On the Retail disbursals - it's slightly down Q-o-Q by around INR 300-odd crores. Given the Asset Quality trajectory, this should be moving up. Why this calibration? And how should we think about the next two-three quarters in Retail disbursals? Also on CASA - absolute number not going up meaningfully for past couple of quarters despite pricing actions. When do we see uptick being meaningful on absolute CASA balance?
In terms of Retail disbursement if you see with the confidence in terms of the underwriting and the collections, we have started seeing the disbursement, which is 15% higher on a Y-o-Y basis. We have also seen since we are not there in the Prime Home Loan and the New Car Loan and the Gold Loan. But we are seeing every month the disbursement happening at a higher level. So, the current quarter should be much better than what we have seen in the past. This is a continuous path where the trend has absolutely improved with continuous improvement. On your CASA - today, if you see our Overall Deposit Growth and the Deposit Growth of the CASA, is doing much better than what the industry is doing, especially when I talk about the Retail. If we need to grow on the overall liability side, at a rate, which would be higher than the industry, then it means for improving the CASA ratio further, you need to grow on CASA much higher than the Overall Deposit growth, which in the current times, if we see the trend across the industry, we feel like it's a tough time. The important part is that we have taken actions in terms of reducing our rate of interest on Saving Bank Account, where the cost of Saving Bank Account has come down by almost 150 basis points. And despite this, we are improving. So, it would be like a balanced approach where we would continue to have the rate action and have the growth also.
On SMBC - right now, they are one of the largest shareholders, but not a promoter. They also have share through their four Indian branches. Do you see a possibility wherein four Indian branches of SMBC are amalgamated or converted into wholly owned subsidiary? Or can they run parallelly? Is there going to be an impending change?
My understanding is almost similar to what understanding you would be having on this. Nothing different. They are currently like 24.9%. We have also seen a news that they got approval for a wholly owned subsidiary. How things will shape up in the future, all of us together we will see that. Because this is the first time this is happening in the Indian banking space, very, very difficult to give a definite answer in terms of having a complete understanding how the regulator would think about this. So at this point of time, let's see how that whole thing would take shape in the future.
As a Retail individual investor, when can we expect a nominal simple dividend from the Bank in future? Any rough tentative time line - one year, two years or something? Because the equity is very high, servicing this kind of an equity is difficult.
Fundamentally, if you see from where we started, we have been able to show quite a decent performance in a very tough market. But definitely, we would like to see that going forward we would continue to perform much better and reward our investors. At this point of time, it's very, very difficult. We need to discuss this part in terms of Board and others, but at the right time, we would also accomplish.
Appreciation for the turnaround. When can we see a doubling of your loan book so that the stock price can go up to INR 100?
Thank you so much for understanding and appreciating the performance of the Bank. What we also need to be cautious of, that, ultimately what is the expectation. As per our understanding, expectation from the investor is always in terms of Profitable growth, instead of maybe doubling the loan book, where you don't earn and you come across the credit issues going forward. So for any Bank, it's very, very important to diversify the loan portfolio, have some time in terms of understanding, doing it better, gradually grow. And this is exactly what we are doing. If you see continuously, every quarter has been better than the previous quarter. We would still like to be very, very calibrated, cautious. I would not like to do anything which can create any pain point for our investors or the depositors. And we are quite confident and feel happy that we are absolutely moving on the right track.
The books that had been delivered to JC Flower of around INR 48,000 crores, how much cumulative recovery has been done from that book? And is there any legacy slippage still left? And secondly, Retail Banking continued to slip. So how many more quarters will it take for the bank in getting Profitability from Retail Banking?
To your first question on the recovery from the ARC. Since we have assigned this to ARC, on a cash basis, we have recovered INR 7,500 crores for YES Bank. And we continue to have almost like INR 1,800 crores of outstanding Security Receipt which would be getting monetization of both Security Receipts as well as the upside from the resolution of those Assets. So still, there are a lot of juice available in that portfolio. Second, in terms of your question on the Retail, I'm really happy to report that this quarter, our Retail businesses have breakeven, and going forward, we would be going to see a significant contribution in the Profitability of the Bank from the Retail. For the last four, five years, especially after COVID, there was a time where we were continuously investing on the Retail side and when you invest, it takes time to have a return out of that and in between, the industry also faced a very adverse credit cycle on the Retail. Not only our investments have started yielding the right results, and with that turnaround in our Asset Quality cycle on the Retail, where we are seeing a lower slippage, better recovery, so not only Retail Asset has breakeven, but would contribute significantly going forward in the Profitability of the Bank. (Niranjan Banodkar added: When you look at our segmental results, you will find that the Retail will still have a negative number, but that is also because we've taken a onetime charge for the gratuity. If you adjust for that, and there are certain internally, we reported as part of Retail, but for the segmental disclosure, we are classifying them as outside Retail, if we build that back into the Retail business, we have broken even.)
If the third quarter disbursements do improve the way you are hinting at, should we now think of next year growth closer to the mid-teen number? Or how should we think about next year's growth?
Absolutely, Jayant, like if we see in terms of the growth for the current quarter, sequential growth, which is 2.9%. We are very confident that we would be sequentially be able to grow more than 3% in the current quarter, which will take our Credit growth to around 8%. But definitely, next year, after we are able to solve the issues in terms of better underwriting and better risk policies control on the Retail and, the high-risk corporate loans have already been repaid, we would be definitely targeting a loan growth, which would be more or less in line with the market, barring, if we need to exclude the growth, especially on the products like Prime Home Loan and the Car Loan. (Niranjan Banodkar added: One, we did call out that in September, sometimes there are certain transient flows that kind of go in on the Deposit side, especially on the Current Account side. Therefore, if I just bring your attention to the average performances here, both on Current Account and Savings Account at the full Bank level, we have seen almost like an 8% increase in Current Account Y-o-Y and about 17% in Savings Account Y-o-Y. If I bring that attention more to sequential numbers, both CA and SA have grown by 5% each. So yes, sometimes we do see some noise that kind of comes through the reported numbers. But the fact that Current Account actually has sequentially grown 5% has also been one of the contributors from a Net Interest Margin standpoint as well.)
As the Bank moved beyond stabilization, how do you see YES Bank positioning itself for growth in the Retail and SME lending, while also expanding Digital Banking? Could you share your vision on how the Bank will differentiate itself in the next few years against larger private sector peers? Second - with Profitability improving, how are you thinking about balancing cost discipline with the investment needs for tech and branch expansion over the next few years? And what steps are you taking to ensure margins remain stable while the Bank scales itself and the SME business?
First responding to your second question, in terms of investment for future and also at the same time, maintaining a balance between the Profitability. If you see last four, five years, we have heavily invested in both technology and our Retail network expansion. And despite this, we have been able to control our Cost to Asset. Our Cost to Asset, despite this kind of investment, has not gone up. Actually, we have been able to control within 2.5% to 2.6%. Even the current growth on the Opex is one of the lowest in the industry. Despite continuing to invest in terms of opening new branches, better digital capabilities, we have been able to reach that inflection point where whatever we have invested in the future, it has started giving the results to us. So it's a cycle where we will continue to invest for the future, and we'll also get the reward for our investment of the past. Coming to your first question in terms of how we need to differentiate in terms of our SME and the digital side - on SME, we are showing one of the best loan growth. And even if you see our Total Advances, 29.3% of our advances are actually the SME advances, which is again one of the highest in the industry. So this is one area on the SME, which offers a huge opportunity in our country, and we have a very good understanding and the distribution network in terms of acquiring new customers having a good turnaround time and meet their requirement, not only from the loan purpose, but also in terms of solutions coming from the digital and the tech side. Now on the Retail side, currently, our strategy is definitely in terms of chasing a profitable growth. And we would not like to grow in those Asset classes where the returns are not as per the risk. But definitely, we are looking for some products on the Retail where we are currently not there in terms of building our capabilities and start growing on this. I can name just two things. Maybe one, on the wealth management side, is one area where we would like to explore and build our strength in this side. Plus, we may also look if the products like gold loan offer a good opportunity, how we can start building our capabilities for that product also.
You specified the impact of gratuity under the new labor code, but the number seems relatively very high if you compare other banks, those who have given the preliminary assessment. Any reason? Other banks are saying only maybe one-fourth, one-sixth number of what you have reported. Any more details that you could share there?
In terms of our understanding of what the wage bill is talking about, that you need to calculate gratuity, assuming that your wages have to be at least 50% of your fixed pay. As per our wages construction, currently, the basic pay is around 30% of the total fixed pay. So if we have to define as per the new wage bill, then the gratuity has to be worked on the basis of if the basic becomes almost 50% of that. Now if we take it from 30% to 50%, and this is how we have worked our liability. We have been very, very careful in terms of why don't you make provisions instead of the coming quarters, we continue to have a negative effect. So basically, the strategy was more in terms of workout as per our understanding, make a onetime provision so that the future earnings are not being impacted from any possible interpretation of the wage code.
On asset quality - this quarter, you've done exceedingly well, the SR redemption continues and the specific provisions are negligible. But if I look at last quarter, it is creating a bit more volatility in the specific provision. There was a bump up last quarter and significant decline this quarter. Fair to say that if you continue to receive INR 500 crores kind of SR redemption you can sustain the current negligible credit cost or that can again have volatility in this line item? Also any rough range of this redemption over the next two-to-four quarters from this SR portfolio?
The right metric to look is really the NPA provisioning because SR provisioning can at times be unpredictable. It is not a function of what we are doing. It's a reflection of what the asset reconstruction company is doing, although we keep getting cash flows from them. On NPA provisioning, the credit cost in March, we did see provisions of about INR 900 crores. They kind of came for the next two quarters at about INR 680-odd crores, which has now come down to about INR 533 crores. And it's also clearly coinciding with the way our core Asset Quality performance has improved. So Slippages have also come down. On the Security Receipts, we did see a dip last quarter, we did see some increase now. We've always said that we had guided last year that our Net Credit Cost, Non-tax Provisions to Assets should be below 50 basis points for the full year. We're happy to state that's something we should be able to continue regardless of the volatility that will happen during different quarters. (Prashant Kumar added: Today if you see that out of INR 6,800 crores of Security Receipts, now we are left with only INR 1,800 crores. INR 5,000 crores have been fully resolved and in addition to INR 5,000 crores, we have also received an upside of almost INR 2,500 crores. So definitely for the remaining books, things would become more difficult and it will take more time. We have given a guidance for this year in terms of having a recovery of INR 1,200 crores for the entire year. We have already achieved INR 1,113 crores. Next year onwards also we would be seeing maybe recoveries in the range of INR 800 crores.)
If you have the number in rupees crore for PL and Credit Card slippages because there has been a lot of improvement in the Retail slippages. That number in absolute crore will be very helpful. And the corresponding number last quarter?
PL Gross Slippage number is about INR 180 crores and credit cards would be about INR 140 crores. Last year, same time this number was about INR 250 crores, Credit Card was about INR 190-200 crores. So we've kind of continued to see improvements from those numbers. (Rajan Pental added: One is the Gross Slippage number. The other one also is to look at the entry rates. So entry rates in cards from 20% is down to around 12% which gives us significant confidence on the way things are panning out. Similarly, for Retail Assets, I don't have here for only PL, but overall for Retail Assets, it is down to 8.7% as compared to a high of around 10.7% a couple of quarters away. So both in terms of entry rates, resolution and slippage and recovery, each of the product, including cards, is showing a significant improvement. Entry rate = check bouncing rate.)
Regarding the Advance growth - are you confident to achieve the Advances growth in the figure of teen, high teen or mid-teen?
We are not like aspiring for that kind of loan growth. We are more in terms of a Profitable loan growth. We don't want to simply grow for a top line purpose, without having a Profitability. So mid-teen or high teen is sometimes a way. Immediately, what we are looking for the current financial year would be somewhere around 8%. And for next financial year, we would like to be in line with the market.