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State Bank of India
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[Audio Gap]is being recorded. [Operator Instructions] I now hand the conference over to Mr. M.B. Mahesh from Kotak Securities. Thank you, and over to you, sir.
Thank you, Ali, and good evening to everyone who have joined into this call. On behalf of Kotak Securities, we would like to thank State Bank of India to host this call to discuss Q3 FY '18 results and also to get a perspective of the situation on the ground. We are pleased to have Mr. Rajnish Kumar, Chairman of SBI and the entire senior management for this call. Without further much ado, I would like to hand over the floor to Mr. [indiscernible] VP, Investor Relations. Over to you, sir.
Thanks, Mahesh. I would like to welcome you all on behalf of State Bank of India to the conference call. Today on the call from SBI, we have Chairman, Mr. Rajnish Kumar; MD, Corporate, Global Banking and Stressed Asset Resolution Group, Mr. B. Sriram; MD, Retail and Digital Banking, Mr. Praveen Kumar Gupta; MD, Risk, IT & Subsidiaries, Mr. Dinesh Kumar Khara; MD and CFO, Ms. Anshula Kant. We also have all the MDs heading various verticals present to enable us to answer your questions satisfactorily. Before we commence the call, I would like to read out the safe harbor statement. Certain statements on this call may be forward-looking statements. These statements are based on management's current expectations and are subject to uncertainties and changes in circumstances. Actual outcomes may differ materially from those included in these statements due to a variety of factors. Thank you. Now I request Chairman to give his opening remarks on the Q3 FY '18 results and the strategies of the bank going forward. After that, we will open the conference to the question-and-answer session.
Good evening to all of you, and welcome to this conference call. These results and the presentation, I presume, will be in your hands. And during the quarter, there has been a loss of INR 2,416 crores. And this loss is on account of 2 major factors: one is the hardening of yields, which has impacted the profit by way of mark-to-market by INR 3,400 crores. That is, of course, below the line. And above the line, the impact is about INR 2,000 crores. In the last quarter, the income was INR 3,000 crores. This year, it has been -- this quarter, it has been INR 1,000 crores.Another factor is that, many accounts which were in the stressed assets, they have now been qualified as -- classified as NPA during this quarter and provided for. The combined impact is all before you. And if I look at the stressed assets or the NPA, the slippages as compared to the previous year, they're much lower. So they are elevated, but it's still at a much lower level. And that is the trend which I'm seeing going forward. The situation as far as the stressed assets is concerned is going to improve. And next year in 2019, our estimate is that the slippage will not exceed 2% and credit cost also is going to be within the range of 2%. There has been very marginal, of course, improvement in the NIM. And that has to be taken into consideration that when account gets declared as NPA, some interest reversal also happens. Other income, again, if we remove the impact of the treasury and the income coming from the sale of investment, the income -- other income is quite steady. In fact, bank is doing very well as far as other income is concerned, be it government business, be it the payment space, be it the cross-sell or recovery in the written off accounts. Overheads are very much under control. The staff costs are, in fact, down as compared to March. The number of people have come down by almost 13,000. And a lot of optimization of costs and -- in the post-merger scenario, the rationalization of branch network, the centralized processing cells, the currency chest. So a lot of work has been done and its impact will be visible in the coming quarters and months. So this quarter is, of course, it is a disappointing quarter for us also, but every cloud has a silver lining. And going forward, what is visible is that financial year 2019 onwards, the normalcy as far as the NPA or the credit costs is concerned, that will return. Bank subsidiaries are doing exceedingly well. And it is our hope that they will continue to do very well, and they have grown their market share. They have improved their profits, and they bring a lot of value as far as the bank is concerned.On the digital front and the payment front, bank has established a very clear leadership on account of the investment in technology, which bank has been consistently making over the years. And whatever field we take, whether it is a debit card or debit card spend or merchant acquisition business, payment transaction, the share is 30% and above. Even our business correspondent channel, which is handling largely the financial inclusion accounts, it is now on the verge of becoming breakeven as of now, but within next 6 months, it maybe become a very profitable channel. So on the whole, accepting this quarter's performance, but things are very much looking up for the bank and very much under control.So these are some of my opening remarks. But please feel free to raise whatever questions you have and we'll try to answer to the best of our ability.
[Operator Instructions] We will take the first question from the line of Mahrukh Adajania from IDFC Securities.
Sir, one is that on your divergence-related slippage, the power was a key sector. So what would be the size of the largest 2 accounts?
The size of the 2 largest accounts.
Well, around INR 3,600 crores each.
Each, okay. And my other question is what would be your cutoff yield on the G-sec book?
Cutoff yield is 7.32%.
We will take the next question from the line of Mayank from Goldman Sachs.
This is Rahul here from Goldman Sachs. Just 2 quick questions. Number one, can we get the number of the total stressed asset pool excluding overlaps as of last quarter? This quarter it is INR 50,000 crores -- last quarter -- September quarter?
See, my aide flagged this to me that you may want this. We don't have the exact number for that 5/25, but one number I can definitely share with you. If you see our Slide 7, where we have said that INR 19,394 crores have slipped from the stress pool. So about INR 10,000 crores has come from standard restructure in this. And another INR 10,000 crores has come from S4A and SDR. And then there is another INR 10,000 crores in watch list and then there is around INR 2,000 crores in 5/25, but there is an overlap of about INR 13,000 crores.
This INR 13,000 crore overlap you're talking about is of previous quarter?
No, no. This is about the slippage. See, if you see on Slide 7, INR 19,394 crores, it's kind of 90% has come from one or the other of the stress pool.
No, correct. But actually, what I'm trying to get to is, if I look at the total stress pool, excluding the overlaps, how has that changed?
Rahul, we don't have it at the moment. Maybe we can give it you...
Sure, sure. The other question is...
What I'm trying to highlight, Rahul, here is that it is at 2.60%. Everything put together, today is at 2.60%. If you add it up to the gross NPA, it is still below 13%.
Sure. The other question I had was on your guidance with regards to slippages in next year. So you've guided for about 2% slippage ratio. So if I do some rough calculation, it comes to about INR 40-odd thousand crores. Now within that, there will, of course, be some regular run rate of slippages coming out of retail, SME and agriculture.
All taken into account.
Okay. So the corporate slippages would be what, about INR 25,000 crores to INR 30,000 crores, odd number?
Maximum.
The NPL is about INR 4,000 crores every quarter.
INR 3,000 crores or INR 4,000 crores is the gross slippage, but net increase is always less than that. So basically, I think, you are very much on the dot that maybe about INR 10,000 crores to INR 12,000 crores for retail and between INR 25,000 crores to INR 30,000 crores for the corporates. And that is again, I would say, a very conservative scenario. Things could be better, but still don't want to give any high hopes.[Audio Gap]And that's why I am giving the number within that range.
So this essentially is INR 50,000 crores for total stress pool as of today. So which means that, are we seeing encouraging signs of NPL resolution on the other 50%?
Right. This is the fresh slippages. This is not the overall reduction in the NPL. So we have to distinguish between that.
Correct.
This your NCLT list, INR 78,000 crores, that is going out of NPL list.
No, there are 2 things, Rahul. One is, of course, we'll have to factor in the Q4 performance as well, number one. And second thing is that, of this 5/25, there are quite a few which have -- now may be put under the stress category, but may not really...
Turn into NPL.
Okay.
I think the key point here is that you have to look at 5 quarters.
Yes.
There is a fourth quarter...
So fourth quarter, we're not talking...
Still happening. We are talking about slippage next year.
We will take the next question from the line of Adarsh Parasrampuria from Nomura.
Sir, first question is regarding the 5/25 book, right? Can you just -- this is one part of the book which is still large, which is in non-NPA stress. Can you just qualitatively talk about the book? What kind of names you actually don't think is stressed? What we're trying to figure out is if you have INR 50,000 crores net. So just qualitatively, can you talk about sectors and names where you think eventually you will not lose money in some of these accounts?
So mostly, these are in infrastructure and in infrastructure, our maximum exposure is in power sector. So 5/25, yes, like I have always maintained, that 5/25 does not necessarily mean a stressed asset. It was an alignment of the repayment capacity based on the cash flows of an entity. So if you look at this sector-wise, we now, even in this quarter, a large chunk is coming from the power sector. And going forward also in the next 2 quarters, this will be the power sector alone and rest is all -- we have a large portfolio. So normal slippages for a bank, which has the balance sheet advances portfolio for almost now INR 20,00,000 crore by March end, which is what we are expecting. About INR 9,000 crores per quarter, which comes to 2%, is something which is considered to be very, very manageable, and it takes care of all type of assets.
Understood. And sir, just going back to our first quarter, we had a lot of slippage, a lot of those were smaller accounts. We've not seen a material pickup in the recovery. There is some pickup, but not a material pickup in the recovery and upgrade. And now we've already got the SME NPA classification relaxation. So how should one think about it in agri, retail, SME put together? Are those accounts coming back? Or are they permanently slipping?
One is that the INR 56,000 crores is at the end of June quarter. We are now at INR 50,800 crores odd as far as the retail is concerned, which is agri, SME industry. In agri also, what we have to keep in mind is that 2 geographies, Maharashtra and Karnataka, they have very high agriculture NPLs, because of the -- there were drought and all those conditions. If I exclude these 2 states, in fact, our agricultural NPA performance has improved considerably and in the post-merger scenario, we are at around 7.5% or 7.6%. As far as the retail book is concerned, there has been a considerable improvement as far as the percentage NPAs are concerned. SME also there is improvement, but still, the percentage continues to be high. But that was one of the reasons also that the denominator was not growing. But now the denominator has started growing and we have put a lot of emphasis on changing the portfolio in SME and in agriculture also, where the emphasis is on what we call the risk-mitigated products. And even for the balance sheet financing in SME, we had initiated a project almost 2 years ago, and that is giving us very good results and all the changes which government and Reserve Bank of India has now made as far as SME is concerned. So going forward, I see that there will be a good growth in SME segment. Bank is fully geared up to meet and cater to the requirement of MSME. And we are very confident of managing the asset quality as far as retail is concerned.
Sir, the guidance in the first quarter, right, that you'll recover, like 50% of that INR 22,000 crores that slipped, still holds good. Has that got delayed or...
No, already achieved that. I think our indication was that by March end, we will be at around INR 50,000 crores as against INR 56,000 crores.
Okay, okay, okay. And so the...
May we request you to come back in queue for follow-up questions? [Operator Instructions] We have the next question from Kamal Verma from CLSA.
This is Prakhar. Just a couple of questions. One, this divergence report seems to be on the parent bank itself. Would there be a divergence analysis on the subsidiary banks also?
Not much. Hardly any -- not much. So 31st March was SBI solo.
And I want to say this, Prakhar, that 31st March was SBI solo, but whatever the observations are there, we have taken it across the bank as on 31st December. So the account outstanding had increased because of merger...
That has all been classified, yes.
If there is a reversal on the fixed asset revaluation partial, we've done it across whatever. So it is taken care of now.
Got it, ma'am. And ma'am, also this -- the NPL that you have recognized out of the watch list or the SDR or 5/25, in your view, would these be NPLs with most banks already? Or you would be ahead of the market in terms of classifying them as NPL?
I think because the way RBI is already doing AQR or this thing, there is likelihood that most of the banks would be classifying. But there may be some bank where if RBI has not told them to classify, they will not have classified. So I don't have any definite information as far as this question is concerned.
Perfect. Quickly, sir, the slippage outlook that you are discussing, should we assume that the next 5 quarter slippages should be largely smoother in trajectory? Or there could be some bunching up in the fourth quarter and next year, we'll see more smoother normalized level of slippages?
The 90 days are always a very tricky thing. So it's very difficult to say that if it is, say INR 50,000 crores. So every quarter it will be INR 10,000 crores. So to that extent, some variance may be there, but quarter 4 will be less than quarter 3. So that is one thing which I can definitely say. And the FY '19, already we have given some guidance. So the overall pool is what you can easily calculate and arrive at. Now within the quarters, there can still be some variations and that cannot be helped.
We'll take the next question from the line of Manish Karwa from Deutsche Bank.
It seems there is a lot of interest reversals during the quarter. Is there a quantifiable number for that?
We can come back to you on that number.
Just give us -- give me 5 minutes, I'll come back to you.
And the divergence thing, would it be fair to assume that all the divergence are now NPLs?
At least, I think they were...
The divergence is about NPL. So like the divergence is where the supervisors feel that as on March 31, 2017, these accounts should have been in NPL.
No, what I'm asking is that, are they -- have they already been classified as NPL now by...
Yes, in December, yes, everything.
Okay. And on the capital thing, you mentioned that you will need to raise INR 20,000 crores from the market and this is in addition to what our government will give you in the recap -- the second round of recapitalization?
So second round of recap, there is no firm indication from the government. And we are not relying on that also. So INR 8,800 crores I get this year and as a part of MOU with the government, we will raise INR 20,000 crores from the investors market depending upon the timing and from whom and in what manner that we will decide. But this 20,000 crores is arrears in the government.
Okay. And last, a small one. You said that you have provided on the treasury line up to 7.32% 10-year G-sec yield. On top of that, if the yields are higher by 31st of March, you may still need more provisions?
Yes.
It depends on the portfolio and the modified duration.
But there is still some provision.
We will take the next question from the line of Manish Agarwalla from PhillipCapital.
Sir, have you utilized RBI dispensation for MSME classification this quarter?
No, not at all. It has come only now and I really don't know. First, I will have to get all the data about like who is GST registered, not registered. So that is a very complicated exercise, according to me. But if any benefit comes, it will come in the March quarter.
Okay. And second is about the power portfolio. Now have we accounted the under-construction power portfolio in our watch list or any RBI dispensation category?
Look, like whatever has been classified, quite a few of them are under-construction projects. That is very much already classified.
So sir, would it be possible for you to quantify what are under-construction stalled projects for us -- exposure to under-construction stalled project?
There are various under-implementation projects, which have been classified as NPA. And there are 3 more projects, which are capital [indiscernible].
Can we have the exposures?
Consolidated exposure value...
Yes, we can adjust the number I gave you, yes.
Okay. And finally, one last question on the telecom exposure, which was on the watch list, which slipped during the quarter. So is the same exposure which can -- which will be upgraded maybe subsequently because of some management change?
Yes, we are very, very hopeful. And within March quarter, this should get upgraded.
We will take the next question from the line of Anand Laddha from HDFC Mutual Fund.
Just wanted to understand, sir, of the divergence of INR 22,000-odd crores, how much was recognized in NPA in Q1 and Q2, sir? And how much...
Q1, INR 2,200 crores.
INR 2,800 crores.
INR 2,800 crores. And Q2, nothing and then the rest is all in Q3.
And in Q3, we had a 19% upgrade also. An account amounting to...
Yes, one account got upgraded, INR 4,300 crores.
INR 4,300 crores got upgraded in Q3.
So this INR 4,000 crore upgrade, is it part of your slippages and part of recovery? Or it's not?
For '17, it is in divergence. And December quarter, it is upgraded. So you classify within the quarter and upgrade within the quarter.
So actually, what you may see as movement of NPA, because it happened in Q3, we have not shown it either as slippage or upgrade.
Or [indiscernible].
Okay. We also have seen large slippages on the SDR book. So if you can give some color, we have outstanding SDR group of INR 5,000-odd crores still. What proportion of that will complete 18 months, be it next quarter or in Q1?
Whatever estimate, broadly, what I have given for the 2%, which comes to about INR 40,000 crores, it includes all and everything.
Okay, okay. So if I remember at the start of the year, we had a slippages target of INR 60,000 crores. I believe we could have -- we would be crossing the target [indiscernible] this year?
We are at, right now...
INR 61,000 crores.
INR 61,000 crores already. So you are right that to that extent, yes, we will slip. But when I compare with INR 1,15,932 crores of last year, so we will be much, much below that.
I agree, sir. Sir, we always thought INR 1,19,000 crores as against that, it should have been significantly lower.
Significantly lower, but significantly has to be quantified.
See, the thing is, whatever -- if you think about it 2 years back, nobody thought that the economy -- the stress in the economy would play out for so long, underutilization of capacity, low demand. That is why it is things have not turned around as per expectation.
Yes, and particularly power sector, we also have been disappointed that in a country where there is so much power deficiency, but because of the inability of DISCOMs and they're not coming out of PPA. So that is impacting and putting pressure on the power sector, but otherwise, fundamentally, they are top quality assets in physical terms.
Right. Sir, just wanted your sense of -- we used to carry some floating provision. If you can give some color, like how much we have utilized in this quarter? And sir, we still carry some provision of INR 6-odd thousand crore of provision. So is it a floating provision against specific exposure? Or what is your thought on this, sir?
So floating provision, we've not taken any, right?
We have countercyclical provision buffer of INR 1,250 crores.
That remains there.
That remains and the stress standard asset provision on various accounts has built up over time to INR 5,600-odd crores. Some of it got actually reversed also, because some accounts on this, when they moved to NPA, the provision moved along to the loan loss provision.
Okay. And sir, lastly, have you made any provision on the employee side on the wage negotiations, sir?
Yes, for 2 months, INR 700 crores, almost. Almost INR 650 crores, INR 700 crores for 2 months.
Okay. So INR 650 crores is what you have made in this quarter. So this will be part of the employee salary cost, not in the employee contribution line?
It's partially there and it is partially there. So the salary portion provision comes in the salary and the other portion comes...
Whatever you provide for the terminal benefits that will come in contribution.
Okay. And sir, lastly, we also changed the revaluation of some of our assets. So what has happened that we revaluated back to normal valuation?
See, last year, RBI had allowed revaluation of fixed assets, if you recall, with a 55% haircut. You could take 45% into a CET1. And when RBI saw our book, they suggested that the leased assets had revalued, because they were fully marketable. But RBI suggested that we should not revalue and take that portion into capital. So that amounted to roughly INR 10,000 crores, INR 11,000 crores. So that we have reversed. And accordingly, about INR 4,500-odd crores has come out of our CET1 on account of that. There has been a recoupment of depreciation accordingly of about INR 300 crores.
We will take the next question from the line of Nilanjan Karfa from Jefferies.
I think I'd request, actually, Anshula, ma'am to, if you can, post-merger, if you can just give the next 3 quarters of what the total stress, like we have put out in the current presentation? I mean, it'll just boost our confidence that the bank is kind of moving in the right direction.
We will try. I don't -- I'm not sure whether we will be able to put out the numbers for June, because there was a lot of chaos at that time. But September, I'll try and we will give it to you.
Sure, sure. The second question, sir, is on the fee side. Could you quantify what percentage is retail? And how are we doing on the retail fees, sir?
Retail, we are doing extremely well, I would say.
Let me pull it out that number, we have somewhere. We'll pull it out in just a...
So that number also is shared. But as I said, that whether it is commission on government business, whether it is commission on the cross-sell, recovery in written off accounts, even a portion of the ForEx income comes from retail and recovery of charges, commission on collection, locker rent, et cetera. So just to give you an idea, say, for example, commission on government business. Quarter 3 last year, it was INR 661 crores, now it is INR 840 crores. If I look at the 9-month period, INR 2,400 crores versus INR 2,100 crores. Then cross-selling, INR 1,074 crores versus INR 579 crores. Miscellaneous commissions, et cetera is INR 8,336 crores versus INR 6,532 crores. So that is what I have been indicating, that as far as the fee income is concerned and particularly on the retail side, which is a very diversified source of income, we are doing extremely well on that.
Okay. And when I look at the slippages for this quarter, right, so if I exclude that, the portion which came out because of the divergence, about INR 19,000-odd crores. So the balance, which is about INR 6,000-odd crores, is what has been historically a run rate going back, I think, almost 4 years to 5 years. But on the slippages, most likely we were not earning anything at all, because most of it is probably coming out of those [ keys ] where RBI has already disallowed accrual of interest. And therefore, when I look at the margins, it doesn't look like it has -- it has kind of remained largely flat, maybe 4, 5 basis points higher sequentially. And given where -- how interest rate trajectory is moving up, how do you foresee margins going forward? Or are we going to kind of lag around or languish around these levels?
No, I'll just take the first part of your question, by saying that some of these slippages actually weren't earning -- many of these accounts are earning interest. And it's only the under-implementation power accounts which were not. And many of them were earning. So that we'll...
Actually...
Got reversed.
Got reversed and until the time that we resolve it. And then, there is that one of them actually was slipped and then got upgraded as well the same quarter. Obviously, we have not -- loss of income there in some way. So that portion, I think, there is -- interest income was being earned.
But yes, interest reversal in 9-month period has been INR 6,370 crores and quarterly, it has been to the extent of INR 1,910 crores. So when the account becomes NPA, definitely it will push down the NIM. But as we see the situation, as the NCLT cases start getting resolved and even if it is a 40% recovery. So on that, we will start earning income.
And our expectation, of course, market is relatively stable, wherever we are or maybe a little bit upside. But next year, we are definitely expecting 25 to 30 basis point improvement.
We will take the next question from the line of Kunal Shah from Edelweiss.
Sir, if you can give some more a granular breakup of the power sector in terms of how much of the power is currently there in -- on GNPLs, 5/25 and other restructured, post this entire classification of divergence as well?
I have some numbers, is that we had total power sector exposure was INR 1,67,000 crores. Out of that, about INR 21,000 crores plus has become NPA. Okay, now we have remaining about INR 1,46,000 crores. Out of that, about -- then there are overlaps, I'll come to the overlaps, about INR 34,000 crores are sitting either in 5/25, S4A, SDR, standard restructured or watch list, INR 34,000 crores.
INR 34,000 crores, okay.
Yes, and the assessment is that there is another INR 6,000-odd crores, where there are some operational issues, which are not in these 3. But other than that, the portfolio is...
It is all the AAA, AA, public sector undertakings, those sort of things.
AAA, AA, public sector, et cetera.
Okay. Sir, within this maybe below-investment grade, there would be nothing left out, if we are considering this INR 6,000 crores.
Yes, overlap [indiscernible].
Okay. And so overlap, so between this, there would -- would there be an overlap? So INR 34,000 crores is -- are not considered....
So INR 34,000 crores is after netting off the overlap of about INR 7,600 crores. So it is after that. So INR 34,000 crores is after overlap. It's the net amount.
Okay, okay. And 5/25, any color on this out of this INR 34,000 crores?
It is -- out of the INR 24,000 crores, 90% plus is in power.
Okay. Out of the INR 25,000 crores of 5/25, net...
All this -- what I'm saying, INR 34,000 crores, most of it is in 5/25, actually.
Okay, okay. And secondly, in terms of this impact of NDS, maybe whenever it gets applicable, so I'm not sure in terms of the applicability, but if we look at that now, the larger part of stress is also getting recognized. So stage 3, maybe given what provisioning is required or even in stage 2, given the expected credit laws, any estimate as to how much can be the impact on the overall network?
We keep on calculating in quarter-on-quarter basis and share it with the Reserve Bank of India. We have to probably wait for the guidelines. Because until the final guidelines come, it is very difficult to make a guess. But yes, Anshula, you want to...
See, what is happening is as each quarter passes by, the impact on -- if we move over to NDS, it is actually coming down, because these are the pools of shares, which are now getting classified as NPA. The NPA provision cover is going up. That is what is reducing the impact of the NDS. And in fact, if we get the transition period of 5 years, which is likely whenever we cut over, I don't think it will be such a significant impact for each year that it will be very material anymore.
Secondly, at this point of time, we don't know what the guidelines would be, what kind of...
We don't know, but broadly, sir, whatever assessment we have done are easier without [indiscernible] 48%, 49% down. So it is not much beyond that.
Okay, okay. And lastly, if you look at the total stress and the GNPLs, outside of this, how much would be, say, below investment-grade exposure, which would be left out across the sectors? Say, if we consider INR 50,000 crores of the stress pool, plus maybe the GNPLs, outside of this, what would be the below investment grade?
I think you can't obviously say that below investment grade would be stressed. It is quite a...
No, just wanted to get maybe...
No, I'd...
We will -- no, separately, maybe you can ask -- we'll let you know separately, please.
We will take the next question from the line of [ Lalitha ] from Sharekhan Limited.
Thanks. My questions have been answered.
We'll take the next question from the line of S. Parameswaran from JM Financial.
Yes, thanks. My question has also been answered.
We have a next question from Mahrukh Adajania from IDFC Securities.
Just wanted to check, that in terms of your core fees, have you reversed any income on minimum balance?
No, we haven't. We haven't reversed anything. We reduced our minimum balance charges from October. So this quarter, our income has been lesser on that account.
Okay. And there has been no reversal of the past income? Because some press articles were alluding to that.
There has been no reversal.
And I'll just add, I think there was a question on how much is retail and how much is non-retail. Fee income about 76% in this 9 months is retail fees.
Okay. And sir, just one more question, that earlier, you used to share a slide on gross slippages segment-wise, like SME, retail or personal. Would you be able to share it?
I can give you the numbers.
Yes.
Okay, so...
CAG is INR 13,724 crores.
Sorry?
CAG, corporate accounts with large corporates, INR 13,724 crores.
Sorry, how much?
INR 13,724 crores. You want all, or you just...
Yes, yes, all, personal...
Mid-Corporate is INR 7,730 crores.
IBG, INR 369 crores; and agriculture is INR 1,564 crores; SME is INR 1,977 crores; and ForEx INR 472 crores. Those 3 numbers, which I have said in the end are actually given in the first couple of slides also. Corporate, we have clubbed together.
We will take the next question from the line of Sreesankar R. from Prabhudas Lilladher.
Most of my questions were answered, but one quick question. You have shown your standard restructure levels at around INR 50,000 crores. So you were mentioning about the power sector at INR 34,000 crores under SDR, 5/25, et cetera, INR 34,000 crores plus INR 6,000 crores. This is forming a part of that INR 50,000 crores?
Yes, yes, very much so.
Next question is from the line of Prakhar from CLSA.
Just wanted to understand, 12 months from -- currently, your advance growth is running at about 3% on a Y-o-Y basis post on a merged basis. When do you think we will start seeing at par growth in terms of advances? Maybe it's an issue with the book realignment between bank and subsidiaries, but when will we get back to sector average growth rates?
Well, we are seeing steady growth there, signs of pickup and last quarter, in many cases, lot of disbursements are there. And retail book is growing at the pace at which we want it to grow. And corporate also, hopefully that...
There is a swing between the markets and the loan book in corporate. If you see even this quarter, by this time, almost INR 20,000 crores worth of CPs have been taken.
Yes.
So it doesn't matter to us, as we have now realigned our portfolio, whether the growth happens in the loan or the market.
And corporate book, going forward, more and more it will be in the CP and bond market.
I'm just saying basically, that whether we'll grow in alignment with the market. I think next year, that...
No, we will grow at 10%, because my balance sheet size is INR 19,50,000 crore. So I can't grow at 20% or 25%. So there, we are very clear, that for us, 10% would mean almost INR 2,00,000 crores. So I won't dare to go beyond that. Let me put it this way.
And Anshula, ma'am, you had just clarified that you have certain provisions outside the NPL provisions and some of it might have been used. Would you have to stock off the provision for a countercyclical and to stress, total put together?
It's there on the presentation. INR 1,250 crores countercyclical...
Slide 8.
INR 5,600 crores.
Sorry to have missed it. I'm sorry, embarrassed for that. And lastly sir, the wage hike provisioning that you've done, what are the -- what is the basic assumption on the extent of wage hike that you're as of now building in, in terms of the provisioning levels?
10%.
10%. So that's actually much lower than what we saw last year. And would this also be...
The number of employees has gone down substantially. Between April and now the number has come down by 13,000. And this number every month, 1,000 people are retiring. So that's how this -- all the estimations have been done. But [ Basant ], my senior is there. Do you want to add anything else?
Basically in the present environment, even 10% is very optimistic. Because we put the industry level wage settlement and most of the banks are under stress. And going forward, if there is a better prospect, then we may [indiscernible].
And is this based on all the employees, as the case was last year, or this time it is being considered that below a particular grade, only they will get a wage hike and others will probably be based on...
For everybody.
It doesn't -- in the bank, we may have said that, we will negotiate with [ in fiscal 3 ], but when the wage hike happens, it happens for everyone.
We will take the next question from the line of Roshan Chutkey from ICICI Prudential Asset Management.
At a system level, on LCR particularly, the requirement of 90% is applicable from January 1. Is that right?
Yes.
Yes, correct. And we are much above that.
Yes. That needs to be updated on a daily average basis, right?
That's right.
Yes.
So if a bank has less than, say, 85%, is that going down -- as of December 31, that's a problematic situation. I mean, regulatory -- is this...
How did you get 85%? I believe I gave more than 100%.
We are above 100% and we...
130%.
130%.
So we are close to 140%, and it is being monitored from the system on a daily basis. We have implemented something called Oracle Financial Services analytical software. It gives us a daily position.
Right, right.
They are more related to the system, not related to SBI, in particular.
Okay, okay. No, I'm talking about SBI, and we are much above that and would like to, in fact, bring down it a little bit.
Sure. And another question is on the retail assets trend. Any -- are you seeing any incipient signs of worry at all on the asset quality of the retail asset?
No, not at all, because the numbers are before you. Gross leverage is INR 4,000 crores, which is in line what happens quarter-after-quarter. And there is, in fact, a net reduction because recoveries, upgrades, some write-offs also are there. So that's been like retail book of INR 9,50,000 crores. It is very, very steady and the lending practices also. Lot of the steps we have taken to just mitigate agriculture and SME portfolio. Rest of the portfolio, housing loan, personal, express credit, all that, in any case, the bank is very careful in terms of either LTV or linked to the income or cash flows. We have no worry as far as the retail segment goes. Yes, Anshula?
See, I just want to also highlight for everyone that under every product in retail, there has been a sequential reduction. Home loan has come down by 10 basis points, home loan NPA. Auto loan has come down from 1.45% to 1.36%. Overall, it has come down to 1.33%. If you see in SME segment, the NPA has come down from 10.91% to 9.20%. Even in the agriculture, had the denominator not got reduced by around INR 7,000 crores due to debt waiver and plus the fact that 2 outlier circles are there, our NPA would have been below 7%, if it had not been for that debt waiver. So I think on the retail and agri and SME, we are fairly comfortable.
And it is -- it's borne out by the vintage curve analysis as well, I presume?
Borne out by...
Vintage curve analysis [indiscernible]. Vintage sourcing, so the...
Yes.
The loan has been sourced in a particular year, how that...
We will take the next question from the line of Ravi Singh from AMBIT Capital.
Sir, related to earlier question on the loan growth, in recent budget, government has discussed a proposal to ask SEBI to ask large corporates taking 1/4 of their sovereign from the market. And there was this earlier proposal from the RBI to ask eventually companies with more than INR 10,000 crores exposure, 50% incrementally coming from the corporate bond markets. So sir, what is your view on the opportunity on the corporate loan growth, given that how the rules are shaping on that side? And even if you're able to capture market share on the CP, bond markets, I think profitability there will be much lower. So any strategy to offset pressure on the large corporate to build your market share in the Mid-Corporate or SME and retail? What are you thinking about the entire dynamics?
So as far as corporate book is concerned, this is inevitable, that movement will happen from loans to bond or CP market. And the yield will be much lower, but at the same time, the risk will also improve because when you go to the bond market, the risk recognition happens very fast. So it is not that it is some sort of a huge negative impact. Ultimately, when you look at the income also, you have to look what are the credit costs and when the market instrument, not everybody will be able to access. Even if it is A and above, then the yield may be lower than the loan book, but still we are not as much worried about it. It is a good development. And as far as the loan book is concerned, more and more emphasis is on the retail, which includes our SME also. And corporates, the lending will be selected at, I should say, on our terms, on our pricing and high-quality exposures. That is what the effort would be.
Actually, there is a small issue on the corporates going into market, in the sense that today, there is no demand for lower-rated corporates and on the sense that, if you're lower than AA, the demand is not there. And if the demand is there, the pricing is too high for those corporates to sustain. So if you have, say, for example, a BBB corporate, now if you go to the market, if at all there is a buyer, you will get 13%, 14%, 15% from that. So as far as, it's not only a question of directing companies to go into areas other than bank loans and source, but also, there needs to be development of those enablers there. The second thing is that, as I said, the comfort to the banks is actually, when there is days default and there are quick triggers, and in fact, happens in the loan book, but there is a cushion period available to rectify the defect. So in that sense, as bankers or as regulators or as even as the government, we would surely like to go as much as into the corporate -- into the markets. But again, it all depends on how fast it is developed.
Sir, any qualitative sense what percentage of corporate loan book would be towards corporate with INR 10,000 crores total borrowing from the system?
But INR 10,000 crores comes 2 years later. Right now -- and from next year it even goes from...
INR 25,000 crores.
INR 25,000 crores, actually. Okay. So it's a 3-year transition period for them.
INR 25,000 crores is for all AAA, public sector undertakings, Maharatna and Navratna, likes of Tata, so those kind of exposures. INR 25,000 crores is not everybody's book.
We will take the next question from the line of Anand Laddha from HDFC Mutual Fund.
Sir, like, you just indicated that next year, looking at 10% credit growth. Sir, if I wanted to break up your credit book into retail, SME, agri, what sort of growth in each of the segment you're looking next year, sir?
So we are at 60% now of the domestic book. So we would try to maintain that, that 60% remains. So which is the INR 2,00,000 crores growth, INR 1,20,000 crores will be the target for the retail book.
Okay. But sir, in that case, if I had to look at the industry on the retail, SME side, you're growing much faster. So we will be at least won't be able to grow in line with the industry also, sir? Like retail, we have grown at 14%. If I look at each of the element of the retail, our growth has been slower than the industry growth, sir.
Right, right. But it is a base effect also. My base is very large. That is what I -- also, you would have seen that a bank, which has a total loan book of say, INR 1,50,000 crores, INR 2,00,000 crores, they can afford to grow at 20%, 25%. But SBI, our market share, we are able to maintain with whatever in percentage term appears to be a lower growth, but fact of the matter is that whether it is home loan, auto loan, everywhere either we have improved the market share, which was already high. And that's why that percentage terms become sometimes misleading. In home loans, our market share now is 33%. So I can't make it 40%. 33%, it may become 34% at best. But it will remain in that range. And auto loans, we have improved by how much market share? Almost, I think 200, 300 basis points. So that is the limitation of the market size also. And when you compare the credit growth of some of the private sector bank, there is credit card is included in that.
Okay. Sir, we are seeing some green shoot in SME this quarter. Do you expect this growth to -- grow meaningfully next year?
I think the emphasis which now even government is placing on MSME and the formalization, that is very important. That a large, large chunk of MSME was not M -- but MSE was definitely outside the formal lending, borrowing market. And now because they are all either have to be GST compliant, impact of demonetization. So that will open up lot of opportunities for the banks to lend to MSME. And for us, it is a focus area. And I am very, very hopeful that we'll do well in the coming year as far as SME is concerned.
Right. Sir, what is our CD ratio currently, sir?
Is that 65 point...
It is at 66% -- 65.97%.
Almost 66%.
The incremental during the quarter has improved.
That was 140 basis points, INR 1.4 crore. So credit growth has been higher than the deposit growth.
[Operator Instructions] We will take the next question from the line of Nishant Shah from Macquarie.
Just one very quick question. The telecom -- the industry-wide telecom exposure, which has slipped during the quarter, could you quantify the amount of exposure that you had to it?
INR 2,600 crores.
INR 2,600 crores. And was this a part of your divergence?
Yes.
Yes.
Okay. And if I can just squeeze in one more quick question. What is the percentage of your floating rate book, which is still on base rate or yet to move to MCLR?
See, of the performing loans, 14% are still on base rate, 1-4. And as this quarter, as the review/renewals are at the peak in the fourth quarter, we are expecting this percentage to come down significantly by March itself.
In the interest of time, we will take one last question from the line of Abhishek Singh from Birla Sun Life Insurance.
This is [ Sandeep ]. Just one clarification. This INR 5,600 crores for stress asset provision, it is a part of cumulative loan loss provision? Or it is over and above that?
No, it is over and above that. Home loan provision is purely for NPA.
So the PCR, which we calculate, it is not included in it?
No, it's not included.
We will take one last question from the line of Dhaval Gala from Birla Sun Life Mutual Funds.
Just a question. I think you answered about the loan growth expectations. Unless you assume, if at all IFRS has to be implemented either in the immediate start of the financial year -- next financial year, or maybe the following financial year, could you expect that the capital needs for SBI would be higher or lower? Or the INR 20,000 crores number, does that include everything? And if at all, our growth expectations are not so high and assuming that the profitability-wise we should return to a much better number next year, because our expectation on slippage is 2%, credit cost is 2%. Then why do we need to raise capital next year?
No, we will -- we have certain calculations of -- about growth and distributed effect. And IFRS, right now, we are not taking into account because we don't know how much transition period will be allowed, what will be the rules. So that is something we are leaving it open as of now. But INR 20,000 crores is something which we may need next year and that's why it has been planned and...
See, if I may say, today our Tier 1 is at 10.30%. And by March '19, regulations prescribe that our Tier 1 should be at 10.10%.
And we'd like to be over and above...
So there is very little room or cushion for growth between 10.30% and 10.10%. And definitely, for a bank of our size, we would like to be at least 50 basis points above minimum threshold or more. So -- and this is not the only avenue. We are also going to be looking at divestment of non-core investment. And we will even look at some of the other avenues for raising capital, if required and...
Yes, but madam, if at all, just to ask you, is that also purported that you expect your internal capital generation will be even weaker than your RWA growth, even in the next year?
No, it will be much healthier next year. I think -- I know the Chairman mentioned in the beginning, we are targeting an ROE of 0.6% by March '19, ballpark figure. It's not a hard-fast guidance. But we have done our number crunching. We are expecting improvement next year.
Then why should we be talking to -- I mean, why should we be raising capital to that magnitude, if at all, the number is not considering the IFRS or...
[indiscernible] depending upon how does the RWA growth will span out. So we will take a call. It is not something that we have decided that it will be -- we are going to do it next month or this thing. But the board approval is there and in any case, that is a MOU requirement with the government for this INR 8,800 crores infusion. So we will enter into an MOU with the government that we will raise INR 20,000 crores. But it is...
It narrows the nature of our buffer to enable us to build up growth opportunities and we need...
And bank would like to be -- like, I think whatever are the benchmarks, but we would like to be much above the benchmark. We need some safety cushion, anyway.
Due to time constraints, that was the last question. I now hand the conference over to Chairman for his closing comments.
So thank you very much, everyone. And I think we have had a very wide range of questions and almost everything has been answered. But going forward, we are going to improve the asset quality, provisioning requirement will come down. Retail franchise for the bank is doing extremely well and will continue to do well. On the digital side, on the payment side, bank has captured more than 30% market share, despite so many new players, so much competition in the market. Overheads are very much under control, and there will be a very tight rein on the overhead. The sources of other income, there is a much more thrust on augmenting the same and improving the other income. So on the whole, 2019 onwards, we are expecting that we will be able to deliver much, much better performance than what has happened in the, I would say, last 2 years, because of the biggest challenge, which was the asset quality. SBI was not alone in this, but yes, because we were the leader in the corporate banking, so that's why the brunt also has been borne by the State Bank of India. But the entire portfolio strategy, pricing strategy, scale upgradation, risk management around credit processes, revamping of commercial banking, organizational restructure, so everything has been planned that what are we going to do and deliver a superior performance. So thank you very much.
Thank you. Ladies and gentlemen, on behalf of Kotak Securities Limited, that concludes this conference call for today. Thank you for joining us. And you may now disconnect your lines.