ICICI Bank Ltd (IBN) 2009 Q4 法說會逐字稿

Good evening, ladies and gentlemen. Welcome to ICICI Bank conference call. I'm Surish Kumar, the moderator for this conference. For the duration of presentation, all participants on line will be in listen-only mode. I'll be standing by for the question/answer session.

I would like to hand over to Ms. Chanda Kochhar, MD and CEO Designate. Thank you and over to you, madam.

Thank you, and good afternoon to all of you. Well, I'll just recap or in a way summarize our presentation and then I will be open to take any questions that you would have.

I'll really break up my opening remarks in three parts. How I saw the operating environment over the last year, what our strategy has been over the last year and how I see the trends going forward. And what the results of the strategy have been.

So, if we, kind of, recap how the last year has gone, actually, I think this has been a year of unprecedented volatility. The environment was very, very, volatile. Between each quarter actually the environment, as I said, the sentiment was very different.

If we look at the first half of the year up to September, business environment actually up to September in India was -- continued to be positive, in fact. And interest rate movement was quite volatile. Inflation was pretty high, so we saw high inflation, high interest rates and -- but over the business environment.

From September to December with the collapse of Lehmann Brothers and the global and the domestic liquidity crisis, we actually saw and we could feel it (inaudible). So there was a sudden loss of business confidence and that sudden loss of business confidence, of course, had some imperative for our clients in terms of cutting down the bank utilization, marking inventories to market. But over and above that it also led to an immediate slowdown in the corporate investment and M&A activity.

But, during the quarter itself we also started seeing some amount of monetary easing and therefore interest rates went up sharply, but interest rates also started coming down by the end of the third quarter.

And, of course, that change in interest rates during that quarter gave a lot of opportunity on the treasury and the fixed income side of the portfolio.

But then when we looked at January to March, while I think the business environment there are some recovery signals but this is still on the whole I would say that environment was a little weak. But the Government of India securities, though these rolled suddenly because we then had the challenge of the Government announcing a large borrowing program and the overhang of that borrowing program on the (inaudible).

So, this is how the environment moved over the four quarters. And given that, there have been some parts of our strategy which have been very consistent over the full year because that is what we have planned for the beginning of the year.

But some parts of the strategy we really tweaked quarter-on-quarter based on how the environment was moving. So I think some things that we continue to concentrate on that we call it the four Cs, capital conservation, CASA improvement, cost control and credit monitoring.

So, on the capital, we continued to control capital and even after declaration of dividend for the year as a whole, we've ended March 31 with 15.5% total capital adequacy. And within that, Tier 1 was 11.8% and, this year, one of the highest amongst the large Indian banks.

Talking about CASA, in particular, our CASA ratio has improved. We started the year with 27% -- actually we started the year with 26.1% as on March 31. That improved to 27% on December 31 and we've ended the year with 28.7% CASA ratio.

And talking particularly of Q4, we have raised CASA by INR 5,286 crores during this quarter. So we've seen a healthy growth in CASA coming back to us in this quarter.

On third part of our strategy, that is costs, we actually managed to control our costs very effectively. Our operating expenses came down 14% compared to the last year's number. And we've seen improvement quarter-on-quarter. Even last quarter, on a quarter-on-quarter basis, we saw a 4% reduction in operating expenses. And that meant that our cost to average assets has gone down from 2.2% to 1.8%. Again, I think at this level we are one of the most efficient banks on the cost to average asset parameter amongst the various banks in India.

Talking about credit control and credit monitoring, we again continued to follow the policy of saying that risk containment, being cautious on our loan book. And, actually, for the year, our loan book has declined 3.2%. And, if we actually adjust for the exchange rate changes, then in fact there has been an 8.4% reduction in our loan book. And the net NPA ratio was the same level as the last quarter.

So, I think this strategy of capital conservation, CASA improvement, cost control and credit monitoring will be our focus even for the coming year, because the intention is that by collecting these four things, or concentrating on these four things, we want to position the balance sheet for the next phase of growth which would take place as the economy recovers over the middle period of time.

Given this strategy, how did it impact our financial performance? If you look at the full year, we've seen 15% increase in net interest income, going up from INR7,300 crores in FY'08 to INR8,367 crore in FY'09.

And the net interest margin increased from 2.2% for the year '08 to 2.4%, on an average, for the year '09. Actually, the last quarter, we ended the quarter with a net interest margin of 2.6%.

And fee income, more or less in line with what it was the last year. A difference of INR100 crore, instead of INR6,600 crores, we had a fee income of INR6,500 crore in this year in spite of the sharp change in the economic scenario.

Operating expenses, as I said, the total operating expenses, including the DMA expenses, went down by 14%. And with all this, our operating profit increased 12% compared to INR7,961 crores last year to INR8,925 crores for the year ended March '09.

So we saw a heavy increase in operating profit, and the profit before tax has been maintained at the same level as last year. A little improvement over last year.

The profit after tax, however, was lower at INR3,758 crores. That is because our effective tax rate increased substantially. Our effective tax rate is now over 26% compared to about 18% last year, and that is because, up to last year, we had a large proportion of income from dividends and capital gains on account of equity, which meant that we could have a lower effective tax rate. Now, this year, we have a smaller component of again some equity shares and our effective tax rate has gone up.

Looking specifically to the fourth quarter, I think there are some very encouraging operating trends. Our net interest margin, as I said, in the fourth quarter has been higher by 20 basis points at 2.6%.

We have seen a heavy increase in our deposit base in this quarter. The total deposits increased by INR9,200 crore, of which INR5,286 crore was CASA, and which meant that CASA ratio went up 130 basis point to 28.7%.

Fee income in the quarter four remained at the same level as quarter three. And even on a quarter-on-quarter basis, we saw 4% decrease in operating and DMA expenses. And, if we look at operating profit before treasury, we actually saw 8% increase on a quarter-on-quarter basis.

So, as I said, in this present year we will continue to follow our strategy of capital conservation and looking at cost control, credit control and improving CASA. And I see some very encouraging operating trends that have been with us in the quarter four.

I would now take any questions that you would have.

Thank you very much, ma'am. We'll now begin the QA interactive session. We request each participant not to ask more than two questions at a time.

(Operator Instructions).

First in line, ma'am, Mr. Arun from UTI Mutual Fund.

Hi, good evening, ma'am.

Good evening.

Ma'am, can you just give us a take on the movement of NPAs for the quarter and the year as a whole? And the movement of restructured assets and the provision that you made thereto?

Well, the restructured assets, the restructured assets lost about INR1,000 crores for the quarter. And we have 57 applications aggregating to about INR2,000 crore as on March 31. That's, of course, the March 31 status, we don't know whether we will get anymore applications going forward. But that is the details on restructuring.

As for the (inaudible) restructuring, we have made adequate provisions whatever we are required on this restructuring of INR1,000 crores. But amount is very small and it's a part of the total provisioning that we have disclosed.

As far as NPA movement is concerned, as I said, the net NPA ratio was 1.95% on December 31, it's 1.96%, as on March 31.

Then, if you can, give me a breakdown of the gross delinquencies for the quarter and the year. The operations and recoveries, the write-offs and the balancing figure thereto.

Okay, I'll ask Rakesh to (multiple speakers)

The gross NPAs as of March 31, as you can see in the presentation is about INR99b. The same number for December 31 was about INR96.4b. During the quarter, we would have written off about INR4b of retail loans. And we sold about INR1.5b of retail loans to an asset reconstruction company. So if you adjust for that, the gross additions for the quarter would have been in the region of about INR12.5b, a large part of that coming from the retail loans.

Okay. And for the year on the whole, how much would have been the gross additions?

For the year as a whole, the gross additions adjusting for the write-offs and sale to -- our sale would have been about INR50b.

And, lastly, can you give us an estimate of the gross loans as well as the investment in the security of the private corporate book? The loans which would be of the less than or equivalent rating of BBB or less.

We are not making such disclosures on the rating while it's in the portfolio.

Okay. And on restructured assets application that you've got and the restructured assets that you have, what kind of collateral you would have and what would be approximate value of the underlying collaterals to the overall cost of the loans?

As you know, the loans that we restructured are only the secured loans, so all of these loans will be secured. And the security would typically be [successes]. And in terms of the coverage for individual loans, that'll vary from loan to loan.

And, lastly, how do you see the outlook on the incremental delinquencies in the next couple of quarters and particularly for FY 2010?

By 2010 I think the mortgage and the car loan portfolio will continue to be pretty stable. We've not seen any surprises there on the loss ratios and I think that's how the situation is going to be.

The unsecured loans and credit cards, well, the industry as a whole, we are continuing to see increasing loss ratios. So, I think there would be some deterioration there but our portfolio on these products is actually coming down. So the actual impact on account of amount would not be higher for us, it would only -- it should only come down.

On the corporate side again I don't expect any (inaudible) surprises. Yes, there would be some restructuring required and we would complete that restructuring largely towards the first half of the year.

All right. Thank you so much, ma'am.

Thank you very much, sir.

Next in line is Manish from Kotak Securities.

Yes, hi. Just to clarify on the restructured assets. This INR1100 crores of restructured assets has been restructured in the fourth quarter, is that right?

Yes, that's right.

So, the total restructured assets on book would be INR6100 crores now?

Yes, INR6,100 crores, yes.

And, in addition to this, we have got INR2,000 crores of restructuring proposal spending.

Yes.

Right. Okay. And just wanted some color on the international book. Have things -- given the way things have been moving over the last couple of months, would it be a fair assumption that the mark-to-market losses from here on would not be very high? And business seems to be picking up, somewhat out there?

Well, mark-to-market losses are entirely to do with the way the market moves. So it's a little difficult to predict how the mark-to-market would move.

I would only say that, on the credit quality side, the book still continues to be pretty stable and our book is not growing substantially. We are consciously not growing the book substantially. What we are concentrating on is raising, really, the (inaudible) deposits to give us that stable sources of funding, getting healthy in flow of retail deposits. And we are using that to improve our asset/liability mix. And maintaining a very moderate growth on the book. And the -- credit quality continues to remain good.

And on an incremental growth in fiscal year 2010, would it be in similar lines compared to what we saw in fiscal year 2009?

Yes, yes, absolutely, because we want to continue to follow the strategy of capital conservation.

So, the proportion of retail assets will continue to come off and we might just see some growth happening on the corporate side.

Yes.

Okay. Thanks.

Thank you very much, sir. Participants, I request that you ask only two questions in the initial round and come back for follow-up.

Next in line is Sunil Kumar from Birla Sun Life.

Yes, thanks, my question has been answered.

Thank you very much, sir. Next in line is (inaudible) from (inaudible).

Hi. I just wanted to check on (technical difficulty) q-on-q in terms of the e-loan advances. So, are we actually doing anything (technical difficulty) with the loans and the bookings, right now? And could you give me a sense of what is the current incremental use?

Rakesh?

There would have been some decline in the e-loan advances because as you recollect, towards the end of December we reduced our prime lending rate, both on the home loans and the IBAR which is the benchmark we allot. So because of that there will be some decline in the e-loan advances in the current quarter. That was offset by an equivalent kind of decline on the funding costs, as well.

Okay, thanks.

Thank you very much, sir. Next line, ma'am, (inaudible).

Good evening, ma'am.

Good evening.

Could you please give me your cost of funds for the year?

The NIM was 2.4% plus the funds --

Cost of funds was about 7%.

7%. And this has decreased on a year-on-year basis?

Last year would have been higher, it was about 7.5%.

7.5%.

And my other question was on your SLR investment, could you give me a break-up of the investment in HDM in the [assets] category?

Currently, about 80% of our portfolio is maintained in the HDM category.

Okay. Thank you.

Thank you very much, ma'am. Next in line is from (inaudible).

No. Thanks, my question has been answered.

Thank you.

Thank you very much, ma'am. Next in line (inaudible).

Hi, good evening. Just to get a color on the fee income on a quarter-on-quarter basis it remained stable but on year on year basis is remained lower. Can you give us a guidance in terms of how will it look like in the next financial year?

I think given the current economic scenario, at least for the next two quarters I think the trend would remain similar to what we have seen in Q3 and Q4.

Okay, thanks.

Thank you very much, sir. Next in line, Mr. Aditya from Citi.

Good evening, ma'am. I had two basic questions. One was in terms of the offshore book, have there been any [MPM BLR] balance sheet moves in this quarter in terms of mark-downs or mark-ups?

Yes, there have been, but --.

In the UK investment book, the mark-to-market on the assets portfolio, which directly impacted the results would have gone up by about $50m between December 31 and March 31. In addition to that, through P&L the impact of the (inaudible) investments would have been about $15m, one five.

Okay. And there haven't been any reversals as such?

No.

Right. The second thing was, in terms of the liquidity situation on your offshore borrowings on the parent book, there was a little bit of a gap spread over the current period. Any update on where things stand there?

In terms of the gap which was there until March 31, we have -- met all the liability payments and we have not drawn down on the [RBS] facility which is available for us for $1.5b until March 31, 2010. So, if we look at the market in the last quarter, it was much better than the December quarter, so we were able to roll over most of our borrowings. Although we did not do any bond issuances, through interbank borrowings and deposit raising we were able to meet all the liability repayments.

And, specifically, in terms of the liability of the repayments of the maturity balance over the next one year, what is the status on that?

If we look at the total liability repayments, it will be close -- slightly below $2b in the current financial year. And of that, about $1b would be the repayments on the asset side that we will get. So, the net refinancing requirement will be about $1b. And this net refinancing excludes the deposit maturities and interbank maturities.

That $1b excludes?

Excludes -- yes, deposits are more -- accretion we look at it on a net basis.

(technical difficulty).

No, but this would be really on the parent books and the bulk of them would be wholesale borrowings and such.

In the parent book also we have close to $2b of deposit. It's a smaller proportion, it's only 15% of the total funding.

Actively there's about $1b and that needs to be refinanced --?

Yes.

-- or effectively paid off.

Yes.

The other thing was just from a look at the portfolios of both the UK business and the Canada business, there is a fairly large loan component that seems to be other than India, right? The India ones have been specifically pulled out. Any sense on the asset quality there either in terms of numbers for these particular balance sheets or in terms of trends/expectations?

In terms of the portfolio in our overseas branches and in the UK and Canada, as we've said earlier, there is part of the loan book which is not linked to India, that's about 10% of our overseas branches and about 20% of the overseas subsidiaries.

If you look at the trends, still know there really not have been any additions on the impairments in any of these portfolio on the loan side. So we are not seeing any such trends there on the portfolio. Though, like on the domestic book, we would see some amount of restructuring in the overseas corporate loan book, as well.

And that would be for Indian corporates or non-Indian corporates, the restructuring?

It will mostly be for the Indian corporates.

Okay, fine. Okay, thanks so much.

Thank you very much, sir. Next line is Prashant from ICICI Prudential Asset Management.

Good evening, ma'am. Good evening, sir.

Good evening.

One is, what has led to sharp improvement in NIMs quarter-on-quarter and year-on-year, and is it sustainable?

Yes.

In terms of the increase on the margin from 2.4% to 2.6%, the borrowing cost has come down between the December quarter and the March quarter. So with that if you look at the overall trend the (inaudible) has gone down but the funding cost also has gone down while the deposit cost has remained nearly the same at about 7.4%. So overall funding cost has gone down.

If we talk about going forward, as we said earlier, that in the current quarter, a lot of the growth on the loan book has come from lending done to the [rule] sector of meeting the (technical difficulty) requirement on the (inaudible).

Yes.

This is done typically at a lower yield compared to other commercial loans. So going forward, so for example in the June quarter, there will be some downward pressure on the e-loan advances because of that.

Okay. But the cost part of it will remain low.

There'll be clearly a decline in cost of funding because if you look at the incremental deposit costs, it has come down significantly, so that trend will continue. But, of course, we also reduced our [DMA] lending rates so there will be a decline in rate because of that as well.

But what is a sustainable kind of margin that you see now?

In terms of -- as I said, we will -- we may see some decline in the June quarter because of -- the lending part.

Yes.

From then on, given our current strategy of improving the CASA deposit, as well as the fact that the wholesale deposit rate has come up significantly, from there on we should see a consistent improvement in margin. And, specially, towards the end of the year, when a large part of our deposits raised in October/November 2008 had much higher cost mature. Thereafter, the funding costs will decline more substantially.

On CASA, the kind of growth that we have seen in the quarter, is this sustainable deposits that we have and not the year-end phenomenon? And do we expect this absolute amount of CASA improvement quarter-on-quarter basis from now on?

I think it's quite the result of all the new branches that we set up last year. And as the number of branches has been increasing, clearly our reach for the customers towards current and savings accounts is increasing. And I'm hopeful that we will continue to maintain this positive trend as we go forward.

Okay. On restructuring, ma'am, is this largely in SMEs or there are corporate accounts, also, which are getting restructured in this INR1,000 crore which has happened in 2000 that we have proposals?

It's a mix of both, corporate and SME.

Okay. And what percentage -- of this will be deferment -- will have deferment of interest, also?

Maybe little (technical difficulty).

The deferment of interest -- in terms of interest rate reduction, that will be a very small component. They will principle deferment or interest deferment but interest rate reduction is a very small part of this.

No, my question was what percent of the total restructuring would have loans where you have also deferred the interest payments?

There will be some but we have not given a specific number on that. But, as I said, there will be principle and interest deferment in these cases. Interest rate reduction will only be a very small portion percentage of the total.

Last one is on why is the net worth lower quarter-on-quarter because what is the adjustment?

That is the dividend payment.

Okay, it's dividend only.

Yes.

Okay, thank you.

Thank you very much, sir. Next in line is Dipankar Choudhury from Deutsche Bank.

Yes, hi. Most of my questions have been answered. Just one clarification. There seems to be a sharp drop in the Eurasia assets, if I read it right. Is it due to write-down of loans, or what happened exactly?

No, that will be also because of the (inaudible) movement, actually.

Okay, okay.

Just for that, about 20%/25% kind of decline is what we have seen on the balance sheet.

Okay. So, what exactly accounts for the decline?

The decline is actually repayment of loans and we have consciously not been growing the balance sheet in Russia. So, as the loans have matured, we have not made fresh loans.

That has been our strategy since more than a year. We have consciously not been growing and we have only been allowing the maturities to come up.

Yes. And could you just give us some color on the asset quality of that subsidiary? Do you have a number there or anything which will help in understanding?

There's a break-up (multiple speakers).

There is -- the balance sheet break-up is given in the presentation on slide 27 in terms of the total assets of $441m. If you look at the current trends in terms of NPAs, that's a very small percentage of the overall portfolio of Eurasia. And, as you said, it will be reducing the overall balance sheet, as well.

Okay. That's it from me. Thanks.

Thank you very much, sir. Next in line is Rajiv Verma from Merrill Lynch.

Good evening, ma'am. Just wanted to understand are you seeing any improvement in the mortgage base per se. (inaudible) trying to get a feel from you on that.

And also on the asset quality side, what's the trend line? There has been concern and worry that you will start seeing a much troubled situation. Are you starting to see that not specifically in your portfolio? Both, sorry, in your portfolio and also in the market.

I think, on the mortgage pickup, frankly, I still feel that the customers are not going ahead and buying homes to the extent that they were doing in the past. I think, even today the rate of mortgage investment is probably at least 20% lower than what it was in the last year, or not even that, actually, it's even lower than what the amount was last year.

People are, I guess, still waiting and watching not just for the real estate prices to correct but also for the fact that they're just wanting to be very sure about their own jobs and the economic environment before they plunge into committing into an investment.

So I think there is still some time before which we could see this market coming back. I do believe that there is a huge amount of latent demand. I think people can still afford homes, they want to buy homes for the affordability and the aspiration is still there but people just want to be more sure about the economic environment before they plunge in.

On the credit quality, whether for us or for the industry, I think on mortgage side and on the car loan side, there seems to be a lot of stability. There don't seem to be any surprises, really, in store. One is feeling pretty comfortable about the current levels of loss rate.

On the unsecured loans and the credit cards, I think the loss rates are still continuing to increase. And we would see pressure on these products on the loss base even as we go forward. And third point, just we are bringing down the portfolio in both unsecured loans and credit cards.

Thanks a lot.

Thank you very much, sir. Next in line is (inaudible) from Kotak Securities.

Ma'am, I have three questions. The first question is if you could show some sectorial color on the INR2,000 crore pending restructured asset proposal.

And the second question is given that you are going slow on the loan books, when do you see this gross NPL slippage to peak out?

And my third question is (inaudible) there is a lot of focus on CASA in the bank. What kind of CASA ratio would make your bank comfortable to start lending even close to the peer group in the marketplace?

On the first one, we haven't really given an industry-wide break up. And even the amount is INR1,000 crore. But it's really not got to do much with the industry trends as such. It's got more to do with individual companies. We have seen that in the same industry some companies which are low leveraged are able, are in a much (inaudible) situation and able service their loans. But in the same industries some companies with high leverage are not able to service their loans. So it has more to do with the financial structuring of the company rather than an industry as such.

Coming to your third question on CASA ratios, my intention is that we should at least get to about 33% of CASA ratio before we start pressing the accelerator on lending. Because I think our current CASA ratios are lower than in the three averages. And that does impact our net interest margin to some extent, and therefore it's important for us to correct the CASA ratio. And after a build of about 33% if we start growing, I think we will grow then at -- on the basis of a much healthier base. So that is the strategy that we are following.

What was your second question?

My second question was when do you expect this gross NPL to peak out, given that you are going slow on the loan book?

I think the current levels are -- if you look at quarter-to-quarter levels, it should be kind of peak level. Because what would happen in the next two quarters I think is that on the retail side in fact we should see a little bit of correction for the simple reason that our unsecured portfolio will actually come down gradually, so we should see some correction. But on the other hand on the corporate side we would have to still for the next two quarters or so do something more on restructuring. So there would be this little bit of (inaudible) change. But broadly I think the current levels are what should be the peak levels.

And the last question is 33% the target CASA for FY10?

Yes.

Okay. Thanks a lot, ma'am, and all the best.

Thank you.

Thank you very much, ma'am. Next line is Mr. Jatinder Agrawal from ABN AMRO.

Ma'am, two questions. In terms of operating cost, they've actually been flat on a year-on-year basis. What would your outlook be for the next year?

No, actually the operating cost once you include the DMA expenses as well is down 14% on a year-on-year basis.

Thanks. Ex DMA expenses?

Yes, ex DMA expenses, yes, they have been flat. The outlook we expect, we should again keep it flat for the coming year as well.

That would be despite the addition of 500 odd branches that you look at?

Yes, that's the intention.

Okay. And can you, ma'am, in terms of your loan loss charge for the full year, to look at it, it's average about 170 basis points on your loan book compared to about 120 a year ago. Any guidance on that? Because I think this year partly a large part of it would have come because of your unsecured loan books also and credit cards, whatever. Any guidance in terms of -- ?

No, we don't give guidance, but whatever is my feeling about how this situation would turn I have already explained. But we don't give guidance on numbers.

But do you think in terms of loan loss ratios the cycle would have peaked internally in terms of your book?

As I said on the mortgages and the car loans at least, I don't see any reason for any increase to take place. Unsecured loans, credit cards, I can't say about the percentages, but clearly overall loan portfolio will only actually go down. And on the corporate loan you may see some amount of impact on account of restructuring.

Okay, thank you, ma'am.

Thank you very much, sir. Next in line is Mr. Neil Mascarenhas from SBI Life.

Hello, good evening.

Good evening.

Ma'am, I'd like to know the number of agents and the number of branches for ICICI Life this year as well as going ahead your plans next year. And also the accumulated loss.

Branches and agents, Kannan.

Hi, this is Kannan here.

Hello, Mr. Kannan.

Hi. We have, as of March we have about 2,100 branches. And going forward there is no intent to increase the branch network, because as you know about 45% of our business comes from channels other than agents. And we have a good mix of bank partners, brokers and corporate agents for that part of the business. And through branches we do our agency business. And as of March I'll just give you the number of agents. 277,000 agents we have. So given this diversified geographical presence, we don't intend that -- we don't intend to increase our geographical presence any more.

All right. And the accumulated loss?

The losses for the year was INR780 crores.

INR780 crores.

INR780 crore for the year, and which is down some INR1,395 crore for the previous year. So we've got a 45% reduction in the losses for the company.

Okay, thank you very much.

Thank you very much, sir. Next in line is Saumya Agrawal from HSBC Securities.

Hi, good evening, ma'am. I had a couple of questions. Firstly, I wanted to understand for the credit derivative portfolio of INR57b, is it all on the payments book? If yes, then how much is the overseas credit derivative portfolio?

Secondly, if I look at your UK investment book, it's shrunk some 20%, possibly because you've offloaded some Indian investments and bonds of financial institutions. I wanted to understand how much is the MTM losses on these categories. And is there a conscious strategy to offload these investments over a period of time?

Thirdly, if you could give me the breakup for the provisions for the quarter of INR10.85b into specific provisions and provision for investment appreciation. Thank you.

Our credit derivative book is all India linked credit derivative book of INR1.1b. I will tell Rakesh to give you the breakup.

For the parent bank it's $1.1b and for subsidiaries as is given in the slide it's about $300m. The aggregate for the Group is $1.4b. All of which is having Indian names as underlying. On the provisions for the quarter of $10.85b it will largely be specific provision on NPL.

So have you netted off any MTM loss on bonds from the trading gains?

That we will [turn up] in the treasury line.

Treasury line, okay. Investment book, could you run me through the MTM loss?

The UK investment book as of March 31, 2009, the mark-to-market net of tax was about $265m. That is on the banking book which directly impacts the results. And for the quarter, as I listed the incremental number is $50m pre-tax directly in the banking book which [impacts us] and about $15m for the quarter to the P&L.

And is there some course, some sort of strategy to offload these investments over a period of time?

To the extent that we get opportunities in the market we would look at releasing the investment portfolio.

Ma'am, does that answer your question?

Yes, thanks. Thank you.

Thank you very much, ma'am. Next in line is Mr. [Anand] from [LGFC Mutual Fund].

Hello?

Yes?

Hi, Rakesh.

Hi.

Just a bookkeeping question. I just want to know, you mentioned as a gross addition for the whole year for Tier 1 INR2b. And does it include sale of loans to (inaudible) also?

Sale of -- sale to --

Yes.

Thanks.

Thank you very much, sir. The next in line is Mr. Sandeep Jha from Tata Securities.

Good evening, ma'am, hello.

Yes?

Ma'am, I want to know the restructuring effect on standard and the breakup of standard (inaudible). In the restructuring effort all on the standard assets?

Yes.

Okay, sir. Okay, thank you.

(inaudible - microphone inaccessible).

Does that answer your question?

Yes, yes, thank you.

Thank you very much, sir. Dear ladies and gentlemen, this is to inform you that there are only last few minutes remaining for the call to conclude. Thank you. Next in line [Mr. Rojit] from [LPA Mutual Fund]

Hello, good evening. Congratulations on good numbers.

Thank you.

First question is on the subsidiaries. Can one look at targeting a breakeven in the life insurance business in FY10?

And secondly on the asset management, could you explain why the huge difference in profitability in the current year?

Kannan?

Yes, on the -- this is Kannan here. On the life insurance company, as I mentioned a little while ago the losses have come down from INR13.95b to INR7.8b for the financial year 2009, 45% down. We think that will be -- we've articulated saying that we will achieve [excellent] breakeven by 2011. So that is what we are really pursuing. So it's about two years away as we speak but really depends on the growth rate from here on.

And as far as the MP is concerned, first of all, of course, management fees itself was down. And then during the months especially of October, November, December, etc. we had to provide team support. So there were certain abnormal events during this year which led to this.

Okay. And second question is on the term deposits. Does the mix continue to be two-thirds wholesale and balanced retail? Or has that changed in this quarter?

The proportion of retail has improved during this year. On the total deposit base at the end of last year, at the end of March '08, retail was about 45% of the total deposit. As on March '09 it's 48% of the total deposit.

Okay, so your CASA plus retail term deposits in terms of your current saving accounts in retail would be 48%?

Yes.

Okay, thank you.

Thank you very much, sir. Next in line, Miss Mahrukh from Nomura.

Hi, thanks, most of my questions are answered. Just one thing I missed. What is the provision on restructured assets?

No, you didn't miss it, Mahrukh, actually, we didn't disclose it. It's a very small amount as part of the same number.

Okay, thanks. Thanks a lot.

Thank you very much, ma'am. Next in line, Mr. Hiren Dasani from Goldman Sachs.

Hi, just on the restructuring. You say the INR11b is all standard asset. And this INR22b would also be I presume all standard assets on the, am I right, the applications pending?

Yes.

Okay. And ma'am, any restructuring you can do in the subsidiaries loan book which are India linked? Would the guidelines and all be the same relative to what we're doing in India?

Yes, if it's possible to do it, the provisioning guidelines may be different in the subsidiaries but it's possible to do restructuring. And indeed if there is some particular Indian company that needs restructuring then whether the loan is from the India book or the subsidiary book, we'll look at it in totality.

But this INR22b of applications include subsidiaries or it includes only India book?

No, it includes only India book.

Any disclosures on the subsidiary related restructuring?

We don't have any major ones as of now.

Okay. And question to Rakesh. I think you said about $2b of repayment. That is only for India balance sheet borrowings or overall?

That is for the overseas branches of the bank.

Bank branches, yes.

Overseas branches of the bank. And would there be any repayment obligations for the subsidiaries as well in FY10?

Very small amount because Canada is fully quantified deposit. In UK there will be some amount but not a material amount.

Okay. Thanks a lot, that's it from my side.

Thank you very much, sir. Next in line, Mr. [Ashutosh] from Asian Market.

Good evening, ma'am. Thank you for a good set of numbers. I just want to know about what is average maturity of the term deposits.

The maturity is one year.

That's one year?

Yes.

And what is an overall loan book of retail, what is the proportion of the low ticket personal loans?

On the overall loan book, 49% is retail and within that unsecured personal loans -- you want it (inaudible). Low ticket personal loan is 0.4% of the total loan. Of the retail loan.

And is that normally less than a 5 level (inaudible) of loan?

Less than 5 level, no, much smaller.

These are the small ticket unsecured personal loans where the average ticket price would be maybe about INR30,000.

Okay. Okay. Thank you, sir.

Thank you very much, sir. Next line is Mr. [Ahmed Brenkendoni] from UTI Mutual Fund.

Yes, ma'am, just a small question. There is a capital increase of around INR2,000 crores in Canada branch and the Canada subsidiary. Any specific reason?

No, that's mainly to meet the growth requirements of the Canadian subsidiary. The balance sheet has also gone up during the year. And so have the profits.

Do you expect increasing lending opportunity in the Canada subsidiary?

When we watch, there could be some growth. But we watch how the deposits are coming in and there would be some growth there.

That's it from my side, thank you.

Thank you very much, sir. Next in line is [Mr. Kashav Suverey] from MK Global Services.

Hi. Just wanted to have a breakup of [CN assets]. In terms of current deposits and so?

Savings deposits are INR410.36b.

Come again?

INR410.36b. And time deposits are INR216.32b.

Okay. And I missed this number on the retail deposit which you mentioned, the retail deposits last year as a percentage of total deposits was?

45%.

Okay. And the CO?

48%.

48%. So we would -- if I look at the numbers which you have given, probably we would have paid off more retail deposits than wholesale deposits during the year?

Yes, we have added more retail deposits. We've consciously paid back wholesale deposits.

Okay. Then how much of the wholesale deposits are coming for repayment over next six odd months?

It will --

Will it be same as overall maturity profits?

Yes.

So roughly about 50% will come from repayment loan, like six months?

Yes.

So looking at the fact that wholesale deposit costs yesterday are slightly less than the retail deposit, at least that's what the [issue] banks are guiding at, what's our plan on that? Do we intend to replace them with wholesale deposits again? Or would we go for retail deposits?

We would continue to increase the retail deposits as well. If you look at the balancing strategy, even in the last 12 months the wholesale deposits have declined. So that kind of strategy will continue.

Will continue. So wouldn't that put pressure on our cost of funds if wholesale deposits are costing less than retail deposits or probably the other way around, if retail deposits are costing more than wholesale?

It will be only a matter of time, for example, if you look at retail current deposit, also that retail has been reduced by us and also by other banks. That explains the retail one year deposit rate is also down to close to 8%.

For us.

Yes, that is broadly the rate which all banks are offering.

Okay. Secondly, in terms of our subsidiaries, in Canada subsidiary probably this quarter we did only about $1m of profit compared to first nine months of about $22m odd. So what could be the reason for that?

In the -- there will not be much growth in the overall balance sheet in Canada in the current quarter. So that's the reason why the profit would have been --

No, I mean, for you to do $1m is like -- for the first nine months I can see in the press release about $32.3m odd. In the full year we have done about $33.9m or something like that. So in the fourth quarter we would have done only about $1.5m of profit. From $32 to $1.5 is too sharp a decline. So --

It is completely (multiple speakers). We have not had much opportunity on the fee income in the current -- in addition to that there was some mark-to-market impact on the asset backed commercial paper that we have (multiple speakers) in Canada. We had marked it down by 40%, given the USD/Canadian dollar exchanges, we would have made some incremental provision for that.

But that's only for currency movement?

Yes, yes.

But nothing to do with probably spreads or anything going -- any asset going bad?

No.

Okay. And lastly in terms of losses in insurance, the fourth quarter losses seem to be -- accounting losses seem to be much lower than what we've seen for the first two quarters. Would that be only because of seasonality or are there any -- anything else, any changes in probably as I'm sure that probably one needs to make?

No, one primary issue here is the deferred tax asset which got created during the quarter of INR1.1b.

Okay.

So that is why you see that fourth quarter loss as being far lesser. And you should really look at the year as a whole losses because (multiple speakers) normal course would have got created through the year. But we were waiting for IRB permission to create that. So it got created in the last quarter.

In the last quarter. So that is the main reason why it's lower, accounting losses are lower?

Normally, you see that in the fourth quarter losses are less than other quarters but this time the seasonality has got skewed by the deferred tax (multiple speakers)

Sure. And just last question, if I look at addition to results, the reconsolidation is actually not matching. If I were to add four quarter profits, and less (inaudible) I'm getting some difference of about INR550 odd crores. So is there any revaluation or any other reasons which have been created which are not free?

That will be the foreign exchange translation result. When the rupee depreciation, they (multiple speakers) translation [is there].

Okay. Sure. That's it from my side.

Okay, thank you.

Thank you very much, sir. And your last question comes from [Megna] from Stan Capital.

Yes, this is Sudarka here. Just one question. What kind of growth do you expect in your life insurance business? And what kind of lapsation are you seeing in this business? And also any -- what is the amount you plan to invest in this business in next one or two years?

The growth in the --

Yes, the growth in life insurance business for the industry is expected to be anything between zero to 10%. It's very difficult to guess today what kind of growth rate because of the market conditions. The first quarter growth for the industry itself will be -- we think it's negative because January, sorry, March, April, May, June last year were very good months. So we would really look at industry growing anything between 0% to 10%. We'll have to evaluate it as we go along.

The capital requirements for the company has come down quite drastically. In the beginning of the year we thought we would take about INR20b from the shareholders. We have actually taken only half of that, INR10b. We expect the capital requirement to be significantly less than even INR10b for the coming year.

On the lapsation, yes, we have seen decline in the persistency. But that got offset by the surrenders which has been far less than last year as a percentage of assets. So net-net we are broadly okay as far as the in-force value of the book is concerned.

You've said the lapsation number?

No, it's not in the public domain but you can see the conservation number should be above 70%.

Thank you.

Thank you very much, sir. At this moment I would like to hand the floor back to Miss Chanda Kochhar for final remarks.

I would just like to thank everyone and end it by saying that we are seeing some encouraging change in the operating performance in the quarter four. And that's a positive sign that I would end the call with. Thank you.

Thank you.

Ladies and gentlemen, thank you for your participation. That concludes this conference call. You may now disconnect your line. Thank you, and have a pleasant evening.