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ICICI Bank Ltd
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Good afternoon to all of you, and welcome to the ICICI Bank earnings call to discuss the Q4 2020 results. Joining us today on this call are Vishakha, Anup, Sandeep Batra, Rakesh Jha and Anindya. Thank you, everyone, for joining us today. Team ICICI hopes that you and your family and your near and dear ones are safe and healthy. We would like to extend our gratitude to all the health care workers, sanitation workers, police and other essential service providers and everyone who has continued to work to keep our society functioning and meet our daily needs, for their immense contribution. Banking was categorized as an essential service to enable customers to meet their requirements in the physical space, to the extent possible as well as through digital channels. In these challenging times, our employees have shown strong resilience and the ability to adapt to changing circumstances. The health and well-being of our employees and customers and business continuity is of utmost importance to us. The bank formed a quick response team to take steps to protect the health of the employees and provide essential services to the customers. About 97% of the branches were functional with reduced working hours during the lockdown. The branches were staffed based on the customer footfalls and employees were rostered. Excluding the employees working at the branches and some of the team members from operations and IT, the majority of the employees were working from home during the lockdown period and continue to do. There is an ongoing thorough risk assessment for augmenting IT security controls, and addressing any gaps and potential threats in the current working arrangement. ATMs across the country remain operational, with an average uptime of about 98%. We have also deployed mobile ATM vans for the benefit of the general public residing in and around the containment zones. Even in this challenging time, we are seeing opportunities to grow and strengthen our franchise, and we are using these opportunities to further accelerate the digital journey of the bank and our customers. In March 2020, we launched a comprehensive digital banking platform called ICICI STACK, which offers nearly 500 services to ensure uninterrupted banking experience to our retail, business banking, SME and corporate customers. Many of these services are first in the industry and are available instantly on the bank's mobile banking platforms such as iMobile and InstaBIZ or the internet banking platform. These include digital account opening, instant loans, payment solutions, investments in the health and term insurance. Small business customers can also use the APIs from the recently launched API Banking Portal to integrate various payment and product solutions. We are seeing increased utilization of our digital channels and platforms by our customers and have ensured that our IT infrastructure is equipped, maintained to handle any surge in digital transactions. We continue to monitor the situation in the country, and would take necessary steps to ensure the safety of our people and continuity of our business operations. In our effort to support the nation in its fight against the COVID-19 outbreak, the ICICI Group has committed a sum of INR 1 billion, including INR 800 million to the PM CARES Fund. ICICI Bank and ICICI Foundation have worked actively to assist various agencies, including hospitals, the police, paramilitary forces, municipalities and other government bodies in their tireless efforts to safeguard the citizens of the country. While the first 2 months of Q4 of 2020 saw business as usual, the month of March was impacted by COVID-19. In Q4 of 2020, our core operating profit increased by 17.6% year-on-year to INR 71.48 billion. For financial year 2020, the core operating profit grew by 21.5% to INR 268.08 billion. The lower growth in core operating profit in the fourth quarter reflects the high level of interest on income tax refund of INR 4.14 billion in the corresponding quarter last year. Our deposit flows continue to remain healthy. Term deposits grew by 28.6% year-on-year to INR 4.2 trillion at March 31, 2020, while average CASA deposits increased by 12% year-on-year in this quarter. The bank has been carrying substantial excess liquidity, and the liquidity coverage ratio on a daily average basis for the quarter was healthy at about 125%, and on an outstanding basis at March 31 was even higher. Deposit flows have continued to be robust and liquidity has continued to increase post March 31. The deposit flows and costs are reflected in the progressive reductions in our MCLR. The loan growth was impacted in March due to COVID-19. The domestic loan book grew by 12.9% year-on-year, at March 31, 2020, driven by retail loans, which grew by 15.6% year-on-year. The overseas branches portfolio decreased by 14.4% year-on-year in rupee terms and 21.7% year-on-year in U.S. dollar terms as of March 31, 2020. The overall loan growth was 10% year-on-year. Coming to asset quality. Gross NPA additions were INR 53.06 billion this quarter. As you are aware, there have been certain developments with respect to a healthcare group based in West Asia and an oil trading company based in Singapore, where the borrowers appear to have been misrepresenting their financial position to lenders. Our exposures to both these accounts have been classified as nonperforming and substantially provided for in this quarter. Going forward, we do not expect any further impact on the profit and loss from these accounts. Here, one would want to spend a couple of minutes on our overseas business. Since March 2016, the overseas branches loan portfolio has reduced by 50% in absolute U.S. dollar terms and its share in the total loan portfolio has decreased from its peak of 24% in 2014/'15 to about 8% at March 31, 2020. We have redefined our international strategy from financial year 2019 onwards to focus on: nonresident Indians for deposits and remittances businesses, with digital and process decongestion as a key enabler; deepening relationships with well-rated Indian corporates in international markets, subject to our risk management framework; deepening relationships with MNCs and funds for maximizing the India-linked trade, fund flow, transaction banking and lending opportunities, with strict limits on exposures, including reduction in the current exposure where required; and progressively exiting exposures that are not linked to India in a planned manner. Our provision coverage ratio against nonperforming loans was 75.7% at March 31, 2020. We have made COVID-19 related provisions of INR 27.25 billion against standard assets to further strengthen the balance sheet, which Rakesh will explain in more detail. Excluding the COVID-19-related provisions, credit costs were 206 basis points of average loans fourth quarter 2020 and 186 basis points of average loans for financial year 2020. The profit after tax was INR 12.21 billion in the current year compared to INR 9.69 billion in Q4 of 2019. For the full year, the profit after tax was INR 79.31 billion compared to INR 33.63 billion in financial year 2019. In line with RBI guidelines issued on April 17, 2020, the Board has not recommended any dividend for financial year 2020. The CET1 ratio was healthy at 13.39% at March 31, 2020. The bank has undertaken a detailed analysis of its loan portfolio to assess the potential impact of the pandemic and economic disruption. As you would appreciate, we are currently in a period of high uncertainty, and any outlook necessarily involves a range of assumptions around constantly evolving variables. Hence, we would not share any specific numbers in terms of outlook. At a systemic level and for us, there will be an impact on revenues and an increase in rating downgrades and NPA formation. However, based on our current assessment and the starting level of capital, operating profits and provision coverage on NPAs as well as the COVID-19-related provisions that we are carrying, we expect to be well-able to absorb the impact. We will continue building a granular book and lending to higher-rated corporates. We are conscious of the importance of balance sheet resilience in a highly uncertain scenario. As we mentioned, our current capital position is strong. We would continue to assess this and look at further strengthening the balance sheet as opportunities arise. We see our digital and technology platforms as a key strength and the present scenario as an opportunity to reengineer the delivery of banking. We are using this period to further strengthen our platforms, our ability to capture market potential and our delivery capabilities, while enhancing efficiency. As mentioned earlier, we have seen a robust deposit flow post March 31, 2020, reflecting the strength and trust of our brand and franchise. Overall, the bank is well positioned to serve risk-calibrated opportunities that would arise in the coming times. At ICICI Bank, we are committed to building a sustainable and responsible business and creating a positive impact on the economy, society and the environment. We have a Board-approved Environment, Social and Governance framework, which integrates the various policies and approaches of the bank with regard to ESG. Our activities around ESG are covered in the slides 43 to 47 in the investor presentation. The bank is committed to having an ethical and transparent relationship with all its stakeholders, and making a positive impact on the society in which we operate and the environment. With these opening remarks, I will now hand the call over to Rakesh.
Thank you, Sandeep. I'll talk about the loan and deposit growth to start with. The overall loan portfolio grew by 10% year-on-year as of March 31, 2020. The domestic loan growth was 12.9%, driven by a 15.6% growth in the retail business. Within the retail portfolio, the mortgage loan portfolio grew by 12.3% to INR 2 trillion, auto loans grew by 2.5%, business banking by 41%, rural lending by 13.8% and commercial vehicle and equipment loans by 7.7% on a year-on-year basis. The personal loan and credit card portfolio grew by 40.7% year-on-year, off a relatively small base, to INR 609.42 billion, and is now 9.4% of the overall loan book as of March 31. The domestic loan portfolio at March 31 grew by 2.1% over December 31, 2019. Within this portfolio, the retail grew by 2.6% over December 31. The sequential loan growth was lower than previous quarters. The SME business, comprising of borrowers having a turnover of less than INR 2.5 billion, grew by 27.5% year-on-year to INR 228.51 billion at March 31. Growth of the performing domestic corporate portfolio was about 9.3% on a year-on-year basis. The bank is focusing on meeting the commercial banking needs of its corporate clients, including foreign exchange and derivatives, trade finance, payments and collections as well as tapping opportunities across corporate ecosystems, including the supply chain and the employees. Coming to the funding side. We continue to focus on growing the daily average CASA balances. Average savings account deposits increased by 11% year-on-year, and average current account deposits increased by 14.9% year-on-year during the quarter. For the year, average current account deposits grew by 17.1% during FY 2020. Total term deposits grew by 28.6% year-on-year to INR 4.2 trillion at March 31. Coming to credit quality. Gross NPA additions during the quarter was INR 53.06 billion. The gross NPA additions from the retail portfolio were INR 12.94 billion. Of the corporate and SME gross NPA additions of INR 40.12 billion, INR 4.68 billion represents the impact of rupee depreciation on existing foreign currency NPAs. There were slippages of INR 17.26 billion from the corporate and SME borrowers rated BB and below at December 31, 2019, which includes devolvement of non-fund-based outstanding to NPAs amounting to INR 0.32 billion. The slippages from the BB and below rated portfolio included 5.86 billion pertaining to an account, which was substantially recovered in the same quarter pursuant to a settlement. The balance corporate and SME NPA additions virtually entirely comprise the oil trading company and the health care group that Sandeep mentioned earlier. The provision coverage ratio, excluding write-offs, continues to remain healthy at 75.7% at March 31. Recoveries and upgrades, excluding write-offs, were INR 18.83 billion in the current quarter. There were recoveries and upgrades of INR 9.74 billion from the retail portfolio and INR 9.09 billion from the corporate portfolio. The gross NPAs written-off during the quarter aggregated to INR 54.55 billion. The bank sold gross NPAs amounting to INR 0.13 billion during the quarter. The total net nonperforming assets was INR 101.14 billion at March 31 compared to INR 103.89 billion at December 31. The gross NPA ratio declined from 5.95% at December 31 to 5.53% at March 31. The net NPA ratio declined from 1.49% at December 31 to 1.41% at March 31. The loans and non-fund-based outstanding to borrowers rated BB and below, excluding the NPAs, were INR 166.68 billion at March 31 compared to INR 174.03 billion at December 31 and INR 175.25 billion at March 31, 2019. Of this, the non-fund-based outstanding to nonperforming loans was INR 50.63 billion at March 31 compared to INR 39.19 billion at December 31. The bank holds provisions of INR 11.82 billion at March 31 against this non-fund-based outstanding. The fund and non-fund-based outstanding to borrowers under RBI resolution schemes was INR 15.33 billion at March 31 compared to INR 38.94 billion at December 31. The fund and non-fund-based outstanding to restructured loans was INR 1.8 billion at March 31. The balance is INR 98.92 billion of fund-based and non-fund-based outstanding to borrowers rated BB and below, includes INR 65.98 billion related to cases with an outstanding greater than INR 1 billion and INR 32.94 billion related to cases with an outstanding of less than INR 1 billion. On Slides 29 and 30 of the presentation, we have provided the movement in our BB and below portfolio during the quarter and for the full year. The rating downgrades from investment-grade categories, excluding fund-based outstanding to accounts that were also downgraded to NPA in the same period, were INR 22.88 billion in Q4. The downgrades were granular in nature. In terms of sectoral composition, there were a few downgrades in the commercial real estate portfolio. There were rating upgrades to the investment-grade categories and a net decrease in outstanding of INR 12.97 billion during the quarter. Lastly, there was a reduction of INR 17.26 billion in Q4 due to slippage of some borrowers into the nonperforming category and devolvement of non-fund-based outstanding to NPAs. The bank has operationalized the RBI guidelines on moratorium for borrowers as follows: borrowers required to opt in for the moratorium, which included all eligible corporate and most retail and SME borrowers; borrowers with automatic deferral, who could opt out of the moratorium, which included select retail categories like commercial vehicles and rural loans, comprising about 11% of total loans. At April end, loans under moratorium across both opt-in and opt-out categories constitute approximately 30% of the total loans of the bank. The bank has made COVID-19-related provisions of INR 27.25 billion against standard assets to strengthen the balance sheet. Based on the RBI guidelines, the bank is required to make a provision of 5% in Q4 amounting to INR 6.07 billion on all loans overdue as of March 1, where moratorium has been granted. Loans that were overdue more than 90 days at March 31, but have not been classified as nonperforming as per the RBI guideline of April, were INR 13.09 billion. The impact of classification of these loans of INR 13.09 billion as nonperforming on the gross NPA ratio at March 31 would have been 18 basis points. On these loans, the bank has made provisions equivalent to that on NPA accounts, which is included in the COVID-19-related provisions of INR 27.25 billion mentioned earlier. The total outstanding provisions at March 31, excluding provisions for nonperforming assets considered in the computation of the provisioning coverage ratio, was INR 79.4 billion, or 1.2% of loans. These include the COVID-19-related provisions, provisions held against the non-fund-based outstanding to NPAs and general provision against standard assets as required in the RBI guidelines and other standard asset provisions. Coming to the P&L. The net interest income increased by 17.2% year-on-year to INR 89.27 billion, driven by both the loan growth and an increase in margins. Increase on -- interest on income tax refund was INR 0.27 billion this quarter compared to INR 0.16 billion in Q3 and INR 4.14 billion in Q4 of last year. Excluding the impact of interest on income tax refund, net interest income grew by 23.5% year-on-year in Q4. The net interest margin was at 3.87% in Q4 compared to 3.77% in Q3 and 3.72% in Q4 of last year. The impact of interest on income tax refund and interest collections from NPAs was about 4 basis points this quarter compared to 10 basis points in Q3 of 2020. The domestic net interest margin was at 4.14% in Q4 compared to 4.04 % in Q3 and 4.12% in Q4 of last year. International margins were at 0.28% in this quarter. Noninterest income, excluding treasury income, grew by 15.8% year-on-year to INR 40.13 billion in Q4. Fee income grew by 13.2% year-on-year to INR 35.98 billion in Q4. There was some impact of the lockdown in the last fortnight of March. Retail fee income grew by 16.1% year-on-year and now constitute about 75% of overall fees in the current quarter. Dividend income from subsidiaries was INR 3.38 billion in Q4 of 2020 compared to INR 2.69 billion in Q4 of 2019. The dividend income from subsidiaries was INR 12.73 billion in this financial year compared to INR 10.78 billion in FY 2019. In line with the IRDAI guideline, insurers -- asking insurers to conserve capital, ICICI General and ICICI Life have not recommended any final dividend for FY 2020. As a result, dividend income from subsidiaries is expected to reduce in FY 2021. On costs, the bank's operating expenses increased by 15.7% year-on-year in Q4. The employee expenses increased by 17.7%, and nonemployee expenses increased by 14.4%. The bank had 99,319 employees at March 31. The provisions on retirals and other employee benefits have increased during this quarter due to decline in yields in the current quarter compared to Q4 of 2019. For FY 2020, employee expenses increased by 21.5% on year-on-year, and nonemployee expenses increased by 18.3% year-on-year. Treasury recorded a profit of INR 2.42 billion this quarter compared to INR 1.56 billion in Q4 of 2019. The core operating profit increased by 17.6% year-on-year to INR 71.48 billion in Q4. Excluding the impact of interest income on income tax refund, the core operating profit grew by 25.7% year-on-year in Q4. For the full year FY 2020, the core operating profit grew by 21.5% to INR 268.08 billion. Total provisions for the year were -- for the quarter were INR 59.67 billion compared to INR 54.51 billion in Q4 of 2019. These include the COVID-19-related provisions. There was no benefit of the relaxation provided by RBI in relation to making additional provisions required for extension in resolution period as per the June 7, 2019 circular. Excluding the COVID-19-related provisions, credit costs were 206 basis points of average loans for Q4 and 186 basis points of average loans for fiscal 2020. The profit before tax was INR 14.23 billion in Q4 of 2020 compared to INR 7.82 billion in Q4 of 2019. The profit after tax was INR 12.21 billion in Q4 of 2020 compared to INR 9.69 billion in Q4 of the previous year. The profit after tax was INR 79.31 billion for the full year FY 2020 compared to INR 33.63 billion in FY 2019. Regarding capital, as per Basel III norms, the bank, on a stand-alone basis, had a CET1 ratio of 13.39%, Tier 1 capital adequacy ratio of 14.72% and total capital adequacy ratio of 16.11%. On a consolidated basis, the bank's Tier 1 capital adequacy ratio was 14.41%, and the total capital adequacy ratio was 15.81%. Coming to some further information on the loan portfolio. Retail loans, as a proportion of total loans, were 63.2% as of March 31. Including non-fund-based outstanding, the share of the retail portfolio was 53.3% of the total portfolio at March 31. The portfolio level build-up strategy for the retail loan book has been based on utilizing the existing customer database for sourcing in key retail asset products through cross-sell and upsell. The underwriting process involves a combination of key variables to assess the cash flow and repayment ability of the customer like income, leverage, customer profile, affluence markers, bureau data and demographics. The bank utilizes multiple data points from the ecosystem, including liability and asset relationships, transaction behavior and bureau behavior, along with proprietary machine learning and statistical models for credit decisioning. The bank also leverages on the strong analytical capabilities for finer risk segmentation of customers based on internally developed scorecards and models, which help in achieving superior categorization of delinquency identification. The bank carries out regular benchmarking of its major retail portfolios with industry through credit bureaus, and the delinquency metrics have generally been better than the industry for all major retail products. We continue to monitor the performance at a sub-segment level. And in view of the current operating environment, we have reviewed the customer selection and underwriting norms, and carried out necessary policy strengthening at micro-market and sub-segment level. Our mortgage portfolio was about 49% of the retail loan portfolio and about 31% of the total loan portfolio at March 31. Home loans comprise about 70% of this portfolio, and the balance is predominantly loans against property. The home loan portfolio is granular in nature, with average ticket size of about INR 3 million. It is geographically well diversified and has been built on fundamental premises of cash flow assessment of the underlying borrower as well as meeting the legal and technical standards of the bank for the property being mortgaged. The average loan-to-value ratio for the home loan portfolio is about 65%. The loan against property portfolio has conservative loan-to-value ratio, and lending is based on cash flows of business or individuals with limited reliance on the value of collateral. The valuation of the property is carried internally. The average loan-to-value ratio of the loan against property loan portfolio is about 55%. Auto loans and commercial business loans, which includes commercial vehicle financing, account for 5% and 4% of the overall portfolio of the bank, respectively. The commercial vehicle portfolio across banks, including us, had seen an increase in delinquencies even before the outbreak of COVID-19, and the situation is likely to deteriorate further due to lockdown across the country. However, it may be noted that generally, the economic life of a commercial vehicle or a construction equipment is much higher than the tenor of the loan. It has been seen during past cycles that vehicle and equipment owners repay dues as and when the asset starts to generate profit in tandem with economic recovery. The growth in the auto loan portfolio across banks, including us, has declined over the last few quarters, due to decline in the passenger car sales. Our personal loan and credit card portfolio is about 9% of our total loan portfolio. We have grown this portfolio from a low base primarily through cross-sell. About 75 -- about 70% of the personal loan and credit card portfolio is to the existing customers of the bank, which provides strong liability information for credit assessment. Around 85% of the portfolio comprises salaried individuals, about 75% of the customers in the salaried segment are employed with well-rated corporates, including MNCs and government entities and have stable income streams. The delinquency rates for the remaining customers in the salaried segment are only marginally higher than the rest of the portfolio. This can be attributed to conservative underwriting norms in terms of higher income cut-off, lower leverage norms, loan caps and other such things done by the bank. The self-employed segment in these portfolios is about 15%. And while this segment could be more impacted in the current environment, the proportion of customers in highly impacted sectors like restaurants and travel and tourism is generally low. The rural portfolio comprises 9% of the total loan portfolio. Within this, gold loans are 2% and kisan credit cards are 3%. We and other banks have been highlighting the higher delinquencies in the kisan credit card portfolio for the last several quarters. Our overall micro finance loans directly done by the bank are very small lendings. Our business banking portfolio accounts for 4% of the total portfolio. It comprises small business customers with an average ticket size of INR 10 million to INR 15 million. The relatively high growth in this portfolio reflects the low base and market share. Our focus in this segment is on parameterized and program-based lending, digital channels, granularity, collateral and robust monitoring. About 85% of the portfolio has a collateral cover of more than 100%. About 87% of the portfolio qualifies for priority sector lending for the bank. The delinquency trends in this portfolio have generally been low. The corporate, overseas and SME portfolios were 36.8% of the loans at March 31, including non-fund-based outstanding, the share of the corporate, international and SME portfolios was 46.7% of the total portfolio at March 31. The SME portfolio, comprising exposures to companies with a turnover of up to INR 2.5 billion, was 3% of total loans. In the past, the bank has experienced high NPLs in this portfolio. In recent years, the bank has reoriented its strategy in this portfolio towards granularity, collateral security and more parameterized lending. The international loan portfolio was 8.4% of the overall loan book for the parent bank at March 31. Excluding exposures to banks and retail lending against deposits, the corporate fund and non-fund-based outstanding at March 31, net of cash, bank or insurance-backed lending was USD 7.48 billion. 63% of the outstanding was to Indian corporates and their subsidiaries and joint ventures. 16% of the outstanding was to non-India companies, with Indian or India-linked operations and activities. The portfolio in this segment is well-rated and the Indian operations of these companies are target customers for the bank deposit and transaction banking franchise. The bank would continue to pursue risk-calibrated opportunities in this segment. 7% of the outstanding was to companies owned by NRIs and PIOs. 14% of the outstanding was other non-India companies, which is about 1% of the total portfolio of the bank. We are planning significant reduction in this portfolio. While the outstanding to Indian corporates and their subsidiaries and joint ventures has remained at a similar level compared to the previous year, the balance portfolio has reduced by about 30% year-on-year at March 31. The builder portfolio, including construction finance, lease rental discounting, term loans and working capital loans, was INR 223.18 billion or about 3% of our total loan portfolio. The real estate sector had been under stress even before the outbreak of COVID-19 due to slow sales, cash flow mismatches and funding constraints. The lockdown on account of COVID-19 is expected to cause delays in respect of project progress and sales. Our portfolio is generally granular in nature, with the larger exposures being to very well-established builders. About 12% of our builder portfolio at March 31 was either rated BB and below or was classified as nonperforming. The total outstanding to NBFCs and HFCs was INR 397.55 billion or about 5% of our total loans at March 31, and the details are given on Slide 32 of the presentation. Our exposure is largely to well-rated entities with long vintage, PSUs and entities owned by banks and well-established corporate groups. The proportion of the NBFC and HFC portfolio internally rated BB and below or nonperforming is about 2%. Coming to our non-fund-based exposure, we would like to highlight that the notional amount of derivatives and swaps represents over 90% of the amount reported as contingent liabilities in the financial statement. Since 2016, we have focused on shifting from non-fund-based exposure to fund-based exposure, even as we continue to consider all types of exposure for our credit assessment and limit setup.The outstanding amount of letters of credit and bank guarantees has declined over the last 4 years, while the total advances of the bank have grown by a CAGR of about 10%. As a result, the outstanding amount of letters of credit and bank guarantees are about 22% of total advances at March 31, 2020, compared to 34% at March 31, 2016. Overall, our approach to the corporate portfolio since 2015 has comprised: improvement in the incremental rating mix, with 80% to 90% of fresh disbursements being to clients rated A- and above; reduction in concentration risk, particularly in lower-rated borrowers, reflected in the reduction in share of top 20 borrowers in the portfolio, substantial improvement in the rating profile of top exposures and a much more granular lower-rated portfolio. Other than 3 accounts, 1 each in the telecom, power and construction sectors, the maximum single borrower outstanding in the BB and below portfolio was less than INR 6 billion at March 31, 2020. The fund-based outstanding of the construction account is classified as nonperforming, and its non-fund-based outstanding is part of the BB and below portfolio that we disclosed. The reduction in specific types of exposures such as project implementation risk, equity shares as primary security and low visibility of cash flow are the exposures that we have reduced over this period. We have shifted from non-fund to fund-based exposure, even as we continue to consider the entire exposure for our risk assessment and limits; and our focus on sell-down syndication of originations to other market participants.Over the last 2 years, our focus has shifted from loan growth to serving the entire ecosystem of the corporate client, including its employees, business associates and the supply chain. As Sandeep mentioned, the bank has undertaken a detailed analysis of its loan portfolio to assess the potential impact of the pandemic and economic disruption. This involved assumptions on the time to normalcy of the environment; assessment of resilience of the borrower based on income or profits, leverage, rating or credit score, level of fixed costs, market reputation, liquidity on hand and ease of restart of the business; and assessment of the COVID-19-induced risk intensity, including the industry, the nature of the market, volatility levels in the specific segments and complexity on the business. For the retail portfolio, other than business banking, risk markers based on credit score, leverage and loan-to-value as well as categorization of employees -- employers for salaried borrowers and inputs from analysis of customers under moratorium were considered. In the rural portfolio, the analysis was based primarily on assumptions of drop in collection efficiency. For the SME and business banking portfolios, factors such as collateral, industry, location and other credit markers were considered. For the corporate portfolio, the bank has conducted a borrower-specific analysis covering a substantial part of the portfolio. In respect of NBFCs/HFCs, the analysis took into account available liquidity, collection assumptions, promoter support and ease of refinancing. For the real estate developer portfolio, assumptions on rentals and cash flows were considered. At March 31, the bank had 75.7% coverage against existing NPAs. The total outstanding provisions at March 31, excluding the provision for nonperforming assets considered in their coverage ratio were INR 79.4 billion or 1.2% of loans, as we discussed earlier. The bank's CET1 ratio is comfortable. Based on all the above, our operating profitability and our current assessment, we would be well able to absorb the impact of the potential stress induced by the COVID-19 pandemic. Coming to the subsidiaries. The details of the financial performance of subsidiaries is covered in Slides 38 to 39 and 65 to 70 in the investor presentation. I'll briefly talk about the major highlights of the unlisted subsidiaries. The profit after tax of ICICI AMC was INR 2.17 billion in the current quarter, at a similar level compared to last year. ICICI Bank Canada had a loss of CAD 7.5 million in the current quarter compared to a profit after tax of CAD 22 million in Q3 and CAD 12.6 million in Q4 of 2019. The loss in the current quarter primarily reflects the increase in expected credit loss provision under IFRS 9 due to change in the macroeconomic outlook arising from COVID-19. For the full year, the profit after tax was CAD 40.6 million compared to CAD 52.4 million for FY 2019. ICICI Bank U.K. had a net loss of USD 6.8 million this quarter compared to a net profit of USD 8 million in Q3 and a loss of USD 25.3 million in Q4 of 2019. The loss in the current quarter reflects the collective overlay provisions related to COVID-19. For the full year, the profit after tax was USD 23.2 million compared to a net loss of USD 52.9 million FY 2019. The focus for the overseas subsidiaries is similar to that for the branches, primarily around NRI and India-related opportunities. The non-India corporate portfolio of the subsidiaries has reduced over the last 1 year, and we are working on a further planned reduction going forward. ICICI Home Finance had a profit after tax of INR 0.64 billion in the current quarter compared to a profit after tax of INR 0.03 billion in Q3 and a loss of INR 0.03 billion in Q4 of 2019. The consolidated profit after tax was INR 12.51 billion in Q4 compared to INR 46.7 billion in Q3 and INR 11.7 billion in Q4 of 2019. The consolidated profit after tax for the full year of INR 95.66 billion compared to INR 42.54 billion. With this, we come to a conclusion of our opening remarks, and we'll now be happy to take your questions.
[Operator Instructions] The first question is from the line of [ Ashtaru Vabadanye ] from Elara Capital.
Sir, is it fair to assume that your offer of INR 27 billion of provision, INR 8 billion is IRDAI mandated or NPL provisions, that is accounts that would have become NPL and INR 19 billion is broadly on completely standard loan?
Obviously, INR 27.25 billion. As we said that INR 6 billion is the minimum provision required as per RBI based on 5% provision requirement, which is there at March 31 because as of the -- of course, all these provisions are on the standard overdue loans as of March 1. Out of that, as we have said, about INR 13 billion of loans where we have granted moratorium, that would have crossed 90 days at March 31. And they have been kept standard as for the benefits given by RBI. So if you look at the INR 27.25 billion, if we were to go strictly by spirit of minimum provision that RBI required as for the April 17 circular, we would have done provisions of about INR 6 billion for the quarter.
Okay. And in terms of your slippage, the health care account, that would also be domestic or international?
That was in our overseas.
So that was also overseas only, right?
Yes.
Okay. And just in terms of the moratorium, would you be able to give any color on how the moratorium looks like in personal loans, unsecured loans and the SME book?
So the moratorium, as you know, it has been given by RBI given the current situation where the borrowers, whether they are of the highest credit standing or of low standing, would look at opportunities to conserve on their cash flows. So we have seen borrowers from across geographies, across product segments, across customer categories, who have opted for taking the benefit of the moratorium. So it's something which is actually quite well spread across portfolios. So there's nothing specific that one will be able to conclude from looking at each of the segments.As we mentioned earlier that indeed, for some of the portfolios like the commercial vehicle portfolio, some of the rural portfolios, the 2-year portfolio, which is more portfolio for us, we had an opt-out kind of an option for the customer that we gave by default of moratorium. And the customer, if he came back to say that they did not want the moratorium, then we exclude the customer from moratorium. So that's how it has played out, and that's what aggregates to about 30% for us.
Okay. Sure. And just one last question in terms of your international book now. You did mention that the size of the largest account except for -- the size of account except for the CD you mentioned is INR 6 billion, right, INR 600 crores?
That was 40 for the BB and below portfolio.
BB and below, yes. So sir, just in terms of the international loans because the commodity cycle is very weak, would you see -- would there be a lot of stress on the international book -- the remaining international book? Or would those downgrades have already happened in focus?
So maybe if you look at the rating profile that we have given for the portfolio and the BB and below, indeed, that may not capture the full impact of what may happen under COVID. So that is not something which would have already completely been factored as of March 31. So that is generally true for the entire portfolio for us and I'm sure for other entities as well.Within the overseas portfolio, I think over the last 12 months, 15 months, we have been pretty focused in terms of our approach and Sandeep outlined that approach and focused on the non-resident Indian and other India-focused business. We have had a local lending portfolio in the past, and we have been working to bring it down. And we did reduce that by about 30% during the year, including wherever we have been able to get cash collaterals or get guarantees from other banks or credit insurance, all of that. And we will continue to reduce that further. But I would not say that there is any specific large worry that we have on the portfolio. It was indeed unfortunate that in the March quarter, we have had these 2 incentives, and they are, in the overall scheme of things, material for us. That's why we have called them out in our presentation. In both of them, they were both product investment-grade loans, and we were not surprised with the outcome which happened in terms of the financial misrepresentation. So that kind of clearly tells us that we should kind of be even more proactive in bringing this portfolio, which is not core to our strategy. That, I think, is very clearly established by us internally across businesses over the last 12 months. The only thing is that on the existing portfolio, we could have been more proactive in terms of bringing that down. That's something that we will look at going forward. But I would not say that there is any specific worry on the portfolio per se. And I gave you a portfolio to say 63% of the fund and non-fund-based outstanding, net of all the cash-like collateral that we have, sales to Indian corporates and their subsequent joint ventures. So it's already at 63%, which would have been maybe a bit lower in March '19. That's how we are looking at the portfolio.
[Operator Instructions] The next question is from the line of Prashant Poddar from ADIA.
Quickly, one clarification. So the provisions -- outstanding general provisions, which is excluding the standard provisions on assets, is about INR 50 billion. Is that fair?
Just come again. What is...
So there are 2 types of...[Technical Difficulty]
We take the next question from the line of Bhavik Dave from Nippon India Mutual Fund.
Sir, my question is regarding your mortgage business, can you clarify the 70% of your mortgage portfolio is home loan? So just wanted to understand, on the home loan front, what proportion of the bid would be to customers that haven't bought the property like their property under construction and they have taken a loan? And if you could provide some more color on your mortgages and what proportion of the customers are asking for a moratorium and did not get?
So you were not very clear. But from what I understood, the -- on the home loan portfolio, we have not given a separate breakout in terms of the under-construction properties. It will be a part of our overall portfolio. I don't think we will be -- we would broadly be in line with the market or slightly lower than the market is what we believe on that aspect. I could not get the second part of the question.
So second part is, sir, on the moratorium front, is there any specific number that you are giving us for retail as a -- specific figure a focus area? Is the moratorium very distinct in the retail segment?
So in the retail segment, even in the corporate segment, we have had borrowers who have opted for moratorium because kindly, if you look at it, it is at the normal interest rate, and it's like an EBITDA line for you. But these times, we have seen even corporate opting for moratorium. And for retail also, there have been a fair number of customers, and that's the aggregate 30% which is there. As I said, it is broadly quite well spread across a big portfolio. It would, of course, be higher for the portfolio where we had a default moratorium option, which I talked about the commercial vehicle portfolio, parts of the rural portfolio and 2-wheeler, too, right? So it is quite spread right across each of the portfolios.
And sir, lastly, on your personal loans, which has seen a reasonable growth momentum although off a smaller base. Can you throw us some more color on the personal loans, credit card loans, where -- how much -- what customers would have a liability or savings account with the bank? Or any other color on the personal loans?
Like I mentioned on the -- about 70% of the personal loan and credit card portfolio is to the existing customer base of the bank. And that overlap will virtually be on the liability side. So they would largely have savings accounts with us. So that is the number that we could to look at that.
The next question is from the line of Prakash Kapadia from Anived PMS.
I had 2 questions. Loan mortgages has been a big driver to our growth. So what is the kind of the growth we are looking at? Because that's a large part of our retail book and the overall book also at INR 2 trillion. Given the uncertainty due to COVID, what are we seeing? Or what is our sense on residential segment as an asset class? And maybe if you could give some color of intensities to our book, that would be helpful. And secondly, in terms of our cross-sell on personal loan and credit cards, are we setting the limits for risky customers? What is the cross-sell ratio? To give some color, that would be helpful.
So on the mortgage portfolio, actually, even if you look at it more generically, it is fair to assume that over the last 6 weeks or so, I don't think much of bank lending has happened at all. I talked about our approach across the retail portfolio. Indeed, mortgage alone is a very important product for us, and we find it to be a very sticky product. So when you get the customers with the mortgage and the savings deposit account, you can have a long-term relationship. So it will continue to be a key product. In terms of growth, I think it will be a function of all the factors that we talked about while discussing the COVID-19 in terms of how soon the lockdown gets over, how soon the economic activity resumes and all the other such related things. So what we can say is that we will be focused on this segment. We will be -- if you look at the approach in the last 3 years, nothing will change going forward. Of course, from a risk assessment point of view, there are some things that we will fine-tune given the current environment. On growth number itself, it's very difficult to give any number on mortgages or the rest of the portfolio as well. Your second question on personal loan and credit card was -- it was related to -- on the cross-sell, yes, I put there, like I said, 70% of the clear and card business had been coming from existing customers of the bank. And that focus will continue to be there in the future. If anything, it would get even, even sharper than where we are right now. Of course, as we speak, it's not that we are doing a large amount of business on the personal loan side. On credit card, wherever we have existing customers of the bank and we have preapproved limits, of course, we have tightened all those limits compared to where we would have been a couple of months back. We are quite happy to issue credit card also. So that is how we would look at it. So overall, I think we are happy to do business, but indeed, we have tightened credit filters in the current time.
And any number you can share on the cross-sell ratio as of now or the number in terms of case book contribution from top 10 cities will be?
We have not disclosed that separately. The way we track cost actually what I say that 70% of the business is coming from the existing customers of the bank.
Okay. And lastly, we have targeted ROE of 15%. Does that stand, too, given the uncertainty or can get deferred by 6 to 8 months, 1 year, our overall sense?
As Sandeep mentioned, given the uncertainty in the environment, we would not be in a position to comment on a specific outlook in this regard. I think it is fair to assume that there will be an impact on current demand on our loan growth. On fee revenues, there will be some increase in 90 additional credit losses. So I think the focus in the next 6, 9 months for us would be on balance sheet preservation on ensuring we are well capitalized, have a high level of liquidity buffer and also use this opportunity to further strengthen our customer franchise, deposit franchise. I think there's a lot of opportunity there as well. So on the ROE, we will see -- I think we'll be able to assess that once we have clarity on the post-COVID situation.
The next question is from the line of Rahul Jain from Goldman Sachs.
I've got 2, 3 questions, but I'll limit it to only 2. Number one is just wanted clarification on this provisioning that you made on COVID side, Rakesh. So this INR 13 billion that we talked about where you have granted moratorium, which otherwise would obviously have been INR 20 billion, you said you made 100% provision against this under this COVID provision. Did I get it right?
No, no, no. We -- I said that against that INR 13 billion, we have made provisions as if they would -- they were NPA. So we have made -- if they had become NPA at March 31, if this April 17 circular was not there, the provision that would have been required is the same provision amount that we have made on these loans. And that is a part of the INR 27.25 billion.
Understood. And this INR 13 billion would all be on account of retail loans or there would be corporate loans as well?
It would not all be retail, but predominantly, I would say it would be retail.
All right. And you said that 30% of the customers applied to moratorium. This is as of what date? Or is it as of end April or at this point of time?
This is as of end April.
Okay. Got it. And then just one more thing. Is it possible to get a color in terms of what will be the bureau score of this 30% of the customers who applied for it, particularly in the retail? If you could give me about 10, 50 -- between 7 and 10, 50, any color on that qualitatively.
We have not disclosed anything specific on that now.
Okay. The other question is, just wanted to know what would be our strategy on provisioning now going forward.
Sorry, what is that?
Strategy on provisioning going forward over the next couple of quarters.
On provisioning, like we said, I think over the last couple of years, our approach has been very clear that we would want to be conservative in terms of provisioning, recognition. I think we have tried to be -- if a problem comes up and we kind of see that because it will be a challenge, we have classified accounts upfront. We had one in the December quarter. A couple of ones which we have done in the current quarter technically may not have been 90 days overdue. So that approach is very clear. Once an account is NPA also, we try and take provisions which are appropriate. So we will definitely want to keep our coverage ratio at a comfortable level. So we -- today, of course, we are at a pretty high level partly because the past -- the cycle of the corporate NPL with the aging, we have increased the provisions there a lot. So we are at 35%. But clearly, for example, if I go back 2, 3 years, we were as low as 50% or below that of coverage ratio. There is no way that we'll go down to those kind of levels. We have put in place a policy for a certain minimum coverage ratio as well. So that is on the NPA side. On the standard asset, of course, in addition to whatever we are required to do as per RBI, we have the extended INR 27.25 billion, out of which, like I said, INR 6 billion would have been the minimum as per RBI based on 5%. If you make it 10%, then also by June, it will have been INR 12 billion. The rest of the INR 15 billion is clearly additional provisions, the kind of provision that we have taken at March 31. The actual requirement of provisions over the next couple of quarters or this next -- this current financial year, we'll have to see how that plays out. But in general, we will want to continue with a conservative approach on the asset quality and the provision aspect.
The next question is from the line of Anand Laddha, HDFC Mutual Funds.
Am I audible?
Yes.
Sir, a couple of questions from my side. Sir, if you can share your outlook. In fact, look at our NIM, it has consistently improved from 3.5% in the domestic side to today almost like 4.15%. If you can share an outlook, given the environment that the pricing power are against banks, would we expect that things will be stable or improve from here on? Second, if you could give some color on cost income exercise, this year, our cost growth on employee side is -- on the current other OpEx sales very strong. Your cost outlook, also same. And if you can share what...
Yes. We can -- I'll take those 2. Otherwise, I'll lose track of the questions. I'll take those 2, and then we can do the next, yes?
All right.
So on the net interest margin, I think the funding franchise, which we have had the benefit of the growth in -- not just in the CASA deposits but the retail term deposits, you will have been seeing our retail deposit rate virtually being the lowest among private-sector banks. At most times, we have been leading the reduction in rates. Even term deposit rates, we have no cut. So we are focused on margins. Of course, in the current context, we will have to take into consideration that the liquidity that we are having is much higher than normal levels. And that is -- a large part of that is by design. So part of that is because there is not as much of credit demand as well. It will have some impact on the margins going forward for sure. We have reduced our MCLR, you will have seen from May 1, by 25 basis points. Some of our loans are linked to repo rate. So as the repo rate has come down, some of the yield there will go down as well. So to the extent possible, we will try and manage that with funding cost. But at some stage, beyond the level, you are not going to do that. So that's how we are looking at it. The other thing has been that on the business side, each and every business segment has been extremely focused on pricing of loans. And that also has kind of benefited us in terms of giving us that extra 10, 20 basis points on the asset yields across portfolios. So that focus will continue, but it's absolutely fair to assume that in the near term, the pressure that will be there on the margin coming from the surplus liquidity, lack of loan demand. And the lower rates always mean that the CASA cost benefit comes down. So some of that will be there directionally, but we should look at the fact that over the last year or 2, we have been able to improve our NIM despite the increase. On the cost-to-income ratio, I think FY '21, we will have to see how the income kind of shakes up. So it will again be a function of the lockdown period and the time it takes to recover from there on. So it's difficult to say. On the cost side, you will have seen that in this quarter, the cost was more -- clearly somewhat lower than the trend that we have seen in the first 2, 3 quarters of this -- of FY 2020. I think going forward, we'll have to focus both in terms of the -- leveraging the investments that we have done in terms of increasing employees, increasing branches, and get outcome from there. Sandeep talked about all the efforts that we are making on the digital side and new ways of customer acquisition that we have been working on and servicing the customers. So on the cost side, both the employee cost, clearly compared to, say, FY '20, incremental hiring will not really be there in the current context. So some of those benefits will come in. But some of the costs like technology on -- and all, we will continue to invest through this period. So that is something which clearly is giving us a competitive edge. And on that side, we will continue to make investments and expenses. Sorry for a long-winded answer, but the focus will be to bring down cost. But on the cost-to-income ratio, there is no specific number that we are kind of looking at.
Perfect. But if you can give -- articulate a 2-year, 3-year cost-to-income ratio strategy, probably the peer banks are at 37%, 38%. We are at 43%. The gap is almost like 5%, 6%. So is it fair to assume that at some point of time, this gap will again narrow down like we have seen narrowing of gap in the margin side?
No. So the gap can be narrowed in any way, but we -- what we would want to do is that whether that gap narrows or even widens, as long as the core operating profit of the banks is increasing on a risk-calibrated basis, we are quite fine. So to that extent, people are reducing their income investments and all of that, maybe do less of business that are used for. But as we know, we have witnessed in the past, the focus in the bank across each of the businesses is to maximize core operating profit on a risk-calibrated basis. So we are not so focused on particular ratios per se. But yes, directionally, I think clearly, there will be -- benefit will come from technology. But we see that benefit to come in more from enhancing revenue opportunities rather than just plain cost-cutting.
Perfect. And just data point. In our mortgage growth, what proportion could be lapped?
About 30%.
30%, sir. Okay. And lastly, on the U.K. and Canada subsidiary, the reported loss, what's happening in both the subsidiaries? And what's our strategy going forward? As we have clearly indicated that the domestic book, we will keep on reducing the international loan proportion. So what would happen to these 2 subsidiaries?
So in both these subsidiaries, Anand, I gave the specific reason, actually, and the reason why they got into a loss position was because of the provision required because of COVID-19. So for example, ICICI Bank Canada, they are on IFRS 9. So they have taken a higher expected credit loss provision. Based on the impact -- the potential impact of COVID-19 and the slowdown in the growth and all has to get reflected in the probabilities of default, they considered for their Stage 1 and Stage 2 portfolios. Similarly, ICICI Bank U.K., the U.K. gap has taken additional collective provision because of COVID-19. So that is the reason for the loss in the particular quarter. We were quite happy to note that U.K. came into profit after a gap of a couple of years. Canada, if you look at the earlier 3 quarters, has been profitable. They have declared dividend -- part of our dividend income for the quarter has come from Canada. So our focus, again, for overseas subsidiaries will also be similar to what is there at the branches: to focus on NRI and India-linked businesses. We do acknowledge that as part of the subsidiary, there will be local business that we will do, which will be more than what we do in the branches. But the overall focus will be that I don't think you will see much of a balance sheet growth. Capital conservation will be the key there as well. And on the portfolio, we do give some breakup in our presentation.
The next question is from the line of M.B. Mahesh from Kotak Securities.
Just one question from my side. Have you made any reassessment on the capital side given the post-COVID scenario?
So in terms of capital, as you would assume in the current scenario, it's something that one would regularly kind of keep reviewing. You look at our current CET1 ratio at 13.39%, you factor in the operating profit trajectory that we have had for the last few quarters and also the fact that what does happen at these sites is that there is a lack of credit demand and the loan growth actually goes down. So the capital consumption pace also comes off during this period. So those are the factors that will be the positive. I think no declaration of dividend is also helpful in this kind of a situation per se. There will be special because of the profitability kind of getting impacted and the potential credit losses. So as of now, we believe that we are pretty well placed to kind of absorb the impact, which could potentially be there from COVID-19 given the starting level of capital, which is there and the operating profit, which we have.
So okay, sir. The only reason why we are asking, sir, is that given the situation on the ground there, we really don't know what is the good level of capital for a bank. That's the broad point. We've seen stock prices being very radically for -- even some of the reasonably well capitalized from when they enter into some problems. That is the reason why I had asked.
Yes. No, absolutely. I think -- and that's the reason why Sandeep, in the opening remarks itself, we commented that our current capital position is strong as you can make out by the 13.39% of CET1 ratio. But we will continue to address this and look at further extending the balance sheet as opportunities arise. That's something that we have said upfront, and it's a continuous assessment that will be required because of the reasons that we mentioned.
My second question, just one clarification. If a customer moves from MCLR to external benchmark, is this at this point of time a margin-dilutive exercise?
Sorry, if it moves from MCLR to reported...
External benchmark.
It is margin-dilutive.
It would be dependent on NCLR at what rate the customer is. So if the current rate is lower, it would be at a lower yield. That does happen when rates go down.
But -- no, the question is, at this point of time, when you look at your conversions, which is happening, the new rate, the whole year lower rate, it is dilutive.
Yes.
The next question is from the line of Manish Ostwal from Nirmal Bang Securities.
Yes. Sir, most of the questions have been answered. Only one data point, what is the excess liquidity sitting on the balance sheet on 31st March 2020?
So we don't disclose that number separately. But I think you can imagine, in the kind of environment where banks are lending so much to RBI in terms the surplus, which is there, and given our strong deposit franchise, we have a significant surplus, which is there. A part of that, you can kind of see in the balance sheet. When you look at the cash and bank balances numbers, that has gone up substantially compared to December, and it's reflecting the higher liquidity that we have.
The next question is from the line of Nitin Aggarwal from Motilal Oswal.
[ A few questions. Firstly, in the deposit growth, our CASA deposits growth has been relatively ] be modest versus what we have seen [ when compared with some other private banks ]. So has there been some shortage on savings account deposits [ flow from savings to term deposits which has held up ] really well and how is your account opening run rate since March?
On CASA deposits, like I said, we are trying to virtually completely remove our focus from the period-end balance number. So if you look at both current account and savings deposits, I think the Y-o-Y growth is 6% or 7%. But I would ask you to look at with any average balance crore, which on the current account side is 17%, I don't think there will be too many banks who would have grown at 17% their current account balances for the year. On the savings deposit side, yes, I think we are at about 11%. We have been in that region of 12.5% to 12% kind of a range. We would like to do better than that. And again, if you compare it on a daily average basis across banks, yes, maybe one bank would have done higher than that. But generally, that's not what is norm, much lower than better than us. And the other thing that you as well mentioned, this vehicle, term deposits, has been doing extremely well. And as I mentioned on that, the rates that we have been keeping are the lowest amongst the private-sector banks. If you look at the cost of deposits, that has been coming down for us well. And again, we would pretty much be the lowest cost of deposit bank. Maybe SBI would be lower. Other than that, we would be there. So again, we look at not just the CASA ratio per se. We look at the absolute growth in areas and the cost of deposits. And that is what has, over the last couple of years, on the margin expansion, which we discussed in the earlier part of the earlier question.
Right. And on the account opening, Sandeep...
On the account opening, I think it's fair to assume that the disruption has impacted the -- all aspects of business, including the account opening. We are not giving any specific numbers on that.
Okay. Secondly, on the mortgage, which is the largest segment for us. The growth trend has been different, not just in this quarter, but in the earlier quarters. And we have been trying to compensate for that by growing the LAP book. So what is the growth of pure housing loans? And secondly, are we seeing any customer showing from a housing loan to other uses during the rising rate of interest?
So on the mortgage portfolio, in terms of outlook, I think I talked about it in response to an earlier query, which is there. On churning balance transfer in, transfer out, I think in terms of rates, our rates have been somewhat higher in the past. I think as we speak, we have brought down the rate a bit. So we would -- we should not be net losing is what -- our objective should be. And we would have seen client gains in terms of balance transferring during this period.
Okay. And if you can share the growth rate for housing loans, excluding LAP?
So if you look at the overall growth, it's about 12% in the portfolio. We -- I don't have specific numbers on that, but it will be lower than that for the pure home loans.
Okay. And lastly, you've given color on the moratorium. But particularly in the presentation where in the operating profile, 70% of the book is rated A- and above, and on moratorium 30%. So if you can share some color to where the moratorium book comes from, how much from A- and above and how much below that.
This portfolio that is on Slide 33 is for corporate and retail loans in aggregate. And the retail portfolio like we have given in the footnote, that is not on the entire product level. So if mortgage is rated, for example, A, they really come in the A category. It is not customer-by-customer kind of a rating profile for the retail portfolio. And as said, I think the moratorium, which has been -- as far as will be spread across the borrowers. We have not given any further details on the rating-wise split of the moratorium.
[Operator Instructions] The next question is from the line of Sameer Bhise from JM Financial.
Can you kind of give some commentary on how the bank approved the requirement of the INR 27 billion provision or some commentary on stress-testing the portfolio? How do you think things are shaping up? I mean while obviously, we know things are uncertain, in terms of your approach is -- how you are looking at the situation?
So indeed, we have looked at various kind of scenarios. And I talked about in my opening remarks in terms of each of the portfolios, what are the variables that we have looked at. For example, on the retail portfolio, we have this quarter based on credit score, leverage, loan-to-value as well as the employers for salaried borrowers and other such inputs, including whether the borrower has taken moratorium. So each portfolio, there is a specific kind of assessment that we have done based on the analysis that I talked about earlier. Indeed, there can be many more scenarios that can be developed. I think the fundamental assumption is around when does the lockdown get over. And then thereafter, what is the time it will take for economic activities to kind of come back to the pre-COVID kind of level. So those are the 2 biggest variables which are there. And that's something that we will continue to assess on a continuous basis based on the framework that we have put in place. The provisions that we have taken, it is not technically exactly concluded based on a particular scenario of stress per se. We have looked at various scenarios, and we have looked at various factors and then taken what we believe is the provision to strengthen our balance sheet in the current times.
So I'm assuming that in your base case, this is the provision that you would want to make, and there's nothing to demand or require depending on the information that we have today.
So I think it's very difficult to look at it that way. So it is not that we would have upfronted all provisions required due to COVID and taken it on March 31. I don't think that would be a fair assumption because it's not that we will not have incremental provision requirement coming in because of COVID in FY '21 because there are so many scenarios that can be developed in that regard. This is a provision that, of course, we have looked at all the scenarios, we have looked at how things can play out, and then we have taken a provision to strengthen the balance sheet is how I would say it. And I would not say that it is equivalent to the total provision required because of COVID.
The next question is from the line of [ Nilanjan Karfa ] from IDFC.
One question on cost. So will you be able to help us understand the rough split between, let's say, fixed costs to, some extent, variable costs? And when I talk of variable, which is business linked. Something on that will be really helpful.
So again, it's very difficult how each of the expenses are categorized into fixed and variable. I think there are a lot of business-linked expenses which are there. The ones which are absolutely variable, at the end of the day, would be things like the sourcing cost, which we are paying a percentage for a particular zone. That is a completely variable cost which is there, which will not be a very large number, as you would appreciate. Rest of it will be a mix of fixed and semi-variable, but then again, some of those costs can be managed as well at these times. So we'll have to look at it on a line item-by-line item, business-by-business basis.
Okay. But you won't like to give us a little more kind of color on that?
No. It is very difficult to give a number.
Okay. Let me ask it differently. If you have to look at your costs, what will be your strategy in terms of how much of costs you can take over the next 3, 4 years? I mean is that the kind of range you would want to look at?
On cost, I think there are variable -- various things which are there. If you look at, for example, employee costs, that is a large part. A lot of expenses are attending to employees where you have [indiscernible], you have variable costs which are there. So the variables there are, would you -- how much will you hire new employees? How much of attrition do you replace? What is the increment that we have for the employees? What is the performance bonus that you have for employees? So there are -- all of these variables are indeed there. And on the nonemployee side, there will be, like I said, technology, IT expenses that will definitely continue. You have rentals and all of this. I am sure in the current context, all entities, including us, will look at various options on work from home and all of that. Do we really require as much of it as we have? Can we look at rentals differently? So a lot of those opportunities will be there. But it's the fine balance, I think, we'll continuously assess, the time that we think it will take for the economy to get back to and even cleaner for us to grow our revenues. In the meanwhile, we look at all of these options.
Okay. Let me ask another question. Given how severe the growth in economic activity pans out, you would want to keep your revenue growth above expense growth. That's something you will not sacrifice at all. And that would mean that you will also sacrifice margins if it comes to that. Will that be a right assessment?
So if for a particular quarter, expense turns out to be higher than revenue, we will not overworry on that. I think that is not something we will overworry about. I think from a longer-term perspective, anything which is sustainable, I think our objective is very clear in the medium term, long term, is to grow core operating profit in a risk-calibrated manner. For us to grow that, we will require revenue growth to be higher than expenses. That is the core objective. But at such times, it is difficult for them to make more credit demand. There is no growth you assume in the June quarter. The loan growth actually -- loan book declines. It is possible our expenses will be growing higher.
That is not a quarter, not a quarter. I'm not even bothered for the next 6 months or 9 months.
Yes. In the medium term, absolutely, revenues will have to be faster than expenses. There is no 2 ways around it. And as soon as any business sees potentially that expenses can start running higher than revenue, each business would set that objective.
Sure. And just a bookkeeping question, Rakesh. If we have to exclude those 2 international accounts, what would -- what might have been the slippages this quarter?
Lower, it would have been lower.
Sequentially lower.
The next question is from the line of Abhishek Murarka from IIFL.
So a couple of questions. One, in this moratorium that you've given to nearly 30% of your portfolio, can you give some sort of understanding of which product you would have seen a higher request or a preference for moratorium versus others? The second is, in your BB, as in business banking portfolio, would you be able to give some sense of industry-level NPAs -- average industry-level NPAs pre-COVID? And any commentary around what kind of -- what you could see maybe from a 6 months, 1 year point of view? And third, on credit cards, again, if you can share some ballpark of, let's say, composition of trends between broad head, like travel, entertainment or discretionary/nondiscretionary? Any sort of ballpark there would be very useful and -- very useful. Yes, so 3.
So on moratorium, I think we have answered it earlier as well that it is spread across portfolios. I think clearly, portfolio, there, we would have a higher proportion of customers under moratorium, maybe like commercial vehicle portfolio, some of the rural portfolio, 2-wheeler portfolio, where we have given an opt-out and we have given moratorium by default. So there, the percentages will indeed be higher. Otherwise, it is spread across each of the portfolios. It's not that any portfolio is at a very low number or anything is at a very high number other than the ones where there is a default moratorium being given. As I said, that is about 10%, 11% of our total loans. So that, of course, will be a large part of that. Would have -- would contribute to the 30% number, about 30% number that we talked about. That is on moratorium. Second question was on the BB and below portfolio.
Yes. The double, no, the -- sorry, the business banking portfolio.
Okay. Yes, yes. No, the business banking portfolio actually until this March 31, the delinquency number has been extremely low for us for the last few years. And that then has continued until March 31. Of course, now we have to see how the current scenario impacts that portfolio. So from all that we have, that it's a calendar portfolio, it is very well-collateralized portfolio. It is a portfolio where we have deep banking relationships with the customers. It is not just kind of a term loan portfolio, which is there. So with all of that, we believe that the portfolio should do well. But again, overtaking is an unprecedented kind of process which is there. So we'll see how that plays out. But generally, we are comfortable on that portfolio. We don't have any industry-wide breakup there. Maybe in the future, we'll consider that. Obviously, on the credit cards, I don't have those numbers right now. Maybe separately, we'll see if we can provide those numbers.
Sure. So just squeezing in one more question, very quick one. So overall contingency provision, do you propose to keep them at a certain level, let's say, 2% of loans or 1% of loans? Or do you want to increase them to a higher level? Any sort of target there?
No, we don't have any specific percentage in mind. I think it will be a function of what we see on the portfolio, what we believe should be comfortable from a balance sheet strength perspective and how we will look at it. The provisions we have, like I said, on the NPAs, we are extremely comfortable with the coverage level. If anything, it's slightly higher than there it normally would be. On this time, because of the current COVID-19, we thought we should take a somewhat higher provision on the standard loans per se. We don't have any specific number in our minds in terms of what we'll maintain in that.
So at least in the short term, I mean notwithstanding what's happening otherwise, you would not look to take it to, let's say, 2% of loans or anything -- any such level?
No, no.
Ladies and gentlemen, we'll take the last question from the line of from Prashant Kothari from Pictet.
Rakesh, on the international losses that we have seen, just trying to understand why we are still lending to corporates who don't have any Indian connection, why we could not kind of wind up this earlier.
So I think that's something which is clearly a learning for us. I think we have been winding it down. We -- I talked about a 30% decline in the portfolio on a year-on-year basis between March '19 and March '20 for the overseas portfolio in the branches, which was not to a Indian corporates and their subsidiaries and joint ventures. So clearly, we are going in that direction. And like Sandeep mentioned, we would do that -- continue to do that in a planned and calibrated manner going forward as well. And we take your point on that maybe we could have done it better possibly.
And second question is around unsecured loans, credit cards and personal loans. How worried would you be about that or not worried about because [ of the COVID situation ]? Can you give us some sense on that, please?
One way to say is that I don't think we would be worried more about the unsecured versus other categories of loans in the current environment, current context. Like I said, 70% of these are -- these borrowers are customers who have their client relationship with us. I talked about the numbers on the proportion of customers. Within that, a large proportion is with the well-rated entities as well. So overall, I don't think the portfolio on which we are more worried than other portfolios. So we'll see. I think in the current context, things are uncertain, and what would have concerns across portfolios in terms of how things shape out, that is true for the entire portfolio. But nothing higher than that, I would say, for the unsecured book.
And just last one if I could squeeze in. [ ICICI Home Finance’s loans and advances ] has declined about 10%, maybe a bit lower. What's happening there? Because some business will want to scale up in a meaningful way as they will in the trend?
I'd say that home finance, the loan book has come down. So we would have done some -- the company would have sold securities as a part of their loan. Again, that is from the point of view of their balance sheet and capital management perspective. So indeed, we would look at growing the portfolio there. So it is within the context of the category which is there and the opportunities which are there.
Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.
Thank you, everyone. And like always, we'll be happy to take your questions. While we'll not be able to meet, I guess, in the next few weeks, but we'll be available for calls or video calls at any point of time. Take care, and be safe. Thank you.