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Ladies and gentlemen, good day, and welcome to the IDBI Bank Q4 FY '22 Results Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Divya Purohit from ICICI Securities. Thank you, and over to you, ma'am.
Good evening, and welcome, everyone, on behalf of ICICI Securities. I welcome you all to IDBI Bank Limited's results call. Today from the management, we have with us Mr. Rakesh Sharma, Managing Director and CEO; Shri Samuel Joseph, Deputy Managing Director; Suresh Khatanhar Deputy Managing Director; Shri P Sitaram, Executive Director and CFO. Thank you, and over to you, sir.
Thank you, madam, and good evening, ladies and gentlemen, and welcome to the IDBI Bank's quarter 4 financial year '22 and financial year-ended 31st March '22 conference call. So I'm Rakesh Sharma here.
Just to begin with, of course, the detailed presentation will be made by our CFO, Mr. Sitaram. Just want to say some few words. One is that in the last 2 years, we're affected by COVID as all of us know. And as far as IDBI Bank specifically is concerned, from May 2017, it was placed under PCA and that PCA was lifted in March 2021. So that way, this last year was the first year when we were out of PCA, though the first half was affected by COVID also. That's why the performance was affected to some extent.
But today, when we are out of PCA and we are discussing about the financial results for financial year 2021/'22, I'm happy to say that the bank has achieved the turnaround and the turnaround has really happened. During this 4 years' period when we were under PCA, we have taken a lot of measures both financial and nonfinancial. Nonfinancial, when I say it, in as far as this organization restructuring, revision of all the policies, credit policies, risk management policies and strengthening the compliance part and strengthening other various measures, follow-up mechanism, collection recovery, EWS and all these things, which has helped us achieving the turnaround and which is reflected in the year ended results, which, as I said, detailed presentation will be made by CFO.
But main factors I would like to invite your attention that the bank has achieved a net profit for the continuous 2 years. And during the current year, the net profit has increased Y-o-Y 79%. And the ROA, we have been able to achieve 0.84% of ROA and 13.60% of ROE. And the main issue during the last 4 years we were facing was that our balance sheet was degrowing because we were under PCA. Especially because of that, the corporate advances, there was a reduction in the advances level, though in retail we were growing at a robust pace. But the mid-corporate and large corporates were showing a decline.
But now for the first year, we have been able to show growth in all the sectors, retail as well as corporate. And the overall growth has been 14%. Retail has grown by 7.06%. So that way, this -- the growth momentum has started.
Now our emphasis was also on reducing the cost of deposits and cost of funds because we knew that since our -- the advances side was not growing, rather it was degrowing, and as a result, it was affecting our aggregate interest income. And due to the declining interest rate scenario also, the overall aggregate income was affected. But we were able to reduce the cost of deposits substantially. So by increasing the low-cost deposits, the CASA deposits have increased to 56.77%, which is, I think, one of the highest in the industry. And the cost of deposits also, it has declined to 3.56%. So the SA bank and CASA, that current account, both have shown growth of 14%. Both in percentage-wise and amount-wise, there is increase.
Net NPA, which was around 17.30% as of 30th September 2018, it has come down to 1.27%. And GNPA also, which was 31% as of 30th September '18, has come down to 19%. Of course, I will agree that the GNPA level is high, but the main reason is that we have not been doing technical write-off for the last 3, 4 years because of some tax reasons. If our -- do the technical write-off all our 100% provided accounts, while GNPA will also come down below 2%.
The provision coverage ratio has increased to 97.63%. And the capital adequacy also is quite robust at 19.06%. Tier 1 is 16.68%.
If you see that the last time when the LIC and government of India, they had given us capital in September 2019. So after September 2019, now 2.5 years, we have not raised except that QIP of INR 1,435 crores, which we addressed in December '20. After that, we have not raised capital. So whatever the growth improvement in capital adequacy has happened, it has happened through internal generation of resources.
So we have been quite proactive in making the provisions. Even the CFO will explain that stress [ as such ] stabilization fund, which I had mentioned last year, we had made assessment that how much shortfall is expected to be. And accordingly, we have made a short provision of INR 2,000 crores. And I can mention that out of INR 2,000 crores, INR 1,700 crores provision was made when we were earning profits. So otherwise, the profit would have been higher by that amount.
But now this quarter also, what we have done that as a proactive measure, whatever the balance securities are remaining, those recoveries may happen, we have made the full provision, although the time for SASF is up to 30th September 2024, 2 more years are there, we have made a full provision for the outstanding security. And whatever recoveries happen in the next 2 years or if we decided to pre-close the SASF, so that the recoveries will add to the bottom line.
So that way, like the number one, productive provisioning has been made, the balance sheet has been strengthened, turnaround has happened. And now since we have started growing also, in the total revenue also you will start seeing the increase from this year onwards.
So with that preliminary remarks, I will hand it over to Mr. Sitaram, CFO, who will give you the detailed presentation. Thank you.
Good afternoon, everyone. So if we go to Slide #5. The major highlights for the financial year. The profit after tax has improved by 79% to INR 2,439 crores. Operating profit has increased by 7% to INR 7,495 crores. NII has also improved by 7% to INR 9,162 crores. NIM has improved by 35 basis points to 3.73%. And if we exclude the impact of interest on income tax refund, NIM stands at 3.59% for the year, it is also a similar improvement of -- in fact, a bigger improvement of about 73 basis points over last year.
The ROA has gone up to 84 -- 0.84%, and the ROE stands at 13.6% Overall, the cost-to-income is at 45.89%. This includes the impact of the entire amortization that we had taken for family pension of INR 266 crores. If we had restricted ourselves to only the period charge-off, then it would have been lower to about 43.5%.
Capital adequacy, as already mentioned, is quite comfortable and RWA is controlled, and in fact, there is a marginal reduction. Overall, it stands at about INR 1,54,000 crore.
Cost of deposits and cost of funds have improved, not only in tune with the movement in the market interest rates but also due to improvement in the composition of funds for us in terms of CASA. Within that, both CA and SA have shown improvement. CA had dipped in between due to the RBI-mandated correction. But after that, again, CA has also started showing improvement and now SA also improved. Overall, both in terms of amount and percentage, it has reached to 56.77% and that is a growth of about 6.3% compared to last year. Yes.
And now the retail corp rate is steady at about 63:37. This is more or less where we had targeted it to be. And going forward also, we are looking at it more or less plus or minus a few basis points here and there, it will be on this line.
The net NPA has improved significantly to 1.27%. GNPA without any technical write-off has improved by about 3% to 19%. And PCR has further improved by 70 basis points or so to 97.63%.
So coming to the next slide, so I think I have covered all this. As I mentioned, the family pension effect if we remove, then the cost-to-income would have been even lower than this. We were committed to RBI to maintain a cost to income below 50%, and we are well within that.
Coming to the Slide 7. Here again, as I said, the net NPA, the GNPA and the PCR that I already mentioned have shown significant improvement. And capital has consolidated to 19%. There is a reduction in the RWA by about 185 basis points year-on-year.
On the Page 10 -- the Slide 10, we have a snapshot of the PL. The improvement if we compare March '21 to '22, in the NII, there is an improvement of 7%, the total income of about 6% and in the operating profit of about 7%. In this, if we exclude one-offs, that is INR 1,300 crores interest on refund of income tax received in fourth quarter of last year and corresponding to INR 350 crores in the third quarter of this year, then the improvement is even better. NII has improved by 22%, the net total income is 15% and operating profit has actually gone up by 25%.
Coming to the next one, a little more detail on the NII. One can see that year-on-year basis, there is an improvement in the interest on advances. However, the interest on investments has come down. This is largely because we have capitalized on the interest rate in the Q1 and we have sold off to record our valuation gains. And other interest income, there is a reduction. That is mainly because of the movement of the interest on refund of income tax.
The interest expenses have moved in line with what I have said, that is both in line with the market rate as also the change in composition of the liability profile.
Overall, the NIM percent, which is with and without that effect of the interest on the IT refund we have given here, whichever we look at it, there has been a meaningful improvement in the performance of the bank.
So the next slide, it gives just how the buildup has happened both for the PAT for the quarter as well as the PAT for the full year. And on the PAT for the full year, you can see that the NII and -- there's a reduction in provisions and contingencies have been the major contributors to the 79% improvement in the PAT for the financial year.
If we come to Slide #12. This is the breakup of the other income. Again, more or less, in terms of commission fee and brokerage, we have maintained the trend of the last year. And with actually our entire post-PCA activity commencing towards the second half of the year, we look forward that this contribution from the commission and the exchange and brokerage will come now not only from a growing retail but also from enhanced activity on the corporate side.
Loss/profit on investment, as I said, we had recorded along with the industry at the time when it was opportune. Now possibly going forward, that would be a little muted.
On the other thing on the ForEx, of course, recovery from written-off cases, we had done well this year. But going forward, the number of large ticket cases would be less. Therefore, one can expect that recovery from written-off cases would taper off a little over the next year. Miscellaneous income will maintain around the same level that we have.
On the next slide is the provisions and contingencies. Here, the main feature -- we have done everything. The main feature that I would like to point out here is that we have pointed out that we've made full provision for the outstanding amount of the bonds, representing our interest in the SASF. The reason that we have done this till last quarter, what we're doing is estimated in the remaining possible recovery for the 3 years of the residual period and providing further balance.
However, we took a call now so that we could have our hands free to decide on the future course of action on what we can do with SASF. With this, now we are armed with much more flexibility and take much more pragmatic decision to ensure that the value, which is residing in the SASF up until now we capitalize on it in the best way possible. We'll explore all revenues now that it has been fully provided.
We have not done any technical write-off in this quarter. So the -- whatever bad debt written off is right up to December plus whatever on the -- what is essentially required on the retail and the SME side. Other than this, we have done every provision that is required as per RB and ops, both for the nonperforming, the standard assets as well as the restructured assets.
So just coming to the next slide on the yield ratio. Yield has improved a little for the financial year if you see that both on quarter-on-quarter and year-on-year, it has improved. However, these trends will reflect the movement in the market rate as we go along and as we improve our corporate book activity.
On the NIM, we already mentioned that it has improved to 3.73%. It includes the impact of that interest on refund. Without that, it is about 3.5%. And the cost-to-income has also improved. As I mentioned, it includes the impact of the onetime write-off on family pension benefit.
Yes. Now coming to the next slide, this is the trend in the cost of funds, cost of deposits. These are figures already known to you who are tracking the bank. It's in line, as I said, with the movement in the industry as well as the changing in composition of our liability profile.
Coming on to the balance sheet. Basically, this time, we have crossed INR 3 lakh crore as a balance sheet size. And the advances overall have grown on a net basis by about 7% and gross advances by about 10%. Anyway, we'll discuss the future tender there.
Then coming to the next slide on the business performance. This again summarizes what we have -- the MD and I have stated till now that is the total deposit has grown and the composition in that deposit in terms of current account, in terms of savings account, also in terms of retail term deposit has grown. Overall, term deposits seems to have declined from 49% to 43%, but that term includes the bulk part of -- sorry, in the bulk now it has come down from 11% composition from last year to 5%.
In -- coming to the next slide, again, quickly. I will say that the book of savings and the book of retail, book of current all have grown. And their contribution to the overall deposit profile has also improved.
Coming on to the subsequent slide, this is the gross advances breakup. More or less, as I said, that we had stabilized that at about the mix of corporate and retail. And I think that's where we'll be maintaining plus or minus some 3% to 4% on either side. This would be the trajectory going forward.
On the structured retail asset, we continue to be heavy on the home loan -- the mortgage and the sector home loan. But we will -- as we had said earlier, we have put in place systems and we are also looking to activate various other products both on the [ SME ] and the agri and on other retail loans to widen the portfolio base as also to enhance the growth from all possible components.
Gross advances, as I said, have grown by about 10%. And largely, we now have advances mostly only in the GIFT City branch. Otherwise, it's all domestic.
So coming to the breakup of these advances. You can see that, first of all, on the corporate and retail, as I mentioned, now it is fairly steady direction in which it is going. The standard gross advances also, more or less the composition is stabilized now. And so the ratio between corporate to retail is also a very -- even keel. And net advances have shown an improvement of about 7%.
Priority sector, which is the next slide, we have achieved all our targets. And overall, of the PSLC, bottom, sold, we are net positive which has contributed to P&L.
On the treasury operations. Again, in terms of modified duration on the AFS book, we are well placed to meet the raising interest rate scenario. And overall modified duration is also fine. Even in terms of PV01also, we are quite comfortable.
So here, we -- look, we'll go on to the next slide, that is on Slide 26, the COVID-19. On this, as far as the restructuring is concerned, we are maintaining all the required provisions. As per the outstanding balances, we are maintaining that INR 415 crores provision.
And then in the earlier provisions that we had made, out of that 2 components, we had taken out. And on that now, as I said, that we have also made new provisions that I already described here, both in terms of family pension full amortization, also in terms of SASF [ full amortization ].
On the asset quality nothing much to add. This is where it stands. We have not done any technical write-off. So despite that based on the recovery that we have achieved and other settlements, the gross NPA has improved to 19% and net NPA has significantly improved to 1.27%.
So the next slide is on the NPA movement where we had given our achievements in terms of settlements, upgradation and written off.
The advances portfolio includes this type of an amount of about INR 9,000 crores under reverse term report. This is as per the recent RBI master circular. Therefore, we have given some of those figures with and without all this so that you'll be able to analyze the way you would prefer to.
Now coming to the NCLT, this is the position. More or less, I mean, NCLT now that things are stabilizing we can expect that this year there will be a little more movement in the cases pertaining to NCLT and perhaps some amount of recovery is possible. But the big ticket cases are not so many there. In terms of volume perhaps it will increase, but in terms of amount, it will be not as significant as it was earlier.
On the SMA, there is an improvement overall to about 3% of the portfolio now at total. Out of which, the SMA 0 is quite small and this has, of course, taken into account the restructuring that we had done under [ RF1 and RF2 ]. We'll be watching that portfolio as we go ahead. And as of now, it is not possible to say exactly how that portfolio will behave. Definitely requests to be looked at and watched closely and which we'll be monitoring quite well.
The capital slide, I have nothing to add. We already discussed this. Shareholding pattern. Again, there is no -- nothing much to mention. It is more or less the same.
On the -- this is just a bit about the digital footprint that we are having on that. So in financial year 2021, out of the customer induced financial transaction, about 91% was digital. And this year, it has improved by 3% to 94%. And you can see that out of that, the large share has been taken by UPI, which is no surprise. I mean, there have been so many [indiscernible] reports upon this phenomenon.
And now coming to the next slide. This is the overall digital footprint of the bank, which is improving. Now that we have come out of PCA and everything, we do have much more freedom now and we'll be working a lot more to improve this footprint through various other emerging means to engage the customer and improve our business.
A snapshot of all the digital products that we have introduced and are introducing. And you will continue to see some more announcements and actions on this side as we go forward into this year.
On the financial inclusion, I think we'll not spend too much time on this. Just at both slides, both the MUDRA achievement on that.
So we come down to subsidiaries. All reported profits and improved profitability.
I think just on the last slide on the guidance. Okay. Going forward, just next year we are looking at a growth rate of about 10% to 12%. And as I said, that 63:37 can go to even 60:40, a little here and there. But around, this is the balance that we would like to maintain.
The credit cost and net slippage we expect the credit cost to improve to about 1.5%. And slippage also, we expect it to improve to about 2.5%. This improvement here is also because of that [ RF1 and 2 ] book that we have, which we have to see how that plays out.
On the ROA, we expect now to cross 1% next year. We are poised to do that. And the ROE, of course, above 14%. And CRAR, we'll definitely maintain above 15%.
On the GNPA, that one is, of course, there is a possible transfer to [ NA or CL ]. That and plus recovery altogether, I think we would be looking to bring down the GNPA to about [ INR 4000 crores ]. And on the NIM, we'll be looking to maintain at least 3.25%.
On the retail, of course, as I mentioned, we have much more detail or color given by the DMD and MD, but we'll be working on many fronts to improve and broaden our retail portfolio.
Cost to income, we want to maintain below 48%. And that's it. I think as far as the coming year is concerned, these are some of the highlights that I wanted to mention.
I will stop here so we can start [indiscernible].
[Operator Instructions] First question is from the line of Chintan Shah.
One question largely on the recovery front. So sir, given that the momentum has been strong on the recovery front, so any guidance what we are expecting recoveries for FY '23?
Now this, like last year, as you know, we had a target of INR 4,000 crores. As against that, we have been able to recover INR 5,320 crores. So this INR 5,320 crores includes everything: a recovery in cash and the recovery in [indiscernible] account and some part which has gone to interest.
So this year, because now most of the big accounts mostly have been settled, there are small accounts are there, but still we are expecting a total recovery of INR 4,000 crores during 2022/'23.
Okay, okay. Got it. And probably, sir, this might even break on the higher side, but chances are breaking on the lower side is less, right?
Yes. yes.
It can even be more than INR 4,000.
In fact, so far, if you have seen last year, whatever guidance note we had given where -- exactly.
Yes. It is -- yes. yes.
We had given up to 0.7, but we are quite for most of that...
Yes. Yes. I think most of the parameters, we have overshooted the guidance.
We have shown the better performance.
Yes. And this is likely to sustain in the coming year as well, right?
Yes, Hopefully. Yes.
Yes, yes. And sir, so just one thing largely on the macro part, so probably the year of bankers saying that growth is likely to come back. CapEx is likely to drive growth back. So I just wanted to get your thoughts on -- when are you expecting the CapEx cycle to kick in and whether it would be driven by government or by private CapEx or who will take the lead? And any guidance on when it can start?
Since the -- if we look at the data, the macro data is not that strong on the industry. The credit growth is not strong for the industry. It is going on the retail front, but industry growth is not picking up.
Yes. Chintan, you are right. The private sector investment cycle, which was expected to kick start in 2021 has got delayed for various reasons. COVID to begin with and later on, some uncertainties around the world. But given the push made on infrastructure by the government and also the PLI scheme approvals given by the government for various sectors, we expect the private sector CapEx cycle to restart because there are in higher terms of around 4 to 5 years on private sector CapEx and capacity expansion [indiscernible]. but we are already seeing green shoots.
If you are aware, in Q4, certain marquee projects have already got funded. They were funded in no time at all like the Navi Mumbai Airport or the coastal road project. So we are seeing green shoots in private sector CapEx investment, so to say.
But other than that, as a bank, we will take a very calibrated approach on such large infrastructure projects because our book already has a slight concentration on these large infrastructure projects, but our concentration will be on [indiscernible] expect to revise the CapEx cycle and also light manufacturing like pharmaceuticals, auto components so on and so forth.
But another point for -- in favor of corporate credit growth will also be the working capital draw downs, which are already started to have -- we are already seeing drawdowns increasing in Q4 itself. For instance, highly rated corporates, which were barely driving fund-based working capital limits from the banking sector as a whole. This is for the sector as a whole.
We have seen drawdowns increase in Q4, mainly because of the input costs going up. For instance, a lot of these core sectors, companies import coal or stock coal, coal prices have gone up. So the working capital holding has gone up and brought out a, in fact, we are seeing even request for enhancement in sanction limits happening.
So overall, we estimate '22/'23 to be to see banking sector will see a pickup in the corporate sector credit. Overall, that should happen in '22/'23.
Okay. Okay. So it means basically for your discussion with the bank means your clients that is [indiscernible] CapEx is likely to start. So -- but then any -- so are there any reasons that why that it can be deferred further from here on? So for example, due to some macroeconomic issues or geopolitical concerns,this blenders are deferring from doing the CapEx. Is that the case? Or now they are ready now go ahead and do the CapEx?
No lenders are not deffering. There was no pushback from the lenders. But private sector was not investing in the last couple of years. For reasons of lower growth [indiscernible]....
Yes, sorry. So I mean, so you are private sector. So now is the private sector still deffering or still deffering the same or now they are ready to invest?
They are ready to invest now, but
Okay -- so now we can -- sorry.
There are still uncertainties in the macroeconomic front, especially on the global front on the war and other measures. There could be unforeseen things which could develop in the CapEx front also because whenever there is uncertainty, private sector will defer their CapEx plans.
But as of now, we see projects taking off from the drawing board stage and coming to the banks for financing. So we are seeing that trend already.
Got it, sir. And sir, one thing on the housing loan dilemma. So if I look at our housing loan portfolio, it has grown roughly 10 percentage during the year. And if you look at the RBI housing loan data, so that is also showing roughly 9%, 10% is growth for the housing loan. But so in sort in case of some banks, some private sector banks, they are reporting a very high number of growth, very high number growth in housing loans. So where is the consumer I think each and every year is reporting 10% take or above. So who is undergoing in terms of housing loans? Any clue on that means -- or why [arbitized] showing only 9%. Shouldn't it be higher?
So Chintan, there is a complete liquidity play in this market. So all those banks who are flushed with the liquidity have lowered their rates, and they mostly they are pretty much due to use this time in this business, balance transfer's happening.
yes yes
So overall, if you see, there is a growth of about 9% to 10%. And our growth is also in line with that for our home loan product.
So only there are some few banks where because of the liquidity and the interest rate play, this shifting in some pockets. Otherwise, the overall economic growth is like this.
[Operator Instructions] The next question is from the line of Bunty Chawla
Just one query. As we see the provisioning line item, as we have shared on Slide 13, so it seems to be, there has been a high deprecation on the investment part, and we got a reversal in the provisioning on the NPA as well as the tender assets. How one should see this number? Because I believe there is -- still, there has been a Q1 stability in the loan book. So why there is a decline or reversal in the standard assets on the provision part?
The decline in the standard asset provision. As I mentioned, that we held COVID provisions as in the slide that we gave, which we have now -- we did utilize those provisions as and when the stress came, whether from COVID or from other sources. We continue to make provisions from that directly charging it to peer. So this -- as on March now, we have taken a reckoning now that in terms of the RBI circular [indisernible] on the status of the COVID.
We have retained that extra provision that we have made of about INR 116 crores and the remaining thing is what we have taken back to PL. That is why you will see some amount of credit on the provision.
On the investment side, the additional provision is coming because of the item that I explained. That is the full provision for the securities representing our interest in stressed test stabilization fund. So that is the main aspect of that movement there.
But whatever provision has been utilized has been used for additional provisioning on SASF and as we mentioned and other.
[indiscernible].
So in fact, that has not the profit is coming from the operations only. So the set up...
Effective provision that we have made is more than that what we had taken out. That INR 266 crores additional write-off, it will reflect in OpEx. So that also can take into account that. So overall, for sector, we had done additional provisioning.
So in short, can you say there is no forward provisioning as of FY '22 already. All the [indiscernible] has been completely utilized.
No.
You don't...
First of all, there is a provision of about INR 415 crores. That is the provision mandated for reservations framework 1 and resolution framework 2 as for the 2, 3 percentages that RBI has mentioned in the respective circulars for the assets that have been restructured under those 2 frameworks.
Over and above that, we had made certain additional provisions, which are prudential have cautious. Again, it starts up with the RBI circular. So the first one that we had made INR 116 crores was based on that RBI circular, but we continue to add to that on a voluntary basis, which are accumulated to about INR [8833] crores. Out of that, which was not against any specific asset, we retained the INR 116 crores, and the remaining amount is what we had taken out. So we do have COVID provisions still, INR 415 crores for the restructured assets and INR 116 crores, which we have continued to hold against the initial COVID provision.
Our next question is from the line of Pranav Tendolkar from Rare Enterprises.
Sir, just a query. So in your slippages data or in the movement of asset quality data, you have said that there is a INR 160 crores write-off, but in provisions data on the write-offs, bad debts written off is INR 529 crores. So can you just reconcile to because I think that the bad debts written off provisions should be less than the loans written up during the quarter? So is there something else there?
Sure. Just a second, okay?
Yes
This INR 160 crores is for the quarter 4,
Right
okay? Now you're -- as against INR 160 crores, you're referring to PL.
Correct. In the provisions in the PL, the bandwidth written-off provisions is higher, higher number. It's around INR 529 crores for quarter ended March '22, on slide, I think Page 13 or Slide 14.
Yes. So that INR 529 crores write-off an is that includes settlements. Okay. So that really is not a write-off, but so what we do voluntarily is what we have shown as write-off in the NPA movement. But in terms of accounting, even if 100% provided case, I recover something, what we do is to show on a gross basis that the entire principle has gone up or to the extent not recover, I had to show it as a gross write-off. And correspondingly, there is a gross reversal of provision held against that also.
Okay. Okay. Okay. So that will be in the standard assets or provision for NPAs
Yes.
In the P&L?
In the PL. In the provision side, NPA.
Okay. Got it. Got it, sir. Sir, also, can you just guide on net interest margin going forward?
We are expecting to maintain at least 3.25%, that is the guidance we are giving.
Right. Right.
This is without one-offs. I mean I'm comparing with that 3.5% that we achieved for the year. Yes.
Right, right. So also, any monetization from the subsidiaries or, or any [indiscernible]?
Yes. MD will answer.
Okay. So like now as you have seen, our capital adequacy ratio is quite comfortable. We are at 19%. And even Tier 1 is 16.68%. So as such, for raising capital or for strengthening capital, we do not need any monetization now. But at the same time, for some like legal statutory requirements. So like this RCL, we are in the process because NARCL now we have invested so that RCL we will be doing partly. So this may materialize during the current financial year. Same way that our IDBI mutual fund because LIC is our holding company they are holding 49%, and they also have mutual funds. So that's why as for SEBI requirement, both of us, we cannot have it fund. So that also is under process.
So the third one is that this NSDL, we are holding 26% share. But now as per their requirement, SEBI requirement, we cannot hold more than 15%. So 11%, we will have to dilute. There is a time limit for that. So that only we will be monetizing.
And fourth and the last one is that Ageas federal life insurance, where we had earlier diluted 23% that time was there. But at the same time, the Ageas other our joint venture partner, they had opted for that call option. So whenever they exercise that call option, so that remaining 25% will be monetized. So these are basically like for this type of requirement these subsidiaries, we may monetize during the current financial year.
The next question is from the line of Jai Mundhra from B&K Securities.
I have a couple of questions. So firstly, sir, on your write-off, so your loss [indiscernible]. I have a couple of questions. One is on your write-off policy, so we have INR 22,500 crores of loss assets which are 100% provided. And this, of course, moves the in the reported write-off as a much higher number. And in this quarter, we have done a very miniscule write-off. So wanted to check, sir, what is the write-off policy. These assets are already lost assets, 100% provided. So I mean what stops you from writing of these assets and bringing down your GNPA? And what is the thought process there?
The thought there is that we are carrying certain amount of double tax asset, which is significant. And the component there -- of course, the larger component is towards the provision, but we also have business loss there. So any technical write-off that we do will move the double tax asset from the provision to the business loss category.
As you know, that the business loss category has a limited life, whereas the provision has gotten unlimited life. So any call that we take here will have an effect on the average life to utilize this. So that is the main consideration which is there.
Okay. And I at least have understood some portion of it. Okay. And sir, right, you said that there is some accumulated losses that we are carrying. We may have set it off against the securities premium from a dividend perspective. But we are still carrying some business process, right? But we are still paying income tax. So for this year, we have paid around INR 1,100 crores of at least tax provisions. So why are we still paying tax? I mean, how does this work?
Two things. One is that write-off has not yet happened, is subject to NCLT, that is yet to come. But yes, the proposal is at the final stage.
Second, on the provision for income tax, it is basically a reversal of DTA. It is not [indiscernible]. So we are utilizing the DTA. So if you see the balance sheet side also, the DTA drawdown has been different there.
This is DTL?
DTL [indiscernible] Yes. So there is a small amount of provision, of course. That is because some earlier years as and when appeals and further appeal gets settled, so sometimes, we have to reverse the provision. Sometimes we have to make marginal additional provisions. So those cannot be set off against DTA. For that, we have to make a small provision. But those are minor. Mainly, it is a DTA utilization, which is happening, not a fresh payment or anything.
Okay. Sure. And sir, on your CET1. So in absolute terms, this quarter, CET1 has increased from 21,000 roughly to 25,000. 700. 800. So around 4,400, 4,500 kind of an increase. I think you had mentioned that there is some portion coming out of reval, and of course, you would have had full year profit into this. But if you can still explain that what are the moving parts here? So how much has come from Reval? How much has come from PAT? And is there any other third portion here?
Reval] will contribute only marginally in the Tier 2, okay? So the main increase is because till December, we cannot recognize year-to-date profit. That can be taken into account only when we reach the year end. So as of March now, the entire year's profit has got added to the Tier 1. So I had mentioned in December -- or in September that the capital adequacy that we are reporting is without taking into account the year-to-date profits.
No. But sir, even if I were to add the profit, it will add around INR 2,500 crores?
Yes in terms of utilization of DTA. Now DTA, there is a slightly complex formula Some part of it is reduced from Tier 1 and some is left as residual asset a risk-weighted asset at about quarter 625% or 325%. So what happens is as we utilize the DTA, the amount of reduction from Tier 1 keeps reducing. So that augments the Tier 1 straight away.
Understood. So the DTL winding is helping capital increase? Understood. Okay. And thirdly, sir, on your guidance, right, so I don't know, it looks -- does not look very coherent in the sense that we are saying that credit cost will be below 1.5%, and slippages will also come down. But this year, we have a credit cost of around 89 basis points. This is what you have reported in your presentation. And you are saying that it will be below 1.5%. You are saying that with this year, we have done INR 5,300 crores of recovery and next year, we'll do INR 4,000 crores. Despite the fact we have -- if I were to take GNPA plus [TWO] , this is like INR 70,000 crore worth of stock of NPA.
So I mean, are we under -- I mean it does not look very coherent. So you may say that you are sort of under promising but still wanted to get your thoughts here on why are you saying that credit cost would be below 1.5%. But this year, you've done only 89 basis points.
The 89 is the net of the COVID provision reversal that we have done. So we should look at it from that perspective. And secondly...
So technical experience segment. That is...
Secondly, of course, now we have to monitor that [RF1] and [RF2] book.
Actually, you are right that it is quite conservative that we are saying that it will be below 1.5%. See if we are the credit slippage level is around 2.5%. Technically, the additional first year, the provision should be 15% so that should be around 0.4%, 0.4 or something.
And then some aging provision there. But at the same time, we are also saying in our guidance that our provision coverage ratio will continue to be about 95%, 96%. So that's why like some accelerated provision we may make, that's why this, we are showing 1.5%. But technically, if you go, you are right, it should be somewhere around 0.75%. 0.5%, we are -- further, we are adding because of some maybe accelerated provisioning. And over the year, last 4 years, you have seen we have been doing quite aggressive provisioning. So that is why it is there. But technically, yes, it will be around quite 0.75%.
Right. And sir, if you can detail what is the restructured assets outstanding? I could not get that number, including COVID and an earlier SDR 525, everything.
That effect of the total restructured assets, including COVID and older that S4A, 525 everything, total both retail, corporate, it is INR 4,620 crores which amounts to 3.16% of our standard gross advances, which is around 146,000 crores. So it is quite reasonable.
And we have made a provision also for that, like you see -- as against 4,620, we have had provision of INR 697 crores. And if you see the SML because your question can be that there, what is the stress level. If you see the SMA level, it was 5.08% in March '21. And when I am saying SMA level because some of the banks are reporting only more than INR 5 crores. But we are reporting on each and every account, whatever in SMA.
And if it is an SMA not only fun base, but non-fund-based outstanding is also added. Despite that, my SMA level is 5.1% ,5.08%as on 31 March '21, which has now come down to 3.12%. So I don't see much stress in that, but yes, that is why despite the fact that my quarter 4 slippage, if you see, has come down quite substantially. But I'm keeping my slippage ratio conservatively at 2.5%, but it will be -- it is likely to be much below that.
Right. Okay. Sir, on restructuring, I think in the last quarter, the number was some INR 7,900 crores. So is it the right like-to-like number? So INR 7,900 crores has come down to INR 4,600?
Number of accounts, 7,900 is the number of accounts
Number . Is it number of accounts
Okay. So sorry. So what was the quantum, sir, last quarter, if you have this for...
I think it was in the same range only system. Remember, I had mentioned the percentage almost 3% 3.25%, or something. So it was in the same range only. Because after that, I think some -- roughly, it was -- if I remember correctly, it was INR 4,200 or something. So around INR 300 crores, INR 400 crores has been added because of that extended provisioning part, extended restructuring. Otherwise, it has not gone up drastically. It's only maybe around INR 300 crore, INR 400 crore has been added. Now in this INR 4,620 crores is exact number.
Understood. Actually say, other banks have seen a drop in the restructuring because Shapoorji Pallonji has been upgraded or as they have repaid, so I was thinking if you have also got benefited.
[indiscernible]
We had a very small fund-based exposure. So it didn't impact our books.
In fact,
It's very, very small double-digit notable [indiscernible].
In fact, if you see my, out of that 4,620, if we take a breakup, my LCG restructuring is -- corporate is basically 1,200 only. LCG 1,000 and mid-corporate 220. So 1,200. So 3,000 is coming from retail. But what I've seen other banks should not comment, but it is percentage-wise, it is in the same ratio. So my corporate restructuring is not much. It is only INR 1,266 crores.
Right. Right. And sir, on, so this is a slightly a clarification. So on -- we are showing provisions -- in the provisioning slide, we are showing provision MTM, there is another negative line item in the other income, INR 48 crores, profit loss on revaluation of investment. So just wanted to check what is that? I mean I thought all standard assets MTM, you either run it through other income or you provide any provisions as earlier. But you have mentioned that subject to RBI, I mean, consequent to RBI direction change, you have put in something in other income. So what is that INR 48 core?
Simple matter is if there is a performing investment. We have to do mark-to-market. The mark-to-market, if there is appreciation or basis, you cannot take into account. If there is appreciation, then you have to provide for that.
Okay. So what we show in other income as valuation loss is the MTM, which comes on performing investments.
Right. So this is not G-Sec, Right? This is some corporate investment.
It can include the G-Sec also. It can include any treasury investments that we have. That has to be passed away mark-to-mark formula as required by reserve bank.
Right. So entire standard assets, standard provisions, MTM will be routed through other income. That is what the policy is?
Yes. We don't use the word standard because, again, further competition income. I mean what is the just as an interim valuation is there in the other income, but where it is required as per a prudential norm due to some whatever triggers that RBI specified, then that comes under provisions and continue.
Right. So just hypothetically, I mean, does this include MTM on G-Sec So let's say, if you have...
Yes, it includes MTM on G-Sec.
Right. So sir, if you can tell me the quantum there.
out of that. One second. We'll give [indiscernible]
The reason why I'm asking is, sir, I remember you have already IFR at above 2%, so I was wondering why were you do MTM through this line item versus using RBI leeway in setting it off from IFR.
So what's wrong in doing that?
Nothing wrong, but you are one of the few banks which already have 2% plus IFR.
I'll take that as a compliment.
Yes. Yes. But in going ahead, if you have, let's say, MTM, but you can -- theoretically, you can adjust in IFR without routing it through P&L, right?
But anyway, we have not considered that. We would like to be the tradition that we are as well.
Right. All right. Okay. Sir, I have one more question. If you want, I can ask right now or I can come back in the queue.
Go ahead.
Yes. So sir, on on NIM, right? So we have mentioned the margins, but somehow on a quarterly basis, it becomes very volatile because of the NPA recovery that we include here in NII, right? The -- I mean NPA recovery, you would be adding a principal fee or interest income. If you were to do only, let's say, business NII, if you have that number maybe for full year, that...
That's 2.53% for the full year business NII. And that is the improvement of about 70 basis points over last year, 2.8% business NII last year.
No. But sir, that business NII will also include the normal recovery from NPA that you would be going through interest income. Is that right?
Okay. It will not -- yes. If we take out large ticket recovery because then -- NIM excluding all this, both the interest on income tax refund as well as major recoveries is 2.79% last year.
Last year, FY '22, right?
FY '21.
'21
2.79 against that this year on the same parity, 3.26. So that's it.
That's why 3.25, we have the guidance.
That's we saying. Any way you look at it, we have achieved an improvement in the full NII
Correct. Correct. Great, sir. And last thing there, just a small clarification. When you report your data to RBI on a monthly basis, I mean, the data which comes out in sectoral deployment of credit, do you report gross number? Or do you report net number? Because for you, I mean, I just wanted to understand because as for you, there is a large difference in gross advances and net advances. So what is the number that goes to RBI in sectoral data?
So I remember, sorry, I cannot effectively say that. But I'm sure that somewhere or the other, RBI is collecting both data, and it is up to them to utilize the way they desire. So we don't know exactly what was entered. But both the gross as well as the setups are available to RBI.
Right. So there is a large difference in your net advances growth and gross advances growth.
Yes.
Right? So I was just checking from RBI, the data that RB gives, is that gross or net? Or is there any way to find out.
The 70% confidence, I will say RBI is using net advantage. But I'll need to recheck again to make it very sure.
Thank you. Ladies and gentlemen, that was our last question for today. I now hand the conference over to the management for their closing comments. Thank you, and over to you.
So thank you very much, ladies and gentlemen, for attending this conference. So after this, also, if you have any questions, so the entire top management and of the CFO, will be available for answering your any specific queries or any other questions. So thank you very much for attending the call. Thank you. And thanks to ICICI Securities for hosting this conference.
Thank you very much.
Thank you, sir.
Thank you. Ladies and gentlemen, on behalf of ICICI Securities, we now conclude this conference. Thank you all for joining us, and you may now disconnect your lines.