HDFC Bank Ltd (HDB) 2015 Q3 法說會逐字稿

Thank you for standing by and welcome to the Q3 FY 2014/2015 results conference call presented by Mr. Paresh Sukthankar, Deputy Managing Director, HDFC Bank. (Operator Instructions). Please be advised this conference is being recorded today.

I would like to hand the conference over to Mr. Paresh Sukthankar. Over to you, sir.

Thank you. Good afternoon to everyone and thanks for being on this call. I know it's unusual for us to do this on a Saturday, but here goes.

I don't have a full presentation. I'll just walk you through a few brief numbers. I guess most of you, if not all of you, would have seen the press release, but let me just walk you through some of the key parameters.

Net revenue growth was 21.4% taking net revenues to INR8,234 crores for this quarter, which is the quarter ended December 31, 2014.

Net interest income growth was 23%. Net interest income constitutes 69% of the net revenues and that growth in NII was on the back of a year-on-year improvement in net interest margin from 4.2% to 4.4%.

The other income growth was approximately 18%, again driven by fee growth and some bond gains.

Cost to income ratio was more or less flat. It was at 42%. Corresponding quarter was 42.7%.

And after a 21% increase in the taxes, the profit after tax, net profit, was up 20.2% to INR2,794.5 crores.

On the balance sheet front, the deposit growth was 18.6%. That's the overall deposit growth. Savings accounts grew also by the same number, 18.6%, so certainly as a proportion the savings accounts remained flat.

As far as the current accounts are concerned, they increased by 17.6%. So overall CASA growth remained fairly healthy.

The advances growth was 17%. Again, this I think compares favorably with roughly 10.3% which was the industry growth rate. Within that the mix of wholesale and retail is 51/49, which is 51% being retail and 49% of the advances being wholesale.

As far as branch expansion is concerned, we have now reached 3,659 branches. We added about 323 in the last 12 months. And of these 3,659, 56% are now in semi-urban and rural.

On the asset quality front, gross NPAs were flat at about 1%, 0.99%. Net NPAs were at 0.26%. Restructured loans were at 0.1%. So there's really been no meaningful shift in the NPL numbers or the restructured numbers.

The capital adequacy was at 15.7% of which the Tier 1 capital adequacy was at 11.97%. This is as of December and includes the profits up to December. It obviously does not include the capital raise because as you know that happened only in February and these are December numbers.

Just a line on the issuance of course, the simultaneous QIP and ADR issuances that we did totaling -- totaled to a total -- the proceeds which came into that was about INR9,766 crores.

So those are some of the key numbers. We'll be happy to take questions now.

(Operator Instructions). Nitin Kumar, Prabhudas Lilladher.

Hi. Good afternoon, sir.

Hi.

Sir, my question is on the delinquency trend. How has the same been faring between the retail and the wholesale business, because we have been growing more into the credit card personal loans and given the provisional also that we have done this quarter? And if you can just throw some color on that.

The retail asset quality overall has remained fairly stable. We've had one or two segments where we've had a few basis points increase, but those are not necessarily the credit cards or personal loans. They've still remained other businesses, including, say for instance, auto, business banking and so on. But again, no meaningful changes. These are single digit basis points here or there and we've, in the last few quarters, seen movements in both directions for these.

So, overall, I would say that the concerns that were there more on the commercial vehicle and construction equipment side a few quarters back, those have tended to level off and overall retail asset quality remains stable.

On the wholesale side, you will always have a few customers who are overdue, delinquent, SME and stuff like that. But in this quarter we've not had any meaningful -- that is in the December quarter, we have not had any meaningful slippages.

Okay. And is it possible to get the NPL movement details?

Meaning the actual? I can give you the gross NPAs in absolute terms. Is that what you're looking at or you're looking at the --

No, the fresh slippages and the --

Oh okay. Fresh slippages, we'll try and give it to you later in the call.

Nitin, it should be available in the Pillar 3 disclosures that we'll put up on the website.

Okay. I'll see.

So you'll be able to pick it up from there.

Sure. And what will be the Tier 1 for us after the capital infusion raising that we've done?

So, it will take the Pillar 1 -- I mean the Tier 1 up by approximately 220 or thereabout in terms of basis points. If I was to -- obviously it depends on what will be our balance sheet outstanding as of, let's say, end of March.

But if I was to overlay the incremental capital on a static December balance sheet, then the roughly 12% that we have, 11.97% which we have as of now in the books, would have been higher by about -- it would have been somewhere in the 14% to 14.3% range.

Okay.

This is for Tier 1.

Okay. And did we have any provisioning write-back during the quarter?

No, not in this quarter.

Not in this quarter.

We have, as you know, in the corresponding quarter of last year we did.

Okay.

And that is in the March -- in the December 2013 quarter we had a write-back, but not in this quarter.

Okay. And lastly, sir what's the outlook on the cost/income ratio? Like even on a core basis that number has like come down quite sharply.

It has, but you know typically Q3 it tends to be that much lower every year. But overall on a full year basis, I think the fact that we've been somewhere in that 42% to 44%, 45% range with some quarterly variations, I think that still remains.

Clearly, in the last couple of years, we've consciously been bringing it down. That's been our continued effort. In this year also we've seen some improvement. But since we've remained in an investment mode and as and when the top line growth starts gaining momentum whether we will have to increase some spend is something that we'll have to remain open to.

Okay. Thanks sir. Thanks a lot.

Adarsh Parasrampuria, Nomura.

Yes, hi. Hi Paresh. Just a question on the provision break-up. If you can give did you do any floating provisions or?

No. In this quarter we have neither made any floating provisions nor have we utilized any floating provisions. So the provisions are essentially for specific and general. So nothing which has majorly changed.

If you look at the total INR560 crores, almost well INR490 crores of them or INR487 crores of them are specific provisions of roughly INR60 crores odd of general provisions and then some other contingent provisions or other provisions are the rest of it. So these are the three. No floating.

So does that mean did a higher write-off for this quarter? Is that a fair? What was run rate or is that -- that would have been largely flattish?

No. There hasn't been any. So it's not even been -- it's been more or less flat. It's a single digit change on a sequential basis in terms of write-offs and even on a -- for the last three quarters if I look at it, it's been more or less in the same range. So there's really been no one-off higher write-off in this quarter, in the December quarter.

Perfect. Second question on the growth rate and on cards and two-wheelers you'll have seen the inch up in growth. You know obviously the OEM numbers are also looking up, so what's your expectation there in terms of momentum? And then the CV book seems to be still contracting so what's the view there?

Actually, you know the CV book if I look at the total CV book, CV/CE book which means that portion which shows up in retail plus that portion which shows up in wholesale, because as you know the segmental reporting is driven by the size of the exposure and Basel II guidelines.

So if you have a transport operator or an auto dealer where the outstanding is more than INR5 crores, or a business banking customer who is more than INR5 crores, it shows up as wholesale, although the basic business itself may be more of a retail business.

So if I look at the combined total commercial vehicle and construction equipment portfolio, what I would say is at a business basis rather than a segmental reporting basis, then actually in this quarter we have seen a sequential increase of about 1.9%. So -- which is not much to write home about, but what I am saying is it has stopped declining or stopped contracting and you're seeing a sort of a flattening of that book. Which obviously means that we've reached a level where the run-offs and disbursements are essentially sort of flattish, you know are offsetting each other.

As far as the auto loans are concerned, yes, there has been a bit of pick up. Maybe this is -- a little bit of it might have been the festive season sort of experience. Some of it may be -- may have been market share gains for us. I guess we'll have to see whether this sustains in terms of demand and improvements in market share for the next couple of quarters.

But I think the positive sentiment, I guess the lower prices on the fuel side may be -- and the fact that it's coming off a year or two of sluggish growth might just help the underlying industry and therefore lending to that.

I think that's it, Paresh. Thanks.

Thank you.

Pankaj Agarwal, Ambit Capital.

Hello, sir. Sir, if I look at the provisioning costs, it's almost INR100 crores higher compared to the last quarter. So is it because of -- you said that the write-offs have been almost stable on quarter-on-quarter basis. Even if I see the provisioning, that is also not increased that much. And so from where this additional provisioning has come during the quarter?

So if you're talking about -- are you comparing with year on year or are you talking about sequential.

I mean both sequentially as well as year on year, I see a sharp jump in this number.

Okay. So as far as year on year is concerned, last year and I think I mentioned this a while back, if you look at the INR380 crores, whatever the comparable number, INR388 crores, that included a INR120 crore write-back which was there in some indirect tax and other provisions last year, contingent provisions last year.

So that -- therefore, if you adjust for that, there is an increase from INR500 crores to INR560 crores which therefore is say, about a 12% -- 11%, 12% increase. On a sequential basis, last quarter we had also used a little bit of INR30 crores odd of floating provisions which obviously we've not used in this quarter. And there's a slightly higher general provision this time because the loan growth has been a little higher as compared to the sequential quarter. So those are really the differences.

As far as gross additions to NPLs are concerned, which would be what would drive the specific provisions, those have been across the retail and wholesale piece which I mentioned earlier, including in products like business banking, auto and so on.

And sir, in terms of the credit quality in your whole portfolio have you seen any initial signs of higher delinquencies in that portfolio?

Nothing meaningful. See you know when you look at various products, in the last few quarters, we've seen some few -- some products going up by a few basis points, some coming off. So there is no real trend where over the last several months we've seen a continued increase.

Like I said we -- and this was there in the September quarter and this quarter. We've seen some products seeing marginal increases on the retail side. They've still remained lower than what is priced in or what we believe is the long-term expected loss in those portfolios.

But within the rural side also I don't think the rural portfolios have shown -- generally speaking, the rural portfolios have a slightly higher expected loss and higher loss than the equivalent portfolio because of the logistics of the collections and so on. But within that we have not seen a meaningful change in trend in the last few months.

Okay, sir. Thank you. Thank you very much.

Thank you.

Abhishek Kothari, Quant Capital.

My questions have been answered. Thank you.

Thanks Abhishek. Appreciate it.

Manish Karwa, Deutsche Bank.

Yes, hi Paresh. I just wanted to check, after a long time, we're seeing fee income picking up. Is there something one-off which is creating it or do you think -- are you seeing a steady trend here?

It's a bit of both, Manish. We did have some one-offs. But even if we didn't have those, we would still have had roughly a 12% increase in the fees. So there is -- what takes it from 12% to 14% is some one-offs that we had in some of the payment products in the cards and other businesses. But there has also been a slight pick-up in the -- in two, three other businesses, including the third party distribution business has certainly picked up also because on the mutual fund side, the mix of mutual funds towards equity has been a positive.

Again this quarter usually sees slightly better fees because of the seasonal impact in terms of spends on cards because it's the festive season. So you've seen a few things which are I would say somewhat regular, core improvements and then there is a little bit of a one-off which adds that extra percent or two in terms of growth rate.

And now what would be the break-up of your core fees between retail and the corporate?

It's almost 90% would be retail and 10% would be wholesale.

Right. And the ForEx fees declining is just because of lack of corporate activity on ForEx.

Actually two things. One is, this is in relation to last year, clearly volatility has been much lower. If you remember last year we were still in that phase when the rupee was still relatively more volatile. And what that meant was that you had higher flows because more customers were hedging and of course margins would have been slightly better.

Right now you have much lower volatility. You have therefore margins much thinner and volumes clearly relative to where it was last year. Especially when you add the NRI linked flows in the corresponding quarter of last year, they are lower this year.

The corporate flows actually have been fairly stable for us. But last year, the one-off flows that we saw on the back of the FCNR deposits when you had the RBI window for the swap and so on, those were clearly one-off.

Right. And just lastly, quickly, on your treasury gains, generally we don't see high treasury gains for HDFC Bank. Is this again some position that you have taken which you're seeing the benefits coming in and can we see more of it happening in the next few quarters?

So this is -- I must say, we should probably -- it has more to do with what has happened to yields. It's not a huge position taking. It's a question of having an opportunity to churn a portion of the portfolio perhaps to, to be able to realize some gains and to replace that portfolio. The good thing is there has been an opportunity for us to realize some gains and fill it up with slighter shorter duration but maintaining the yields. So there really isn't a huge one-off trading position, but it's been realizing some gains in the SLR book that we hold.

And lastly, can you just give me the absolute floating provisions that you hold now?

Absolute floating provisions are about INR1,700 crores.

Okay. Thank you, Paresh.

Sameer Bhise, IDFC Securities.

Hello.

Hi.

Just had a question regarding the business banking and CV/CE piece. What could be the wholesale proportion of these businesses?

We don't have it ready just now. But on the CV/CE portion, it won't be very large. But on the business banking front, it will be -- it could be somewhere in the range of about 60/40, but that's roughly.

60 towards the wholesale price.

60 towards the wholesale [in value].

Okay. Thanks a lot.

And this is roughly.

Anand Laddha, HDFC Mutual Fund.

Hello sir.

Hi.

There's been the growth in the KGC business for you. If you can just give some color like what sort of customers we have, what could be the average ticket size. Is it pure agri loans? What could be the yield on the same and how do you see growth for the same?

Look, this is pure retail agri loan. So we have a larger portfolio here which is essentially in certain states. But this is purely retail. And it's something which we have been growing in the last few years because it's obviously the portion which qualifies for direct agri.

The -- this is not something which is changing too much in the last year or quarter or whatever. But it is -- and again in certain -- in about six or seven states, in particular where we have done this.

The average ticket size I don't have readily available with me.

And sir, what could be the yield on the same?

Just a minute. Somebody is going to pull this out. Maybe we can answer some other questions and if we -- as I get it, I'll have that given to you in due course while the call is on.

Sir, I have two more questions.

Sure.

Sir, on the loan growth side now we're at 17% YoY and the system is at 10% to 11%, so for the full year if I were to look at, is it possible for us to grow, continue to grow at 5% to 6% faster than the system? And where do you see the growth will be coming from?

So I think our ability to grow 5% or 6%, or 4% or 5% faster than the system is something that we believe still remains very much intact. I mean it's something that we have done when the system was growing in the 20s and when the system has been growing in the low teens and certainly when the system has been growing around 10%.

And I think because we have a more diversified portfolio, whether those lending opportunities are in wholesale or retail, I think we are in a position to capture those.

You add to that the fact that we've been adding branches and therefore extending our distribution network. You add to that the fact that we have a huge continued focus on our existing customers and, therefore, we try and cross-sell a range of retail and other loan products to those customers. So we do believe that while the system might look up from where it is just now, I think that 10% odd is an extremely low figure for the system to grow at. But as it grows, would we like to and would we want to try and maintain a 4%, 5%, 6% faster than system loan growth, I think that's certainly something that we've done over the last several years and we'll want to do that.

So, if I were look at the retail loan composition, or retail contribution, today it is at 48%. But if I were to look at your definition of the normalized business banking (inaudible), what could be the retail proportion?

So actually when you look at the segmental reporting piece, which is, as I said based on size of exposure rather than the underlying businesses, then the mix is more like 51% in favor of retail and 49% in terms of wholesale. That mix -- actually, you know honestly we are not really focused on a certain number in terms of mix.

So even if you look at the last few quarters, in a couple of quarters you suddenly had loans on the wholesale side had seen a bit of a spike. Then I guess with some of the corporate borrowings reducing, whether it's the oil company borrowings or others, that probably might have come off in terms of growth rates. We then have also had some of the wholesale borrowings going into the commercial paper and other markets which also might have taken some sheen of the wholesale growth rates. On the other hand, we saw retail picking up.

So whether it remains somewhere in the 50/50 range or even if it goes for the sake of argument to a 55/45 in either -- on either side, we are pretty agnostic and we are pretty comfortable growing either business. And we really believe that we are equally well positioned in both of these.

Sir, we also do some sort of a micro finance loans, what we call as sustainable livelihood.

That's right.

If you can just say what could be the outstanding book in that.

See that is, in terms of -- because it's a relatively short duration and keeps running off and given the ticket sizes, it is today less than 1% of our total balance sheet -- of our total loan book.

Okay.

It's about INR800 crores, INR900 crores.

Okay. If you can just give what is the RWA number for us, sir.

It's [INR396,000] crores. And the yield on the KGC loans is between 11% to 11.25%.

Okay, fine sir. Thank you.

Nikhil Bhagat, Barclays.

Hi, sir. Thanks for taking my question. If you could give some color on the retail loan growth within segments, specifically credit cards and personal loans, because I can't seem to find the data on the website. Thank you.

Well, sure. In terms of actual -- if I look at, not just the loan growth, but even the disbursals, I think the products which have seen healthier growth have been credit cards, business banking and some personal loans. Home loans is also -- most of these are in the 20%s and products like auto, which have seen a pick up, but are still in the high teens.

Thank you sir. Where could I get the exact numbers from because I can't seem to find them on the website?

Actually Nikhil it would have gone to Anish. I'll just forward it.

Sure, sure. Thank you sir thanks a lot.

It's attached to the press release.

Sure. Thanks a lot. That's all from my side. Thank you.

Sure.

Alpesh Mehta, Motilal Oswal Securities.

Sir, hello?

Hi.

Hello Paresh.

Yes hi.

Yes, hi Paresh. Alpesh here from Motilal. One, first question is on the business banking segment. Can you throw some light why the growth is moderating? Is this because of the high competition in the loan against property business?

No. The -- when you look at the total business banking business again between wholesale and retail put together, then actually the business banking business has grown at about 21%. So when you are looking at perhaps only the breakup of the retail component of it, then perhaps it looks to be moderating. But what it really means is that there would be borrowers who might have moved over the INR5 crore threshold and therefore would have this thing, or would have moved across a threshold which is the turnover threshold and therefore gets classified from retail to wholesale, because these are the two elements why something gets classified as either retail or wholesale.

So the overall business has actually grown, as I said, in the 21% range. Within that has loan against property been a competitive segment, the answer is yes. But remember this is a -- our business banking is something which we primarily source through our branches. It's a combination of loans against property and working capital and other businesses that we do. So we have still been able to maintain reasonably healthy growth rates there.

Okay. And what proportion of our business banking must be loan against property? I know you have roughly 90% which is cash flow based, and that is just an additional security, but just to get some idea of what proportion should be that in this portfolio?

Okay. I'll just get that for you and answer it as we answer some other questions. Somebody will just pull out that data point for you.

Sure. And secondly, on the ForEx swap related loans that you had last year, around $1.8b if I'm not wrong.

That's right.

Is the number same or there has been some run-off in that position?

Yes. Those will be the same for three years because these are essentially three-year loans, three-year FCNR deposits. So that entire piece, on both sides of the balance sheet will remain unchanged for three years and then drop off.

Okay. And the last question on the corporate portfolio. Has the mix shift changed between working capital and project loans for us, or it still remains the same?

It's still the same. There hasn't really been a change in this quarter.

So is it around 80/20 range now?

Yes, approximately.

Okay. Thank you so much.

And I'll get you the LAP piece later on when I'm answering some other questions.

Sure. Thank you so much. Bye.

Jai [Y] Mundhra, CRISIL Ltd.

Yes, hi sir. This is Jai Mundhra from CRISIL. Sir, most of the questions have been answered. Just one question -- just two questions. One is, can you give me the outstanding number on our international loans, which were somewhere around 7%/8% of the balance sheet? If you can give the --

There is -- even now it's at 7.4% of the total advances --

Sure, okay. Then sir, secondly, just if you can, in our non-retail corporate loans, can you just give me a broad breakup between large corporate and mid-corporate, if possible?

In value terms, between the two -- because we have what we call corporate banking, we have something called emerging corporates, which is also INR700 crores of turnover, then we have FIG and the wholesale part of business banking. But between the two, if I just look at the corporate banking and what we call emerging corporates, then it's roughly a 75%/25% mix between the two.

Okay. So 75% is large corporates?

It is large corporate.

Okay. (Spoken in Hindi) sir. Okay. That's it. Thank you.

You're welcome.

Nilanjan Karfa, Jefferies.

Hi Paresh. Good afternoon.

Afternoon.

My question is on base rate. You have made some comment in media on the base rate or statement of base rate, I guess. Could you clarify please?

On the base rate -- in what connection? What are you -- I didn't get the question.

I think what we saw or heard as base rate will be aligned in a couple of months, so that's the only headline that I heard.

Okay. No I am -- because there were different questions asked on the base rate. But the basic question which was being asked I think on the media was that are you -- do you expect the base rate to come down and so on. And my simple point there was that the base rate is purely driven by -- there's a formula right. Each bank has its own formula. And with that formula or the methodology that you have, you have certain deposit rates and one or two other elements, whether it's return on SLR or certain return and so on.

Sure.

The only way that the base rate can change is if deposit rates change. My point was that so far you have only had one tenure deposit rates come down by about 25 basis points. You had the one year retail deposit rate, fixed deposit rate come down from 9% to 8.75%. There is an expectation that perhaps there may be a little more reduction in deposit rates between now and March. So depending on whatever are the changes in deposit rates, the base rate will get aligned to all of those, because those will go into your formula and that's what will determine what your base rate is for this quarter.

Okay, okay. So --

So, that's only.

As I get it, you are not going to unilaterally -- because you now have capital and probably you're better placed in pricing terms across, let's say, across a select segment, you don't want to go ahead and meet out the competition out here. That's not something you're looking at.

Well, at least that's not something that we've ever traditionally done. I don't think we've tried to or wanted to build market share on the basis of over-aggressive or irrational pricing for sure. But, in any case, even if for the sake of argument, somebody wanted to, the base rate structure, fortunately, is reasonably clear and rigid, that you have to have a certain methodology.

That methodology does not include proportions for capital and stuff like that. It's really linked to various elements of your cost of funds. You may have picked a few deposit tenures. You might have picked policy rate. I don't know. There will be -- each bank will have its criteria. And therefore the room for somebody doing something unilaterally is not there. You have to -- there has to be a change in the input parameters to come to a lower base rate.

Sure. Paresh, my second question is particularly on these two line items, the business banking and CV/CE. Now, as you have clearly mentioned, this is -- the decline that is being reported is because of the transition beyond INR5 crores.

Yes.

Is that an -- how do you read that statement in terms of not CV/CE but particularly for business banking. Does it price something for the environment?

Not really because every year, if you look at -- because it's the size of exposure or the turnover. So the customer moving from whatever, the cut-off maybe INR25 crores or INR50 crores, if the turnover changes which is bound to happen over a period of time, then the segmental reporting will capture it in one or the other. Which is why, frankly, for each of these businesses, we would look at it as a business right, as -- the way we manage it from an internal MIS perspective. And which is why the way we would relate to both of these is that CV/CE not still growing in any meaningful manner, but has stopped declining or stopped contracting. And business banking still growing in the low 20%s. That's the way I would look at it.

Remember, this is a mix again of some working capital, some term loans which are also secured by property and so on. So a lot of the -- in terms of numbers, we actually have a very high proportion, or very high number of customers who are actually retail, because you have even INR50 lacs and INR1 crore outstanding in this segment.

And on the other hand, you will have -- because in this segment we would also have customers who are in the INR50 crore to INR125 crore range in terms of turnovers. And they are still branch-originated business banking customers for working capital or LAP. So from a value perspective, you will always have a reasonable portion which will keep going into the wholesale piece.

Okay. If I can rephrase it. Rather than looking at the value terms, but if you look at the number terms, has -- would that -- has that changed?

No. That has not really changed at all. And in fact, in terms of sheer number, in terms of customer acquisition and so on, it still continues to be very much a retail type business.

Okay. And a quick last question. The KGC, is it -- that's not the same as the KCC, right, the Kisan Credit Card, or is that?

It's a what we call a Kisan Gold Card which is essentially an agri-loan. It's a crop loan.

It's a crop loan.

Yes.

Okay. And qualitatively, what kind of NPLs are you seeing on this?

You typically see NPLs which are only a couple of percent change.

More than 5%?

No, no.

Okay.

Less than 5%.

Okay, yes. Thanks. Thanks so much Paresh.

You're welcome.

Nilesh Parikh, Edelweiss Securities.

Yes, hi Paresh. The question is on the fee income. Now, for many quarters actually, we've seen the fee income in the early teens and basically there's a big gap between where the loan growth is progressing and the fee income trajectory. So just wanted to hear your thoughts on what do we expect going forward. Is that a bridge? I.e. the gap gets bridged as we go along? Just wanted to hear your thoughts here.

I think in the somewhat immediate near term I wouldn't see that gap being bridged. I think we saw the sharp decline in growth rates on fees over the last few years partly driven by regulatory changes which had impacted fee growth, commission rates and so on across a range of products from ATM fees to distribution fees on mutual funds, insurance. So there were a whole host of commissions which got impacted by caps or changes in the rates that were regulatory prescribed.

And then you also went through a phase where this was compounded by much more sluggish volume growth because the markets were sluggish. And generally, economic activity was that much lower.

I think the reason why we have seen a bit of a pickup in the last couple of quarters from where it had gone to in terms of growth rates is because you started seeing now a slight volume pick up in some of these products. I mentioned earlier on the distribution commissions, at least a little bit on the mutual funds side and maybe a little bit on the insurance side as well, and also on some of our payment and card products at least a little bit more, especially during festive seasons and so on.

But even with all of this I don't see this picking up sufficiently to catch up with growth rates on the loan book, or certainly in terms of NII either. So the positive however is that if you look at the composition of our fees, a very large proportion of those are retail or are wholesale, including transactional banking fees, so much of it doesn't consume too much of capital. And it's certainly large parts of it is not linked to our lending business, so it's a relatively higher quality fee income. But growth rates I think will still lag loan growth.

In terms of the mix, you mentioned retail is roughly about 90%, right? Steady state, when corporate comes back, maybe say in the next or a year later, what is the mix that you probably would be looking to at least target?

Paresh Sukthankar So I would actually be happier with maybe 5, 10 basis -- 5%, 10% higher on the wholesale side. But unfortunately, when you look at the wholesale businesses and when you look at fee opportunities there, trade, cash management and so on over the last several years have become extremely thin margin businesses.

So the increase in volumes which would be required to meaningfully change the proportion would be extremely high. And you're talking about a running target because retail businesses are also continuing to grow. So while we would love to have a 85%/15% or maybe even a 80%/20% mix going forward, if at all, that will be a very gradual change if it happens on the back of a huge pick up on the wholesale fee side.

You won't be getting too much into the syndicated -- syndication fees market, right? Would -- because that was something which was missing earlier. Now would we see that as an opportunity going forward?

It is an opportunity and it's -- some parts of it have been there in some quarters, even this financial year so far. But for a lot of the loans that we participate in, for the profile of those customers, those fees are extremely thin. The segments which perhaps give slightly richer fees are not necessarily our strength.

That's fine Paresh. Thank you very much.

Thank you.

Rakesh Kumar, Elara Capital.

Yes, hi. Could you hear me?

Yes Rakesh.

Yes. So I have a question regarding this what we have as [liquidity] (inaudible) also. Essentially, I was trying to understand that how we are going to consume this capital. Do we have a plan that from hereon we are going to get more into the corporate side of the lending so that the (inaudible)? So what is the plan there?

Well, clearly our growth in the loan book or growth in risk assets is driven by our -- the opportunities which are there in the marketplace, whether wholesale or retail, the pricing environment and [retail] appetite. Merely because we have more capital is not going to make us grow a particular segment faster or be more aggressive on pricing to grow a particular business unless we felt that there was a change in the risk profile of that segment.

So I think all we're saying that this capital does is it gives us a capital position which is adequate to support growth for the next few years. If we were to grow at a certain pace which was higher than the system, which is what we have been doing, and if we look at the capital consumption as a result of that, over a few years we would have -- the 11.9% or 12% capital would have come off. This adds about a couple of percent to the Tier 1 and therefore gives us that much more leeway to be able to grow for longer.

And if there is really a meaningful pick up in the economy, which a lot of us would like to see in the next year or two, if that pick up in the economy, therefore is let's say a 100 to 200 basis points in the next couple of years, that translates into a certain growth rate for the banking system in terms of incremental loan demand, then obviously that's an opportunity that we would also like to get our share of. And this capital only further strengthens our position, or positions us appropriately to be able to do that.

So, alternatively, if I ask that suppose the kind of return ratios we are talking about around 21%/22%. So after this deduction, how much time you -- the bank would take to reach that level again?

See, we don't have a guidance on bottom line, so I cannot give you time indication. If you just look at the expansion in the net worth, obviously this would take ROE's down by about 2% or 3%, as a back of the envelope calculation. So, depending on how quickly we consume capital over the next few years and how stable or what happens to our ROAs, that would determine that. But we don't have any guidance on the P&L numbers and therefore trying to answer your question would be an indirect way of doing that, which we would not be willing to do.

Okay. Thanks a lot.

Thank you.

Tabassum Inamdar, Goldman.

Yes. Hi, Paresh. Very quick two data points. Can you give us the business banking amounts outstanding in the wholesale book and how it would compare q on q and year on year?

Well, we're at a total of about -- like I said the amount which is there in the retail portion, right, which is about 21,000 is approximately 40% of the total.

Okay. Okay, and this amount would be similar to last year?

The proportion has remained more or less the same.

Okay. And just one more data point; number of employees?

Number of employees is 76,000.

Okay, thank you.

M.B. Mahesh, Kotak Securities.

Good afternoon.

Hi, Mahesh.

Just a couple of questions. On the auto loans side, the growth that you saw this quarter, just trying to understand how much of it is coming from used -- new vehicles and how much of it is coming from used vehicles? And also do you offer any other product like top ups and how does that change the entire loan growth that you reported for the current quarter?

And the second question is, is there any target that we would like to have over the next couple of years with respect to unsecured lending in the auto portfolio because currently it stands at about 25% of the retail loan book.

Yes. So on the first front, yes, we -- on the auto side we have the complete product range which includes new, used car and dealer floor plans, everything that a fully-integrated player in the retail financing, auto financing business would have. The proportion of used cars has typically been between 10% and 15%, and that has really not changed. We can -- we tend to have 1% or 2% movement in either direction from time to time, but that proportion has not changed really in the last few quarters, including in this last one.

As far as --

(Inaudible).

And the top-ups in that is not very large, but the new, used dealer floor plans are all there.

The second -- your second question was --

Unsecured loans please.

On unsecured loans, no, we don't really have a specific target because, again, if you look at the 25%, that's therefore, of the proportion of our total loan book, it's half that because retail itself is about 51%.

And it's really a function of the mix that we have within that because you might see a personal loan, but within that we might have certain segments, whether it is salary, whether it is self-employed, whether it is business borrowers. And the credit card business again, it's still an extremely small business when you look at the overall penetration levels.

So we are quite comfortable as long as the individual product parameters remain stable. We are -- not that we see a huge difference in the mix, but we are okay with the fact that right now both PL and cards is growing a little faster than the rest of the retail loan book.

Okay. Thanks a lot.

You must remember, by the way, that while we're looking at these two products having grown a little faster than some of the other secured products, home loans has also grown substantially as a proportion of the total retail loan book. So from where it was say three or five years back, if the credit card and the personal loan, the unsecured book has grown by about 2%, 3% as a proportion of the retail loan book, then the home loan business has actually grown from single digits to double digits. So there's actually been -- the highest proportion increase has actually been in home loans. So if you look at the blended risk/return profile of the retail loan book, it's remained fairly stable from our point of view.

Sure. How much of housing loans did we purchase this quarter?

In this quarter we purchased about INR12,000 crores.

INR12,000 crores, okay. Thanks a lot.

Thank you.

Thank you sir.

Can you just tell me approximately how many more people are waiting because we thought we should --

Sir, this is the last one,

Perfect because --

Nilanjan, Jefferies.

Okay hi. Hello?

Yes Nilanjan.

Yes, hi, Paresh. See, we had some 60 odd branches this quarter right?

Right 59 branches.

How many of them are in Tier 1, Tier 2 versus the rest?

About half, because half of them were in urban and metropolitan and the other half -- almost 30 and 29.

Okay, okay. So basically the investment phase is continuing essentially?

That's right.

Yes, thanks.

Welcome. Okay. That was the last question. Once again I want to thank all of you for being on the call. Sorry for having done this on Saturday, and that too I had got one or two messages about having spoilt somebody's Valentine Day lunches, but apologies for that and once again thanks for having been on this call.

Shall I conclude the call sir?

Yes, please.

That does conclude the conference for today. Thank you for participating on Reliance Conference Bridge. You may all disconnect now. Have a nice day.