HDFC Bank Ltd (HDB) 2012 Q4 法說會逐字稿

Thank you for standing by and welcome to the HDFC Bank's Q4 and full year results conference call presented by Mr. Paresh Sukthankar, Executive Director. (Operator Instructions). I would like to hand the conference over to Mr. Paresh Sukthankar now. Over to you sir.

Thanks. Good evening to all you. I have Sashi with me as well. As was just stated, I think I'll just spend a couple of minutes walking you through some of the highlights of the results. You've probably had a chance to see them and we'll of course throw the house open for question thereafter.

The fourth quarter, the total income growth was 32% so the total income for the quarter was IND8,880 crores. The net revenue growth was up from IND4,095 crores to IND4,880 crores. A key driver in that net revenue growth was net interest income growth. NII was up 19.3% and that was driven by a margin of 4.2%, core margin of 4.2% and an asset growth on a point-to-point basis of 22.2%. The net interest margin of, core net interest margin of 4.2% is a marginal improvement from the sequential quarter, though on a year-on-year basis it's been stable.

The other income grew by 18.8%. There are three components to the other income. The major component, which is fees and commissions, had a particularly strong quarter where commissions went up to IND1,273 crores (sic - see press release), which is up a little over 23% from IND1,000 crores in the corresponding quarter of last year. The FX revenues were up from IND245 crores to IND325 crores. And the mark to market and -- I mean profits on investments were a loss of IND71 crores as against a profit of IND9 crores for the corresponding quarter of last year. All of these put together come to that other income number of IND1,492 crores, which was an increase of 18.8% over last, over the corresponding quarter of last year.

The cost-to-income ratio deteriorated marginally from other quarter, deteriorated marginally from 48.9% in March of last year to 40 -- of the previous year, of March '11, to 49.8% for the quarter ended March 2012. One of the key drivers of that was the fact that just during this quarter itself we've added substantially to the branch network. Through the year we added almost 558 branches. But a large portion of that was added, in fact around 343 branches of this 558 were added, just in this last quarter.

The total provisions are marginally lower. For this quarter, for the quarter ended March we were at just under IND300 crores at IND298 crores, which is a little lower than the IND431 for the corresponding quarter of last year. And we bottom lined therefore and net profit growth was 30.4%. Net profit was at IND1,453 crores.

The balance sheet figures, advances were up 22%, deposits were up 18.3%. If you were to adjust for the deposit spike that we had, the one off deposit that we had as of March of 2011 -- and this was something that we had put out in last year's press release as well that because as of March 2011 we had roughly about IND4,000-odd crores of deposits from the government having bought bonds which had been issued to fertilizer companies and that was a spike as of that date. We have adjusted that in the, what we had stated in the release for last year. If you adjust for that, then the deposit, core deposit growth would have been closer to 20%. But even without adjusting for that the total deposit growth was 18.3%.

CASA was at, CASA ratio was at 48.4%. The savings deposits increased by about 16.6% year on year to touch almost IND74,000 crores, IND73,998 as of March of 2012. Sorry, yes, that's the CASA ratio piece and the savings accounts piece.

Moving on to capital adequacy, the total cap ad is at 16.5% as against 16.2% for the last year. Tier 1 was at 11.6%, which is also a marginal improvement over the corresponding number for last year.

Dividend has been up from IND3.30 per share to IND4.30 per share. This is obviously on the split share of IND2. Last year the dividend of IND16.5 was on the IND10 share so the equivalent of that is IND3.30 per deferred IND2 share, and that dividend has been increased from IND3.30 last year to IND4.30 this year.

The branch expansion this year has been one of the highest that we have seen in the history of the bank. We increased our network from just under 2,000. We were at 1,986 at the beginning of the year and we ended the year at 2,544, which means we added 558 branches. And we also added almost 3,400-odd ATMs as we went, in terms of number of ATMs, from 5,471 to 8,900 in the year. And of that 3,400 that we added in the year, we added about 1,800 in the last quarter. So today we do have an extremely strong network of 2,544 branches, just under 9,000, 8,913, ATMs and a presence in 1,399 cities.

On the asset quality front we continue to have fairly stable asset quality. The gross NPAs as of year end were at 1%. That's as against 1.1% as of the end of last year. Net NPAs are at 0.2%. Our coverage ratio on specific provisions alone, which is not taking into account general provisions, not taking into account write-offs of any sort, technical or otherwise, so just on the specific provisions, the coverage ratio is 82.4%. As you are aware, through the last couple of years we've been adding the floating provisions so at the end of this year our total floating provision in the balance sheet is at INR1,435 crores. And the restructured loan piece remains at 0.4% of our total loans, which was again 0.4% as of the end of last year as well.

So these are some of the highlights. And I'll stop here and we have to take questions. As I said I have my colleagues Sashi, and Bhavin with me as well. So all of us happy to take your questions.

(Operator Instructions). First in line we have Rakesh Kumar from Dolat Capital. You may go ahead please.

Good afternoon, sir, a very good set of numbers. Just I would like to know what is the reason for the sharp increase in loan advances. Apart from the retail competition, which has gone up, is there any other reason which could have contributed to this increase in loan advances?

For the quarter?

Yes, sir.

No, for the quarter the only change is that we ran down about 5%, if you notice on a sequential quarter basis of the wholesale book, which is obviously the shorter duration, lower yielding book on the corporate side.

And what has continued to grow is the retail piece which would clearly have been at a higher yield. So other than that there has really been no other trigger to the asset yield side.

The only other thing of course, is that you know in the last quarter of every year we -- to the extent we've hedged [our pluses] and we have mutual funds and so on, investments that we hold, we also tend to get the annual sort of dividends in that quarter. So, we would have received some dividends during the quarter as well. So between these two would have led to some improvement in the yield.

Okay. On the ATM network front, there is a sharp build up we have done in this quarter, in the fourth quarter. So is there anything, any indication what we can get from this action?

Not, I mean there is nothing sort of specific about this quarter. The fact that today across the channels that we service our customers through, the ATM channel has been seeing one of the highest proportions of transactions in terms of servicing.

We also have seen the opportunity to put out more ATMs. One, that ensures that our customers operate through our own ATMs much more than they might operate through somebody else's, some other banks because that costs us. And equally we do have a large network, and if we do have more uptime and greater reliability on our ATMS that encourages customers of other banks to also use our ATMS, which earns us a fee. But there isn't anything definitely or anything special about this particular quarter. It was a challenge to increase our ATM network, and we have obviously done a fair portion of that.

And a catch up of the market.

In this -- and there are other banks --

Other banks.

-- both public and private sector who also have been increasing their network, and the -- as the ATM as a channel has gained in popularity.

But the way we have increased the size of the total ATM network, could that much increase we have -- we could not see in the [over rates] in this quarter. So the corresponding increase is not there.

Well, some -- the full impact of the cost will come in the subsequent quarters, you are right. Having said that there is a bit of -- the fact that sequentially if you see the operating cost has gone up by 14%, while there could be some -- there is a bit of one-off there. But even if you adjust for the one-off it is still higher than normally that one would see on a sequential basis. So the expanded -- expansion in ATMS and branches do have some amount of cost factor in the fourth quarter too.

They would have been obviously there for the full quarter. So you have had some proportionate costs which are coming for this quarter.

Also some of the expansion that we might have done on the ATM side would not necessarily have been on the old model it would have been on (multiple speakers) transactional model. So there are different elements of cost which would come into the P&L.

Thanks. Thanks a lot for the insights.

You're welcome.

Thank you sir. Next question comes from Mr. Manish Ostwal from K.R. Choksey. You may go ahead please.

Yes, congratulations on a good set of numbers. First question on bank the growth side, this year we grew 22.1% against the system of 16.3%. So going forward how do we see loan growth panning out and what will be the key growth driver for -- of loan growth in FY'13, whether it will continue to be retail loan book growth or there will be some becoming the corporate loan book.

Yes, so let me answer both those parts. One the absolute rate of growth that we would want to grow this year, again is a function of the pace at which the system grows. And I guess the pace that at which the system grows is partly dependant on how the economy does and the growth of the economy. Assuming a 7% GDP growth we do believe the industry loan growth will be approximately 16% to 17%. And we would typically want to grow a few percentage points faster than that.

As far as the composition of that growth between wholesale and retail we at this point of time feel comfortable that both the businesses can grow at somewhat similar growth rates.

You know, you must appreciate that even last year while retail ultimately grew faster than corporate it wasn't that we were not in a position to grow or that there was lack of demand or like a lack of current appetite, or lack of relationships on our part to be able to grow the corporate book a little faster. It was a conscious move on our part to moderate the overall loan growth, keeping in mind what yields and what funding costs were for the last quarter or two.

So as we look at this year we do see continued demand on the corporate side and the retail side. It is possible that relative to last year there may be a slight moderation in the retail loan growth rate and a slight pickup in the corporate loan growth rate such that both these businesses or both these portfolios grow at somewhat similar growth rates.

And second, in terms of credit cost what we have seen in last three quarters that credit cost has been lower than the normal level. And plus we have seen a strong growth in retail loans and with the regularly -- with the significant growth in unsecured loan products. So how do we see your retail loan portfolio revert to the normal levels first, and secondly, likely increase in credit cost due to higher growth in unsecured products in last three quarters. So what are the -- what is your outlook on the credit cost going forward?

Okay, so I think the point on normalization of credit costs at some stage I think is one that we have made in the last few quarters. And that's really going by the fact that we have always believed that there is, based on the composition of the loan book, an expected loss, so each of the retail loan products do have an expected loss.

Similarly in the corporate side, based on the book that we have between large corporate, emerging corporate, business banking and so on, there is what has been a historical average in terms of NPLs and credit cost.

As far as the change in mix of the retail loan book, and whether that distorts or changes meaningfully the expected credit loss, the answer so far is that it has not. Because although there has been a pickup in the rate of growth of say personal loans or credit cards in the last two or three quarters, even today between these two, the -- between the entire unsecured piece is just around 20%. And -- which is, or nearly around 19% something, which is hardly some 0.2% or 0.3% difference -- different from what it was as a proportion.

So, we haven't seen a huge change in the composition of the loan book, of the retail loan book which would result in a change in the expected loss. And while we've had whatever little change in the unsecured book, we've also had an increase in the proportion of, let's say, home loans or some of the other low yielding, lower risk retail loans as well.

And lastly sir, we have a floating provision of INR1,435 crores, and since -- and during the quarter the dynamic provision norms -- the discussion paper has been put out by the RBA. So once that norm kicks in how do you -- how we are better off in terms of incremental provisioning due to this dynamic provision, because we already have INR1,435 crores in the balance sheet.

I think it's really premature to try and speculate on what the impact of dynamic provisioning will be on any bank, including us, because as you rightly said it is only a discussion paper. You probably then have some draft guidelines and that would ultimately result in final guidelines.

Conceptually the fact that you do need to have some provisions which offset specific provisions being [low] during in the cycle, I think that is a concept that we fully agree with. And therefore the need for having countercyclical provisions is something that we believe is a logical and sound and welcome move.

The actual -- the calculation methodology and whether this needs to be an annual charge and so, I think a lot of this is still very much uncertain and in the melting pot.

Clearly to the extent that the guide -- the discussion paper suggests that whatever are the existing floating and general provisions would essentially be merged into or be part of the dynamic provisions, we would be better off than those banks who don't have this current base of provisions.

Okay, and thank you very much and all the best for next quarter.

Thank you so much.

Thank you sir. (Operator Instructions). Next in line we have questions from Mr. Asit Mehta from Ambit. You may go ahead please.

Yes, good evening sir. Congratulations on an excellent set of numbers. I'd just like to know how come gross NPLs have they grown like 1% Q-on-Q in such a challenging environment?

Well, we've actually seen slippages which have been not very different in the last couple of quarters. In fact, we have the (multiple speakers).

No, there are obviously three elements to this, there are gross slippages, there are recoveries and upgradations and there are write-offs. The slippages net of recoveries in this particular quarter were virtually the same as they were in the previous quarter. Write offs were marginally higher. And therefore on a net basis there is this whatever 1% or so -- as far as I am concerned it's more or less flat.

I think the reason ultimately why the asset quality has been holding is that the actual gross slippages in terms of new NPL formation has been at lows for some time now. On the retail side, it's been at cyclical lows for an extended period of time for the last few quarters.

On the corporate side, I think we've been fortunate that most of the specific customers or projects or sectors which have been a little more vulnerable in this recent past we either don't have or have minimal exposures to those particular names. And that has obviously meant that we have not seen as much of new NPL formation. Nor have we seen any sharp spike in the restructured loan portfolio.

So I don't think there is anything particular as far as this quarter is concerned. But I think it is just the overall strategy on the lending side, and the tighter credit standards that we have maintained, which has helped us.

Okay, so my understanding is because of higher write-offs the gross NPL number has come down along with the usual (multiple speakers) underwriting.

Yes, this quarter the write-off has been slightly more. I am talking about the 1% change or whatever, yes.

Yes, so around like 30% more than the previous quarter?

Yes, approximately.

Okay. Thank you, sir, your question is answered.

Thank you sir. Next question comes from Nilesh Parikh from Edelweiss. You may go ahead.

Yes, hi Paresh. Just one thing on the interest expenses side we've seen actually a sequential decline on the absolute number. Just wanted to get your thoughts on that, considering where rates have been on the deposit site during the quarter.

Yes.

At least for the last six months, just wanted to get your thoughts how you've managed to do this.

Yes.

That's one, and probably I'll take another one.

Ask all your questions.

Okay. The other one is on the corporate side we've seen a sequential decline of about 6%. So is this run down of portfolio, retirement of portfolio or you've kind of slowed down some portfolio there?

Yes, so the second one is simple. We haven't sold anything meaningful on the corporate side. So the -- essentially allowing some short term loans to mature.

Okay.

We might have had some very small sales, but not -- the major portion of this 5% or 6% has been just allowing loans to mature. And the reasons we did that was that given the spike that we have seen in fixed deposit rates to continue to take deposits at those rates and put up corporate assets just didn't make sense from a margin point of view.

Okay.

So it made sense for us to just allow those loans to mature. And therefore not be as much in the saving part deposit game that the entire industry was in, in that period.

On the cost of deposit the main improvement or the reduction that we saw in the cost of deposits was because this was a good quarter from our CASA perspective. We had a spate of these [euro bank] issue for some of the bond issuances, the tax re-bond issuances and so on that we -- that you might have --

Yes, sure.

This quarter, and we were one of the larger bank, collecting bankers. So we did see, while it may -- since these are in and out, we would not necessarily have had the -- period end, these may not be as visible, but through the quarter we did have slightly better CASA. And to that extent the deposit -- weighted average total deposit costs were slightly lower.

The average cost would have gone up by how much means the point to point has gone up by 70 bps, but average CASA (technical difficulty).

Would have been (technical difficulty).

Sorry?

It is about 2% up for the -- on a daily average basis for the quarter.

2% up. And the other thing is your end deposit has obviously seen 6% Q-on-Q movement, now have we on the term side you mentioned that bulk deposit has come off. So what are the mix today on -- in the term side between retail and wholesale and what was it, sorry, in Q3?

The mix actually in terms of proportion between wholesale, retail and you know this is -- the definition of wholesale and retail of course tends to vary from bank to bank (inaudible). But in our own minds I don't think the proportion of wholesale and retail has changed. It's just that we did run off some CDs which obviously is also part of the wholesale piece a little earlier in the year, and we've ended the year with less than about 2% of our total deposits as CD.

But roughly you know it will be a 70 -- well, about 72% of our deposits, of our fixed deposits will be what we would believe is retail. And that number is almost give or take a percent or so is pretty much the same as last year as well.

Okay. So when you mentioned -- sorry, when you mentioned bulk deposits coming off, so where do I see that decline? In the proportion of wholesale where the high cost bulk has been kind of retired that (multiple speaker).

No, no, I was talking about the loans running off. What I was saying was --.

No, you mentioned that that you've not renewed the deposit side also, so, on both ways that there were purchases in Q3 that you capitalized on and then I think in Q4 since deposits were getting expensive --

No, I think the --

Sorry, I mistook that.

No, no, let me -- I mean I am not putting across exactly, what I was saying was that if there was a choice in not taking further and just maybe not renew, and not taking as much of an increase on the -- we did -- what we had run off was some of the CDs which of course are not only in the fourth quarter, we run some of these down in the third quarter as well. So between the third and fourth quarter we had run down some of the CDs. And the overall wholesale bulk deposits -- now, can you hold on -- the overall wholesale (multiple speakers).

Wholesale customers they are not bulk deposits.

Okay. What we just -- I think when you talk about this wholesale we are talking about the wholesale customers giving the whatever deposit flows that we are seeing from wholesale customers. So the idea was essentially -- the basic logic was that at the margin it did not make sense for us to take any further increase in bulk deposits.

Okay.

Did we -- if your question was had we also had a yearend spike in deposits, the answer is no whether it was for [FD] or anything else. Whether on the loan side or on the deposit site there were certainly no meaningful -- I mean there is always some quarter half 1% somewhere here or there, but as against the system we saw some, what about 20%, 30% pick up in the last week or 10 days.

Correct.

We did not see anything at all in that sense.

Okay. Just one last quick question what was the floating provision that you made during Q4?

During Q4 it was about INR180 crores.

INR180, okay great. Thanks, thanks a lot.

Thank you sir. Next question comes from Mr. [Avitan Bak from SDI Capital]. You may go ahead.

Good evening, congratulations for a good set of numbers. I wanted to re-visit one of the earlier questions because on the bank's network expansion. Could you just let me know in a bit more detail your thoughts on -- your strategy rather on the significant expansion that you are doing? Because if I were to look at even the ATM network it's been expanded, and for the last couple of years if you were to look at the way you expanded what you did in FY'12 was significantly higher.

So I recall you had also for rural strategy, so if you could also clarify whether some of the incremental additions were actually targeted at some of the rural or semi-urban kind of businesses.

That's absolutely right. In the normal course in any case we look to add about 250, 300 branches a year. So the fact is that we did add about a maybe couple of hundred branches, more branches than what we had been doing in the -- on average in the past.

And I think the answer to your question is evident in the fact that apart from the number of branches we also actually added many more cities than what we normally do, so it was -- a lot of this expansion was not new or additional branches in the existing cities or existing locations where we were, but a lot of them were new cities. In fact we did go from about 996 cities to almost 1,400, 1,399 cities. So clearly we added almost 400 and odd new cities out of the 558 branches.

A lot of these were Tier 3 to Tier 6 cities, so they were semi-urban; some of them were fringes of rural and rural branches. And this is -- for instance at the end of the year now we have almost -- of the total branches about 46% of our branches will be in semi-urban and rural locations.

Okay.

So it is -- a fair portion of our increase is linked with our strategy of having a stronger footprint in terms of spreading ourselves across a larger geography. Of course, the remaining 150 branches would have been where we had increased our presence or increased our -- the coverage of existing locations.

Right, right. And if you could just give us a guidance on whether this kind of expansion would be done when in FY'13 or '14?

Well, I think, the whole -- this thing of having an average growth is that you will have some years of slightly stronger and some slightly moderate growth. At this point of time -- and it's not that at the beginning of the year last year we had decided we will add 550 right.

Right.

So I think at this point of time we would believe that we would add again the normalized couple of hundred branches. In fact we could argue that one could take a bit of a pause in terms of the consolidation of the pace of growth. But if we find that, there is continued strong momentum in our -- the -- our experience with the branches that we opened the last one year -- continues to be as healthy as we have seen in the past, then we might look at adding a few more.

But at this point of time it's more likely that we will add a couple of hundred branches, which is the normalized growth rate, and that last year was a bit of a spike.

Right. And then if you could just -- well before I withdraw, if you could just share the employee headcount if possible.

Yes. The total employee [spend] is 66,000.

Okay, thanks a lot and all the best for the New Year.

Thank you so much.

Thank you. Next in line we have Mahrukh from Standard Chartered. You may go ahead please.

(inaudible - microphone inaccessible).

Yes, hi Mahrukh. Mahrukh, your voice is very faint.

Can you hear me now?

Yes, much better.

Yes. So basically I have a couple of questions, one is on your provisioning. From the data I have for the first nine months if I back calculate that I am getting floating provision of around INR270 crores whereas you said INR180. So what is the breakup of provision, what was the specific provision during the quarter, and if you could give us the [new] number for the nine months.

For this quarter the -- so the -- of the total floating INR180 for this quarter were floating. And the remaining INR111 or some -- is -- are the special provisions, because the loans did not grow on a sequential basis there was no incremental general provision.

Other than that, there are some provisions for investments, for diminishing in value of investments, and a write back in some other provisions, so that almost net out itself. So the total -- the two major components of the provisions are the INR180 for floating and INR111 for loan -- for specific loan loss.

Okay, thanks. And would you have a similar number for nine months?

Well, the total floating provisions created for the year are INR700 crores.

Okay.

Yes, so.

General?

The general provisions for the year.

Is about INR150 crores.

And the rest will be specific provisions.

Okay, thanks. And just one more question, on this branch addition of 343 branches during the quarter how much of it would be attributable to the rural mandate and how much of it would just be commercial in that sense?

Most of these would be -- I don't know when you say rural mandate, but if you are saying --

That is as in RBI has come up with new guidelines for having a certain number of branches in the rural areas, which was higher than what it is for --

So far what we have been opening -- we have been opening bands based on -- branches based on the licenses that we've got for the semi-urban or urban locations. But whatever are the locations that we've been adding in the rural or the semi-urban Tier 3 to Tier 6 locations are ones that we have selected and we had expressed our intention that we want to open.

Okay. And just one last question on deposit shedding, I know you discussed this a bit earlier as well. But like last quarter, so you just talk about the fertilizer deposits but what about that was there any bulk deposit shedding, any quantifiable number? Because in the third quarter you had said it was around INR60b or something like that.

No. You are talking about just this -- you're talking about on a sequential basis.

Fourth quarter.

On a sequential basis there was [no running out]. The portion we I spoke about for clarity was the (multiple speakers). Was, yes, fourth quarter of last year.

Yes, yes that (multiple speakers). Thanks. Thanks so much.

You're welcome.

Thank you, Ma'am. Next in line we have Mr. Rajeev Varma from DSP Merrill Lynch. You may go ahead please.

Hi, Paresh, I think both of my questions have been answered. Just one thing, I guess looking ahead, sort of understand, as you are expanding your distribution, are you looking at I guess the breakeven on your branches improving or reducing over the time period. And I also -- in terms of fee traction could we be expecting more of that as you expand distribution?

On the breakeven I think we are running on very similar lines than what we have already -- we have always done which is typically somewhere around two years. It's anywhere between 18 to 30 months depending on the location and the kind of branch that it is, whether it's in existing or new location and so on. But, let's say, running on an average of about two years to breakeven, I don't think that has changed.

As I mentioned earlier as we get into smaller locations clearly the business potential of those branches and the absolute level of business that one can originate from those branches may be smaller. But the costs are also proportionately smaller, and therefore the basic construct of the payback and the breakevens don't really change drastically.

And this is so the basic piece. Apart from that this does help us in achieving our PSL and inclusion in other targets that we have. So there for more reasons than one strategically the expansion on the network both from a pure business and the other platform benefits tends to make sense.

As far as the fee generation opportunity of these branches I must say that the -- in the initial stages for the newer branches the businesses that one tends to focus on are more the deposit and some of the retail and SME lending pieces. So there aren't larger fee opportunities, specifically relating to the newer branches or the rollout of the branches in the newer locations.

Alright, sir thanks a lot.

Thank you, sir. Next question comes from Mr. Manish Arora from Deutsche Bank. You may go ahead.

Hi, Paresh. Hi, Sashi. Congratulations on the good numbers. Just a few questions. One your investment (technical difficulty) during the quarter has actually grown very sharply in the quarter, and there is (technical difficulty) capacity out there.

Manish, can you just repeat the question.

Your investment book as at March 31, have grown very sharply. Is it just a quarter-end thing again this year or there is a real buildup of investments during the quarter?

No, again we have been -- we were surplus, so we've been holding some marketable investments in the -- in T-bills and in other -- some liquid funds and so on.

Liquid funds and T-bills.

So it's -- there is no -- and there is no conscious sort of build up in investment, it's just where our surpluses were parked at that point of time.

Okay. And what is the quantum of sell down of retail loans?

For a couple of hundred crores.

Okay. And you mentioned in your other expenses there is a one-off, is that a big number or just a quantum of that.

Yes, see this is partly relating to -- as I said it's when we have (inaudible) issues that are large operating costs which get bunched because we are processing those higher transactions. So this was really -- the one-off was really linked more to that. And of course, the rest of it is the pick up because of the new branches.

And of course, I must say that the full quarter impact of the new branches has not been felt in this quarter, because as you can imagine these came to at various points of time, you know a fair number of them also came in toward the last couple of weeks of the year. So we haven't really seen the full quarter or full year impact of those new branches. But the one-off was more linked to very -- we also saw the benefit in terms of slightly higher floats.

Okay. And lastly what is the slippages for this quarter and for the whole year if you can share that number?

The full year slippages on -- in terms of movement of NPLs?

Yes.

The additions to NPLs in the year were INR1,575 crores.

Okay. And you have them -- would you -- for this quarter.

No we don't sort of break this out for the quarter. I've just got movement of NPLs for the full year.

Okay. And if you can just then give me the movement then for the full year what has been the upgradations and recovery investments.

The upgradations were INR197 crores, the recoveries were INR120, write-offs were INR940 and the closing balance is INR1,999.

Okay. Then just some sense, just looking at your numbers, it clearly seems that your fourth quarter slippages would have been very low, given the fact that your gross NPLs have actually come down. You have not made much provisions also during the quarter. And all the slippages that would've happened have been in the first half, as the numbers clearly show. Is that a right assessment?

No, actually, we -- the slippages have not shown any pattern across the quarter. The last quarter was no better than the previous quarter. As I said, we've seen slippages which have been more or less at the same level. We have seen some -- to the extent that recoveries have shown some volatility and write-offs has shown some volatility because depends on when these became NPLs and the recoveries as we experienced them and the operations as they'll happen.

But, overall, if we look at it vis-a-vis last year, the additions in terms of actual slippages have been marginally higher. But, the upgradations, the recoveries and write-offs offset for that. And then finally, we have seen an increase in terms of the absolute level of gross NPLs from what was INR1,694 crores last year to about INR,2000 crores now, I mean, INR1,999 crores now.

Thank you, sir. Participants are requested to ask two questions at a time. Next in line, we have Mr. Saikiran from Espirito Santo. You may go ahead.

Hi, Paresh and Sashi. Just be clear on the cost of funds, just to understand, you said (inaudible) how the average cost of balances have moved during this year on a quarterly basis and if you can share the percentage, that would be (inaudible).

Well, I can -- on a full-year basis, the CASA ratio was -- for this year was marginally lower, so at 47.3% as against 49.5% last year. Let's see. I have CASA --

On a daily average.

On a daily average basis through the year. What was your other question, sorry?

I'm just wondering, like on a quarterly basis, I think in one of the earlier questions, you mentioned that there was a sharp spike up from 2% on a quarter-on-quarter basis.

For this particular quarter, we saw a bit of a spike. But, I don't have each of the quarters of each of the last four quarters with me. All I was saying was that, on a full-year basis last year, when -- if you look at just March --

Yes.

-- as of March, even adjusted for that one-off which was there, the CASA ratio as of March 31st last year, the core CASA was closer to about 51%. As against that currently, we are at 47%, 48%. So, there has been a couple of percent decline in the core CASA, which is clearly partly related to the migration which will happen from current and savings to fixed deposits, given that fixed deposit rates had been at highs in the last few quarters. And partly driven by the fact that, since you haven't had as much of activity on the capital market side, some of the current account floats on an ongoing basis would've been a little lower than what they were last year.

And even while fourth quarter was different from the general trend, if you can just --

Yes, the fourth quarter, as I mentioned, there were specifically some issues that came up, the bond issue, the actually bond issues. So, while we have not had capital market activity for the rest of the year or even now and not in terms of the equity IPOs and so on, we had a couple of, two, three large bond issuances where we were collecting bankers and have seen float. So, this was clearly a temporary or whatever, I mean, during the quarter, a spike that we saw.

Again, these are not outstanding as of quarter end or the year end. This is why the year-end numbers don't see any distortion.

[Is this] for those I think -- is it a fair assumption to say that, on a quarter-on-quarter basis average cost of balances would have been flattish?

Yes, it should have been more or less flat.

And just couple of data points which I would like to have on risk-weighted assets number and also investments breakup in terms of [oscillar] and non-oscillar.

So, the total risk-weighted assets INR241,000 crores.

Right.

And the breakup of investments -- well, government securities are INR76,000 crores. The -- what is called others, which is everything from -- it's CDs, CPs, (inaudible) deposits, and everything else, is INR19,400 crores. And the rest are 900, 700, etc., which are not relevant. The total investment number is INR97,480 crores.

And just the fee on the fee income, actually, has held on very well in the full-year basis for 2012. What's your outlook there, considering the environment?

No, I think our core fee growth has typically been in the 16% to 18%, basically in the mid- to high-teen range.

Yes.

In this quarter, we have seen some bunching up of fees. We have seen one-off -- you typically have some seasonal pickup in the fourth quarter in any case in fees because of third-party sales and so on. But, even apart from that, I think if you were to sort of remove that bunching and so on, you run pretty much through the year -- inside, on a full-year basis, we have seen growth which has been about 18.9% to 19%.

So, I would still say that the outlook for core fees still remains in the mid to high teens, although this quarter has seen stronger growth as we have seen in the last quarter of last year as well.

Okay. And just one last question from my side. When I look into retail breakup, the other segment has shown a very sharp spike up during the current quarter, even if you exclude the [gold] loans. What's the reason for that?

The others actually has products like holding against fixed deposits, some [tractor] loans, healthcare, [Prisan], gold card, and so on. There isn't any one specific product which has seen a particular side. So, it's just that six, seven products have seen some growth. But, total of the others, of course, comes to about INR7,000 crores out of the total of INR107,000 crores of total. So, it's about 6%, 7%. There's about six, five or six products, which total up to that 6.8% of the total loan book or the total retail loan book.

Okay. Thanks a lot from my side. Thanks.

Thank you, sir. Next question comes from Mr. Mahesh from Kotak Securities. You may go ahead.

Good evening, sir, and congratulations on a good set of numbers.

Thank you.

Just a couple of -- first question is, when you report the slippages on the retail side, do you net the change in opening and closing and then report that as slippages, or do you actually report it as gross slippages and then write-off, slippages and upgradations.

Okay. So, so far, what we were reporting was on a portfolio basis until last year, which was essentially saying, like, you had during the year something which became impaired, was recovered or upgraded, and again became impaired. There was no double counting. We're looking at it on a portfolio basis.

From this year, what we have given is the total opening balance plus the total slippages in the year that is comparing the opening NPLs, gross NPLs at the beginning of the year, which are the closing balance for last year and the closing balance for this year. And the account level, not a portfolio, but an account level additions of gross NPLs and the gross slippages, then giving you what the upgradations, what the write-offs and recoveries were to come to the closing balances.

So, 1% is the effective slippages that you've seen when you include portfolios like credit cards in the book.

That's right.

That's okay. Can we have the breakup of the overall NPL portfolio between agri, retail, and industry and services as what is reported in the balance sheet?

Thank you, sir.

I don't have that breakup right now with me. It's --something should come out in the annual report you'll get because I don't have it ready with me.

Thank you. Next in line, we have [Mr. Parak] from Macquarie Securities. You may go ahead.

Yes, I just wanted to have some thoughts on your saving deposits. Is there any competitions from some of the smaller players which have increased their saving rates? So, mainly, I mean, what could be our average balance on saving accounts and how it is moving and some kind of guidance on how it will plan out in next one year?

Well, all I can say is that, obviously, competition will be there in savings accounts, even when pricing was not an element of the competition, it was there. But, we continue to see almost a little over 21% increase in these savings accounts in terms of number of accounts and a almost 17% increase in savings accounts deposits, both of which seem to suggest that, based on the service, the brand, the distribution, the product range, we've continued to grow our savings accounts at a fairly healthy rate at a time when the overall system savings account growth has not been anywhere close to the level that we have.

What will happen in the next one year, I think it's tough to predict. We just do believe that we have a superior and more complete product range that we offer to our customers. We believe that's really a strong pull for the customers to continue to open new accounts. And we should be able to continue to grow our savings accounts like the rest of the retail franchise.

Okay. And sir, just one question. Is that just 21% you're talking about in saving account is your year-on-year number, or -- ?

Yes, it's a year-on-year number.

Okay. Thank you.

And while I'm -- next question, just to go back to Mahesh's question on the sector-wide NPLs, one of my colleagues has just given it to me. So, the percentage of NPLs to total advances in that sector are the breakup which comes in the annual report for agriculture. It's 1.27% for industry, which includes whatever micro, small, medium, and large is 1.36%. Services is 1.54%. And personal loans is 0.4%.

Thank you, sir. Next question comes from Ms. Pooja Kapur from Citigroup. You may go ahead.

Hi.

Hi.

Just wanted to understand what proportion of your fees really comes from the retail segment and what from the corporate segment if you could give a sense on that.

Yes, it's about 85% is retail, and the balance is wholesale.

All right. Thank you.

Thanks. Yes, can we have the next question?

Yes, next we have Mr. Ramchandani from UTI Mutual Fund.

Good evening, sir. Thanks for taking my question. I have a question on the gold loan part. Over the last one year, the book has grown around INR13b to around INR30b. Recently, we have seen some regulations on gold loans and [BFCs].

Sure.

So, how does it impact the competitive intensity for you? And do you expect similar regulation to come for the banking sector?

See, I think, from what I have read and heard from whatever statements have been made by the regulator, I think the rationale for the -- whatever changes which were made were apparently more relating to concentration risk, rather than anything else.

And clearly, for the gold loan business, at least for somebody like us, the last thing that we have is a concentration risk simply because the gold loan piece is about 2.8% of the retail book, which means it's less than 1.5% or roughly 1.5% of the bank's total book.

We have grown this business in the last four years. We have split it out because a lot of people were asking questions about this. Otherwise, gold loans for us was also part of the others that I was -- we were covering. But, it has grown from about INR1,300 crores in March of '11 to INR3,000 crores. It's grown at a healthy clip this year after the fact that we've introduced this product in many more branches than we used to. And to the extent that we have a stronger presence in some of the semi-urban markets than we used to, clearly, this is a product which has demand in those markets.

So, I don't see, frankly, the level at which we do this business for our customer segment, which is perhaps a little different sometimes in terms of ticket size. And we profile then the major segments that perhaps some of the other [NBSCs] cater to.

I don't think there is a direct, head-on sort of competition for some parts of the customer segments at each of our services. We do see strong opportunities for us to continue to grow this business. But, the base is very small, both in absolute terms and in percentage terms of our -- in relation to our total portfolio.

And in terms of generating the strategy of banks to kind of tap lot of customer segments which have initially been targeted by the NBSCs, gold loan was a new product and another product which maybe you're not tapped until now is [UCV]. Are you seeing any more [store] that also?

Well, we've not sort of been focused on this in a very meaningful manner and we're not looking at scaling this business. Nearly almost every product that is being offered by different players, the bank does try and figure out how these businesses are doing or sometimes by trying to pilot somewhere or might have a small portfolio somewhere.

But, like, even in the case of gold loan, as I said, we've been doing gold loans now for about 3.5 years or somewhere close to four years. So, very often some of these products, we will do for a couple of years. We will figure out how it works, what works for us, what doesn't before we figure out whether it's worth scaling up and whether we will then scale it up.

So, at this point of time, clearly, UCV, which you mentioned as a segment, is not something that we've been looking to scale up or we've been focused on in a meaningful manner.

In terms of the structure of gold loan, how many branches kind of will be offering this product now, like it is covered at all branches or a few branches/

No, it's not across all branches. I'm not sure of the exact number. But, it will be probably a couple of hundred, a few hundred branches that will be offering it. But, it would probably be not more than 20%, 25% of the total branch network of the bank.

Thanks a lot, sir.

Thank you, sir. Next question comes from Mr. Ganeshram from Spark Capital. You may go ahead, please.

Hi. I wanted to discuss the potential impact of the [NVNI] committee recommendations if implemented still stay that on the sub-target they have created for small and marginal farmers at -- starting at 6% of total assets, what do you think can be the impact because of this on you? What -- where is that number currently for you?

Well, I don't have the exact number where we would be. But, I would tend to believe that it would be fairly low. I mean, we wouldn't be anywhere close to that 6%. And obviously, it's something that we would have to build. We've already identified markets and sessions that we can -- and products that we can offer to customers to tap into a larger share of the small and marginal farmers. We do have some business there, but it's not a whole lot.

I think the general -- our approach to the entire PSL piece have evolved in the last few years, where having embedded our -- each of our PSL requirements into our businesses, we keep ensuring that, as we grow our businesses in terms of geography or in terms of products or customer segments, we actively identify those products or those segments which would enable us to meet the PSL requirements. And therefore, as -- if these recommendations actually become part of the final guidelines, the good part is there is a scale up, as you mentioned, from 6% ultimately to 9%. So, there'll be some period of time that would be given.

Would we day one or in the first year or two be able to meet the sub-limit? The answer is no. Just as in the last few years in terms of, say, the direct agri sub-limits, we were much, much lower. We were less than half. And at some stage today, we are very close to meeting even some of the sub-targets.

So, I think -- the recommendations are a mixed bag. There will be some where we will be able to meet these sub-limits almost in the initial phases. And there's some which we would probably fall short and we would have to sort of tweak our businesses to catch up over the next -- on the overall, this is of course the 40%. We have consistently met the 40% limit for the last several years.

Okay. Secondly, on the quantum of loans which you've bought from your -- from HDFC this year, what would that number be? And if the securitization norms are indeed implemented, how do you see that going forward?

Well, in this year, our total origination of home loans remain pretty strong. And therefore, the total increase in our home loans was about INR3,000 crores. We're at about INR11,490 crores at the beginning of the year or March of 2011. And we are about INR14,250 crores at the end of the year. So, there's roughly little less than INR3,000 crores. There will be some runoffs.

Now, we obviously have to wait for what the final guidelines are going to be. Clearly, the question -- other question, of course, is that the whole idea of having that gap on securitization and so on in those guidelines I guess was intended to ensure that banks originated their own PSL.

I think we might have a case that, since these are essentially loans which we originate from our customers and then which are processed and booked, then it's just a more efficient and logical way of processing these mortgages and ensuring that there is no dysfunctionality between a HDFC and HDFC Bank home loan out there in the market.

There could be a case that, whether this -- whether we could approach the regulator for [considering] separately, at this point in time, this is all hypothetical because the guidelines themselves are not there. And we don't know whether such a request will be considered or entertained at all.

But, the intrinsic spirit behind the guidelines, I think we are -- by -- since these are home loans that we originate, I don't see that as an issue. But, yes, if the 5% is an absolute cap across all [securizations], then obviously, we'll be in excess of that. And we have to figure out how the structure would work.

Okay. So, is it safe to say that the impact, INR3,000 crores, you have taken will be from PSL?

Yes.

Okay. All right. That's it for me. So, thanks a lot.

Thank you, sir. Next question comes from Mr. Anish from Barclays. You may go ahead.

Yes, hi. Congratulations on a good set of numbers.

Thank you.

I have two questions. One is, how do you expect the interest rate cut to sort of play out in the banking system? And in that context, would you expect to preserve NIMs by moving the mix or by cutting deposit rates?

And secondly, just, Paresh, listening to you on the guidance for growth, I heard you mention that you expect to grow at a few percentage points above the system. Historically, you've quantified that as 4 to 6 percentage points above the system. Should I read something into that, or am I just listening too carefully?

I didn't know that you know -- this is like the (inaudible) and something of the other. No, I think the --

Yes.

-- active that we've -- you can say the same, whether it's 3 to 5, 4 to 6, or whatever. Of course, it becomes difficult to quantify the exact number of percentage points that we will beat the system by when the system grows at 30% in the last week.

But, no, when I talk about growing a little faster than the system, it's what the average growth for the year has been. So, I don't think you should read anything more in terms of the basic range. I will still maintain a, whatever, 3% to 6% as a reasonable range that we can -- that we would like to target.

Again, I would like to reiterate that we don't have a policy on guidance. All I'm saying is that, traditionally, we have grown faster than the system. The pace at which we've outpaced the industry has been 3%, 4%, 5%, 6%. The pace at which we would outpace the system was even higher than that when the base was much smaller years back. But, typically, it's been in that range. And I think that range still remains reasonable.

As far as the impact of the wage cut is concerned, clearly, at this point of time, the -- all it does is reduce the cost to the extent that the banking system was borrowing on the [last], which number has, as you know, come down from well over INR100,000 crores in the last quarter of last year to whatever, say INR60,000 crores to INR70,000 crores, INR80,000 gross.

Obviously, the expectation is that that triggers a reduction in deposit rates and simultaneously or immediately thereafter the reduction in deposit interest rates goes, which -- and those which go into the calculation of the base rate will therefore lead to a change in the base rates.

I think by itself, the reduction in CRR has just ensured that the liquidity situation has eased. And therefore, the amount which has been borrowed by banks [under that] has come off.

Immediately after the year end, I think you've seen some cooling off of the peak bulk deposit rates that were there in the market. I don't see retail deposit rates coming down sharply immediately. They probably might in a few weeks. But, at this point of time, when you look at one year or the more meaningful retail fixed deposit rates, those are not yet coming off.

If at all, the short-term deposit rates, which are much more relevant from a corporate point of view, those might have started coming off or might come off. So, I would imagine the next few weeks, you'll first see some reduction in retail fixed deposit rates. And then simultaneously, you would probably see some reduction in the lending rates, whether the base rate or otherwise.

Yes, I guess, simply speaking, to protect NIMs, right, we need to reduce the deposit rate more than the lending rate. Is that likely to happen, or am I -- or -- ?

Well, there's the different things. There will be some reduction in CRR also gives a couple of basis points, which can offset some of that. The reduction in deposit rates and lending rates having to be different is really a function of the lead and lag of each individual bank's balance sheet.

What you are saying is true if you do have a large part of your asset side, which is repriced on the base rate itself. Again, because the -- that would imply that that component of the loan book would reprice immediately while the corresponding reduction in deposit rates would happen as deposits mature.

But, at this point of time, I would just reiterate on the basic issue that we don't see as a result of the reduction in rates, whether on deposits or loans, at the same or slightly different levels, margins moving out of our band of 3.9% to 4.2%. There could be some movement here and there within that range. And sometimes, this -- for a quarter or to like, as I said, in the last year, we did see a couple of quarters of 4.1%. And we've managed to claw that back in terms of core margin for this quarter to 4.2%.

And just one final thing, Paresh, what was the amount of restructured loans that are classified as standard and which small -- ?

First half of that --

Of -- ?

Of the total, yes.

Thanks.

Thank you, Mr. Anish.

I'm not sure how many questions are still sort of in line. We thought we would do this for an hour. It's about an hour and 10 minutes. Maybe we can do it for another five minute or so, maybe a couple of more questions. So, I'd appreciate if we just stick to now maybe a question per person for whoever's still on the call.

Okay. Fine, sir. Next in line, we have Mr. Adarsh from Prabhudas Lilladher. You may go ahead. Mr. Adarsh, you can go ahead. There is no response. I'll take the next question. Next in line, we have Mr. Jatin Agarwal from RBS. You may go ahead.

No more questions. They've been answered. Thank you.

Thank you, sir.

Thank you.

Next in line, we have Mr. Vishal Goyal from UBS Securities. You may go ahead.

Hi, sir. Of the operating expense increase, how much should we assume nonrecurring going forward? Basically, how much was related to branches and ATM installation in the quarter?

So, one thing which is not [accretive], or you said (multiple speakers) which is (multiples speakers)?

Nonrecurring.

-- income -- the branch part was not one-off. The branch part will remain. The one-off portion would be about -- yes, so about INR120 crores.

That is related to -- ?

That is related to the extra expenses that we had. Part of it was related to the higher processing expenses that we had because we were processing on issues and so on as bankers, collecting bankers. But, rest of it were again some other one-offs which were there in this quarter.

So, basically, on the cost-to-income ratio --

Yes.

-- should we expect the 48% to 50% range, or should we expect -- ?

Yes, we should because the branch expansion expenses will remain until we start having revenues. And then we need some other offsets. But, currently, we are in the range of 48% to 49%. So, it's a knock off that the one-offs -- you would still be in roughly that 48%, 49% range.

Okay. Just one more thing. What is the investment yield actually for the quarter, average book basically?

Average investment yield for the quarter was 7.7%.

Thank you.

You're welcome.

Thank you, sir. Due to time constraint, we will take the last question for the day. Last question comes from [Mitin Sony] from GSE. You may go ahead.

Hello, sir. I just wanted to have a flavor of how much of the asset side and the liability side is coming from maturity this year in FY'13.

Hold on, please. Just a moment.

And also, could I add onto that, how much of the deposit of that which will be maturing will be the high-cost deposit which would have come in this year?

No, I don't think that detail's in the public domain. The maturity profile is something that we put in the public domain because it's part of what we put out in the annual report as well.

Okay.

So, as far as the loans and advances maturing up to a year just totaling because, as you know, we put this out as one day, two to seven days, and all that, less than three months, over six months, up to a year.

If I can add one more question, meanwhile, a year ago, we had this fee income in the mutual fund, from the mutual fund industry had come down because of the changes in (multiple speakers)

That's right.

Has the base effect, again, taken now keeping has gotten, or are we still to take -- still to catch up with that, the base effect?

No, the mutual fund piece is probably in our base -- our base.

Okay.

But, the insurance piece has still probably got a couple of quarters to go. The total third-party revenues this year would have been -- that is the fee revenues from third-party sales -- would have been down almost 20% year on year.

So, maybe a couple of more quarters, and the insurance piece would also have to -- will probably have been baked to the base. But, the [MF] piece are already normalized in terms of the --

Because we have seen this fee. We have seen a 15% year-over-year growth in the first and the second quarter. But, then pace of growth has come down to about -- come up to about 22%, 23%.

Yes.

The fee and commission, so wanted to have a -- like, is there something like a one-off which you had here?

Yes, in the fourth quarter, we always tend to have a bit of a bunching up of some of the fees that you get on annualized basis, on annual basis.

Okay.

But, which is why the full-year fee growth is less than 19%, like just for this quarter. You have it slightly higher.

Okay. Okay. And so, on the (inaudible)?

Okay.

We'll send it to you by --

(inaudible) it's there as a -- in the annual report as well when it'll come out. But, we'll give you what the maturities less than a year would be.

Okay.

Thank you, Mr. Mitin. At this time, I would like to hand the floor back to Mr. Paresh Sukthankar for final remarks. Over to you, sir.

Well, I hope we've been able to take most of the questions. And thank you, once again, for having been on this call.

Thank you, sir. That does conclude our conference for today. Thank you for participating on Reliance Conference (inaudible). You may all disconnect now.