On Opex - overheads miscellaneous number has more than doubled YoY - anything specific? Also, with bond yields having come off, is there a risk on pension provisioning to beef up planned assets? On Bhushan Power and Steel - in light of the Supreme Court judgment, what is the impact on SBI? On NARCL sale - with RBI allowing SR provisioning writeback, are we looking at higher number of sales this year and what could be the potential writeback in FY26? On RoA - with rate cuts potentially impacting margins, how confident are we to maintain 1% plus RoA?
On overheads, there are three performance-linked payouts which we make to the staff. The primary performance linked initiative is the industry agreed upon incentive i.e. 15 days of pay once we reach certain levels of operating profit. There are two other PLIs, one where 1% of our profit we allocate to the performance linked incentive. The third element is a PLI scheme introduced from the scale IV and above, chief manager and above, which is specific to the chief manager and above grade. That PLI is payable on approval of the government. That expenditure we have shown under the overheads. That is also appearing in the overhead which is showing the jump in the overheads. On Bhushan Power and Steel, you know our stance, we don't comment on the individual accounts. So, I refrain in terms of the impact, but I can tell you that we are studying the order. Obviously, the councils for the vendors and councils for the company, councils for the RP, we all will sit together and see the impact of this order, and what could be the potential options available to us. Beyond that, we will not be able to comment on this. Our transfer to NARCL was never guided by, you know, what is happening on the provisions. RBI clarification is more in terms of the differentiated approach towards the SR guaranteed by the Government of India. The transfer to the NARCL so far has been significant. It is more than ₹1,50,000 crores worth loans have been transferred to NARCL already. It will be purely based on what is the right strategy for resolving an account. I think we still will be able to maintain 1% RoA. How quickly the further rate cuts will happen will determine on the net interest margins. The effort would be to protect the NIM at 3% level, but there would be some quarters where we will have some pressure on the NIM. Broadly, on annual basis, we may have some quarters where there will be much more pressure on the NIMs and impact on the RoA, but broadly we are sticking to our guidance of 1%.
If NIMs are under pressure and credit cost remain very excellent at 38 bps full year which is as good as standard provisioning only, what will be the cushion for RoA at 1%?
Treasury gain. So, Mr. Ajmera said that treasury should perform well. No, I'm not looking at, you know, the treasury, as to heavy lift, but I think our focus is always on the core activities, how efficiently we run the core activities, but treasury is also a core activity for us because we run the largest treasury in the country. So, obviously we have the potential as well as the downside risk on the treasury and we will have to play on that.
Within the diversified loan portfolio, the 'other industry' classification is almost ₹5.4 trillion and has the highest growth of 22% compared to any other industry - can you share some color on this?
So, lot of things which are not classified here, they all get into those other industries, but this is mainly coming from like industries like data centers and all could not be put in anywhere. It doesn't fit in the real estate, so some of those items move in there, but it's very diversified one. Maybe you know 5-6 major industries, Saloni, you can give later to him, constitute in other industries.
On credit growth - we had a target of 15%-16% and it came down to 12 point something. What has gone wrong in 2-3 months that against our targeted numbers we couldn't achieve that number? Second, the net profit in Q4 is down 10% - could we not have used some of the buffer provision of ₹30,300-30,500 crores to avoid the ₹6000 crores provision this quarter? Third, there is large variation in segment wise results - treasury from ₹891 crores to a few thousand crores, retail banking from ₹17,311 to ₹9,325 - is there a change in classification? And fourthly, with another 50-75 bps reduction expected and a strong investment book, do we expect bumper treasury profits in FY26?
Yes, we did give guidance last year, not guidance, we expected credit growth to be 14% to 16%. In the Q2 guidance, I have said this and in Q3, I moderated that to the lower end of 14% to 16%. So, obviously we expected the year to close at 14%. If you see, most of the segments in the presentation it is shown on slide 16, which shows that in many segments we have done well except in the corporate. Corporate is a bulky and chunky credit, and we have had an unusual prepayment in that segment. So, while we have had a good pipeline, which I mentioned earlier also. Even now, we have around ₹3.4 lakh crore pipeline in the corporate side, the unanticipated prepayment definitely had impacted us. It is nothing to do with any of the segments not doing well. Many of the large central PSUs have utilized their equity funding to deleverage, and that we could not cover in the short tenure of one quarter. So, that is the major reason. Otherwise, we still have the visibility on the corporate side and that is the reason while we are not saying that it would be 14% to 16%, but 12% to 13% is quite possible while the industry is growing less than 12%. On the net profit, I think, the numbers have to be understood by everyone, but our focus is always to strengthen our balance sheet, and also create a consistency in our performance. It is not about one quarter we try to ensure, but our preference is that, if any costs are visualized, let us take them upfront. Front loading the cost has always been our strategy and the ideal way of looking at it is the 12 months performance and an aggregate basis. In terms of RoE guidance, we still stick to it. So, we didn't want to show that we can make the similar profit what we have made, when we know for sure these costs are likely to happen. So, some front-loading of provisions have happened definitely that has resulted in this. Moderation in treasury yields definitely would help the markets to perform better and I think our treasury will do, while we are not willing to give any guidance on this. We believe that with the rate cut cycle kicking in, the yields will definitely moderate, providing an opportunity for us both on the MTM side as well as on the trading profit, but we will be a little more objective in terms of any guidance on the treasury side.
On provisioning, there is other provision of ₹16 billion or so - what is that about, is there some one-off there? On asset quality, regarding the large account transferred to NARCL - was there no recovery, and where would that have been booked? On employee expenses, the actual wage cost looks higher sequentially in Q4 - how do we forecast wage cost for next year?
On wage cost, Q4 we take a lot of provisions. The PLI and many things which are added to the staff expense are not in the earlier quarters. It will appear only in the fourth quarter. Yes, 6% growth is next year also. On the account mentioned, the accounting can be mentioned by us. Without naming the account you mentioned that everybody knows, roughly ₹3,300 was the component we got, and ₹500 crores plus roughly went to NPA reduction, remaining 85% essentially is the treasury income, as RBI circular which came on 29th March. So, 500 crores, roughly, 15% will come into NPA reduction, recovery you can see that number in the NPA reduction. The remaining will be on the SR revaluation which circular came in the last week of March, that will go in the treasury side. Because it was a fully provided account. So, it will impact the provisions and the SRs we used to hold that ₹1. Subsequently, on 29th March, RBI has given a clarification that if you have SRs which are governed guaranteed by the government guarantee, we can revalue. So, you see in our treasury profit, the revaluation profit also is shown there. The ₹1,636 crores in other provisions - Other provisions, basically they have increased because provision for other receivables and contingent liabilities include ₹700 cores of CDS based PLI. This is again PLI related for the employee provisions.
Foreign branches growth is much higher than domestic by a couple of percentage points - how sustainable is it and what are the key geographies? On valuation, we deserve maybe a valuation of ₹1200 if not ₹1,000 - there is discrepancy in book value per share between slide 10 and money control. Also, the resolution for ₹25,000 crores equity raising - is it only enabling or are we looking at it seriously?
On the IBG side, the observation is correct, we grew faster. Traditionally, we have that ability to play a complementary role to domestic. So, whenever we feel like domestic growth is slightly lower, we can always ramp up the IBG growth or the International Banking growth because we use the three levers evenly like we have exposure to trade finance, we have exposure to the local corporate, whether in US or UK, etc., well rated corporates most of them are listed entities and their debt is also available in the market. We had a slight uptick in India linked loan where in second-half of last year we have seen a higher demand from the Indian corporate for raising ECBs because of the cost arbitrage even on a fully hedged basis. In terms of the local credit, it is predominantly coming from the markets in US, and a little bit from Bahrain. We are also, extensively using the Gift City now because of the tax benefits. On the resolution, it's not ₹30,000 crores, it is ₹25,000 crores, enabling resolution, for equity raising. Today we don't need growth capital. With 14.2% capital adequacy, we have enough firepower to cover ₹8 lakh crore credit growth. So, we don't need immediately in terms of the CRAR requirement for credit growth. But we still feel that if there is an opportunity to raise the equity capital, we will definitely access the market. The timing is uncertain. We need to get the right value. While we cannot time the market absolutely, but we will look for an opportune moment. Book value is calculated as standalone banking business net worth divided by number of shares. The net worth is ₹3,89,071 crore and the number of shares is ₹892.46 crore, arriving at 435.95. This is also adjusted for the revaluation reserves.
On saving deposit rate - large private bank cut 25 bps, what would be your stance in the near term and if RBI cut repo rate 100 bps, would we still maintain the 25 bps delta versus large private banks? On recovery from written-off income - ₹80 billion this year vs ₹70 billion last year, how confident are we that it will sustain and how many chunky accounts are left? On staff cost - can we expect mid-teen growth in staff costs next year?
From the savings bank interest rate, there is no plan to cut any further. I think we will maintain at this rate while the ALCO will take a call on that, but broadly I think we believe that the rate is stabilized at this level. Other banks have had higher rate, so they had the room to cut that savings bank, but as I mentioned, there will be some readjustment on the fixed deposit going forward. Recovery in written-off accounts, we don't have any chunky accounts where the recoveries are coming from. It is broadly coming from these smaller accounts, and we have strengthened our recovery processes. In fact, we brought back our stressed assets management regional offices. There is a renewed focus in terms of these small value recoveries. I mean these 2000 run rate per quarter is essentially coming from the retail loans and small value loans both in the stressed asset group as well as in the retail banking group. So, hopefully I think, that run rate is expected to continue. Saloni Narayan: The staff expense has gone down from ₹71,237 crores to ₹64,352 crores. Basically, the provision for employees has come down by 36.86%, which is because of the provisions that we made last year for the bilateral wage settlement and coming to salaries on a YoY basis, the salary has increased just by 5% and that to the profit the PLI has been taken into consideration, despite that the increase is just 5.79%. Provision for pensions also came down because of the MTM gains we made on account of the yield movement.
We are still paying higher in the shorter duration bucket in term deposits - when would we realign with other banks, and why are we still paying higher in the shorter term buckets given good system liquidity? Also, our CET 1 ratio is 10.8% - how much of that is AFS?
The interest rate will be relooked in the coming ALCO this month. So, we will definitely look at all the channels. Most of the short tenure higher rates are generally given in the last quarter just to ensure that the liquidity is available, and also when interest rates are coming down, none of us want to lock in at a long tenure interest rate, but we will review all of them in the ALCO. Saloni Narayan: AFS reserves sir, can I respond? It is ₹6,600 crores.
On Xpress credit growth - the YoY growth has come down to almost less than 1%, though the GNPA number has come down from 1.11% to 1.07%. How would you look at the growth in this book? One or two quarters back, you had said you are looking for maybe early double-digit kind of growth there.
No, we are definitely seeing some uptick on the Xpress credit. In fact, Q4 we have had a net growth of ₹5,600 crores. This growth rate on the YoY looks smaller because the earlier quarters have been not so good on the Xpress credit. There are two reasons, one is that, as I mentioned in the last quarter also, we completely revamped the whole process of extending the Xpress credit. We also looked at some of the lower segments of customers, though they are salaried class, the lever is going up there. But we are confident that the growth will come back for two reasons, one is the NMI EMI profile of many of these lower end customers in the salaried class would definitely improve with the revised tax structure. So, hopefully their credit profile will improve, and some of them whom we are either not lending or they are not borrowing, will come back to the Xpress credit, and the asset quality front, asset quality in the Xpress credit has never been an issue. Another potential area is that among the corporate salary package customers, the new customer acquisition in the last financial year was 6.5 lakh customers we have acquired under the corporate salary package, and as you know, most of the Xpress credit is extended to corporate salary package customers who have salary accounts with us. So, this 6.5 lakh new customer addition to the CSP also gives some amount of pipeline for the Xpress credit.
On domestic NIMs - the cost of deposit is still going up. On a full year basis from the beginning of the rate cycle FY22, we have lost around 13-14 bps margin on the domestic book. With the first rate cut in early Feb and only half quarter impact in Q4, and the second rate cut announced, how do you look at the overall NIM trajectory?
No. First of all, I think there definitely will be pressure on the NIM. There is no denial of the fact. The pressure will be relatively less on us because as we mentioned that our repo linked loans are only 29%. Our book is either predominantly MCLR linked or fixed rate loans, almost 50% of that is MCLR plus fixed rate loans, which means that the impact of any further rate cut would take some time for us, but as I mentioned, there will be an imperative need to readjust the rate on the deposit. Obviously, the monetary transmission and MCLR impact will not be visible unless we readjust that. So, the effort would be to protect the NIM at 3% level, but there would be some quarters where we will have some pressure on the NIM. I am not able to quantify immediately because we don't know about the rate cycle, while broadly we believe that there would be another 50 bps rate cut. How quickly and how much is unknown at this point of time, but the fact that the NIM will be under pressure is something which we recognize, and we'll see what kind of efforts can be made in terms of adjusting the rate, both on the deposits and the loans.
On the sanctioned corporate loan book - you said that towards March, Central PSUs and everybody reduced. But now how are they behaving, what is your expected disbursement coming over the next 2-3 quarters?
So, we have good visibility on the corporate side, ₹1.7 lakh crores, which is sanctioned, but not disbursed. Much of that growth will come from that segment. So, there is a visibility. We only hope that nobody again decides to deleverage and pre-pay the loan, but broadly, we are sticking to our 12% growth rate on the corporate side also. Ashwini Kumar Tewari: I think, one thing which has been explained, in the last quarter, many of the central PSUs got lot of money from government, and with the clear instructions to pay all the lenders which happened in our case. Very, very large accounts were prepaid. So, that brought down the corporate book, otherwise till Q3, the growth rate was pretty good, and we are not seeing this happen now because now the disbursements and the overall pipeline as Chairman has already said ₹3.4 trillion, out of which half of it is sanctioned already. So, we should see consistent growth in this corporate book including the projects in hand. We are not seeing any other behavior which was seen in the Q4 last year, at this point of time.