On growth - very strong pickup in system numbers, ICICI Bank has picked up well in last two quarters. How do you look at this momentum going into FY27? Will this pick steam further or has it reached the high point? Will the growth broad-base from here further with respect to unsecured loans and other segments not contributing, like mortgages now picking up, or is 16-odd percent growth on upper end?
We wouldn't get into giving a growth number. Post all the measures taken at policy level through last year and from our own side, with interest rates stabilizing, benchmark stabilizing, growth has picked up. And general outlook on the economy has been quite positive. Of course, more recently, since March, the conflict in West Asia has clouded the outlook in the sense that it has created some amount of uncertainty. But from our side, we believe we have a strong franchise, healthy capital levels and strong funding and liquidity. So, we would want to leverage that to grow the business within our parameters of risk acceptance.
For the second successive quarter, your credit card book is contracting. Is that just the nature of business, seasonal, or are you taking interventions to boost profitability? How is the profitability of the credit card business trending - revolver rates coming down, cost of acquisitions seems to be moving up?
The decline we saw in Q3 was really seasonal because there was a sharp buildup of the book towards the end of Q2 due to the festive season spend, which ran off in Q3. The small decline in the fourth quarter, I would say, we can't really say that it is seasonal, it is really a function of spends and revolvers. We are focused on growing the business with the right set of customers in a profitable way. We have been seeing reasonably steady new customer acquisition. The level of revolvers etc., has been an issue for the industry. Profitability - at a very high level over the last few years, the decline in the level of revolvers has impacted profitability, but it still remains a very profitable business, and it is a business with many levers of profitability, including on the cost side, reward side, etc.
Can you comment on how much residual deposit repricing is remaining in your case?
Don't really give a number of that kind, but I guess maybe till the last summer, our peak rates were more in the 1-year kind of level. So that's kind of the repricing horizon.
Where are we in terms of the issue that came up last quarter on the priority sector related provisioning? We have been talking about recoveries of those provisions gradually over the next year. Any update?
As we said earlier, as of March, we continue to hold those provisions. We're in the process of working through that portfolio to try and bring it into conformity with the requirements of the agri lending classification. And maybe we will have an update on that a quarter-or-so from now.
On home loans - is there also an element of lower prepayment rate driving the pickup in home loan growth this quarter, or is it just that repo rate cuts have ended and you are pushing growth?
I would say it's more a pickup in disbursements.
How do we see the growth outlook for the coming few quarters? We're talking about nice growth in the system in this quarter. But clearly, it's too early to incorporate the supply shock into expectations. As you look forward, as you look into your books, as you see how corporates are getting impacted, how do you think both your book and system loan growth will develop over the next few quarters?
It's very difficult to make a prediction at the current time because this is an evolving situation, but as we said we believe the system is going into it with a reasonable degree of resilience. So we will wait and see how the demand conditions pan out. As far as we are concerned, we see that we have strong levels of capital, liquidity funding and a large franchise and we would continue to try to use that to grow the business. Of course, we'll have to keep calibrating the risk acceptance levels as we go along.
But are you seeing anything in your corporate or business banking book that looks like production is falling, slowing down, working capital limits are not getting utilized? Are you seeing any stress in your early indicators?
It's too early to make any call or generalization of that kind.
On cost-to-income ratio - this year operating expenses growth has led top-line growth. Could we say we are committed to delivering positive jaws next year?
We really look at the PPOP and the PBT post credit costs. So it's not that we are looking at managing or targeting a particular cost-to-income metric. So obviously, our objective would be to grow revenues ahead of costs. So we will see how it evolves. That's certainly the way in which we would like to drive the bank.
On retail growth uptick, particularly mortgages up 4.7% QoQ and uptick on PL and CV - is competition coming off, are spreads getting attractive? What is driving mortgage growth quarter-on-quarter? Also on deposits - deposit growth slower than loan growth, losing market share. What will be the stance on overall deposit growth into next year?
On the growth in mortgages - 2 to 3 quarters ago, we were probably holding back a little because of both the benchmark risk and the spreads over the benchmark. As the benchmark has settled, it has given us the space to grow that portfolio and that is what you have seen over the last 2 quarters and more particularly in this quarter. It is a competitive market, but we are within that trying to operate and price appropriately, focusing very much on the entire customer 360 aspect. On deposits - while it looks like a loan growth of 15% and a deposit growth of 11%, on an average basis, they are pretty closely matched. Average deposit growth would also be very similar to the average loan growth. LCR is about 125% average for the quarter. Deposit growth is not something that will constrain us from pursuing loan growth.
In terms of the provisioning - overall provisioning quite low during the quarter. Were there any write-backs or release during the quarter? Recoveries seem in line with last quarter. Was there any provisioning release in any line items?
On the provisioning side - on year-on-year basis on the retail side, the net additions are lower, particularly over the last few quarters the additions to NPLs on the unsecured side, which get provided pretty aggressively, have been coming down. Plus we had a somewhat higher level of recoveries and write-backs on the corporate portfolio, including recoveries from written-off accounts. Overall for the year we were at 38 basis points. And if we adjust the one-time KCC provision and also the corporate recoveries, we would be below 50 basis points. So, the underlying credit cost remains pretty stable.
On the fee income growth - how do you look at this over the coming year? What steps are you taking to drive better traction on this line?
On the broad areas of fee income - on transaction banking, including trade as well as forex and derivatives, and on deposit account linked fees, demat, etc., we are doing reasonably well. On the cards and payment side, this year has been a little slow. We have not grown as much there in terms of fees and that would be one area for us to focus on. More recently, as the loan growth has picked up, the lending-linked fees have also picked up and we will hopefully see that momentum sustain going forward, but this is something we'll have to keep calibrating.
Can you give some color on the impact from RBI's recent foreign currency control regulations on net open position and NDF regulations - how much has been the impact on other income and any losses incurred this quarter?
We have a net treasury loss of 1.06 billion Rupees, that's after taking into account the impact of the mark-to-market as of March 31 on the outstanding forwards. So that's factored into those numbers.
On credit cost - everybody has been waiting for some normalization, some uptick in credit costs in the banking system and yet you've reported a sharp improvement again. While guidance remains below 50 basis points, in terms of your own confidence and assessment, do you feel more confident now versus how things were in prior years - given our guidance has been sub-50% over the years - how do you see this versus what you have guided in the past?
If you look at the different segments - the corporate sector is pretty strong, and they are well funded with healthy balance sheets and significant resilience. And on the retail side, banks including us have been reasonably sensible about credit selection and the customers also have held up well. We had maybe 1 year, 1.5 year, 2 years ago, some increase in delinquencies on the personal loan side, but with regulatory action and with the steps taken by banks that also was fairly quickly contained. So that is showing up in these very healthy credit numbers. And while there are these externalities to be monitored, we don't, at the moment, see any cause for concern as such. The other portfolio, which is reasonably large now and has grown rapidly over the last few years, is the whole business banking portfolio. And again, one would have to monitor any potential impact of the external events on that. That is a portfolio that at least to the extent that we have a track record has been tested through COVID, the energy dislocation of 2022 and then the whole tariff issue and has held up reasonably well.
After this war, have you tightened any credit parameter or any credit rule going into FY27 or is it business as usual or growth as usual across segments, even small segments? Secondly, on yield on advances - it's been coming off over the last 2 quarters. With impact of rate cuts and cost of funds also coming down materially - can we say yields have now bottomed since most of the repricing is done there?
On the first question, we have looked at and continue to look at regularly all the potential sectoral impact as well as the impact at a client level. I would not say that we have specifically tightened anything or are excluding any segment, but we have our understanding of which are the segments that potentially need closer monitoring, and we are doing that, and we will calibrate our actions as we go along. Overall we are continuing to focus on growing the business. On the yield - this quarter we have seen the impact of the December repo cut, and we'll just have to, as we go along, look at how incremental pricing plays out in the market, and we'll have some amount of deposit repricing also. So at a margin level, we continue to look at sort of range-bound margins, unlikely to move up, but should be broadly in this range is what we would think.
On the decline in credit cost - was it more driven by unsecured slippage coming down or more by corporate slippage this quarter, more by corporate recoveries?
This quarter, we saw a higher level of recoveries and write-backs on the corporate portfolio, including recoveries from written-off accounts. But in general, the retail credit costs, as you can see from the retail net additions itself, have been coming down, so the retail credit costs have also been coming down. And within that, the unsecured has been moderating. So secured was anyway pretty stable. So that is having a beneficial impact on the provisions.
On the corporate loan outlook - both tactically in the short-term while the energy crisis and war is on, and also from a medium perspective, what are your growth aspirations and key drivers? Are there particular segments you're looking at?
We are very focused on the counterparty in terms of the quality and the overall business opportunity. Our funnels are open, and we are in a constant dialogue with the clients. Wherever there is a level at which it makes sense, both for the client and the bank, the business happens. Over the last 2 quarters, we have seen a reasonably good accretion to the corporate book, and we continue to see opportunities going ahead. With the better-rated clients, we will look through any short-term issues arising out of this crisis and see how we can work with them over the longer term.
Operating expenses growth was 11.5%-12%, higher than peers this year, perhaps due to increase in average remuneration. How should we think about this going into next year, especially with volume growth picking up? Will expenses growth rise further or are there levers to bring it down? Also, on government SA balances where we were seeing outflows - have trends stabilized?
On operating expenses - if we look at this year, more or less, it has been in line with our expectations. A couple of areas where the costs have been somewhat higher are priority sector compliance and to some extent on remuneration because of the Labour Code and a couple of others, like the market movement impact that we saw in March. And the final numbers on business growth are a little ahead of operating expenses growth, and we hope that will be sustained over the next year. So definitely, we would want to have opex growth at a level which is below the top line growth. That would be our objective. On government SA balances - as we had said last time, those are in the low-teens as a proportion of the balances. This quarter the level of rundown has been somewhat lower. But really, that's something that we will have to just bake into our plans and really focus on growing the money in bank from the other set of customers.
On rural loans - sharp uptick this quarter. What is driving that 18% quarter-on-quarter?
Part of it is due to higher demand for gold loans over the last couple of quarters and we have also geared up our machinery. Some of it is not strictly rural, although we club it in that segment, it could be from a broader range of branches, but that would be one of the drivers in addition to other elements of the portfolio.
Broadly, where are we in terms of PSL compliance on SMFs etc., since we are at the end of the year?
It's pretty much the same picture. We would be compliant overall, we will have some shortfall on the small agri side. So that's pretty much the same picture.
On government deposits being in low-teens - is it low-teen share of total deposits or low-teen share of SA?
SA. Government SA is a low-teen share of SA.
On cost of deposit point - you said there should be some more residual re-pricing left, but you also said take the duration as 1 year, which is slightly contradictory. So which is it - is there more to go on cost of deposit in terms of residual re-pricing?
If you look at where the deposit rates were a little more than a year ago, they are at somewhat lower levels. And the large rate cut cycle happened in June and then there was some further cut, small cut in December. So as I said, overall, on the margin side, we expect it to be range bound from here on.