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State Bank of India
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Hello. Good evening, ladies and gentlemen. So on behalf of State Bank of India, I extend a very, very warm welcome to the analysts, the investors who are here and also those who are joining through webcast of this event and also to our staff members from various verticals and the business lines who are here on the occasion of the declaration of Q3 results for FY '19. Before we get on with the proceedings, I would like to introduce the dignitaries on the dais. We have with us our Chairman, Shri Rajnish Kumar at the center; and to his right, our Managing Director, Retail and Digital Banking, Shri Parveen Kumar Gupta; and to the left of the Chairman is the Managing Director, Global Banking and Subsidiary, Dinesh Kumar Khara; our Managing Director, Commercial Clients Group and IT, Shri Arijit Basu is seated next to Dinesh Kumar Khara; and our Managing Director, Stressed Assets, Risk and Compliance, Madam Anshula Kant is seated to Shri Parveen Kumar Gupta; and our DMD and Chief Financial Officer, Shri Prashant Kumar, is seated next to Madam Anshula Kant.We have amidst us the deputy managing directors heading various verticals, the managing directors from our subsidiaries who are based out of Mumbai. They are all seated in the first row, and we are also joined today by various chief general managers, general managers and our senior executives from corporate center pertaining from various verticals and business lines.I would like to -- before we get on with the Q&A, I would request our Chairman to highlight the bank's performance during the Q3 and by making an opening remarks. And before that, I would like to read the safe harbor.The certain events in these slides are forward-looking statements. These statements are based on the management's current expectations and are subject to uncertainty and changes in the circumstances. Actual outcome may differ materially from those included in these statements due to a variety of factors. Now I would request our Chairman to make opening remarks. Over to you, Chairman sir.
Good evening and a warm welcome to all of you. I think most of you have our presentation probably and the idea about the results, but some of the performance highlights this quarter, we have seen a very robust credit growth. In fact, that used to be a matter of concern that the growth of SBI is not in line with the industry, but now we are back, and let me assure you that all the growth is quality credit growth. There's an improvement in the net interest margin. And for the quarter, the NIM is 2.97%. The slippages have been controlled, and fresh slippages are INR 4,523 crores. If we -- I think, it's in the outstanding, it is about INR 6,000 crores. The provision coverage ratio, as you can see, that almost 871 basis point improvement Y-o-Y. This quarter also, there is accelerated provisioning, and almost INR 5,000 crores is what we have provided more than what is required as per the norms. The net profit, INR 3,955 crores. The contribution to the net profit is coming, I would say, from all corners. One is because of the increase in the loan portfolio. The earnings have improved. Net interest income has improved. The margins have improved. All the costs are under control accepting because of the provisions for the terminal benefits and wage division, the staff cost Y-o-Y is just 2.58%, but the provisions are up by more than 200%. Other than that, the CD ratio of the bank and NCR, again, it is -- it enables the bank to sustain further credit growth. Our deposits, mostly, it is coming from savings bank, almost 1 lakh crore growth, and bulk deposits, which are the retail country, not differential pricing. The strength of our liability franchise and particularly savings bank where bank is adding customers on a continuous basis and almost more than 1 crore customers get it every year, we currently have a customer base of 41.5 crore. As far as savings bank accounts are concerned, it's a huge number. And this gives a lot of advantage, not only the cost of deposits is low, but it has enabled the bank to maintain its leadership position as for the payment and the digital space growth. It's a huge competition out there, but this customer base, which provides us the strength to compete in the market and maintain the leadership. Overheads are all contained, as I mentioned, that other than the provisions for retire terminal benefits. All other overheads are under control. You know now, it is almost a new digital ecosystem, which bank is developing, and this will become a main distribution channel for various products and services of the bank. Just to give you very small example as at how much transactions are happening as of now. Every day, the number of users is going up by 30,000 per day. We have crossed 6 million user base. INR 50 crore preapproved personal loans. INR 1,100 crore is the loan book, which we have built on this channel and with 0 delinquency. And 40,000 funds transfer every day happens. 8,000 to 10,000 IRCTC triggers gets booked. Personal accident insurance policies, more than 2,000 to 3,000 every day. Life insurance protection plan, we are selling to this channel. So this is a huge potential, both in bringing down the distribution as well as the deficiencies, which will happen in our branches. The share of alternate channel, now only 13% transactions happen in branches and the rest happen outside branch, and it includes, of course, ATM channel.These are some of the pointers that how SBI is continuing to maintain its leadership position, and a couple of things I've already spoken about. We're, of course, like 53rd rank globally, and it also depends upon that what is the dollar-rupee rate, so this position can also move. And the liability franchise, I've already spoken. Home loans and auto loans, such a competitive market, but still, SBI our, market share amongst scheduled commercial banks is 34%. If we take into efficiencies then market share comes down to 20%. And we are not giving an inch as far as market share in deposit and advances is concerned. In fact, in advances, now, we are seeing a growth in our market share, I have spoken about, you know already. As far as subsidiary is concerned, they all are doing fantastically well. They have emerged leaders in their respective segment. And even a small subsidiary, which is SBIE payments where we have done a joint venture with Hitachi, and they've taken 26% stake. Even that could fetch a value of INR 6,000 crore. So that is the power where our subsidiaries, the value with these subsidiaries, there's immense potential and they all are on the growth path.So these are some of the numbers about the financials. And as you can see, net interest income has gone up by 21.42%. Noninterest income is still showing a negative growth, but when you look at this, this -- what we have to keep in mind, last year, we did a stake sale of SBI Life, which gave us more than INR 5,000 crore. And the treasury income was higher last year, but this year, not only we did a switch in April, which cost us about INR 2,000 crore, and because of the price movement in the bonds, the opportunity for the treasury income has been much lower. And the operating expenses, though it looks 20.54% but mostly, it is on account of the provisions and some of the expenses, which are leading to the business and have impact on income, like the expenditure and currency turnover, business correspondence or the expenses incurred on mobilizing business under the auto loans. So there are some of the expenses, which directly benefit as far as the income side is concerned. The provisions, of course, the loan loss provision has gone up, and that is a deliberate and conscious decision to have higher provisions and accelerated provision. The net impact is on account of an investment depreciation write-back. So this is the order position as far as some of the parameters are concerned. Next slide, please. This is the snapshot of the total income. And here, you can see that -- and in subsequent slides, we will show you that other than the treasury income, what are the earnings source as far as fee-based income is concerned. Please go to the next slide. Fee income, if you can see that almost everywhere, there is a good growth: Loan processing charges; commission on government business; LC/BG. Because of the change in the accounting, there is some impact; cross-selling; account maintenance charges, of course, we reduced last year in April, so there is some negative impact; and miscellaneous fee income, we have a breakup in the next slide -- in subsequent slides. Yes, please go back to that slide. Yes.So here, you can see that depreciation, of course, there was a one-time item of 300 crore, and that is on account of the -- when we revalued our property. At that time, certain leases, which are long term, so bank took the benefit, but subsequently, as for SBI, the thing that was disallowed, so it doesn't matter. And all other expenses are controlled. Business acquisition, development expense, I spoke about that, these are generally on sales and our BC channel and ATM expenses, because the card business is increasing and proportional expenses are there, but on the income side also, we get compensated. Next.This is a position of the operating profit. As you can see that the loan loss provision is INR 13,971 during the quarter. But within this, almost INR 5,000 crore is accelerated provisioning. And investment depreciation, there was a write-back of about almost INR 8,000 crore, and ROA for the quarter now is 0.45%.This is the yield on advances, cost of deposits, you can see the graph, how it is moving, and domestic NIM now 2.92% on an average; foreign NIM, 1.38%; and overall whole bank NIM, 2.76%. And if you compare with December '17, almost 31 basis point improvement. Business, as I was mentioning, that savings bank year-on-year growth is nearly INR 1 lakh crore, it is in there. And CASA, on the strength of savings bank growth, it is going up. Term deposits, the growth is coming from the bulk deposits, but the [ card due ] we pay whatever we pay for the retail. Next. The portfolio of the bank, of course, is very diversified, and all segments, there's a growth. Even agriculture, there is a small growth, and P segment, the growth of 17.57%. It is, again, a very satisfactory growth rate. And corporate, of course, 20.67% growth. So overall, 15.65% domestic. The decline in the loan book, overseas loan book, is on account of 2, 3 factors. One is, of course, the price movement between rupee and dollar. Rupee has strengthened during this quarter. And the impact of transfer of $2 billion assets in SBI U.K. And because of the LoU band, the trade finance portfolio came down by almost $8 billion, but we have covered quite a bit of a ground there also. Retail banking, the portfolio quality is very good, and growth housing loan, you can see 16.54%; auto loans, 8.88%; Xpress credit, which is a very profitable portfolio for the bank, 36%. And other P segment loans include education loan also. So that's why because of the education loan, you can see that GNPA percentage is on the higher side. This is the industry classification. And as you can see that fairly diversified portfolio bank is holding. And most of the growth, as you will see in subsequent slides, is coming from a lot of government undertakings where bank has grown its portfolio. Next slide please. Power, you can see that the growth is mostly coming from public sector undertakings and generation and transmission sector. Roads and ports, again, 93.7% growth is coming from only the government sector. Services, of course, like again, NBFCs Y-o-Y growth and we have put all the NBFCs in 4 categories: One is central government; second is institution-based; third is large corporate house; and fourth is the entrepreneur base. So there, the growth is, lowest, 10%. So the rest of the 3 categories, we are growing and we have grown. For the fourth category, the bank's approach is not to grow the portfolio as much but go more for portfolio purchase after due diligence and the co-lending where we believe that the NBFC meets the criteria. Already, bank has approved a policy based on the Bank of India guidelines. And based on those guidelines, we are moving into co-lending model. So as far as NBFCs is concerned, bank's approach is very clear. We don't have much concern on 3 categories at all. And the fourth category, preferred model will be the portfolio purchase and co-lending model. Direct credit will be very limited to this category of NBFCs. As far as treasury book is concerned, you can see that modified duration has come down from 3.28 to 2.45. And given the size of the treasury, I don't think that we can do better than this as far as modified duration is concerned. Capital adequacy. Despite the credit growth, because we are very consciously managing the credit risk-weighted assets growth, and that's why we have been able to maintain capital adequacy ratio, and bank raised the additional Tier 1 of INR 6,066 crores during the quarter at a very fine price, and the same goes for Tier 2 bonds. This is the gross NPA chart. And as you can see, that the net NPA ratio is now 3.95%. Gross NPA ratio is 8.71%. Slippage ratio is 1.64%. Credit cost looks at the high 2.42%, but I've already explained that this is because of the accelerated provisioning. And here, I would like to mention that 8 accounts, they are in very advanced stage of resolution. What will be the recovery, the price has been discovered. It's just a matter of either adjudication before NCLT, or approval -- liability approvals in respect of power assets. And INR 34,000 crores is straight away, it can come within 2 months. Or there may be some spillover. Difficult to say, but this INR 34,000 crores, 8 accounts itself, will bring down the gross NPA ratio below 7 and net NPA ratio below 3. And there will be a write-back of INR 6,000 crore of provisions. This gives again the breakup that how much has been the reduction, recovery and upgradation, gross addition and net decrease of INR 18,000 crore. The ratios on the retail, they have improved in percentage terms, at least slightly higher. And P segment, there's a considerable improvement. International book now, the NPS point hit it, and in fact, net NPS is now below 0.5. So that way, retail NPA, if you observe carefully, June '17, we saw a spike because that was the first quarter after merger, but after that, bank has been able to maintain retail NPA within the range of INR 55,000 crores, either INR 1,000 crore more or INR 1,000 crore less. And international book is now almost clean. Corporate, I already explained what is the trend. This 130 can easily become 95. And the control over the equality on the retail and international continues. And on the corporate side, the bank has taken several steps, several changes in organizational structure so that the corporate NPA quality is maintained and not allowed to deteriorate. Now we are discontinuing watch list because we feel that it has lost relevance. SMA 1, 2 is what gives gets reported every quarter -- every Friday to Reserve Bank of India, and that is the figure which we will be now disclosing as far as our disclosures are concerned. This is power sector. So we have already improved the PCR to 50%, which I believe is an adequate cover, given the trend of the price discovered in respect of some of the assets where we are close to resolution. And here also, the -- if we look even at the -- in terms of rating, 67% is A- and above. Next. NBFC, this is where like a lot of discussion happens, but if you look at it, the private others, which I was talking about, that there are 4 categories, that constitutes a small portion of the bank's overall NBFC portfolio. This is the provision coverage ratio on NCLT accounts. Here, again, there is a fairly good possibility that these provisions are more than adequate. In NCLT 1 alone, the recovery to the bank will be 6,000 crore, and same as the position for NCLT 2 because we have provided up to 86%. And there are accounts where we are seeing some very good recovery. Digital banking, we are very proud as a State Bank of India that despite all the competition from various players, whether fintech or other players, private sector, but the bank's undisputed leadership continues as far as the technology and innovation is concerned. As I mentioned earlier, only now, 13% transactions happen at branches and just all are either on digital channel or the ATM channel. Even the ATM channel is coming down as far as the percentage transactions are concerned. I spoke about YONO, and this is a channel, I think, in the market today in India and our consultants still even globally, nobody has developed the kind of capabilities which we have developed in YONO, and it is the beginning. Still 2 more years to go. And as far as the P segment is concerned or the individual consumer is concerned, most of the work has been done, but some exciting things are going to come. And we are working already on bringing out for the farmers, for the corporates and for the global clients. So within 2 years, it will be a complete solution. And anything which an individual wants to do, not only banking, investments but online shopping, book and other, everything will be possible on a single application. And this power is huge in terms of reducing the cost of distribution as well as the branch processes are also now being redesigned and completely[Audio Gap]channel experience across channels, whether mobile or your iPad or your branch. So the savings, which this channel will give us, ultimately, our aspiration is that this should help us in bringing down our cost to income ratio of 40%. This is again some of the data around like where SBI is as far as the payment space is concerned. Financial inclusion, again, all of you know that SBIE is fulfilling this responsibility. And almost 40% accounts are with the State Bank of India. Average balance in this account as well as the balance on per account basis, both have gone up and almost INR 2,000 per account, so this channel now is almost at the breakeven stage.Subsidiaries, again, I've already spoken. They are giving fantastic performance quarter-after-quarter. There's a huge value sitting in, whether it is SBA Card, or Mutual Fund, General, Life is already a listed company. And there are many smaller subsidiaries, which already one example I gave, but there are quite a few more where, first, we will add value to them, and then, at the opportune time, in cash. This is the group financials, the balance sheet. And thank you.
Thank you very much, sir. We will now take the call from -- questions from the audience. [Operator Instructions]
This is [ Devesh Mehta ] from [ Meadowlands Private Limited ]. Sir, you have given a fair enough idea on the recoveries for second half of this year, in the calendar year, I'm saying. But sir, then, you have not given any clarity on the fresh slippages, so what is the quantum of the slippages you expect going forward in next few quarters? So if you've seen this quarter, it has reduced drastically, sequential basis also and year-on-year basis also, but do you expect this figure getting stabilized over year?
So last time, what -- the guidance of the bank was that the fresh slippages will be contained around 2%, both the credit cost as well as the slippages, and we are bang on the target. If you look even at March, then there's a question of INR 8,000 crore, right? But that does not mean we are going to INR 88,000 crores as NP. So we are likely to end below INR 40,000 crore. That is what the estimate was. And financial year '20, given the size of the balance sheet and the portfolio composition of the bank, the target would be that anywhere between INR 25,000 to INR 30,000 crore. So that will be the fresh slippage target. As far as the credit cost is concerned, so already, the loan loss provision is INR 37,000 crore, but we have to also keep in mind that there is accelerated provisioning in that. So both on the fresh slippages as well as on the loan loss provisioning, whatever guidance or the targets we have given for the current year, we are very much there. And next year, obviously, if the fresh slippages, even in the worst case scenario, are INR 30,000 crore, and the credit cost can easily be anywhere again between INR 25,000 crores to INR 30,000 crores. It means whatever are the fresh slippages, you're providing 100%. And that automatically means that your provision coverage ratios will improve further. But a lot of upfronting and accelerated provisioning because we have already done. So this year's -- this year means March '19, there will not be any carryover credit cost, which will be loaded in the next year.
Sir, this is Ashok Ajmera, Ajcon Global. Sir, there is a limit on the questions but not on the compliment and observations. So my compliment to you and, sir, your entire team of SBI for the all-around fantastic results. In fact, many of those targets which you set up for 2020, you are almost reaching those -- your credit growth this quarter, 15.65%; NIM, 2.97%, which is 3%, the target. Slippages are under control. All, gross NPA, net NPA, everything is under. So definitely, I mean, you deserve each compliment. Having said that, a few observations and some, maybe you might take it as questions, sir, in this NCLT List 1, D2 to D3 movement up 5,207...[Audio Gap]100% of RBI [ LOIs ]. Is there a dialogue with RBI? I mean, is it permitted to continue with this or?
So up to December, of course, we have disclosed, and it has been done with the approval. And March quarter, I'm not so sure about RBI's stance. But logically, if you see a loan account where 11,000 crores, recovery is imminent. And that INR 5,200 crore also, we will be able to write back. The INR 6,000 crore [ when I speak ], it is only one account, from where INR 6,000 crore is coming. And just all we have aligned with the recovery. So logically, there's no need. And we're still in January, and the matter is under discussion in NCLT. So I'm hopeful that we may not have to go again to RBI, but this is something which needs to be looked into, even from liability perspective that if the price has been discovered through a court-led process, whether you necessarily need to make...
No, because the military has a project as a major emphasis in the north, that is why...
We have to disclose what we have disclosed.
So -- and secondly, Note #8 on MSME, that June 6 circular that INR 904 crore had not been recognized because the special dispensation is given. However, the interest on that has not been considered. So what is the status of those INR 904 crore now when we are at the end of January?
Strictly speaking, all due accounts are now eligible for restructuring. With the recent RBI secured as...
That 25 crore in...
25 crores exposure. So all of them are eligible for restructuring. So as for the RBI circular, we were supposed to put in place a board-approved policy within 1 month, which we have already done. So we are not talking up all these accounts and [indiscernible].
And sir, my next, just one...
We'll come back to you.
DHFL and -- or earlier one that IL&FS impact and this INR 22,000 crore on those NBFCs, which, of course, you explained it, but still, is there any chunky accounts in those 22,000? It will take something or there is happening in some of these NBFCs...
It has to be viewed in the sense that, still, those accounts are AAA rated. That is the first thing. Second is that our analysis reveals that the cash available to service, the debt to the banks is higher. So there is no compromise on the DSC. Third, there is no asset liability mismatch. So 3 months back, when IL&FS space, there was a certain liability mismatch, so no asset liability mismatch. And in terms of the overall size of the exposure, definitely, it is chunky, but it is not something which will shape the bank. But I sincerely believe that, as of now, there is no risk of default.
But the quality of portfolio at DHFL, you must have assessed that, whether because -- even we understand that the quality of portfolio is good, but what is happening around with those shell companies are something that users are coming through that is different?
The portfolio is good. Sometimes like I think without doing any research, sometimes comments and observations are made. So I will limit my comment to this. But as of now, for State Bank of India, we are watching the situation for sure. We will take all such steps which are required to protect our exposure, but one is that in relation to the overall exposure. The bank's exposure is 10%. In relation to my loan book, it is a manageable exposure. I have a loan book of INR 22 lakh crore which will become INR 23 lakh crore. And if SBI of what appears to be chunky, it is a big exposure. I won't say that INR 11,000 crore is not a big exposure, but it is not something which will shake the bank. Last year, it was INR 1 lakh crore in 1 year. But what you are seeing that is when I said INR 30,000 crore, so whatever may come. But I don't think that our fresh slippages will exceed INR 30,000 crore. It isn't some sort other estimate. I won't say that 5% year-on-year cannot happen. But otherwise, if you go by our guidance, whatever guidance, whatever estimate bank has given, not even a single item you will find that our estimate was not correct.
Sir, Mahrukh from IDFC. Sir, just a couple of questions. Firstly, the 34,000 accounts -- INR 34,000 crore across 8 accounts, was that all NCLT accounts only? Or some...
Five of them NCLT, and 3 in Power.
Okay. There are some one-on-ones also. Okay. Got it. And so my other question was then what was your -- how much of retail portfolios did you buy in Q3? And what was the incremental loans given to NBFCs in Q3?
So NBFC incremental loan, again, you have to realize that in 4 category of NBFCs. So if I give loan to Power Finance Corporation, [ ADC ] that is one category. If I give loan to LIC Housing Finance or SGFC or this [ Kenhome ] or PNB Housing Finance, that is second category. Third category is if I give loan to Cholamandalam or Bajaj or TVS Sundaram, that is another category. Fourth category is where mostly I would call them first generation entrepreneurs. There, our credit would not have increased, number one. There, as I mentioned earlier, our approach is do due diligence on the portfolio. And if it is a good quality portfolio, is available, and priority sector mostly. Sometimes it comes as a package. That 18 wasn't this priority sector, 20 is non-priority. Without diluting our due diligence norms, that portfolio purchases as a part of policy we were doing earlier. We continue to do that. Numbers, you can tell her.
INR 11,000 of buyout.
And diversified again.
Diversified across NBFCs?
Across NBFCs. And mostly, it is retail loan.
INR 8,700 crores is in housing sector, and about INR 2,500 crores is in the MFIs.
Got it. And just a clarification on this. And so there has no fresh loans given to HFCs or NBFCs. It's mostly the portfolio buyouts only. So in 3Q, no fresh loans?
No, there are fresh loans. This is not that we have closed that TAM. But some of the names where you know and I know, so there's no increase in credit. Rather, it has come down.
This is [ Akash Lidani ] from HDFC Securities. So would you be able to comment on the quarter-on-quarter movement on the bank's deposit base?
Yes. So deposits, as I mentioned, that the -- we have readily available Y-o-Y figures and quarter-on-quarter also there. But the growth is all coming from savings bank account and is coming from the term deposits, which are 1 crore and above. But there is no difference between the card rates for these deposits and the retail deposits.
6.76%.
6.76% is the quarter-on-quarter.
No, this is year-on-year.
Year-on-year. Year-on-year. Quarter-on-quarter also...
Are the deposits flat quarter-on-quarter, the total deposits?
No, no. They're growing, but I don't have to be very aggressive for mobilizing the term deposits. The price differential between what the people are getting in the market and what is this figure is almost 200 basis point. But my credit deposit ratio is 69%, and my liquidity coverage ratio is 130%. So there's no need for me to pay a higher interest on the deposits as of now. For us, it is very easy. We can open the tap, and the deposits will flow. So it is a hard work, which goes around mobilizing the savings bank deposit and the current account deposit, which is the focus area for the bank. And that's why the CASA ratio is always improved.
And just to add, so during this quarter, [ WFC ] and our loans, 5-year loans, maturity out. So with $1.2 billion, that also went out, actually.
Unrelated from today's budget. Finance minister has exempted up to 40,000 on tax. I would like to know what your experience when such a measure is allowed that amount of cash, which is in circulation, will go down towards CASA accounts.
No, I think one is that it is a big relief to the senior citizens and pensioners. Otherwise, like, there are -- they do submit [ Form G ] format, whatever it is. But it's still like if the tax is deducted and the refund. These people like this don't like that, so it is a big relief to this category of people. And it may have, in fact, some positive impact on the deposits and maybe more on the term deposit side. Savings bank deposits, I don't think they are governed by what is the interest rate. Because when we reduced our interest rate from 4% to 3.5%, despite that, our deposit continues to grow. It's a more of a utility account rather than a savings account. Does it answer your question?
I was just asking is it possible...
No, no. I think -- basically, I think you should read it along with the 2 announcements they made. One is they said up to INR 5 lakh there exempt from the income tax. Okay, so obviously, there'll be a lot of people who will have the income coming from interest income, okay, who will fall within that. And if they were not to increase the TDS limit, all of them would be required to file income tax returns and claim reimbursement. So this INR 40,000 comes as a relief to the people who would now be exempt from the tax but don't have to be subject to filing off tax returns and have the tedious thing done by the banks, actually.
You don't estimate parallel economy money coming into system for cash deposits?
Definitely, that will also help.
Sir, Kunal over here from Edelweiss. So firstly, in terms of the Watchlist, so as compared to what was disclosed in Q2 roundabout INR 20,000-odd crores. Now SME 1 and SME 2 has gone up to almost like INR 17,000-odd, and we have highlighted INR 14,000 crores is from the erstwhile Watchlist, which is not in SME 1 and SME 2. So does this SME 1, SME 2 includes NIM like -- IL&FS, I think, will be there. But the one and all -- it would be still outside of this list, which is disclosed?
No, no. Like some of the holding company accounts of high levels are already substandard, so that will not be here. This SME 1, 2 is what gets reported to RBI every week. So what we have done is that instead of the Watchlist, which has lost meaning, SME 1, 2 as reported to Reserve Bank of India every week. So that is the figure which we will be giving as a disclosure. It has not gone up. It is around INR 17,000 crore from the -- we rather it just comes down. It used to be higher. And this should be enough for the disclosure purpose. Watchlist, as I said, that no more relevant.
No, so last time, what we see, SME 1, SME 2, it was hardly anything, okay? But, overall...
No, it was not disclosed. Yes?
Out of this INR 17,000 crores, we got the SME 1 and 2 is only INR 9,300 crores.
Okay. That is INR 9,000?
Yes. So there would be some from SME, some from the larger SMEs of INR 5 crores and above because this list is only for INR 5 crores and above, but corporate is only INR 9,300 crores.
Okay. So IL&FS, D1 and all would be outside of this?
D1 is outside. This is a full service so why should we keep it there.
Yes. And secondly, in terms of overall OCA balance, how much are we with OCA currently in terms of outstanding?
131?
Yes.
I think more like 31,000, if I'm not mistaken. I'll give you that number.
IL&FS, IL&FS is actually the major holding companies are already NPS, so they will not be here. They have slipped and...
We have provided 50% on that exposure, of INR 900 crore. The climb rate is 15%. They're also accelerated, provision already done.
This is Seshadri Sen from Alchemy Capital. Just a question on your capital positions. The CET1 has dropped to about 7.8%. One calculation I couldn't figure out, does that include the 9-month profitability? Or it doesn't?
It doesn't.
And it doesn't. So what is your overall sort of comfort level of where you think CET1 should be?
But it is not 7.8%. It is higher.
That is the requirement.
That is the requirement.
That is the requirement.
Cost line is requirement. Actually, CET1 is higher, more than 9%.
10%.
Tier 1 is 9.3% and -- okay, sorry.
9.57%
Yes, 9.57%. 7.825% is the regulatory requirement.
And OCA balance, sir, you're right. It's 1 lakh 31,000 crores.
Just one clarification. Last quarter, in that same question with Kunal has asked earlier, you had INR 14,000 crores which is not in default, and you had about 1,000 which was in SME 2, 200 in SME 1 and 4,200 in SME 0. You're saying that amount has gone to INR 9,000 crores this quarter because the like-to-like number will be that, right?
I think like-to-like comparison shouldn't be difficult.
[indiscernible] [ 100 crore ] and above accounts. So this time, we did INR 5 crore and above. I think that made the difference.
Is it possible for you to give a like-to-like number, either for last quarter or this quarter?
We can do that. That's not...
Because this one slide seems to be a very critical one.
But ultimately, the pointer towards like what is the stress in the loan book is SME 1 and 2. Not even as SME 0 accounts even moving in and out of SME 0 very frequently, and the Watchlist of INR 21,000 crore, which was there in relation again to the bank's loan book size. So what we have decided that there is no point in now showing the Watchlist. Because a very authentic data, which is getting reported to RBI every week, so that should be good enough. And other than that, of course, entire portfolio, we keep a close watch.
We don't dispute that, sir. We just wondered a like-to-like number.
Like-to-like, I think, we can work...
We can work...
We can share it with you. The thing is many of the accounts, in fact, largely, the accounts are common. But I think Misal can secretly just -- Misal, if you can share.
We can provide that.
Share with you.
Not a big deal.
Yes, it's not a big deal.
Sir, this is Anand from HDFC Mutual Fund. Sir, if you can give some color on margins. Domestic margin is at 2.9 almost. So what's the outlook for next year?
So basically, you would have seen that every quarter, it is inching up, right? And the margin improvement is coming. One, we have been able to improve the spread because the loan advances has gone up whereas the cost of deposit is now more or less is static at around 5.09%. And as the percentage of operating book -- performing book, not operating book. Performing loan book is constantly going up. We are, at point of time, our NPA was 10.91%. Now it is less than 9%, 8.71%. So as this rebalancing happens, margin is definitely going to improve, and some of the recoveries also are accounted for in NPA accounts last time also last -- first quarter, we got a fairly good amount in one still account, like that. So 3% would be a fair estimate to begin with, but we can grow or achieve higher. But right now, I think for this purpose, I think I will still keep it at around 3%.
3% is a global margin [ diluted ].
Yes.
Domestic.
No. This time, we're -- currently, we are at 2.76%. Well, yes. 2.76%. And this thing, domestic will be higher. Yes, yes. And this 1 year growth and control over NPAs, this INR 34,000 crore NPA coming down. So a combination of these factors and everywhere, we have been able to push up margins even on the high quality corporate accounts, even the government accounts.
Sir, on the employee provision side, pension and gratuity, so the first 9 month, we have done almost like INR 10,000 crore of provisioning. How do you see this number for Q4 and for next year?
So next year, like, gratuity is [ straight up at ] INR 2,700 crore. You can reduce because this was onetime, because gratuity was increased from 10 lakh to 20 lakh. So that INR 2,700 crore is straight, you can reduce, right? [Weight ] division, as I said that it will be implemented. So that impact, in any case, will be factored in, and that is some sort of like difference upon the yield movement also.
So this time, the yield have come down. So how much additional provision we have made on the pension side?
On the pension side, right?
INR 1,500 crore.
INR 1,500 crore. So what looks the write-back of INR 7,900 crore on that side, INR but 1,500 crore is the cost on pension side. So net-net, you can see that it was a gain of about INR 6,500 crore only.
Okay. So whenever the yield goes up, do we reverse the provision on the pension also?
We don't reverse, but the requirement to do additional provision goes down. So basically, the way to look at it is that any 1 basis point movement in the yield as of now.on net-net basis, the PV01 is INR 80 crores approximately.
And sir, lastly, if I were to look at our core fee income, last 2, 3 quarters, it had been declining on a Y-o-Y basis. So if you can share some like how do you see...
Which one? Which income?
Fee income.
Fee Income is only Y-o-Y when you compare. One is the big divestment, which we did, SBI Life, INR 5,000 crores right now and treasury income because of all this.
Sir, when we talk about fee income, it's growth income. It's excluding treasury, excluding one-off gain.
But that's not going down only because of that monthly average balance.
Only because of average balance.
Minimum average balance, there is a fairly good decline of almost INR 1,700 crore. And last year, we recovered INR 2,500 crores. This year, it will be INR 700 crores. So that is major. Otherwise loan processing fee. You have seen recovery and return of account, your government business, your cross-sell income. All the parameters there as a group.
Sir, on the slippages of INR 6,500 this quarter, if you -- can you break up in terms of how much was on retail, SME, agri?
Of INR 6,500, INR 2,000 is increase in our spending, and that will be mostly in corporate.
SME is INR 1,599. Agri is INR 1,125. And personnel segment, which includes housing is INR 492 and corporate is INR 1,308.
This is from Abhisek from Goldman Sachs. Sir, first is direct keeping a question. What would be the nonfund-based outstanding on the NPL as well as the SME accounts?
You have?
The -- this increase in outstanding has largely come from the invocation and crystallization of the BGs and LCs on the NPA accounts, and now we have outstanding is below INR 10,000 crores on December.
How much?
Below INR 10,000 crores.
Below INR 10,000 crores.
Last quarter, it was INR 10,000. Now INR 2,000 less than that?
It has come down below largely. It's in the BC accounts and telecom.
This includes both the NPS as well as the...
Everything, everything.
No, no. NPA.
NPA. This is NPA account. SME, and I think as you've seen, I told you, the number is very small in corporate. It was only INR 9,200 crores in SME 1 or 2.
And second question is just to get a sense over, let's say, 9-month period, what will be the share of slippages in the corporate side for the SME 1 and 2 accounts? Just to get a sense of what has been the...
Going forward?
Last 9 months.
Last 9 months, retail and corporate loan.
The last 9 month, I can give you...
To now? You're asking for up to December?
Yes.
I can give you the breakup actually. See SME slippages were INR 7,297 crores. Agri was INR 6,556.
Sorry, no. What I...
No, no you want to know from SME...
I don't think we have that actually.
SME 1.
See basically -- see, strictly speaking, if you look at it, all of this goes through the root. It becomes SME 1 then SME 2, and then only it becomes NPA.
Actually, he's right. All the slippages have to come from SME 2.
Will have to come through SME.
There is no other way. It is INR 8,200 crores corporate slippages in the entire year.
So from the opening balance, how much would have slipped during the year? Is...
Everything will be from SME 2.
March maybe but not...
So the corporate slippage between April and December totally is INR 8,200 crores out of the total slippage that the bank has.
Corporate, in any case, is...
You wanted that number or something else?
No, I think I'll just take it off-line.
Yes, we'll take it.
[ Adit ] here from ENAM. Some of the private sector banks have reported a large increase in agriculture slippages whereas you all have not had that experience. Could you share some highlights?
So for agriculture slippages, because the NPA percentage is hovering around 10%, it can be sometimes 9%, or it can be 11%. And if you look at our report from June 17 last year when the merger happened, after that, there's no huge spike despite the fact that there was a loan waiver UP, there was a loan waiver in Maharashtra. Karnataka was even prior to that. This 10% which declares loan waiver there sometimes. There is a credit quality issue. But otherwise, we are hovering around between 9% to 11%. Pre-merger, we had brought it down to almost 5%. But post-merger, we have not been able to bring down, but at the same time, there's no huge upside variation in the end.
Are you all not seeing any impact of the loan waivers on credit behavior?
Not yet. We have to see what happens in NPA has done in [indiscernible]. But again, in any states, so for example, NPA, the total portfolio will be INR 10,000 crore agriculture, because it is our total agriculture portfolio of like INR 1 lakh 80,000 crore, the crop loan is just INR 1 lakh crore and distributed across the country. So not a single [ is tiered ]. The exposure is not really huge. So that's why like even in Maharashtra last quarter, it was INR 800 crore. So overall, again, looking at the size of the book, that is something where I would not consider it to every happy situation, but definitely with our what I call the tolerance level. And historically, because agriculture NPA always has been alleviated, so it does not impact that much year-on-year basis.
My name is D.K. Mishra. I am from Canara Bank Securities. My question is there that...
I'm trying to locate you.
There.
Is here there. Yes.
Sir, one side, we see that robust credit offtake has taken place year-over-year. But another side, when we see them, we find that the operating profit declined in 9 months period.
So one is that the growth is a recent phenomena, I will say, that in the last 6 months only or even later than that, the credit growth has been resumed. And operating profit again has to be viewed in the light of what I've been saying, that is the provisions for terminal benefits. That is something in this year, it has been very elevated because of various reasons. So straightaway now in operating profit, INR 900 crore we can have every quarter. It was last 4 quarters, we have been providing INR 900 crore for gratuity alone. So this number will start improving once there is a little bit of easing of pressure on account of the terminal benefits provision and wage revision.
Sir, second question is regarding your treasury income. You told that there is some decline in treasury income. But a few weeks back, some banks have declared their result. And there, we have seen that they have some good treasury income in the last quarter. So what will be the reason for lower income?
Basically, our treasury composition and their treasury composition is very different. Some of the banks, they don't have any duration risk. So for us...
Okay. I think first -- your first question about operating profit, I think that's one item. Like last year, we had this SBI Life state still.
INR 5,000 crore.
INR 5,000 crore. So if you just pick that item on itself, I think that the operating profit is not lower actually. So if you see that, it's that provisioning and also operating profit actually this year is much, much higher. And treasury profit, again, it a question of how you look at it. I think if I look at the treasury profit, which is shown as a [Audio Gap]
There is no point in -- I mean, nobody looks like this segment-wise because you guys are so erratic. INR 3,700 crores loss in the corporate. Now this quarter, it is INR 5,895 crore loss. And here again, INR 5,000 crores of the retail portfolio profit. This time, it is only INR 3,600 crores. So these figures are only because of those 11 provisions, which are there. So if one column can be added here, so you know exactly the meaning of segment is that, how much asset is involved in that, how much gross revenue you are earning and how much net profit you are earning from that segment. I mean, that is a basic idea.
I think we'll examine what you're saying.
I mean it's just my suggestion.
Just a quick question on the LCBG income. Is it because of the accounting impact? Do we still have that accounting impact that you have been seeing for more than a year now?
LCBG income because of this thing, we're amortized. You get the income amortized.
But then we have seen this even in the September quarter of 2017. It's more than a year. Shouldn't it wane off now?
Yes, yes. I'll explain that. Actually, for the new business done between April and December, there is no difference because you are doing it on the -- in the same manner because this was implemented from 1st April, 2017. But prior to that, because it would come aggregate, this time, there was a higher benefit which was flowing in, in 2017, which is going on in this year. And from 2019, '20, we don't expect that to impact our LCBG income in any significant manner quarter-on-quarter. Overall, there is no difference in income. It is only a question of distributing.
And can you talk a little bit about your current account growth?
Current account is almost flat as of now.
Reasons for that?
Reason, current account, one, is that by nature, it is very volatile. And all the efforts which bank is taking to improve the current account, I think it will be at least still 6 months to 1 year before we can see any significant improvement. But on an average, the growth is about 5%.
5%.
5%.
On the average balances. These are the date-specific balances, but average is up by 5%.
And the increase in outstanding on slippages, right, the INR 2,000 crores number, is there an impact because of appreciation of rupee?
Which one?
If you go to the slippages slide, there you have seen some INR 4,500 crores slippages. In addition, we have INR 2,000 crores coming from the outstanding account. Now the INR 2,000 crores number, does it have an impact because of rupee depreciation on our foreign GNPA book?
Sorry?
Which slide is that here?
Look, that could be very small. You are talking of increase in outstanding of 2018, right?
The GNPA book, the existing GNPA book, foreign loan GNPA book.
So the fresh slippage is INR 4,523 crores, and there is a decrease in outstanding to the extent of 2018.
That is [ part due a ] rub off because of the GNPA, right, I mean the existing GNPA book because of the rupee appreciation?
Not any significant.
[indiscernible] and BGs getting in movement on domestic.
Okay. We have some questions from webcast. [ Odet Gadia ] from [ PMG Investment ]. So the question is that, Watchlist including SME has increased from INR 20,000 crore to INR 31,000 crore. What has led to the accretion? As we have mentioned earlier that now SME 1, SME 2 includes all the accounts, above INR 5 crore, and that's why this increase of above INR 9,300 crore. But Watchlist, again, I am seeing that, in my view, it has become irrelevant. And the number that we look hereafter is only SME 1 and 2, which includes all segment and all accounts of INR 5 crore and above. Then Manish Agarwalla, do we have exposure to DHFL and IL&FS? IL&FS, as already mentioned, that the holding company accounts $3 or $4 of the standard, and 50% provision bank is holding. The size is about INR 900 crore. And the requirement for provision was 15%, but bank has already met 50%. DHFL, we don't -- there is no need for any provision or the exposure is always tender. The rating of the account continues to be AAA. So as of now, there is no need. And Ravi Singh, corporate segment growth is healthy only at 20%. Within that, power, roads and services including appears to be key drivers of growth, please comment. So if you look at our presentation, you will observe that the growth is coming from the public sector undertakings. And NBFCs, as I said, that 4 categories out of which 3 categories is where the growth is coming. Fourth category, there will not be any growth.Any other question?
No more questions, then I would like to say on behalf of State Bank of India, I would like to convey a sincere thanks for all of you having come and attended in such large numbers. And also, I would like to convey my sincere thanks to those who attended this through webcast. I convey my sincere thanks to the dignitaries for having spared their time and grace on the occasion and to all my colleagues who come here and participated in the analyst function. And then I would request all of you to join for the high tea outside in the corridor.