ICICIBANKNSEOctober 27, 2023

ICICI Bank Limited

11,880words

113turns

19analyst exchanges

0executives

Key numbers — 40 extracted

35.7%

1. Core operating profit less provisions, that is, profit before tax excluding treasury, grew by 35.7% year-on-year to ₹ 13,731 crore in Q2-2024 2. Core operating profit grew by 21.7% year-on-year to

₹ 13,731 crore

fit less provisions, that is, profit before tax excluding treasury, grew by 35.7% year-on-year to ₹ 13,731 crore in Q2-2024 2. Core operating profit grew by 21.7% year-on-year to ₹ 14,314 crore in Q2-2024; ex

21.7%

asury, grew by 35.7% year-on-year to ₹ 13,731 crore in Q2-2024 2. Core operating profit grew by 21.7% year-on-year to ₹ 14,314 crore in Q2-2024; excluding dividend income from subsidiaries/associates

₹ 14,314 crore

year-on-year to ₹ 13,731 crore in Q2-2024 2. Core operating profit grew by 21.7% year-on-year to ₹ 14,314 crore in Q2-2024; excluding dividend income from subsidiaries/associates, core operating profit grew

22.9%

Q2-2024; excluding dividend income from subsidiaries/associates, core operating profit grew by 22.9% year-on-year in Q2-2024 3. Net interest income increased by 23.8% year-on-year to ₹ 18,308 crore

23.8%

core operating profit grew by 22.9% year-on-year in Q2-2024 3. Net interest income increased by 23.8% year-on-year to ₹ 18,308 crore in Q2- 2024 4. The net interest margin was 4.53% in Q2-2024 compa

₹ 18,308 crore

grew by 22.9% year-on-year in Q2-2024 3. Net interest income increased by 23.8% year-on-year to ₹ 18,308 crore in Q2- 2024 4. The net interest margin was 4.53% in Q2-2024 compared to 4.78% in Q1-2023 and 4

4.53%

ome increased by 23.8% year-on-year to ₹ 18,308 crore in Q2- 2024 4. The net interest margin was 4.53% in Q2-2024 compared to 4.78% in Q1-2023 and 4.31% in Q2-2023. Net interest margin was 4.65% in H1

4.78%

n-year to ₹ 18,308 crore in Q2- 2024 4. The net interest margin was 4.53% in Q2-2024 compared to 4.78% in Q1-2023 and 4.31% in Q2-2023. Net interest margin was 4.65% in H1-2023 5. Fee income grew by

4.31%

e in Q2- 2024 4. The net interest margin was 4.53% in Q2-2024 compared to 4.78% in Q1-2023 and 4.31% in Q2-2023. Net interest margin was 4.65% in H1-2023 5. Fee income grew by 16.2% year-on-year to

4.65%

n was 4.53% in Q2-2024 compared to 4.78% in Q1-2023 and 4.31% in Q2-2023. Net interest margin was 4.65% in H1-2023 5. Fee income grew by 16.2% year-on-year to ₹ 5,204 crore in Q2-2024 6. The profit a

16.2%

in Q1-2023 and 4.31% in Q2-2023. Net interest margin was 4.65% in H1-2023 5. Fee income grew by 16.2% year-on-year to ₹ 5,204 crore in Q2-2024 6. The profit after tax grew by 35.8% year-on-year to ₹

Guidance — 18 items

Sandeep Batra

opening

“The Bank continues to hold contingency provisions of ₹ 13,100 crore at September 30, 2023 Going forward, we will continue to operate within our strategic framework while focusing on micro markets and ecosystems.”

Sandeep Batra

opening

“We aim to be the trusted financial services provider of choice for our customers and deliver sustainable returns to our shareholders.”

Joel Rebello

“I know you've given some details on, with the most of it is coming from retail and agri but some more colour on the slippage and what you expect?”

Sandeep Batra

“But we'll have to wait and watch how it shapes up going forward.”

Hamsini Karthik

“Would it pertain to a ban instance and should we believe that every bit of that is now sort of built into the financials, we shouldn't expect any fresh hit to the P&L because of this?”

Sandeep Batra

“And another aspect of risk buildup of whatever we have analysed in the overall macro system is that some of these borrowers will be sort of over leveraged and take multiple loans.”

Mayur Shetty

“And is the Bank doing any larger project finance at all now?”

Sandeep Batra

“So, for us we will fund any financially viable project and whenever it comes, we are happy to fund it.”

Preeti Singh

“Do you expect any further narrowing of NIMs and if so, what do you expect to close the year with?”

Sandeep Batra

“We expect the decrease in NIM to moderate over coming quarters.”

Advertisement

Risks & concerns — 15 flagged

Leveraging digital and technology across businesses is a key element of our strategy of growing the risk-calibrated core operating profit.

— Sandeep Batra

As far as recoveries are concerned, I think it's very difficult to give an outlook.

— Sandeep Batra

So, we keep monitoring the personal loan and credit card portfolio that are sub-segment level, to identify possible risk buildups.

— Sandeep Batra

Based on the current overdue trends, the CIBIL distribution, the delinquency levels of the portfolio are all within the defined risk threshold.

— Sandeep Batra

I think you rightly pointed out that both from a regulator and analyst and research report have indicated a slightly higher risk in unsecured portfolio, especially on the personal loan.

— Sandeep Batra

However, the risk buildup is happening in segments in low-ticket size, which is ₹ 50,000 and below, where affordability and the repayment capacity might be constrained.

— Sandeep Batra

As far as we are concerned, we will continue to monitor these portfolios and give loans only to customers, which fall within our risk thresholds.

— Sandeep Batra

Apologies, I did not get the amount, what you said, the segment where the risk is emanating?

— Vishwanath Nair

I was talking of the risk emanating from a larger industry perspective.

— Sandeep Batra

Your thoughts on what could be the impact of this?

— Joel Rebello

As long as we meet our risk appetite numbers, I think we are happy to grow that business.

— Sandeep Batra

We are focused on serving all segments of our customers within our own risk appetite framework.

— Sandeep Batra

For us, we will remain true to the core strategy of ensuring that we lend within our risk appetite framework and we are agnostic to where this comes from.

— Sandeep Batra

And another aspect of risk buildup of whatever we have analysed in the overall macro system is that some of these borrowers will be sort of over leveraged and take multiple loans.

— Sandeep Batra

Q&A — 19 exchanges

Good Afternoon, Mr. Batra. The question I had was with regards to the gross additions to NPAs during the quarter. After a while, I've seen a positive addition net to the gross NPA of about ₹ 116 crore. The number is marginal, but still, the fact that you have lost the business habit that exceeded your recoveries and write-offs. If this was just a one- off, or are you expecting any more? The second question I have was with regard to your unsecured retail portfolio. The numbers are not given in the press statement, but we just wanted to get a sense as to what the asset quality outlook on that is

Sandeep Batra

Thank you Vishwanath. I think I will just reiterate the numbers as far as the NPA movement is concerned. We had a gross additions of about ₹ 4,600 crore. This is lower than previous quarter of ₹ 5,300 crore. Within that, the corporate and SME was a small amount of ₹ 323 crore and retail and rural was about ₹ 4,364 crore. During the quarter, the numbers are slightly lower because of the seasonality on the rural businesses. Q2 is normally lower and you would have noticed that the numbers were slightly higher in the first quarter. In terms of recoveries, the corporate and SME book, we had a recov

I just want to clarify. You said your personal loan portfolio is ₹ 1 lakh crore and credit card is ₹ 33,000 crore?

Sandeep Batra

No, no, credit card is ₹ 43,230 crore to be precise. Personal loan is ₹ 1,04,428 crore. Okay, first question is about your slippage. If you could give us more colour, for example, I don't know what was the gross additions or net addition to NPA one year ago, how is the trend been for you all? I know you've given some details on, with the most of it is coming from retail and agri but some more colour on the slippage and what you expect? In addition to what I've already said, I'll probably give you a colour of what happened in Q2 2023. The net additions in Q2 2023 were about ₹ 600 odd crore. In

Sir, I have two questions. One with respect to your corporate book, corporate SME and Business Banking, they have shown an improvement in growth as well. And today, if we look at the overall mix of the Bank from what was tilted to 60:40 a couple of years back, just about two years or so, is now gradually moving to a 54:45 kind of ratio. Do we believe that the Bank is once again seeing strong pockets of growth opportunities rather on the corporate side, on the business banking side, etc?

Sandeep Batra

Hamsini, I think we have been saying that we look at opportunities across whether it is state, rural, business banking, SME, and of course the wholesale banking that you referred to. I think our growth reflects the opportunities that we see in the respective markets. As long as we meet our risk appetite numbers, I think we are happy to grow that business. As you are aware, corporate India has leveraged over the last two years and has strong balance sheets. However, it's good to see some capacity utilisation of sector and we will continue to look at opportunities across sectors and whenever we

Hi, Sandeep. Thanks, my question has partly been answered, so I ask an additional question on this unsecured loan. So, you said that what the industry is seeing is in this low, small ticket personal loans, and that's the segment you're not present in at all?

Sandeep Batra

Mayur, I have focused on what my portfolio is, and what I did mention was about some of the reports which did mention that the unsecured loan where the risk is building up is essentially on low ticket size as well as where affordability and repairment capacity might be constrained. As I mentioned earlier, we do not have any meaningful presence in this segment. And another aspect of risk buildup of whatever we have analysed in the overall macro system is that some of these borrowers will be sort of over leveraged and take multiple loans. So, we keep looking at our portfolio and we take every ri

Thank you. Hi, sir. So, I saw that the NIMs have declined to 4.53 and I noticed you said earlier that in April that we were at the peak of NIMs. Do you expect any further narrowing of NIMs and if so, what do you expect to close the year with?

Sandeep Batra

Preeti, I'll give a similar response which I gave last time. We did mention at the last quarter itself. For the full year, we will have a NIM margin, which is very similar to what we had for the last full year. The sequential decline in NIM, as you are aware is the lagged impact of term deposits increase over last year. The increase in cost of deposits during the quarter largely reflects the increase in term deposits over last year. Though the rate of incremental rate deposits has largely stabilised. We expect the decrease in NIM to moderate over coming quarters. Well, beyond that, I think we

Thank you so much, sir. So, this was just in follow-up to Mayur sir's question on capex. So, when do you prospectively see sort of some demand on the private capex front and some of it translating into lending opportunities for banks like yours?

Sandeep Batra

Ashish, as I have been saying, I think, the demand has to get created by the corporate India. For us, we will focus on what is within our risk appetite and we will be happy to fund it. We are not fixated about whether lending is happening within the corporate or SME or retail. Wherever there is growth, we are happy to fund it. In fact, if there is growth on the retail segment, we are there. The SME segment and business-banking segment has been doing very well from a country perspective and we have been growing that in a very healthy fashion. And even amongst the corporate world, we are able to

Sound is better now sir?

Sandeep Batra

Yes, you talked of growth of which segment? Home loans, home loans segment Home loans grew by about 16.2% during the year-on-year growth for this quarter. Okay, sir. And sir, if you can provide some colour on the competitive intensity, given that, the merger with a larger peer basically got through just in July So, the two entities were there. As far as we are concerned, we are focused on our own business and we are happy with the growth that is happening. Okay, sir. And final small question, sir, on the contingent provisions which you are carrying, you continue to carry or like was there any

Not Kshipra, Richard here. Sir, I just want to know how much of your portfolio is repo linked and how much is MCLR linked?

Sandeep Batra

Repo is about 48% and MCLR is about 18% and the fixed interest rate portfolio is about 31%. Sir, how much do you think the further rise in deposit rates sir, how much basis one would say factoring in now? We don't really have a given outlook on deposit rates. I think the retail deposit rates have been more or less stable for the last couple of quarters or a little more than that. Wholesale rates, I think, move up and down in line with overall systemic liquidity. So, there has been some hardening, I would say, towards the end of the second quarter and subsequently, but that we will see as it go

Thank you. Good evening to all of you and welcome to the ICICI Bank Earnings Call to discuss the results for Q2 of FY2024. Joining us today on this call are Sandeep Batra, Rakesh, Anindya and Abhinek. The Indian economy continued to be resilient amidst the uncertainties in the global environment, reflecting the actions and initiatives of the policymakers. The underlying growth momentum is visible with expansion in manufacturing and services PMI, real estate buoyancy, increasing steel and cement output, higher tax collections and demand for travel. The Government led capex cycle is continuing.

Mr. Anindya Banerjee

Thank you, Sandeep. I will talk about loan growth, credit quality, P&L details, growth in digital offerings, portfolio trends and performance of subsidiaries. A. Loan growth Sandeep covered the loan growth across various segments. Coming to the growth across retail products, the mortgage portfolio grew by 16.2% year-on-year and 4.1% sequentially. Auto loans grew by 24.1% year-on-year and 5.5% sequentially. The commercial vehicles and equipment portfolio grew by 12.3% year-on-year and 4.5% sequentially. Personal loans grew by 40.4% year-on-year and 10.2% sequentially and the credit card portfol

Hello, I just had a question on the sector and then even on margins. So, there's a lot of talk going around on unsecured loans, on which segment of unsecured loans is safe and which is seeing higher delinquencies. So, what is the sense you make from the bureau data and from your own customer data, that's the first question. And then in your experience as veteran bankers, do you think that the stress in one segment, say below 50,000, can easily spread to other segments, so that's my first question.

Anindya Banerjee

Yes, we track this portfolio quite closely and we have been doing so for the past several quarters. As far as our portfolio is concerned, we feel that the trends are quite stable and the credit delinquencies and credit costs are well within what we would have sort of expected them to be. As far as the industry outlook is concerned, we have also seen some research which makes this distinction between the smaller ticket size loans and the larger ticket size loan. As far as our portfolio is concerned, we have a very minimal presence in the smaller ticket size segment. But I think you are right in

Hi sir, just two questions. One is your recovery and upgrade, so your retail slippages are running at 3% and your recovery upgrades are like 60% of that. Is that what you would consider as a normal run rate in this business now?

Anindya Banerjee

I guess so. I mean as the portfolio grows in absolute terms, it may go up, but we expect these trends to be reasonably stable. There could be some variation quarter- to-quarter. 15 Okay and the second sir, again back to the PL, the 40% growth that you have seen, your approval rates on loans will be -- where would this be versus let's say 2023 and versus like 2019 in terms of your internal credit filters? We have not really talked about approval rates and so on. I think we have given our outlook on the portfolio and we will continue to monitor it as we go along. Okay, but your credit filters in

Hi, thank you for the opportunity. I have two areas; one is on kind of lending and deposit yields and second is on your branch expansion strategy. Lending yields have gone down 5 basis points this quarter, which felt a little low. And cost of deposit yields – cost of deposit has gone up substantially. How much repricing is left on the deposits and on the lending side? And, the second question is, HDFC is growing branches quite aggressively now. It is leaving some of the other private sector banks behind on market share relative to the private sector. How does this impact kind of your branch ex

Anindya Banerjee

As far as the first question is concerned, I think you're aware that the way margins for most banks have moved over the last few quarters in FY23, banks saw the benefit of the increase in the repo rate on the external benchmark linked loans, primarily mortgages and others. And the deposit rate started to also go up last year, but because the deposits are fixed term, that repricing impact is playing out through the quarters and we are currently in the situation where the policy rates are on a pause, and therefore the external benchmark linked loans are not seeing an increase in yields. But the

Yes, good evening everyone. Actually, I have two, three questions. Number one, can I just get your thoughts on the competitive dynamics, particularly in mortgages and deposits because clearly, the systemic growth has not been very strong in mortgages and of course, some pricing pressure here anecdotally has started coming through. So, what are your experience in that?

Anindya Banerjee

So on mortgages, yes, it has always been a competitive segment and it continues to be so. So, we do have players offering in particular segments that they are targeting pretty competitive rates. But we are calibrating our response and trying to make sure that we optimize across the portfolio. But overall, I think on loan pricing there is a reasonable level of competitive intensity across the system. Got it. And the reason I was asking is, of course, credit cost has been extremely benign. So do we choose to pass on some of that and strengthen the position in the secured portfolio because very u

Yes, thanks for taking my question. So firstly, in terms of the international NIMs, they have gone up by almost like 56 odd basis points. Are we seeing, obviously the portfolio is quite small now. But eventually when we look at it, is this a steady state 20 in the overall or maybe we see further improvement in the NIMs as well looking at the rates globally?

Anindya Banerjee

I think it is not particularly consequential Kunal that is a small portfolio. Incrementally, mainly what we are doing there is a short-term working capital, trade finance kind of portfolio. So we do that, the funding that is available and the rates that are wherever we see that the lending rates give us appropriate level of spread over that funding particularly for some of the Indian corporates etc., also in that market the Indian banks tend to be quite competitive. So in the overall scheme of things it does not really make much of a difference. Secondly in terms of the unsecured so if you loo

Thank you for the opportunity. My first question Anindya is slide 54. There is a five basis points Q-o-Q decline in yield on loans when slippages have declined quarter- on-quarter. What kind of explains that?

Anindya Banerjee

So largely I think it is basis, the computational convention, because the second quarter has one day more than the first quarter. So the interest computation convention led to some decline, but that is mathematical. It will be stable in Q3 and then reverse in Q4. 22 As I said, it may not have made too much impact in this quarter from a yield on advances perspective, but there is significant pricing competition in the market as well. I appreciate that, Anindya. But the fact that we are still in elevated interest rate environment, I would not have expected it is to go down, especially when slipp

Hi, thanks for the opportunity. Just a quick question on the mortgage portfolio. So if I see the presentation of few quarters back say a year back, the average ticket size on the portfolio was roughly 25 lakhs. It is right now at 35 lakhs. Does the sizable increase look okay or is there something more to read into it?

Anindya Banerjee

I do not recall the 25 lakh number. I think it would – was always 30 odd. But yes, there would have been some increase in the average ticket size, that looks okay. Okay, because say Q1-2023 shows 2.5 million as average ticket size of the home loan, while it is 3.5 million right now. So just wanted to pick your brains on the same? Fine, I will follow up offline. Thank you.

Yes, hi. Just on the net interest margin, would you be able to sort to differentiate in terms of impact which is because of ICC, incremental cash reserve ratio? So, the NIM compression we have seen something which will not flow through in the next quarter. Any comment on that?

Anindya Banerjee

So ICC would have been a small impact. As I mentioned, if you look at the sequential impact, there would have been some 2-3 basis point impact of the absence of interest on income tax refund. The ICRR would have had maybe one or a couple of basis points impact. The day count would have had some impact, but the larger impact would have been the repricing of deposits that we have spoken of earlier. Okay. The second question would be on the personal loan. So given the growth rate, which we are comfortable at this moment, in terms of what regulator is saying, I think they also have clarified the i

Yes, thanks for the opportunity. So, first question again on the unsecured piece, so we are continuing to see the strong growth at least for us. If you could highlight, explain the disconnect that we are seeing perhaps between the broader trends in consumption in discretionary spend as well as, at least for yourself, the strong growth that we're seeing in the unsecured piece, personal loans, credit cards, etc. Some of the use cases that have increased over the last few years, if you could highlight some of that, which is driving this strong growth that we're seeing? That's the first question.

Anindya Banerjee

So I wouldn't really want to talk more about the unsecured piece. I don't think that our market share in credit card spend has increased dramatically. So there is enough growth happening across the system in these categories and we are not particularly divergent. So no further comment that I have to make on that. 26 Okay, fair enough. Secondly, on this recent fine by RBI on the cross selling of non- financial products and one or two other reasons. You could speak a little bit about that because, when it had happened for the peer banks, especially on this cross selling of non-financial products

Thank you very much for taking time out on a Saturday evening, and have a good weekend. 27

Management

Advertisement

Speaking time

Anindya Banerjee

Moderator

Sandeep Batra

Ashish Agashe

Hamsini Karthik

Joel Rebello

Vishwanath Nair

Preeti Singh

Saurabh Kumar

Manish Shukla

Opening remarks

Sandeep Batra

Thank you all for joining us today. Good evening everyone. Joining me today for this call is our Group Chief Financial Officer- Anindya Banerjee. Thank you all for joining us today. The Indian economy continued to be resilient amidst the uncertainties in the global environment. This has been enabled by effective and forward looking policies and actions by the government and other authorities. The underlying growth momentum is visible with expansion in manufacturing and services PMI, real estate buoyancy, increasing steel and cement output, higher tax collections and rising demand for travel. The Government led capex cycle is continuing. Though there has been a pause in the policy rate hike cycle in India, global and domestic inflation, and the liquidity and rate environment continue to evolve. Our strategic focus continues to be on growing our core operating profit less provisions i.e. profit before tax excluding treasury through the 360-degree customer centric approach, and by serving

Advertisement

← All transcripts ICICIBANK stock page →

ICICI Bank Limited

Market Movers