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Ladies and gentlemen, good day, and welcome to the IDBI Bank Q1 FY '23 Earnings Conference Call, hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Renish Bhuva from ICICI Securities Limited. Thank you, and over to you, sir.
Yes. Hello, and good evening to everyone. Welcome to the IDBI Bank Q1 FY '23 Earnings Conference Call. From the management team, we have with us today, Mr. Rakesh Sharma, MD and CEO; Mr. Samuel Joseph, Deputy Managing Director; Mr. Suresh Khatanhar, our Deputy Managing Director; and Mr. P. Sitaram, ED and CFO. We'll start the call with brief opening remarks, and then we'll open the floor for Q&A.
On behalf of ICICI Securities, I would like to thank the IDBI management team for giving us the opportunity to host the Q1 FY '23 Earnings Conference Call. I will now hand over the call to Mr. Rakesh Sharma for opening remarks. Over to you, sir.
Thanks, Mr. Renish. So good evening, ladies and gentlemen, and welcome to this IDBI Bank analyst call. So thanks for attending the call. So first of all, before I hand over the mic to Mr. Sitaram for making the presentation, I'd like to give some brief background. June 2021, the results have to be seen in this context that we had 2 major recoveries from Kingfisher and Videocon and the INR 590 crores was credited to interest on recovery, interest income and INR 278 crores in TW, apart from other recoveries. In that quarter, we had a recoveries of INR 1,646 crores. So this INR 868 crores was unusual income. So the results have to be seen in that context. So that is why since high one-off income was there in June 2021. So the numbers will have to be seen in Q-o-Q reference March '22.
And overall, we have also recovered -- around INR 1,136 crores recoveries have been made during the current quarter, but these have mostly gone in reversal of provisions. So the operating profit and the net interest income may not be comparable with June '21, but Q-o-Q, there has been improvement. And if we exclude this one-off income from all base as well as June '22 number also. So the numbers will show a substantial improvement. So with that, I'd also like to mention that whatever guidance notes we had given previously, at the beginning of the year, we have been able to achieve all the targets, rather in some cases, we have been able to surpass the targets.
So like I showed that the since the bank was under PCA up to March 2021, so this is -- now we have started growing both in retail as well as corporate advances. Earlier there were some restriction about corporate. So the growth has been 12% Y-o-Y, both in retail and corporate and this is a good sign and good beginning. Apart from that, we have been able to achieve the other targets, which I said ROA of 1.3%, ROE of 14.80%, which are all above the guidelines in the information, slippage ratio is 2.5%. Credit costs, I had given indication that it will be around 1.25%. But this time, we are improving above the guidance note. And we feel that since we have been able to control the slippages, the credit cost will be less than 1%. And for this quarter, it is 0.52%. So we have made some proactive provisioning. And with that, net profit, of course, despite proactive provisioning, there has been good -- this net profit, there has been an increase of 25% Y-o-Y and 10% Q-o-Q. And the capital adequacy is quite comfortable with CET of [ 17.13% ] and total capital adequacy of 19.57%.
The digitalization, we have been making some good improvement and 95% of our customer-induced transactions are through digital channel only. So there is good investment in IT expenditures, so as to improve further our mobile banking and other areas.
And so with that now, I'll request Mr. Sitaram to make a brief presentation so that we can take questions answers after that.
I'm conscious that many of you may have to attend to other calls so I'll be quite brief. I will not run through the presentation as such. One thing to take up from where MD left off, see the -- if we exclude the one-offs, the net interest income in Q1 of last year was INR 1,727 crores. Then Q4 of last year, INR 1,881 crores. And Q1 of this year is INR 2,021 crores. So there has been an improvement steadily over the 3 periods if we exclude all these one-offs. And in terms of NIM, it was 2.8%, 3.09% and 3.26%.
So again, there is a steady improvement in all the 3. And so the highlights MD has covered that we have shown improvement on all fronts. The NIM, if we exclude this interest on IT refund in this quarter, is 3.73%. And then cost to income, we are maintaining where we are. ROA, we have crossed 1%, ROE, we are almost touch 15%, net NPA has come down to 1.25% with a PCR of 97.79%. Overall, there is a growth in advances, slight decrease in deposit. But if we look at the daily average basis, there is improvement in both savings account as well as retail deposit and the current account is almost the same on a daily average basis.
Capital ratio has improved to 55%. We're well capitalized now at the 19% and Tier 1 of 17%, more than 17%. And in terms of the other income, we have a one-off -- sorry. In the interest income, we have a one-off, that interest on refund of income tax, that is about INR 171 crores. And in the other income, we have a one-off, which is gains on sale of stake in [indiscernible] which is about INR 141 crores. The OpEx has been maintained steadily. If you remember, in Q4 of last year, we had taken a onetime hit on family pension and other things, which we could have done over a longer period, but we voluntarily decided to take the entire hit. So if we exclude that effect, we are quite steady. The OpEx is well under control. The cost to income is also well under control at 43%. Overall, there is an improvement in the PAT of 25% and 10% we compare Y-o-Y or Q-o-Q respectively.
Then quickly, NII, I have already covered. Quickly, going over to the provisions. Here, what we have done in provision is that we have taken a look at our restructured book under RF1, RF2 and RF3. We already have mandated provisions slightly above those already. But we have decided to make the anticipatory provision of about INR 777 crores. And this is for any likely stuff that can emanate from this portfolio. So that's an additional contingency provision that we have made for the restructured portfolio.
Then I will not dwell on the ratios. These are all there for you. The cost of deposit, everything trending well, reflecting in the NIM. The movement on deposits and the breakup of the deposits are all given in the chart there. Overall, I have already given you a picture that in a daily average basis, there is a good improvement. And on the -- even the net advances, there is a growth, which MD has already covered. On priority sector, we have achieved all targets. There is no deficit. So the amount of RADF and other deposits that we have, we'll keep running off and not likely to be an additional call, except for some gap in the earlier years, which are still remaining on calls and there is a scope for the RBI to call that.
On the AFS side, modified duration is quite good at 1.04. Even this quarter, we have booked the MTM losses, but they are quite moderate. And going forward also, we don't expect any unusual shocks on that side. For the overall book, it is -- modified duration is about 4.13. And in terms of PCR, of course, we already talked about 97.79%. In terms of slippage, we are at 2.5% annualized. And in terms of credit cost, we are 0.52% annualized. So this is well within the guidance that we have given and MD already guided on -- mentioned that.
And in terms of digital, I'll just make a special mention that we have taken a number of initiatives on digital. We have invested and we are going forward also, we'll continue to invest in improving the digital footprint. About 95% of the transactions -- sorry, 75% of the transactions are from UPI, which are customer induced. And over 95% of customer induced are through digital media. So we are progressing well on this. And we've also given the status of financial inclusion, where we have achievement. You could -- I will not dwell on those in detail.
What I'll do is now, I'll leave the floor for questions.
[Operator Instructions] The first question is from the line of Suraj Das from B&K Securities.
Congratulations on a good set of numbers. A couple of questions. The first is, it looks like there is a restatement in your balance sheet on a Q-o-Q basis. So the March '22 numbers have been [Indiscernible]
Audio is not clear from your line, please check.
Okay. Now is it clear? Is it better?
Yes, sir.
Yes. So sir, the question was, I mean, it looks like March '22 numbers has been restated. And moreover, I mean [Technical Difficulty] more in the line of [Technical Difficulty] So could you please let us know [Technical Difficulty]? That is my question.
Okay. So that restatement is due to RBI clarification. Earlier, they had said that the reverse repo should be included in advance -- term reverse repo, okay? So that whatever was 14 days, the reverse repo...
INR 9,000 crores.
Now subsequently, recently, RBI has clarified that, that will be only which is done through market mechanism. So RBI reverse repo is to be regrouped back with cash and bank balances. So that's the regrouping we have done.
Okay. Okay. Understood. And sir, the next question is more on the yield side [Technical Difficulty]
Sorry to interrupt you, Mr. Das. Again, the audio is breaking from your line. Please check.
Is it better?
Sir, the audio is breaking from your line again.
Is it better now?
Yes, please go ahead.
So sir, the next question is more on the yield side. I mean like there is a drop in our yield on advances on [indiscernible] basis. So just wanted to know what it looks like, I mean in terms of how many percentage the book is [Technical Difficulty]
I got the question. I will answer it. That's okay. So to answer you, first of all, the primary reason for that, what you say, a sharp fall in the yield is because of the reason which MD mentioned that in Q1, we had a onetime recovery from Kingfisher as well as Videocon, mainly. These are -- this recovery comprise a large part of interest, which was taken to interest income.
Likewise, we also have onetime like interest on refund of income tax. So if I exclude those, based on that, then the yield on advances on a daily average basis, is 8.56% for June '21, okay? And for June '22, it is 7.63%. This movement down of about 80 basis points is mainly due to the movement in the market rate. That is the repo rate and [indiscernible] rates have come down. In line with that, this yield has come down.
Correspondingly, of course, we have also reduced the cost of deposits. That is how we have managed to maintain and improve earnings. So before the question started, I mentioned that the NIM has improved, and I gave the figures also without this one-timer. And I hope that answers your question.
Okay. Okay. And sir, on asset [indiscernible], if you can let us know, what is the amount of total restructured book. The restructured provision that you mentioned INR 777 crores, is it above the COVID restructured provision, which is something around INR 476 crores?
Yes. Under COVID, the Slide #26, we have given the COVID restructuring provision, which is INR 476 crores, that is existing, which includes a mandated RBI provision. To that, we have added this INR 777 crores. So we have about INR 1,240 crores against a book of about INR 3,100 crores. So we consider this to be quite adequate. We are not seeing really any high level of stress emulating from that. But since we are only in Q1 and the entire industry wants to see the remaining 3 quarters also to go by to be able to assess exactly what will be the stress.
We are in the surplus.
Yes. So I think most likely, this will be more than enough. There will be extra provision here.
And in fact, the restructuring book, as you had asked, it has come down. March '22, it was 3.42% of our advances -- standard advances book. Now as on June '22, it is 2.98% of the advances book. In corporate, of course, INR 356 crores because one of the group accounts was their retail that has moved to NPA, all of you know. The remaining all, the retail more or less either accounts have been out of restructuring book or some reduction is there about INR 200 crores. So base has also increased. So that's why the restructuring book percentage-wise is now 2.98% of the standard gross advances.
[Operator Instructions] The next question is from the line of Pranav from Rare Enterprises. Please go ahead.
First of all, thank you for actually ramping the presentation and advances slide correctly, and thanks for noting that from the last call. And sir, second thing is also, you have included other income that has also solved our problems a lot. I have just 2 doubts to start with. First of all, the INR 777 crores provisions that you have done on the restructured book that you are mentioning the notes to accounts, where in the P&L, it has hit because you have also given in the subsequent slides, the provisions and in that there is no figure standing out as large as INR 777 crores.
See that is accounting presentation. So, we have made anticipatory provision on cases like future. In March, it was before they slipped. Now when they slip, it will move out of standard as a provision to NPA provision. Likewise, there are movements in and out of standard asset provision. And what is reflected in account is the net of all these accounting debits and credits. So this additional provision that is made, INR 777 crores, is also included in that. But you will not see the figures straight away there because of all the various other movements which are there.
Right. Right. So it is somewhere clubbed in that split of provisions that you have given?
Yes, that is right.
So sir, in that case, can you just specify what is the actual restructured book in terms of amount, COVID and non-COVID because I remember that previous quarter, it was around INR 7,931 crores combined COVID and non-COVID.
COVID is INR 3,422 crores -- INR 2,983 crores. And then remaining is [ S4A INR 491 crores, 5x25 ] INR 306 crores, another INR 684 crores. So total restructured standard book is INR 4,064 crores. It is, as I had indicated earlier, 2.98% of my standard advances as of June 2022.
INR 4064 crores is the total book?
INR 4064 crores, yes.
Yes, it is the total, including all.
Including earlier S4A, 5x25.
Okay. And on that, you have INR 777 crore restructured provision that you have done this quarter and plus restructured provisions from the last quarter?
See, this INR 777 crores plus that INR 460 crores is only against INR 2,900 crores, which MD mentioned, of the restructure. The remaining 5x25, S4A, all that they had their own provisions as mandated by the Reserve Bank of India.
Right. Right. That is 1 question. Second question is that can you just mention a little bit in a slow speed exact NIM for the last quarter?
Sure. Sure. I'll repeat the figures. June '21 -- first I'm reading out the NII in calendar sequence. INR 1,727 crores, INR 1,881 crores and INR 2,021 crores, okay? Now NIM, again, in calendar sequence, 2.80%, 3.09% and 3.26%.
Perfect. Okay. Sir, on this core NIM, what is the guidance, like what could be the core NIM for us?
So we have been -- like last year, I also indicated, core NIM will be above 3.25%. We will maintain above that. And this June quarter, core is 3.26%, so that is -- I think we have been able to achieve the target.
Sir, for the quarter, the slippage, is there anything coming out of the ex restructured book that has also contributed to the slippages in this quarter?
So this corporate book, like the NPA, if you see the slippage breakup, out of INR 964 crores, INR 443 crore is from corporate. Out of that INR 443 crores, INR 356 crore is coming out of that what we had mentioned.
Future cases are all restructured on this [indiscernible].
So INR 356 crores. Remaining all is only 1 account. So only 3 accounts were there, 2 from Future Group and 1 from other. So that now -- that's why the restructured book has also come down in corporate.
Right. So only INR 356 crores -- so INR 356 crores was...
From corporate and a little bit is there from retail, not much.
So this INR 356 crores is from restructured book, previously?
Yes.
[Operator Instructions] The next question is from the line of Renish Bhuva from ICICI Securities.
Just a couple of questions. So one is on the slippage side. So sir, out of total slippages, how much of these slippages have flown from the standard restructured book this quarter?
Yes. We mentioned the COVID restructure. So if we remove that, okay -- from the standard -- sorry, I didn't -- From the standard restructured book, hardly anything is there. So when you say standard restructure, other than COVID restructure, so we have this 5x25 and the S4A and other restructuring. Hardly any cases have slipped from that.
In fact, I will probably say 0.
And from COVID restructuring pool?
That is what we mentioned that the future that INR 356 crores.
INR 356 crores is corporate and INR 92 crores...
INR 92 crores in retail.
Otherwise, all accounts are running fine.
Got it. Got it, sir. And sir, secondly, this is more or less on the industry level, okay? So maybe we have seen this, the corporate credit has been sort of getting the pace from last 4, 5 months after almost 4, 5 years of muted credit growth. So what is your experience in the corporate segment? I mean, you guys also sort of see that corporate demand is picking up and it will sustain going ahead?
Yes. I think 2 or 3 factors are in place simultaneously. One, as you said, after 4, 5 years of muted investment cycle growth, investment cycle is back on the table. But that has not contributed to the growth so far. That is still in the process of being tied up and disbursements from new investments are to happen. But if you look at working capital drawing, I think there is increase in the utilization of working capital. One, there is a capacity implantation pick up in the corporate. Cost will push inflation, which has increased the value of the inventory health and the drawing power or the utilization under the working capital [indiscernible] already sanctioned have also increased. So a lot of borrowing from the bond market and money market has come back to the loan market now because the interest rate from the bonds and the money market moved up much faster than the NPLRs of the bank. So this is a multifactor play, which we are seeing some push in credit uptick.
Got it. Sir, just a follow-up on that. So on the last point about the rate transition, which is a bit faster on the money market side. So would you put it under the seasonality? Or do you feel this trend will continue given there is more rate hike likely?
I think this will continue at least for this year, full year 2023. After that, we would have to see where interest rates stabilize.
[Operator Instructions] The next question is from the line of Pranav from Rare Enterprises.
Sir, can you just highlight what are the steps now taken for divestment of government's stake? What are the -- so there was a news in the media that government is asking for some -- in some -- something from RBI, which will ease the process.
Actually, as you are aware, this entire process of disinvestment is being held by [indiscernible] and they are the seller -- basically, they are the owner of the bank with like 45% share with government of India and 49% with LIC. So the entire process since it is being handled by them. So they are only running the process. So I think this -- they will be in a better position to answer on this investment question because we are only aware whatever is coming to media. Otherwise, as such, they will be the best person to answer this question. I'm sorry.
In terms of your cost of employees, is it safe to assume that now this quarterly run rate of around INR 717 crores will continue? And then there will be a nominal inflation of 10%?
Yes. I mean we have to account for DA change. That is one. Plus also, you have to remember that we have not done any major recruitment for nearly 4 years, mainly because we are under PCA. Now as business expands, and of course, we are pushing on digital, but still we'll require a little more on staff complement also. So some amount of addition to staff will happen and that will also raise the staff cost a little. But I believe that this is -- it will increase, but it will increase by a small amount. We are not anticipating too much on the AS 15 until this interest rate regime actually has a different impact.
Sir, can you upgrade the recoveries to be much more than what you had guided previously of INR 4,000 crores because this quarter itself, it was very good? IBC is still to catch full steam. So can we expect that the recovery and upgrades will be higher than INR 4,000 crores for the year?
We are maintaining our guidance at INR 4,000 crores.
INR 4,000 crores, we have estimated for the full year. Although like pro rata almost INR 1,136 crores we have been able to recover. So let us see, we will remove the position at the end of the second quarter. But as of now, we are retaining the target at around INR 4,000 crores only.
Right. Right. Right. There was one SK Energy or SK Power, something like that in Orissa, which was recovered this quarter. So do we have any exposure to that?
I don't think so. No. no.
And last question from my side. In the IBC pipeline, are there any big accounts that you see are on the [indiscernible] for resolution, where we have considerable exposure in this year?
We have Videocon coming up, but we'll have to wait and see.
Right. And what is the exposure that we have for this account?
Videocon, already we have...
Around INR 4,500 crores.
Yes, INR 4,500 crores.
And we have fully provided for it, right?
Yes, we have fully provided for it.
And what is the expected recovery, like it will be 20%, 30%?
Too early to say.
Too early because the last date for receiving is still -- we are still in the process.
[Operator Instructions] As there are no further questions from the participants. I would now like to hand the conference over to the management for closing comments.
So thank you very much for attending this conference, but we are aware as Mr. Sitaram said, you have to join some RBI conference also. Thank you very much despite the busy schedule, you have spared time. And thanks to ICICI Securities also for organizing this event very nicely. Thank you.
Thank you.
Thank you, sir.
Ladies and gentlemen, on behalf of ICICI Securities Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.