State Bank of India
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State Bank of India
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Ladies and gentlemen, good day, and welcome to State Bank of India Q1 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Sanjay Kapoor, General Manager, PPR from State Bank of India. Thank you, and over to you, Mr. Kapoor.
Yes. [Foreign Language] and Good evening, ladies and gentlemen. I am Sanjay Kapoor, General Manager, Performance Planning and Review. On behalf of the top management of SBI, I extend a warm welcome to all joining us today on SBI's Q1 FY '23 Earnings Conference Call. On the call today, we have with us our Chairman, Mr. Dinesh Kumar Khara; Mr. C.S. Setty, Managing Director, International Banking, Global Markets and Technology; Mr. Swaminathan J, Managing Director, Corporate Banking and Subsidiaries; Mr. Ashwini Kumar Tewari, Managing Director, Risk Compliance and SARG; Mr. Alok Kumar Choudhary, Managing Director, Retail Business and Operations; Mrs. Saloni Narayan, Deputy Managing Director of Finance; Mr. Pawan Kumar Kedia, Chief General Manager of Financial Control; Mr. Charanjit Attra, Chief Financial Officer.
Before I request our Chairman to give a brief summary of the bank's Q1 FY '23 performance and the strategic initiatives undertaken, I would like to read out the safe harbor statement. Safe harbor provisions. Certain statements in these slides are forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual outcome may differ materially from those included in these statements due to a variety of factors. Thank you.
Now I would request Chairman, sir, to make his opening remarks.
Good evening, ladies and gentlemen. Welcome, and thank you for joining this conference call. I start by thanking all our stakeholders, including our customers, analysts and employees for their unstinted support and trust they put in us. I also express my gratitude to our shareholders and other financial market participants who have supported and valued the bank through the challenging times in the past few quarters.
The effect of the pandemic has subdued to a large extent, thanks to the government's massive vaccination program. The dose is administered to more than 200 crore persons, an astounding milestone. The economy is almost on track with resumption of air travel and removal of other containment measures by most of the countries. However, the volatile geopolitical situation still poses a downside risk. The Indian economy remains resilient despite global headwinds resulting in rise in inflation, surging crude prices, increase in commodity prices and disruption in supply chains. The global output has contracted in the second quarter of this year owing to the downturn in China and Russia.
RBI has already raised the repo rate by 140 basis points this financial year to bring down the inflation in its most recent monetary policy statements on August 5, '22. The RBI continued to remain focused on withdrawal of accommodation so as to ensure that the inflation remains within the target while supporting growth. Further hike in interest rate and resultant heightening of liquidity can't be ruled out to tackle higher inflation, increased commodity and energy prices, which are putting pressure on global supply chains.
The increase in urban consumption improvement in rural demand and agriculture and the likelihood of a normal monsoon will help the economy in gaining traction going forward. The government's CapEx program and improved capacity utilization will support investment activity. The economic activity has continued to move forward as per the data available for the quarter 1st of financial year '23 despite global risk. The GST collection at INR 1.49 trillion in July '22 has been the second highest ever remaining above INR 1.4 trillion for the fifth consecutive month showing the strength of the economy.
I now present some of the key highlights of our performance in quarter 1 of financial year '23. The balance sheet size of the bank has caused the milestone of INR 50 lakh crore, which is a reflection of the continued trust and faith placed on us by our esteemed customers. We are committed to adding value to our stakeholders by continuously improving our product and services. As with our business, the bank's advances grew by 14.93% and deposits grew by 8.73% on a Y-o-Y basis.
Our international banking witnessed robust credit growth at 22.39% on Y-o-Y basis, 15% in dollar terms and deposit growth at 30.63%, 23% in dollar terms. The net interest income has increased by 12.87% Y-o-Y, and net interest margin has increased by 8 basis points Y-o-Y to 3.23%. The noninterest income has declined by 80.44% Y-o-Y, mainly because of some gain losses. This has resulted in reduction in operating profit by 32.79% Y-o-Y.
However, the core operating profit after excluding MTM impact has increased by 14.39% Y-o-Y. The MTM losses have also impacted ROA of the bank, which has come down by 9 basis points Y-o-Y to 0.48% and ROE of the bank which has declined by 203 basis points to 10.09% due to consequent decline in net profit. However, if we recalculate the profitability after excluding the MTM losses, the notional ROA and ROE would be 0.89% and 18.57%, respectively, which is on the expected lines and on track of our medium-term guidance.
Our AFS book stands at INR 6,31,530 crores as on 30 June '22, with 60% in G-Sec as yields and 23% in highly-rated corporate bonds. We saw a hit on account of MTM losses amounting to INR 6,549 crores. We do not see any actual loss in this book. And as the rates soften, the MTM losses will be recovered. During the year, we have the redemption of INR 84,000 crores from the AFS book, which will also bring down the MTM losses. Further provision of INR 1,503 crores were made for the investment depreciation during the quarter.
The momentum in retail advances continues to show a growth of 18.58% in quarter 1 of financial year '23 on Y-o-Y basis. Corporate, SME and agri advances have shown a robust growth of 10.57%, 10.01% and 9.82%, respectively, on a Y-o-Y basis. Our leadership position in home loan continues. The individual mortgage portfolio for the bank has the best quarter 1 performance ever. The home loan application registered a 3x jump sanctioned in value terms doubled over the same period last year. The individual mortgage portfolio registered its highest quarter 1 growth of INR 13,425 crores despite industry witnessing a hike in interest rate from the historical lows. The home loan portfolio grew by 13.77% on a Y-o-Y basis.
As far as asset quality is concerned, the bank's gross NPA and net NPA as on June '22 was at 3.91% and 1%, respectively, which is an improvement of 141 basis points and 77 basis points, respectively, on Y-o-Y basis. The slippage ratio for June '22 is 1.38%, which is an improvement by 109 basis points Y-o-Y. We have been able to contain the credit cost at 0.61% as against 0.79% in June '21. The net NPA of the bank has been brought down to 1% which is a result of focus and continuous attention in this area. We have been constantly trying and strengthening to maintain the bank's loan asset quality.
The digital leadership journey of the bank is continuing. More than 96.6% of the transactions are now routed through alternate channels. The registered users for UNO have already crossed 5.25 crores, a big milestone and which has created a significant value for the bank. 65% of the new savings accounts are opened through UNO. We have now more than 100 online marketplace partners for UNO. The bank will come out with only UNO, which is UNO 2.0 with many more advanced features and functionalities.
The bank is leveraging its analytics in a big way for taking forward its strategic goals. We have totally revamped our contact center, which will add a lot of value for the bank and create the superior customer experience. Cost of services will be available for convenience of the customers relating to account inquiry, treatment of account, debit card-related services, digital banking and other miscellaneous services. It will also be used for pre-delinquency reminders, soft recovery for NPA accounts, early bucket collection outreach, proactive outreach for digital handholding besides some routine banking inquiries.
With the economy picking up, we see growth in credit offtake to continue. Our focus is also on increasing the CASA ratio with more emphasis on growing our current account book and to maintain our leadership position in savings and deposits. With increase in credit offtake, we will better utilize our liabilities to improve the key ratios. These outcomes demonstrate the resilience of the bank, supported by our constant improving process-oriented culture, the expertise and the vision of our leadership teams and the quality of employees amidst the present volatile geopolitical situation.
Before I conclude my opening remarks, I would like to thank you all for your consistent support to the bank. We remain committed to reward your trust in us with superior sustainable returns over the long term. My team and I are now open to take your questions. Thank you.
[Operator Instructions] The first question is from the line of Mahrukh Adajania from Edelweiss.
So my first question is on international loan. So we do have a breakup of domestic corporate loans in the presentation, but there is a strong growth in international loans as well. So which are the sectors that have contributed to international growth, say maybe the top 2 to 3 sectors? Is it the oil companies borrowing? Which are the sectors?
Actually, when it comes to international book, our major growth would have come from the syndicated loans. So we would not have the sector-wise per se. But nevertheless, the growth is essentially coming through. I think we can come out with some kind of details relating to whether it is syndicated loan or trade finance, those kind of details we can certainly provide. But majorly, it is coming from the syndicated finance. And also take on syndicated loans and the trade finance are the 2 major products in which we have witnessed our growth. And it is also -- these are the geographies where the syndicated loans are coming from. And also, I would also like to mention that both the places, USA and U.K., both the places have got decent trade finance growth also because there are many platforms, which are available, which helps us in sort of really ensuring that we underwrite decent loan growth from this particular product.
Sir, I'm asking because other PSU banks have also seen a very sharp rise in international loans and what has been happening in general for the segment for the last 2 to 3 quarters. So suddenly, why has there been higher focus on overseas loans because they're growing faster than domestic corporate?
No. I'm unable to comment about others. But as far as we are concerned, we had introduced a product, which is a factoring product was introduced by us about a year, 1.5 years, almost 2 years back. And that is something which has helped us to participate on various platforms, which are available in USA and U.K. And so I think that is one of the major reasons for the growth which we have witnessed in the international banking group. And I think we have witnessed similar growth last year also. But if you look at it, our growth in dollar terms is actually 15% when it comes to the international book.
Okay. And sir, most of the incremental growth in this quarter will be syndicated, not trade finance. Is that a fair assumption?
Yes.
It could be syndicated as well as trade finance.
Okay. So both would be kind of equal.
Yes.
Yes.
Okay. And sir, the other question is on provisions. So the standard asset provisions are negative, and the flow chart that you give a breakdown of provisions that are not reckoned for calculating net NPA for that stock of cumulative provision has also declined sequentially. So has there been a drawdown of existing provisions via standard asset provisions negative during the quarter?
Just 1 second. Yes, let me get the details.
Yes. Sure, sir.
What's the question?
Standard asset provision.
This is actually the write-back of INR 1,295 crores, which is essentially attributed to...
It's a combination of...
It's actually a combination of write-back taken from provision of COVID restructuring, which is essentially attributed to the reduction in the exposure under the restructuring and additional normal provision of INR 300 crores were made further credit growth. So net of that is actually getting reflected here the INR 1,295 crores.
Okay. So basically, there was a write-back of INR 1,595 crores.
Yes.
Because of COVID restructuring.
Yes.
I mean drawdown. Okay. Okay. And sir, my last question is on personal loans. So what would be the maximum in average ticket size? And what will be the share of private versus government in Xpress Credit?
This Xpress Credit, the average ticket size is -- about INR 5.97 lakh is the average ticket size. And out of this, 95% is given to the customers who are maintaining their salary accounts. And when we look at this 95%, almost about 85% would be for the government employees only. And the remaining is depends, first is government employees and the quasi government would be about 90%. Out of this 95%, 5% would be large corporates, which are well-rated corporates. So that's how it's a standup.
Got it. And the maximum ticket size would be?
Almost about INR 6 lakh, INR 5.97 lakh is the amount.
That is the average.
Okay. That is the average?
That's the average.
Maximum will go to -- we have actually recently launched another product, which is RTXC, but which has yet to really grow well. So there, the maximum ticket size can go even up to INR 30 lakhs. But as of now, our maximum ticket size would be in the range of about INR 20 lakh, INR 25 lakh.
Got it. And sir, my last question on this thing is that the business development expenses are the highest component of other operating expenses by value. So these agents will be sourcing what loans, express credit or some other loans? I'm assuming these are DSA commission.
Actually, when it comes to various acquisition expense, it is essentially on account of the home loans. Home loans are the one and also the PSLC certificates, which we buy. For that also, whatever, I mean, fees will -- I mean what a premium is paid, that will also come under this. So I just said it, we are not using any of the outsourcing agents for Xpress Credit.
Next question is from the line of Mona Khetan from Dolat Capital.
So my first question is on slippages. If you could share the breakup of slippages, and if there was any one-off in terms of interest reversal this quarter?
Breakup of slippages, you mean?
Yes.
Just a second. See when it comes to the breakup of slippages. Yes, break up of slippages are essentially about INR 9,700 crores, which is coming from SME is INR 3,000 crores; Agri is about INR 2,700 crores; our segment is INR, 2,353 crores, so which actually add up to INR 8,070 crores. Then CAG was INR 320 crores, and CCG was INR 1,335 crores. So that's how it is. And out of that, we have already recovered INR 2,800 crores already has been recovered until now.
And were there any one-offs in interest reversal from say, the agri book or something?
No, no, no. There's no one-off.
Okay. Sure. So what was the reason behind the decline -- sequential decline in margins?
Sequential decline in?
Margin, net interest income.
Actually, yes, there was a -- as far as the last quarter was concerned, we had some INR 600 crores worth of income tax refund, which is interest on the income tax refund, which is not available this year. This quarter, this quarter it is not available.
Sure. Got it. And secondly, on the reset of EBLR loans, so what is the basis of these reset? Or what is the time period of resets?
Sorry, I could not...
On what basis are the EBLR loans reset, the repo-linked loan reset?
Actually, it happens on the first of the quarter.
First of the following month.
First of the following month, first of the following month.
See, most of our EBLR loans are repo-linked loans, okay? And suppose the repo has an increase this month, any day of the month, this month, and first of the subsequent month, the reset happens.
Okay. Sure. Got it. And just finally, on the BB and below book, we noticed that there was a rise in the share of BB and below book from 11% to 13% Q-on-Q. Anything -- any -- if you could give some color on it, what is leading to BB?
Yes, majority of them are the state government loans, which are not rated. So that is the reason why this kind of a behavior is seen.
Okay. So there was a rise in state government loan essentially?
Not really, actually, if you're looking at it...
Actually, BB has come down.
It has come down. It has come down from 14% to 13%. But BB and below are essentially, those are the loans which are there.
Okay. Sure, sure. Sure. Just finally, on the retail and SME, how is the underlying demand? And do you see any risk to it from the elevated inflation level?
See, we have -- till until now when it comes to retail, we are not seeing the demand tapering off. We have a decent visibility of the demand, and I hope that it will continue. When it comes to SME, SME also, there is a reasonably good pipeline, if I may say so. This year, in the first quarter, perhaps after many, many years, we have seen the SME segment witnessing a growth. So that way, I think it is -- I don't -- I hope that we'll continue to see the decent trajectory of group in the SME segment too.
Next question is from the line of Jai Mundhra from B&K Securities.
So the first question is regarding your savings account rate. So SBI savings rate is linked to repo. And now with yesterday rate hike, the SA rate by formula is very, very -- I mean almost similar to the floor of 2.70% that we offer. So just wanted to check, is it safe to assume that incremental repo hike would now be flowing to the savings account card rate? Is that safe to assume?
No, I think it is not the right assumption because our savings credit is not linked to repo.
We have of 2.75%. So even if we go to 5.40%.
Your mic is on?
Yes, maybe next. Yes. So more than INR 1 lakh if is linked with external benchmark. But the stipulation is that it will be 2.75% below the repo rate. So under these circumstances, even if the repo rate becomes 5.40% then minus 2.75%, it comes to 2.65%. So it is still more than the derivative number, right? We're giving 2.70% up to INR 1 lakh. And technically, by going by this formula, we should have reduced this number to 2.65% or even below. But because we value our franchisee, that is why we do not use this formula, for the disadvantage of people and even if repo has been enhanced, the rate will remain same.
No. The question is, sir, incrementally, now that your formula derived rate and your floor of 2.70% are almost similar, there's only 5 basis point gap. So whatever incremental repo rate hike should one assume that the savings account rate will also be reflecting that?
No, I think we will be very mindful of our income -- yes, please.
See, 2.70%, we have been given irrespective of whether it is 1% -- INR 1 lakh or more deposit. If you had gone by the formula, then this for more than INR 1 lakh, the rate would have been lesser than 2.70%, so we have already been incurring 2.70% in the entire balance. So even now despite the incremental increase, this cost is not going to increase, neither it will reflect in the saving and interest rate.
Even going forward, right? So do you...
Yes. Yes, even going forward at this rate, this increase has happened in...
Going forward, in case repo rate is about 5.45% also then what happens is the question.
If the repo could release further.
We can always calibrate the spread according to what the actual demand would be.
Understood. Second question is, sir, on EBLR. So in the last 3 months, less than 3 months, there is a cumulative 140 basis point rate increase. And the card rate on all floating rate loans on retail SME, they clearly would have increased by 140 basis point rise. So do you think the credit demand is healthy enough to absorb this increased 140 basis point rate? Or do you think that irrespective of 140 basis point rate hike in EBLR, the effective interest charge to the customer could be lesser than 140 basis points on a floating rate?
I think this is a part of the market dynamics. We will -- we are taking a call. But nevertheless, the kind of trend which you have seen, we don't envisage the demand tapering off even if -- because actually, when it comes to the retail loan book, retail loan book, it is linked -- directly linked to the actual number. And when it comes to the corporate loan book, it is all linked to the various benchmarks and also spread over whatever the benchmark is, risk spread over the -- risk premium over the benchmark. That's how it has worked out. But when it comes to the final pricing, the risk spread accordingly gets adjusted depending upon the risk appetite and the market dynamics. So that's how really it works out.
Understood. And last 2 things, sir. If you have the ECLGS number outstanding disbursement and NPA there?
Yes, ECGLS (sic) [ ECLGS ] we had INR 32,000 crores was the total amount in both restructuring 1 and 2. It has already come down to about INR 28,000 crores. And out of the INR 28,000 crores, this INR 4,000 crore worth of reduction is about INR 2,000 crores on, I would say, is essentially on account of the repayment and INR 2,000 crores is the NPA, which has happened.
So this is about restructured, right? Actually I was asking on ECLGS.
ECGLS (sic) [ ECLGS ] also, I think INR 41,000 crores was the total disbursement.
Yes, INR 41,000 crores was the peak level in this and out of that 1.91%...
1.91% is it.
As it is reported here, that is the NPA provision.
Okay. And lastly, sir, the credit growth, it is running at 15%. Q-o-Q, it is also healthy, but it looks like that part of that is because of the low base of last year on Y-o-Y basis. Sir, how confident you would be to sustain this 15% growth for the rest of the financial year?
I'm quite hopeful. The reason behind is kind of term loan and also the underutilization of the working capital, which is all aggregating to almost INR 5 trillion and the pipeline is almost about INR 1.2 trillion. So I'm quite hopeful that we should be patient to sustain this in the subsequent quarters.
Right. And finally, the last question is on...
Sir, sorry to interrupt you. Can I request you to please come back in the queue. Next question is from the line of Kunal Shah from ICICI Securities.
Yes. So firstly, on this decline in yield on advances on a quarter-on-quarter basis. So in fact, we have hiked MCLR. There would have been EBLR linked loans as well. Plus, sequentially, the growth is largely from the retail side. So what is actually leading to this decline in yield on advances? Is it like more competitive rate pressure which is coming in on the corporate and the SME front? And with the revised EBLR, how should we see the trend in next couple of quarters?
I think sequentially for us may not be a right way because normally towards end of the financial year, there are multiple other channels of revenue which are available for various accounts. And maybe that may not be the right way, and that is the reason why we are comparing on a sequential basis. And on a sequential basis, it is an improvement, actually, if we look at it. On a Y-o-Y basis, it's an improvement, though sequentially, it looks like to be a reduction because invariably, we have seen that. Year-end, there are multiple other -- I mean, multiple other sources, which actually improves the -- which are the yield enhancers.
Okay. Sir, how should be the trend maybe with this EBLR hike and the MCLR hike? How should we look at it from year-on-year?
We hope it to be improving going forward.
I think July onwards...
July onwards, it should start looking up. If you were to look at this graph also, you will probably see. This trend line also very clearly indicates. June is low, and it has peaked to the -- towards March, quarter-after-quarter it went up. So it's a similar situation. We hope that we should be in a position to have a similar trend or maybe better towards in the coming quarters.
Sure. And overall, in terms of the deposit growth, so I think it is slightly below the system average as well now. So definitely in terms of the hikes, our hike on the deposit side has been lower compared to that of the other private bank. So what would be the stance out there? Is it like still 69%, 70-odd percent of steady ratio is comfortable, and we can further allow it to expand without tweaking too much on the deposit side. Would that be the call or maybe we will see some action on the deposit rates as well to maybe garner the higher deposit mobilization?
We are very closely focusing on the NIM. And within that boundary condition, if at all, will get a chance to shore up our deposit will certainly do. But nevertheless, as of now, our credit deposit ratio is at 63%. And if we look at the redemption which will happen during the current financial year, both from our AFS and HTM book, it will be almost at about INR 1.5 trillion. So we will be very closely looking at a couple of variables. One, of course, as I mentioned, the availability of liquidity; second, we will be very mindful of our franchise into the liability sector; and also thirdly, that what are the deployment opportunities, which are available and the price at which we can deploy this money. So these are some of the variables which we will kept in mind for deciding the interest rate increase in the deposits.
Sure. And 1 last question on miscellaneous income. So there is a recovery from OCA, but still miscellaneous income is significantly down. So what is the element which is actually leading to that. In fact, on an average, it used to be like INR 2,000 crores, INR 3,000-odd crores, and this time, it is only INR 475 crores.
Miscellaneous income is essentially...
But there is a sharp decline both year-on-year as well as quarter-on-quarter. And we see that...
So actually see miscellaneous income also will have a situation where quarter 4 would normally have the kind of dividend income which we get. And also derivative is other component. So these are -- I mean, last year, we had dividend income of about -- yes, so last year, we had a dividend income of about INR 500 crores. But this year, it is negative. And also, when it comes to recovery and return of accounts, last year, we had a onetime recovery of INR 1,692 crores in Kingfisher, which is not there this year. So that is the reason why this is behaving like this.
Okay. Okay. And derivatives also would be a part of it?
Yes, derivative is the other component.
Some knock on derivatives, which would have been there in this quarter?
Yes.
Next question is from the line of Adarsh from CLSA.
Congrats on good numbers. I have 2 questions. First on margins. When we were having the last quarter...
Sorry, your voice is not very clear. Can I request you to speak through the handset?
Okay. Hopefully, this is better. So just checking on margins, our outlook presented last quarter was that given how things are panning out, margins is 22%. If you can just update how do you see the reason looking here.
Sir, once again, we are losing your audio.
Okay. Just a question, sir, what would be your margin outlook incrementally?
We are hoping it to be in line with that kind of trend which you have seen in the past and also what we have already recorded till now.
Sir, is there a change? Because if you go back to the fourth quarter, clearly, the margin outlook looked a lot more stronger. So is there anything that you are seeing in the market, which makes you believe that margins now should be like flattish rather than going up?
No, I think I would rather expect the margin to improve above 3.23%.
Got it, sir. And sir, second question is on capital. While we are better than regulatory requirements, growth has certainly picked up in the last few months. Do you anticipate that bank may need to shore up a little bit of capital now, given how well the stock is done and number two, growth are certainly is holding up a lot better?
See, we have already got the approval from the Board for raising AT1 and AT2 and worth about INR 11,000 crores in the current -- in fact, in this month itself, I think we have already redeemed about INR 2,000 crores. So about INR 9,000 crores is incremental, which will be available, which we'll be using. So I think hopefully, we'll be very closely watching the situation. And if needed, we will look at the options that all can be tapped to see to it that we have adequate capital available.
And sir, what will be the threshold to consider equity raise because we are close to 10%. Many banks operate at better CET1s. And obviously, the growth is better than what we've seen in the last few years. So what is the threshold when you would think about seriously looking at equity raises?
Well, actually, we have a couple of other options, but we have not really deliberated at the Board level. So it will not be in order for me to really share those plans in this quarter.
The next question is from the line of Abhishek Murarka from HSBC.
So just a couple of data keeping questions. What is your LCR right now?
It's about 130%.
Okay. And currently, how much excess liquidity would you be carrying? And you said that there's about a INR 1.5 lakh crore of redemption coming from the investment book. Apart from that?
No, no. We will -- excess liquidity will...
Excess liquidity is about INR 3.8 lakh crore. So we have enough margin about -- sorry, I think you may not have been able to hear me. I was on mute. So we have sufficient liquidity in terms of our excess SLR, number one. Number two, I think there is about INR 83,000 crores worth AFS portfolio is coming up for redemption this year, the rest of the year. So I think there should not be any problem in terms of funding any credit growth, which is likely to happen. And there's no absolute no liquidity concerns even if the liquidity in the market tightens.
Yes. Sir, how much excess SLR did you say?
Excess SLR is about INR 3.8 lakh crore.
3.8%.
INR 3.8 lakh crore.
INR 3.8 lakh crore. In fact we have got a total redemption from HTM and AFS aggregating to about INR 1,50,000 crores.
Right. So there's enough facility.
Which is actually coming up in the current financial year.
So you could actually hold off any increase in TD rates for a while, while this liquidity gets deployed? That is what I was trying to understand.
That's a venous call. As I mentioned that deposit is a franchise also. So we have to keep that in mind. But nevertheless, what you mentioned, that very clearly reflects that we have got the muscle vessel power, if at all we so decide.
And we always explore all the ways of raising the resources, not necessarily the deposits, as we said. Deposits, of course, as Mr. Khara mentioned, we have 22,000 branches. Obviously, our deposit mobilization will continue.
Got it. And sir, just a couple of questions on Xpress Credit. One is what will be the mix of new versus repeat customers there? And broadly these higher NPAs in the quarter that would have come from, given you have 80%, 85% government or quasi government, that would have come from that same cohort, right?
Actually, this is Xpress Credit NPA is, I would say it's more of an aberration because whenever some of the state governments are unable to pay some salary at the point of time, then it really turns out to be NPA, but as and when the salary gets paid, it gets adjusted also. So that would be the scenario. About your other question relating to how much would be the new versus how much will be the existing, I would -- we will not have that data right now available with us. We have not looked at it from that lens.
Okay. But every time you -- somebody -- some customer wants to roll over an Xpress Credit loan, what would be the rules around that? How much would we have to pay back or something to roll over?
It all depends upon what is their salary and depending upon that we are extending. It's an EMI/NMI ratio, which we really look at it.
Next question is from the line of Ashok Ajmera from Ajcon Global.
Hello?
Yes, sir. You are audible.
Sir, while we appreciate, sir, that the operating profit, but for these MTM losses would have been INR 19,302 crores. Does it mean that we can assume that the operating profit for the whole year of the bank would be around in the range of about INR 78,000 crores to INR 80,000 crores, number one.
Let us hope, Ajmera, sir.
Yes, sir. We hope so. And secondly, sir, this is a loss on sale and revaluation of investment, this INR 6,549 crores. So is it -- what is the component, I mean of the loss which have already been booked? And the MTM on the revaluation, out of the INR 6,549 crores.
On account of MTM, basically we have not really incurred any loss. It's all revaluation.
Okay. So heading only says that the loss on sale/revaluation of the investment.
That is the format. So that's why it is mentioned like that.
Yes. No. No, I understand. I understand, sir. So sir, now going forward now with this 50 basis points, again, further rise, how do we -- what do we expect on the treasury front going forward in the next 3 quarters? Any estimate of further likely MTM or how much we are cushioned for further MTM losses on the treasury front, sir, including the trading profit?
So we have cushioned for 5.45%.
5.75%.
5.75%.
5.74%.
Sorry, 5.74%.
No, no.
7.45%. 7.45%. And if I may say so, the way the situation stands, you will observe that yesterday when the rate hike was there for 50 basis points, the yield moved up from 7.10% to 7.30%. So that is something which is -- I mean, if I read into that kind of a trend, then even if the next hike happens from RBI, which will be somewhere in September 28 to 30, it's too early to say that what will be the interest rate hike because they normally get guided by the inflation trajectory. And if at all, passes a guide for the future, we have seen that about 2 months back, the impression was trailing at around 7.9% about 2, 2.5 months.
And from that level, it has already come to about 6.7%. So what will be the inflation from now onwards, if at all, the past trend continues, then one may expect the inflation to be within 6%. And who knows if at all, it is something, it may not really lead to any kind of interest rate, but it is all subject to various assumptions. So having said that, we are -- as I mentioned, that we are already -- we have already booked the MTM losses to the extent 7.45%. So we hope that we should not have any more such as tranches or providing for further depreciation on the AFS book.
Okay. Sir, coming to this provisioning, we said that we have taken the benefit of some of the buffers of the provision which are there in this quarter. How much buffer is left which can be utilized in case the higher provisions required in future?
That INR 7,800 crores is a provision which is available for the restructured assets, so that can be used. And whatever we have used is essentially wherever the repayment has happened. So to that extent, only we have used. We have not used otherwise, INR 7,800 crores is additional provision for the restructured accounts.
Got it, sir. Sir, on the advances front, credit front, our credit growth, especially in the domestic book is muted. If you take the corporate book, except that yes, international book has grown very healthy, where the margins are but very less or limited. So going forward, when you say that we are aiming 15% of the growth, it means in the next 3 quarters, including the August now, which is going July, August. So we may grow our total credit to about 12.5% for the remaining 3 quarters now?
We hope so because when we -- if I look at the underutilization of the working capital limit in the corporate accounts, which is almost as high as about INR 2.5 trillion. Similarly, when it comes to term loans, which are unaware, it is also to extent over INR 2.5 trillion. And proposals in pipeline are about INR 1.2 trillion. So that is how it is stacked up, even if the term loans will not start availment immediately or may not get disbursed immediately. Still, I expect that we should have a situation where we can easily think in terms of going to the extent of about INR 2.5 lakh crore to INR 3 lakh crores into the corporate book. We are at about 8.75% as far as the corporate book is concerned. So that is the kind of expectation which I have.
So if at all, that comes and the kind of growth which you have witnessed into the retail side that, I think, will continue. Even SME also, we have started seeing the traction and the pipeline is also there. So I think all put together, I expect that there should be a decent sustainable growth in the remaining 3 quarters.
Mr. Ajmera, I will request you to come back in the question queue for a follow up question. The next question is from the line of Nitin Aggarwal from Motilal Oswal.
Sir, this quarter, like many other PSU banks have reported controlled treasury losses and some of them have reported profits as well. So just wanted to check if we have done any transfer of securities from AFS to HTM during the quarter. And related to it, do you think that the mix of AFS portfolio, which is like still looks high, needs to be reduced given how the rate cycle is played out.
No, we have done the transfer of securities, but unfortunately, we could not avail the benefit. So thereafter, the 40 basis point increase announced by RBI, which led to the yields moving up. So we really could not take much of benefit. We did -- we went for the transfer securities also.
Okay. Sir, how much was this?
Also, we have got -- I mean, as of now, we have got a decent algorithm available in the HTM and whatever securities are maturing in AFS and whenever we are buying new securities, we are only putting in the HTM.
And this mix of AFS, sir, which is 42%, does it seem like comfortable? Or any thoughts around reducing this mix?
Sorry, what -- I'm sorry, I could not get your question.
The mix of AFS investments. The mix of AFS investments in the total investment book at over 40%, this number seems comfortable or any -- there have been any thoughts to reduce this number also.
Yes, if I can just point, sir. I think -- so we have adequate room in the HTM portfolio. Maximum of 23% is what we can put in HTM. Our strategy would be that whatever maturing portfolio is there, it would be directly going to the HTM. See, primarily, I think most of the credit growth will now be funded. So the investment book may not grow as much as it has grown in the past 2 years. Even if we have to invest, I think we have adequate room to move to HTM. So to answer your question specifically, I think our AFS portfolio probably will be coming down.
Yes. Otherwise, also, if you look at the industry level numbers, the advances book is growing at about 14% and the deposit growth is at about 8.4%. So which very clearly means that the treasury book of the banks will not probably grow as it has grown in the past.
Right, sir. And sir, second question is like, typically, we have seen that in line with the approvals trajectory from first quarter to fourth quarter, our credit cost also improves. Now in this quarter, we have reported a credit cost of 61 basis points. So how do you see the trajectory now going ahead for FY '23 and any color for FY '24?
Actually, when it comes to macro, though we keep on, they ran it very closely, but there are always the element of uncertainty, more so in the current kind of a scenario. But nevertheless, our effort will be to bring it down to the extent possible. I mean that we have to assure. We'll not be in a position to give any kind of a guidance on this particular aspect.
The next question is from the line of Ayushi Shah from -- an Individual Investor.
Congratulations on a great quarter. Sir, in the beginning of the presentation, you mentioned that you were planning on increasing your CASA book by focusing on the savings account part of things. So I just wanted to get an overall idea about it how exactly do you plan on doing that because there's such intense competition in the market going on right now. So how do you plan on ensuring growth?
We will be trying to meet out the competition.
So basically by raising rates?
No, no. We are actually -- digital is something which is actually growing very well and almost about 65% of our account are getting opened digitally, so which means that we are in a position to offer the convenience to the customers and also the kind of product book, which we offer, it is complete in all respects. There's no reason for us not to be really sharing the mind share of the customers and gaining their accounts. And CSP is one of our focused effort, and we will continue to strengthen that going forward. Maybe Alok wants to add something.
Yes. So in CASA, what exactly -- if you find last couple of years, there was a huge increase in saving and deposits as well as TDR. So on the ground, it was being considered that whatever is coming is fine. But with the competition intensifying, we have also now told communicated with the ground that CASA has to be a priority and that is why on a daily basis, the opening of accounts as well as increasing contact with the, say, premium customers or high-value customers so that they can deposit more and transact more in our account so that the balance is also increased.
So it is two-pronged. One, acquisition of new valuable customers so that we open accounts where there is higher possibility of increase in balances. Number two, with whatever customers we have, making relationship more rich so that the balances in the account increase. We'll also try to increase products per customer so that the stickiness as well as the float around it, that also improves. So it is both acquisition strategy as well as relationship strategy, which will lead to better CASA.
Okay. Sir, that is very good to hear. And sir, is there any guidance about like the CASA ratio that you would have for the coming 2 to 5 years?
See, in this case, what we'll do is we understand the importance of CASA and the bank understands. So the endeavor will be to increase as much CASA as possible. We have our internal, say, benchmark, internal aspirations as to where we should go. But there is a single, say -- structurally as a bank, we are a bank where people trust a lot. So they bring a lot of term deposits to us, and the growth rate of CASA as well as -- and the growth rate of TDR is normally a bit skewed because we have higher growth in TDR because of customers trust. So the percentage may not increase much, but in absolute numbers, it will still increase.
Next question is from the line of Anand Dama from Emkay Global.
Sir, again, a question on the treasury front. So we said that basically, there is a redemption of about INR 1.5 trillion of investment. So whether that could lead to higher realized losses going forward, number one? And number 2 is that what is your status on our investment fluctuation reserve. Where does it stand? Do we have a shortfall over there and whether that is also to be made up going forward, leading to higher provisions over there?
See when it comes to INR 1.5 trillion, which I mentioned, this is a redemption, which is during the normal course in the current year. So which means that we will not book any loss in this redemption process as actually. It is actually -- yes, and it is something which -- and we don't have any stress NPA in the book as of now. So that is 1 thing that should happen. And the second question is relating to -- sorry, I missed out the second question.
Investment fluctuation reserve, sir.
Investment fluctuation reserve, we're in the process of...
So what is the outstanding in the IFR? And is there any shortfall over there?
No. There is some shortfall, but we are actually building up that shortfall also.
Okay. So what will be the quantum of that shortfall, if possible to get?
Sorry, there's a Board-approved light path, which is in line with the RBI directions, and we are strictly following that, and we will try and see that, that gets through.
Current financial year.
That gets completed in the current financial year.
Sir, any quantum basically, what's the kind of shortfall that you have?
I will not have that number.
See the number is available in the balance sheet. But we can share with you.
We will share you offline.
Sure, sir. The second is on the OpEx front. So our OpEx certainly has been lower, whereas most other banks have been reporting very high OpEx for during this quarter. So 1 benefit that we have is the staff cost, which is largely stable. How about the other OpEx of whether we will have a meaningful branch addition over the next 9 months and that will lead to a higher OpEx during the 9 months going forward?
See, when it comes to our -- see, by cost, et cetera, is given. There is not much which can be done. But yes, of course, we are trying to shore up our income so that our cost-to-income ratio gets addressed. And in that direction only, we have come out with the -- we have been given approval to set up the new subsidiary, which is operating support subsidiary. And the intention is that the subsidiary will help us in reaching out or rather supporting our rural branches to garner quality awareness and also to ensure that the renewal, et cetera, also happens on time.
So this is something which it will put to use, and which will help us in reducing the NPA in the agri sector and also will help us in booking the quality awareness, which is available in the rural economy. So this is what the plan of action is, which will eventually address the cost-to-income ratio.
Anand, may I request you to come back in the question queue for a follow-up question. The next question is from the line of Jignesh from InCred Capital.
Am I audible?
Yes, please go ahead.
Yes. Okay. Sir, I have the question. One, on your margins, basically, which has -- basically has come off on a sequential basis. So I agree that Y-o-Y basis, it has been pretty high. I mean it has improved. What trajectory basically you're seeing it up for the full year? Although you have already indicated that you will see an improvement happening, but if you can give some guidance and the road map, how we are seeing it up, the improvement will be coming in. That is one.
And second, obviously, on the growth front, with the rate hike already being there and inflation remaining high, though you remain confident that the growth would be -- you will be able to benchmark it. But where -- what exactly would be the momentum and which areas you think will be a better 1 as the growth really coming up retail corporate or international book that you're seeing it for the next 3 quarters, you can give some clarity on it, that would be really useful.
The trajectory as far as the NIM is concerned, I would say the kind of trend which you have seen in the past. We expect to be a repeat of the similar trend going forward also, though we are starting at a little higher base as compared to where we were last year in the first quarter of financial year '21.
As far as your second question relating to which are the areas of focus, I think irrespective of the interest rate hike sector, which has been talked about. Now our retail engine is -- continues to adhere to its promise, and we hope that we will have a decent growth in the retail going forward as well. Rather when it comes to the corporate growth, we are quite hopeful this year we'll have better traction in the -- as far as the corporate book is concerned.
And even SME also is one of the special focus for the bank. You would have observed that we have moved up in SME from about INR 2.20 trillion to about INR 3 trillion plus it has already moved. And this is all we are getting into supply chain finance and some kind of balance sheet lending also, but we are very mindful of the risks which are inherent in the SME. We are ensuring that we should underwrite the best of the quality of SME also. So I would say that retail corporate SME all will grow. As far as agri is concerned, our focus is going to be high-value agriculture. Our focus is going to be SBG financing. So this will be our focus. So that the agri book should also improve in terms of quality. That is whatever endeavor will be.
Next question is from the line of Prakhar Sharma from Jefferies India.
Just 2 bits. First, on the SME 1 and 2 loans, the balances have gone up from INR 3,500 crores to about almost INR 7,000 crores. Could you just help us understand what is the reason for this?
SME 1 and SME 2?
Sequentially, yes.
Okay. Sequentially, you are saying?
Yes.
Of course, also the INR 7,000 crores also, if you will really look at it, we're going to pull back a significant component in the SME book. Yes. just one second. Yes, SME, essentially, invariably, we have seen that in the first quarter, there are always some peculiar behavior, which we see. And that is one of the reasons why sequentially, it looks on the high side, but almost what INR 2,000-odd-crore has been pulled back out of this. So if at all, we look at the INR 2,800-odd crore. So then actually, it comes almost in the same range as it was as on December '21. So that's how the -- I mean, that partly explains the behavior.
Sir, second question is on the interest on tax refund for the March quarter. Could you please clarify what was the amount in the previous quarter?
INR 600 crores was the amount of interest on tax refund.
Yes, for the March quarter.
Yes, for the March quarter.
Ladies and gentlemen, due to time constraint, that will be the last question for today. I now hand the conference over to Chairman, sir, for closing comments.
Thank you very much to all the analysts who are taking out time on a weekend, on a Saturday evening. I wish all of you the very best. As we have explained that our endeavor is to keep on delivering better outcomes, hopefully, it will be the scenario going forward. But for the situations which are actually beyond our control in terms of G-Sec et cetera, we have to be -- we have to play in the broader macro and our effort will be to navigate through the turbulent times in the most professional way. Thank you very much. All the very best.
Thank you very much. On behalf of State Bank of India, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.