, there is no shortfall.
Yes. So let me just answer the question on branch expansion. For about 5 -- almost 6 years, we added only 20 branches. And the objective was, in my first 5 years, we added about 750 branches. We wanted to make sure they are all productive and performing. Happy that at the end of March 31, 2022, there was only one loss-making branch in the bank. So that said, we were confident that our traction on leveraging that franchise is working. And we also said, we will focus on digital and do digital quite successfully.
So while we did that, we said we will move from branch-light distribution heavy to light branch heavy distribution. So light branch means smaller and compact branches in locations where we don't have our flag. So even in Q1, we added 10 branches this financial year. We're committed to adding about 65 branches this financial year. And over the next 3 financial years, including this one, we think we'll add about 200 branches to 250 branches. And those are very much included in all our guidance, in cost income, our revenues and plans around that. So we are -- we believe that this will be -- we will create 2, 3 more geographies where we are quite potent and dominant.
Sir, we have got, like total written-off loans close to around INR 3,000 crores as on end March fiscal year-end '22. So what kind of recovery that we are expecting for this year FY '23? We did very well in previous year. So any guidance on that front?
I'm not calling anything specifically out of that piece. Our overall credit cost factor and the ins and outs. But yes, there are opportunities. But that said, the bulkier opportunities, we may not be the primary lender or the only lender. Our strength is when we are one or the main lender, then we have opportunities. When it's part of a consortium, part of a much larger platform, then there are too many elements to play and legal processes take endless time. So, I'm not in a position, but we made full provisions. So therefore, those should end up in gains when they come.
And sir, just one last question. There is a government security in a non-SLR portfolio. So what is the characteristic of that non-SLR government securities?
Ashutosh, you want to go?
Yes. See, there are certain bonds which are issued by government, but they are not SLR securities. I'll give you one example. These are -- when this SEB restructuring was done, you had the state government bonds issued, but these state government bonds in lieu of the liability of SEBs, these bonds were not given SLR status. Similarly, I mean, whether it was oil bonds given to oil marketing companies, bonds given to banks for recapitalization, these are all central government securities, but these do not have the SLR status.
Got it.
We have next question from the line of Pranav from Rare Enterprises.
Sir, I have 3 questions. First of all, the loan growth was very good. And can you just elaborate factors that are leading to it and sustainability of the same?
Second is in terms of slippages. So as you mentioned that there will be some slippages uptick because of restructured book. So, this will continue. This is happening in both retail and other categories of restructured. And is there any other something like inflation or economic slowdown leading to retail restructured book? That is second question.
And third question is, sir, how you are looking at now employee expenses because you have given guidance, I think, of 200 basis points of cost to income improvement. So how are you looking at employee productivity going forward? And how are you measuring it, tracking it?
Yes. Credit growth, I mentioned, we will -- the outlook is quite positive at this juncture. We grew sequentially at a rate of about 18%, and that should be our run rate for FY '23. There are some businesses that may do 25%. Some businesses may do between 12% and 14%. So blended will be about 18-odd percent growth, which we are confident will happen. Don't hold me to 18%. It could be 16.5%, 17.5%, 18.5%, 19.5%. But that is all. And that's what we are working on. And it's broad-based. It's not just one business.
The second question was around -- sorry?
Retail slippages.
Retail slippages. Yes, I did mention that I think the best way to look at us is financial year '21, financial year '22, and I said this in the March call also. Our overall slippages for the year were about INR 1,800 crores, both the years. And I also said, I think FY '23 will mirror that. And if you saw Q1 was about INR 444 crores, and that's exactly on course to where it is. Now within the quarter, within the product, there will be some mix up and down, but I don't see it would be widely varying. Thankfully, our corporate book is holding very well for many quarters. Nothing was in the SMA book. So that will continue.
Commercial banking, business banking tend to be -- sometimes you have one account of INR 30 crores, the next quarter nothing at all. So again, commercial banking and corporate banking, there is not much of a threat on that count. Business banking, retail, SME, agri, you will see some impact driven by the COVID restructuring, coming out of COVID restructuring and the current slowdown in the economy in some pockets. But on balance, the numbers that we pointed out look quite possible. And that's why we have given our full-year numbers around INR 1,800 crores of plus/minus a few crores here, there in the slippages. And our credit...
Sir, my question is that, is it just restructured book or is it economic slowdown? Or anything else like inflation impacting the retail for investment?
The restructuring guy, restructuring he took because he saw some stress in the environment, and they were hoping things will work in favor. If the environment continues to be a bit sluggish, their recovery -- their ability to repay may take a little longer, but these are secured books, right, because large part of our retail, home loan or land loans against property.
So then I won't call out specifically saying recession or slowdown or inflation. Those are already build into the statement as the restructured guy may have challenges. That's why we said roughly including 18%, 20% or whatever that number is, we may see slippages in FY '23. And that's how this number of giving the full-year slippage guidance is. Within quarter, we may swing little bit here there. Q1 was INR 200 crores retail. Q2 maybe less. Q3 maybe a little more. So in order of magnitude, it won't change materially. And these are largely stable.
Just to supplement that, I think there may be -- because of the need for restructuring and all that, the probability of default, there could be 10% to 15% or whatever because this is yet to be tested also. The loss given default here is going to be very, very low because these are all mortgaged books.
And the third [ point ], employee cost, I think from what we've said, we get misunderstood for the fact that there was a productivity issue. And I've said this many times, Pranav. It's not a productivity issue. It's the issue of costs that we have to carry for pensioning. And unfortunately, last year, there was a family pension for people who even retired, right? We can't make a old man who's retired to make productive, but at the cost of doing business. Thankfully, when yields have sort of gone up, while treasury doesn't get the gain, there are some gains that come on the employee cost because the actual pensioning requirement comes down as you saw that this quarter. So, we think we are in the INR 500 crore employee cost for FY '23 first quarter. If yields are in and around this region, somewhere this number, if yields start trending lower, it may go to 5.30, 5.40. But we think the full-year employee cost would be about INR 2,100 crores to INR 2,200 crores.
We have next question from the line of Abhishek Murarka from HSBC.
So, I just have one question. How much of your deposits are repo-linked and what is the repricing time line there? And also what percentage of your incremental deposit mobilization is typically repo linked? So just wanted to know that.
Our savings book is repo linked, right? Our savings book is repo linked, and we are not obliged to pass on the entire gain as we did in Q1. You would have noticed. It went up from [ 2.50 ] to [ 2.75 ] that savings linked. Repo minus something, that minus is our charges.
Okay. So if -- just to clarify, if I have a repo linked SAAR and repo goes up by 40 basis points, it's not necessary that my SAAR rate will go up by 40 basis points?
No. Not possible. Because the spread...
Not immediately, Mr. Murarka. But only thing is, in case, bank revises the spread, which is done by ALCO and all, then it would not -- the entire thing would not be passed on. If it is not revised by ALCO, that spread is not revised then entire thing would be passed on because it's repo linked.
Exactly. So that's what I wanted to understand. So if I have a repo linked SAAR and the repo goes up 40 basis points, then the next day, it goes up by 40 basis points until the ALCO comes up with a revised spread.
ALCO makes the same day.
ALCO makes the same day.
Okay. Okay. Okay. So they may revise down these spreads. Okay. And have you seen any -- any revision in those spreads after this 90 bps cumulative repo hike?
Yes. That's why our rates are 2.75. It's gone up from 2.50 to 2.75.
Okay. So 20 bps effectively. Okay. Got it. Right. Got it.
We have next question from the line of Renish Bhuva with ICICI Securities.
And congrats on a great set of numbers. So 2 questions. One on the -- again on the slippage side. So -- of around INR400 crores of slippages, how much of this has flown from the restructured book?
About INR110 crores of the entire INR444 crores is from the restructured portfolio.
Okay. And I like to assume, mostly from the retail side, I mean, in the restructured book.
Retail, business banking. That's the 2 large ones.
Got it. And sir, second, again, on the deposit side. So in our presentation, we highlighted that around 4.5 lakh accounts are being opened every month by FI entrepreneurs. So on the aggregate basis, what is that run rate of new account opening on the liability side?
Roughly about 12,000 to 14,000 accounts a day.
12,000 to 14,000 accounts a day. Okay. So large chunk of these accounts are opened by FI entrepreneurs.
Yes. These are the 2 accounts opened by our partners, wherein we do about 12,000 accounts every day.
And sir, is it -- and what is the, let's say, average balance of accounts opened by fintech partners versus source organically?
Early, but it's lower than our normal balances build on ourselves. These are people who are younger, new to category. So to balance it will take time. I think the book is about INR 500 crores now.
Okay. Okay. And sir, just last clarification. So on the -- again, on the investment side. So, we highlighted that we have not transferred anything from AFS to HTM in Q1. Is that right?
Yes. No, transfers. Other than the regulatory shift, which has to be done in case of your PE and venture capital investments or so, which is a very small amount, there you can keep it in extreme only for 3 years. So in fourth year, you have to shift it to AFS. So, that's a regulatory transfer. Other than that, we have not done any inter-category transfers.
And maybe just, again, a follow-up on that. So, I was just wondering, despite a sharp increase in the yields, why we have not been impacted on the treasury side? I mean, why it is just INR8 crores? Maybe you can take it offline also.
If you keep your investments in HTM, you are not required to mark-to-market, number one. And number 2, if you are having a very small, say, treasury bill -- mainly treasury bills and AFS and all that, which are taken at cost, there would be no need for marking to market. So, there would be no depreciation.
Right. So -- no, even if I look at the credit subsidiary portfolio, I think we have roughly INR 2,000 crores of that portfolio. So there also, I mean, even if you consider the corporate yields going up, of course, I mean, we would be factoring all this in. So net-net it is INR 8 crores, and we don't see any further hit. Or how one should look at this?
Actually, for your information, that portfolio is appreciated. Had it been Ind-AS, we would have booked some appreciation there.
Okay.
Yes. It is always netted off. Your appreciated volume is netted off. That appreciation is netted off against depreciation.
Correct, sir. So now you are just wondering why there was no depreciation, but maybe we can just take it offline.
Yes.
[Operator Instructions] We have next question from the line of Jai Mundhra with B&K Securities.
Congratulations. Sir, during the quarter, we had raised the SAAR rate -- card rate of SAAR by 25 basis points. And the overall cost of deposit is actually down by 8 basis points. If you can help explain what is the -- where did you gain actually?
Ashutosh, go please?
Sorry. Please come again.
So I'm saying, sir, on your SAAR, the total cost of deposit is down 8 basis points quarter-on-quarter, whereas we are in generally -- in general, we are in a rising rate environment and you anyway add up your SAAR cost by 25 basis points during the quarter. So which -- where is the -- which area did you actually benefit, which would have offset such increase?
See, the term deposits, which are there for 3 years to 5 years, the higher value so-called deposits and all, they mature and get repriced. So when you have something in 7 series getting matured, if it's a 5-year deposit, you have to carry because it's a fixed deposit, you have to carry. So your higher-yielding deposits, I mean, rather where the cost is higher, when they get repriced, you get the benefit.
So right now, this is just a coincidence that it has just stabilized, number one. Number two, the CDs and all, which I mean, if you see during the quarter and all that, have also got matured and all. So overall, the impact on that had been 5 basis points, 6 basis points, but that's not going to be the trend. You would see the cost of deposits moving up in the following quarters. So I mean, let me not give you a picture wherein the cost of deposits still have scope to fall in on. This is the earlier ones, which are longer one, longer tenured deposits maturing and getting repriced at a lower rate.
If I can just add to that, this is Shalini here. I think to add -- and Ashutosh has summarized it correctly. Normally, when there is an interest rate change, obviously, liabilities lag in terms of catching up with the interest rate as assets we pass it on, on a repo basis, as we explained earlier. That is one. Two, the savings account rates actually were changed in 2 tranches in May and June. So, you've not seen the full impact of that for the quarter because they were changed in May and then in June.
And term deposit rates in the month of April, until the repo charge is increasing, we had very strict control on our term deposit rate. So, I think it's a combination of all that. There's a lag impact. Clearly, the forward-looking view will be different because next quarter, for example, we will see the full impact of the savings account interest rates. Term deposit rates have been raised by us, as Shyam alluded to in the earlier part of the call. So, this is just the question of catching up and it will happen in the coming quarter.
Sure, sir. Yes.
And Jai, this is Venkat here. Just to clarify and recollect you, mentioning cost of deposits, savings going down. Actually, savings has gone up, but the overall cost of deposits has come down 8 bps between last quarter to this quarter. The savings has gone up by 12 bps, but the overall is down by 8%. That's for the reason which Ashutosh mentioned. Ashutosh and Shalini both mentioned the reasons.
Right. Secondly, sir, if you have this -- I mean, I think the number is very small, but just to get this correct, that if you have the bifurcation of MTM hit and TW recovery, I think both these things are clubbed together so as to arrive at that number, if you have that number, it would be useful.
Which one? Sorry.
The MTM hit during the quarter and TW recovery, I think both of them.
In the other income line, is it? You want that?
Yes, sir.
Usually, we don't share that, Jai. So, these things tend to be -- we just netted off and give the -- yes, it changes every quarter. There is some quarters we have a remarkable gain on one line. So the blended number is a more appropriate number.
Understood. And last thing, sir, from my side, if you have the ECLGS outstanding or disbursement and any NPA number there? Yes.
ECLGS like I mentioned is in lakhs. Thankfully, there's nothing to report in terms of the NPA. Outstanding, if I remember right, it's about INR 3,000 crores. [ Raj ], is that number, right, INR 3,000 crores?
Sir, it's INR 4,000 and odd crores.
Okay.
Sir, this INR 400 crores is outstanding, right, not the disbursement?
Yes. It's outstanding.
This is the balance outstanding. Yes.
We have next question from the line of Mahesh from Kotak Securities.
Just one question. The change in lending yields as compared to the sensitivity of the book, I still didn't get the answer that you explained. Why has it been so small despite it being repriced [indiscernible]
You will see in the quarters ahead because there have been ins and outs, we had some higher slippages in retail and agri. There would have been a reversal of interest income on that count, right?
And also, this increase -- this repo increase has happened over -- I mean, 2 tranches. The second one was only for 22 days, 8th June. And first one happened on 4th May. So the first part, which was 40 basis points and second one, which was 50 basis points, that happened in the middle of the quarter. I mean, first part was 40 basis points, which was available for nearly 2 months. The second one was available only for 22 days.
Okay. And in your assessment, the direction of margins simply because of the change in yields will be a positive one for at least a few quarters? Or it reprices much closely given the way you reprice the deposit side?
I mentioned that our blended margin NIMs, we are looking at 3.25%, 3.27%, which means another 5 basis points to 7 basis points over the coming quarters.
Okay. So you keep despite a much probable appreciation of the lending, is it?
Yes, in ins and outs of everything, book profile, slippages, cost of borrowing -- I mean, cost of deposits going up. Blended, we think between 5 basis points and 7 basis points improvement in NIM is what we are working on.
Got it. Last question, sir. When you speak to your business heads like, let's say in [indiscernible] on the retail side, the business environment continues to remain quite positive despite all what we are hearing outside. So the stock market is in a slightly different world right now.
Like I told you at the top of the call, I said we believe in the bumblebee. We shouldn't get too swayed by either great news outside or bad news outside. Just focus on doing the right stuff. Things will happen. It's not a profound answer, but it's the truth.
We have next question from the line of Pritesh Bumb with DAM Capital.
Our gold loan yields have been down by 64 basis points quarter-on-quarter. Anything there? Any incremental loans lowering? Anything you can give out?
Yes. We have some attractive entry pricing for loans for shorter tenured and that is priced more attractively.
So it's like a teaser right now?
It's a teaser with the belief that some of them will roll over. Some of them will pay off. But to be honest, a larger number of people are paying up.
Okay. And this -- how much time this will continue? Any rollback on that?
I think it goes on this quarter until July or August of this quarter.
Okay. Okay. And then after that, it moves to a nominal rate, I will assume.
Yes.
Just to add, Harsh here. Yes. Just to add, these are given very selectively, where the LTV is much better. It does affect a lot of new customers. So our part was building a large customer base because the fee business comes in. Secondly, there was, as you have seen many competitive offers by other players had been -- we had offered very competitive pricing. So it was to kind of continue and maintain our share. So it was done, but I guess the public pressure on NBFC players has increased with continuing interest rates. So, we see the pressure easing off over here in margins.
But one point, everybody, on gold, I do want to state. We should not assume gold equal to what it was 2 years back when it was a high-yielding product. It is certainly higher yielding, but no longer in the mid-teens to higher teens. It's comparatively priced. Though thankfully, in Q1 of this year, some sanity came. It's not as low priced that is. I mean in Q4 and Q3 of last year, some banks and NBFCs took the market to a very low rate, maybe other forms of credit were not growing. So gold almost became like a home loan.
Right.
Some sanity is coming now.
Sure. And second question was on credit substitutes. I think we've seen a sharp rise of 2%, 3% quarter-on-quarter. Any strategy there? I thought in an increasing rate environment that would -- anybody will not go on back of credit substitutes. Anything there?
Harsh, you want to answer?
It's Harsh here. Yes, yes. I mean -- the credit substitutes increased both short-term and long term. We have largely been on the short term of the curve where it includes commercial paper. So the increase in pricing is already pricing over there. That's number one.
Number 2, the strategy, mainly the corporates need to tape the capital markets because that's where the large exposure of framework is issued by RBI. So under those guidelines, many corporates need to tape those markets, and we as a bank want to build entire suite of products, including credit substitutes. But all these products are priced in at the current levels and never done at the cost of margins.
Sure. Sure. And sorry, last question was on personal loans. I think, Shyam, you were mentioning from last quarter that we were not pushing personal loans. But do you still see environment a little difficult in terms of not pushing personal loans to our -- especially to our retail customers?
It's beginning to pick up. We did delay the reset of parameters to the erstwhile pre-COVID. In the middle or towards the last month of this quarter, we saw a pickup. I think from here on, we will see some pickup. We may do about INR 100 crores a month kind of run rate on the ATV base, but it has started seeing pickup.
Sure. So it should be ranging in a range of 15%, 20% is what we can see ahead.
In terms of growth?
Yes.
Full year, we are still looking at a growth. We ended the last year at about 1,700 something. We think we will get it to 2,300, 2,400.
We have next question from the line of [ Vipin Kumar Jain ] with [ Apar Capital ].
My question, my -- I need a clarification a little. When all the -- most of the banks are saying that there will be a treasury loss because of the rising yields. So how this Federal Bank is able to come with the profit? That is my question, sir.
Maybe you didn't get what Ashutosh explained. I would request you to connect with Ashutosh offline. He'll explain it to you maybe in a little more elaborate way.
In short I can say there has not been much of a profit booking on treasury because that opportunity was not there as the interest rates had moved up. But what was there was prevention of loss and all. So the book was very slim, thin, and therefore, the provisioning requirement was less. And that provision lies against other income. So, I just wanted to clarify that because somebody was saying breakup of 167, 150 is loan loss provision and 18 is -- 17.5%, 18% is about standard assets. Yes, only NPI provision goes in. There was no NPI there. And the rest of it, the mark-to-market thing goes against other income, above the liabilities.
But there is separate hit now for treasury investment income?
If the interest is there, separately give it, income on -- interest income on investments, which is a separate line, which is INR 629 crores for this quarter. And there is other income. In that, you have the mark-to-market depreciation, which is required. But because the book was quite slim, the amount also has been quite less as against some banks who would be carrying larger books. If you carry a larger book, you will have a larger hit.
Operator, we should start beginning to wind down. Maybe 2 questions more and close out.
We have the next question from the line of Sameer Bhise with JM Financial.
Congrats on a good quarter. Just one question. The sequential drop in Tier 1 is primarily go to do with operational risk requirements?
No, I mentioned 3 things, right? Credit growth, the risk weights related to that. In fact, credit growth, some growth coming from corporates who have borrowing greater than INR 10,000 crores. So there's a higher risk weight on that. And growth in unsecured credit. If the line of credit is established, then the risk weight is on the full line. So these are drivers. In addition, operations risk is not significant.
Okay. And just to reiterate, did you say that potentially 18%, 20% of the retail restructure book may be -- I mean, you've considered that it could potentially slip in the INR 1,800 crores guidance?
Ladies and gentlemen, kindly stay connected. We lost the line of the management. We will be connecting back soon. Please stay connected.
Thank you for patiently holding. Ladies and gentlemen, we have the management line back in the conference. Sir, you may please proceed. Mr. Bhise, you may please repeat your question.
So just to reiterate, you said that the slippage expectation, which probably will remain similar to last year's level, probably includes around 18%, 20% of the retail restructured book, which probably could slip. Is that a fair assessment?
Yes. I said the overall slippages guidance for the full year is around INR 1,800 crores, plus/minus a few basis points. A few points will be all inclusive.
We take the last question from the line of [ Anusha Raheja ] with Dalal & Broacha.
Yes. Congratulations, sir, for a great set of numbers. I just want to ask what is the share of non-retail deposits in your total deposit book?
92% is retail, Anusha.
Okay. And I just missed on to that, 48% you said is EBLR-linked loans and 26% is the fixed part, right?
Yes.
And 28% is MCLR. Is that what you said?
Yes.
So what is the percentage for the current fiscal, you feel that would get repriced at higher rates?
No. The floating rate book, which is, if you take EBLR plus MCLR at floating rates at different points in time in the financial year, you get repriced.
Will some part of the fixed part might be probably in the later part of the year?
Depends on maturity.
It depends on the majority, yes. Okay. Sir, lastly, closer to around 70%, are you seeing that would get priced at a higher rate?
Yes.
And I just missed on to that, what is the full-year credit cost guidance that you've been giving?
Roughly about 50 basis points.
50 basis points. And there is no capital raising plan in the near future?
At this juncture, we are not looking at anything.
But the Board approval has come in, right?
We have taken Board approval as we did last year also. We're going to the shareholders. The AGM is on 27th. Hopefully, we will get the shareholders' support. It's an enabling resolution, allows us 12 months till we go to the next stage, if there's an opportunity for us to raise.
Yes. Sorry.
Yes. No, no, I said we took similar approval last year and the previous year, but we are quite judicious in the use of capital.
In the last year, we did our Tier 2 ones INR 700 crores. That's all.
But if I just look at the Tier 1 capital, you are comfortably placed at 14% plus, I guess.
Yes. At this juncture, yes.
Okay. Just one last thing. How is the pricing of the FCNR deposits being done currently?
We have just taken up our FCNR rates to a very competitive rate, one year $350.
It is commensurate to how the US treasury yields are moving through and plus competition, what is the competition quoting. All these factors are taken into consideration, deliberated at ALCO. Right now, what Shyam has said, that is the number.
Sir, don't you this can impact your margins negatively because I mean...
Dollar deposits, if you see, dollar lending opportunity is important. Second, there's no CRR, SLR.
Okay.
Are there any -- we can bring it to a close.
Thank you very much, sir. Ladies and gentlemen, that was the last question. I'd now like to hand the conference over to [ Mr. Souvik Roy ] for closing comments. Over to you, sir.
I thank you. And thanks to Shyam sir for welcoming me into my new role, and thanks to everyone for joining the call. See you on the other side of Q2. And I hope to see you with a better set of numbers. So best wishes, and a great weekend ahead. Thank you, everyone.
Thank you very much, sir. Ladies and gentlemen, on behalf of the Federal Bank Limited, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.
Thank you. Bye-bye, everybody. Thank you.
Bye.