Narrative reset: CASA / rate-cut transmission anxiety (Q1FY26) faded; ECL Rs.

Business growth is good - credit growth 3.79 to 80 percent this quarter, 15.30 percent for full year. But there is pressure on profitability - both operating profit and net profit have gone down, which is generally not seen in peer banks of your size. Operating profit went down by 2,361 crore vs last quarter (which had HSBC/Canara listing gains). Treasury income net of listing went from 1050 crore to 272 crores. Recovery from return of account also went down to 1646 crore vs 2051 crore last quarter. Quarterly NIM 2.54, annual NIM 2.51 - lower than expected. Is there something special that resulted in this lower profitability and may not be there going forward? How do we see coming quarter and year?

Ajmera sir, if you see that our NIM improved 9 basis point and our net interest income, it improved 549 crores. If you compare our peer banks, so our NIM has improved, our net interest income has improved. Only as rightly pointed, why there is a drop in operating profit and net profit by 2300 crores. So, sir, last quarter we had listing gains from Canara HSBC and Canara Robeco of 1930 crores. So, that was substantial enough. Secondly, due to geopolitical situation, the bond yields moved from 6.59 to 7.05 and the share market corrected by 4000 basis point. So, this has resulted into MTM losses of 800 crores. This may not be going ahead for the quarter, this may not be there in the June quarter, but the one-time listing gains were factored in the last quarter of 1930 crores. And regarding the TWO recovery, generally our TWO recovery hovers around 1500 to 1600 crores. If you see last year for the full financial year, the TWO recovery was 6800 crores and in this financial year, it is 6500 crores. So, there in the total TWO recovery, there is no substantial dip, but only some high ticket resolutions come in a particular quarter, but normally it hovers around 1500, 1600 crores per quarter.

RBI has given clear guidelines for ECL. How much buffer provisions or planned provisions do we already have, and how do we plan to meet the provisioning norms as per the final guidelines given by RBI?

Sir, if you see that our SMA is best in the industry, it is only 2.75%. While the advances is growing up in absolute numbers, our SMA is coming down. In the December 25, our SMA book was 35,000 crores. Now, it is 33,728. So, although the advances is going up, our SMA is coming down. Now, coming to the ECL part. Now, sir, on ECL front, stage 1 and stage 3, both are almost at par with the IRAC norms. Our PCR is 94.21. For stage 3, it is adequate enough. For stage 1, it is at par with IRAC norms. Only at stage 2, we see that in stage 2, the regulatory floor has been moved from 0.4 to 5%. So, some additional provision will be required and we presume it will be 2,500 crores. And the probability of default in stage 1, stage 2 and stage 3 will be an additional 2,500 or maybe it may range up to 5,000 also. And additional non-fund requirement will be 2,500. Total requirement will be 10,000. And it can be staggered to 4 years. And our profit is in the range of 19,000 to 20,000 crores. So, bank is in a very, very good position to absorb the entire in the first go itself. If we absorb in the first go itself, then there will be a drop of 1% in the CRAR. And bank is adequately capitalized. Our CRR is 17.04, much above the regulatory level.

On government ECLGS 5.0 creating 2.5 lakh crore rupees of buffer - have we calculated how many customers and how much amount can use this line? How are we prepared, and will it add to credit growth? Are you feeling any stress from West Asian war?

Sir, see, this quarter, our slippage was 2771 crores. Last year, last year in the same quarter, it was in the March, because we have to compare from the previous March only. So, last year also, the slippage was 2702. This year, it is 2800 crores, roughly. So, it is in the similar levels. So, in the March, what happens, sir, some MOCs are because branch audit is conducted across the country. So, some MOCs are, we should not compare from the December, we have to compare from March to March. So, we do not see any stress building as on date, because it is almost at par with the previous March. And out of this 2771, 1333 is for MSME. So, MSME, some slippage has been observed, but not that much. And for coming to your point that ECL-5, bank has already worked on that one, and the entire portfolio that is affected is about 90,000 crores. And the additional exposure will be around 18,000 to 20,000 crores. Definitely, it will give some flip to the advances.

On the advances growth guidance of 11% to 12%, we have closed this year at 15+. Any reason we are calling for moderation in credit growth next year?

No, sir. Actually, bank has a tradition of giving some conservative numbers because GDP growth is projected at 6.9%. And we have seen what earlier guidance has been given by us. And accordingly, it has been projected. I am confident that bank will end up much above the guidance numbers as it ended up in this financial year.

On PSLC - some private banks are facing PSL compliance issues. Would next year PSLC income be higher than this year?

Sir, PSLC, continuously our PSLC income is around 2500 crores. We derive that income. And this year also we are confident that we will derive this PSLC income. Because we are above in priority sector credit, we are exceeding all mandated norms. So, definitely we will gain advantage out of selling the PSLC.

On NIM - have you passed through the entire December rate cut? How do margins trend from Q1 onwards? Guidance is 2.5 to 2.6 on trajectory basis. Also share LCR.

Sir, you see in this quarter, our NIM improvement was 9 basis point. So, already we are very, very, because our credit growth is very high at 15.30. So, that places us uniquely to negotiate on pricing. So, we are not entertaining low yield advances. We are capitalizing on expanding RAM credit. And we are very, very conscious on bulk deposits, pricing of bulk deposits. So, the combined effect, our NIM has taken an uptake of 9 basis point on this quarter and 1 basis point cumulative. So, we presume that it will hover around 2.5 to 2.6 here. So, LCR was 118%. It is much above the regulatory level of 100%.

What is total gold loan outstanding in retail and agri vs non-agri? Going ahead, with this 20% of overall loans, do you see growth to be single or double digit? Also, SMA 0, 1, 2 breakup separately. On ECL and provisioning - any thoughts on capital raise? On NIM - cost of term deposits raised by 30-35 bps in December and January - how to look at cost of term deposit / blended cost? T-bill linked corporate loans? TWO recovery split with NII line item?

Sir, my gold loan portfolio is 2,45,000 crores. And out of which agriculture is 1.54 lakh crores. The remaining non-agri is 91,000. Sir, it will be in double digit because traditionally our number of branches are high in South India, sir. Here, people don't place on deposits. That is why we are lacking. On one side, we are struggling on CASA. But on asset side, we have this advantage of gold loans. People are more comfortable going to branches availing this gold loan. So, that is why we are confident that it will grow with the same pace. SMA 0 is 10961. SMA 2 is 9732 only. SMA 1 is 13,035. So, the total is 33,728. Sir, our profit ranges between 19,000 to 20,000 crores. So, this will continue, I think, for the next year also. So, if the need be, if need required, we will go for capital raising. And since it has not moved to the board, once board permissions, then I will share it with you. I think within couple of months, we will share that number with you. Sir, we are very conscious on pricing, on bulk deposits and CD. So, we work on the blended model only and we are very conscious what is the rate of inflow and what is the rate of outgo. So, that margins we keep always in mind while quoting price. Sir, why we had raised because our retail term deposit even after raising was much cheaper than the bulk deposit rate and the idea behind to have a more flow in retail term deposit rather than bulk deposit and that is what exactly has happened in the fourth quarter which benefited us and our cost of deposit has substantially came down. So, sir, in TWO your interest income on your TWO advances, so it ranges about 350 to 400 crores. Almost it contributes to every quarter this interest income is contributed and we are confident going ahead it will continue, sir. And TWO recovery also it hovers around 1500 to 1600 crores in a quarter that may vary because of one big ticket resolution.

On gold loan - while retail gold loan is growing, your Agri gold loan is not growing for last two-three quarters. Last quarter it was 1.5 lakh crore, this quarter 1.54 lakh crore. Beginning of year was 1.4 lakh crore. Any challenges or related to RBI revised guidelines? Also on current account - growth has been a sharp negative number, any reason? And segmental breakup of slippages?

Shall I say, if you see that whatever loss you are seeing in Agri is compensated in retail. It is a deliberate attempt from the bank. If you see in other than rural, that is semi-urban and urban, we are mostly... That in these areas, we are giving only retail. So, if you see overall, you have to read both put together. If you are seeing in one side, agriculture is showing a slower growth, but retail is taking up its place. It is both combined, the growth remains constant. So, you should not look at it in isolation. It should look at combined portfolio in compliance with RBI guidelines. This is mostly in compliance with RBI guidelines we have devised this. (MD added: And gold loan portfolio is growing at 33-34% of which the Agri gold portfolio is growing at around 15%. There were four accounts which were having big, big ticket four accounts. So, I cannot name that. So, that is causing the variation in current account. Apart from that, current account is growing at a healthy pace. Segmental, I can tell you, 2,771 is the total slippage that has happened in this quarter. Out of which, 1,333 is for MSME. Agriculture is 886. Corporate 80. Gold loan 41. Retail some 431 crores.)

On PSLC - small and marginal farmer surplus this year about 2.5% (12.5% vs 10% required). Last year was 3.4%, year before 6%. Is surplus lower this year? Will PSLC income be similar as last year? And on recovery from return offs - 15-16 billion per quarter expected. For Q1 FY27, do you expect any large ticket account?

No, no, no. We have worked it out and this will be at the same level this year also. No, no. It is 3,000. It will be around 3,000. For Q1 already, we have one big ticket part amount has been recovered of 300. We are very confident that this number also we will be achieving this quarter.

On gold loans - any increase in pricing of interest rate on Agri or retail gold loans over past 1-3 quarters? Are Agri loans largely linked to MCLR and retail loans largely linked to repo? Average yield around 9% on both portfolios? In provision line P&L, negative provision in other provision line - what is that from? Segmental breakup of slippages for the quarter? In spite of ECL transition, can bank deliver 1% ROA?

No, we have not increased. (Bhavendra: Not increased. And LTV also we have kept in check. Below 70%. Yes, yes, yes - MCLR and repo split is fair.) Yes, near 9%. (Bhavendra: Near, near, near. 9%.) So, provision in the large borrower framework, there is a release. As per the RBI guidelines, some 307-crore release is there. Because it is no more required. So, that is one of the factors. Earlier, there was 3% prescribed by the additional provision for large borrowers. Now, this has been dispensed by the regulator. So, there is a release of 307 crores. See, in standard accounts, also in three big accounts, we were maintaining additional provision. Their balances have gone down. So, that is why some release is also there. Sir, I presume yes. Bank can deliver that. Although we have kept it at a conservative level, bank can deliver that. That is why we have given it our return on asset more than 1%. Segmental, I can tell you, 2,771 is the total slippage that has happened in this quarter. Out of which, 1,333 is for MSME. Agriculture is 886. Corporate 80. Gold loan 41. Retail some 431 crores.

On RAM and corporate mix - now at 59% RAM and 41% corporate. How far can we increase RAM mix? Within RAM, will retail segment continue to grow as Agri and MSME proportion of overall loan has been coming off?

We endeavour to reach at 60-40. 59 RAM and 40 corporate. Yes, yes.

Why has yield on advance declined by only 5 basis points during the quarter in spite of the 25 basis point repo cut impact? Can we defend the current operating profit run rate of 6,757 crore? NIM trajectory 2.5 to 2.6 and ROA 1% - this is for current year? Growth in business 11-12%? What percentage of deposits are linked to floating rates? Why is EPS and ROE marked down from this year numbers?

So, 50% of our portfolio is repo linked. And if you see in the December there was a 25% reduction in repo rate. That is why it has impacted. 5 basis point it has come down. So, we are very, very confident that we will protect because this includes your MTM losses. So very soon some reversal will be seen. Already it is showing in our books. So, we are very confident that it will be protected going ahead. Yes sir. Yes sir. Yes, but we are confident of exceeding that. So last year also if you see, 10 to 11% guidance was given but we ended up at 15.30%. This year also although it is projected at 11 to 12%, we are confident that we will exceed. In deposit nothing is there which is floating in nature. Not fixed at demand. There is two categories. One is demand deposits and what is the term deposit. Term deposits are fixed for that particular tenure. Demand deposits can be withdrawn at the will. Savings and current. Yes madam, you see this year we had a gain of 1,930 crores from delisting.... listing benefits of Canara Robeco and Canara HSBC where we diluted our share in Canara HSBC 14.5% and in Canara Robeco 13%. So, this 1,930 crores will not be there because it is a one-time income. So next year it won't be there. That is why it has been kept at conservative level.