ICICI Bank Ltd (IBN) 2011 Q2 法說會逐字稿

Ladies and gentlemen, good evening, and welcome to the ICICI Bank Q2 FY '12 results conference call. As a reminder, for the duration of this conference, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. (Operator Instructions). Please note that this conference is being recorded.

At this time, I would like to hand the conference over to Mr. N. S. Kannan, Executive Director and CFO. Thank you and over to you, sir.

Thank you. Good evening to all of you. Welcome to the conference call on financial results of ICICI Bank for the quarter ended September 30, 2001, which is Q2 of financial year 2012.

As usual, I would like to make my opening remarks in four parts. Part one on the macroeconomic and monetary environment. Part two performance during the quarter, including our performance on our stated 5C strategy. Part three on consolidated results of the Bank. And part four, outlook for the rest of the year.

Let me now start with part one with the macroeconomic and monetary environment.

As we are all aware, global economic conditions continue to remain weak, with increased market volatility and risks. There has been moderation in global economic growth, with increased concerns on sovereign health in mid Eurozone.

In India, there are indications of a slowdown in the economic activity. Growth in industrial production decelerated to 5.6% during April to August 2011 compared to 8.7% for the same period in the last year.

The Purchasing Managers' Index, PMI in September 2011 declined to about [50%]. GDP growth estimates for fiscal 2012 have also been revised downwards by several agencies, including the RBI which, in its recent mid-quarter review, revised GDP growth rate estimates downwards from 8% to 7.6%. Corporate performance has also moderated, with the increased pressure visible on margins.

Inflation continued to remain above 9% levels for the 10th consecutive month in September 2011 at 9.72%. Though inflation in food articles has shown some moderation, fuel inflation accelerated during September 2011 to 14.1% from 12.8% in August 2011, primarily due to the petrol price hike effective mid-September 2011. Manufactured products inflation reached 7.69% in September 2011, and the core inflation, that is manufactured products excluding food, at 7.55% compared to 7.77% in August 2011.

In line with the inflationary trends, the RBI increased the repo rate by 75 basis points from 7.5% to 8.25% during Q2 of 2012. This takes the overall increase in repo rate to 350 basis points since when the rate tightening began in March 2010. Cash reserve ratio, statutory liquidity ratio, were maintained at 6% and 24% respectively during the quarter.

In the Mid-year Monetary Policy Review announced on October 25, 2011, the RBI increased the repo rate by a further 25 basis points to 8.5%, and has indicated an end to the tightening cycle subject to expectations of easing and inflation from December 2011.

With regard to movement in lending and deposit rates during the quarter, banks were seen increasing their rates in line with the systemic trends. Banks increased their base rate by about 75 basis points during the quarter, while term deposit rates were increased by about 25 basis points to 75 basis points by banks.

System liquidity remained in deficit, though relatively better as compared to the earlier quarters. The average daily borrowing by banks from RBI under the [last window] was at about INR420 billion in Q2 2012 compared to about INR480 billion in the previous quarter.

Yields on government securities increased by 10 basis points during the quarter to around 8.4%. Interest rates on three-month and six-month market instruments like commercial papers and certificate of deposits increased during the quarter. Overnight money market rates remained closer to the repo rate.

Equity markets were volatile through the quarter, mainly in reaction to global developments such as the Eurozone debt crisis and weak economic data coming from the US as well as domestic inflation and growth outlook. Foreign institutional investors turn net sellers from August 2011, with [outlook] of $1.89 billion during August to September 2011. In Q2 of 2012, [FIS] investors around $245 million on a net basis. The benchmark BSE SENSEX ended the quarter lower by 12.7% compared to the June 2011 closing.

Now to credit and deposit. Non-food credit growth remained moderate during Q2 2012, with a year-on-year growth in the range of 18% to 20% through the quarter. However, there was a sharp increase in [creditors], taking the last week of September 2011, result in non-food credit growing by 21.2% at September 30 2011, compared to a growth of 21.3% at March 25 2011, and 19.5% at July 1 2011. However, year-on-year credit growth at October 7 2011 declined to 19.1%.

The year-on-year growth in deposits was 19.1% at September 30 2011. However the demand deposits remained a challenge through the quarter, declining by 9.3% on a year-on-year basis at September 23 2011. However, again at September 30 2011, demand deposits recorded a 7.2% year-on-year increase, growth in term deposits remained flat at around 21% through the quarter. At October 7 2011, total deposits increased by 17.4% on a year-on-year basis, while demand deposits declined by 4.9%.

Now let me move on to part two, ICICI Bank's performance during the quarter, including our performance on our stated 5C strategy.

Let me begin with the progress on our 5C strategy. First with respect to the credit growth, the total advances for the Bank increased by 20.5% on a year-on-year basis from INR1.94 trillion at September 30 2010 to INR2.34 trillion at September 30 2011. The growth was largely driven by domestic corporate loans, which increased by 24.2% on a year-on-year basis.

International lending continued to remain strong, this is out of our branches, with the net advances of overseas branches increasing by 37.3% on a year-on-year basis. There was some benefit of the depreciation of the rupee on the growth of net advances of our overseas branches. Excluding this, the year-on-year growth would have been at about 26%.

On a sequential basis, total advances increased by 6%, driven by an increase in the international portfolio in overseas branches by 19.5%, and an 8.4% increase in domestic corporate advances. Excluding the impact of the movement in exchange rate which I talked about, the sequential increase in the international loan book of the overseas branches was about 9%.

Having said this, there was a slowdown in new sanctions during the quarter due to a significant decline in new project announcements. The domestic retail book declined by 1% from INR827 billion at June 30 2011 to about INR819 billion at September 30 2011. This was largely due to a decline in commercial business, auto loans and personal loan segments, even as the home loan book increased during the quarter.

Moving on to the next C, CASA deposits, mobilization of CASA deposits was challenging given the rising interest rate environment and the demand deposit growth I talked about earlier. Despite this, the Bank savings account deposits grew by about INR33 billion in the quarter, and the current account deposits grew by again another INR32 billion during the quarter. As a result, the overall CASA ratio for the Bank was at 42.1% at September 30 2011. However, the average CASA ratio of the Bank during the quarter was lower at 38.3% as compared to 40% in the previous quarter.

Now let me move on to the third C, cost. On a year-on-year basis, operating expenses was higher by 23.5%, primarily due to increase in the employee expenses. The average employee count increased from 48,360 during Q2 of the last financial year to 59,900 people during Q2 of 2012. In Q2 of 2012, the Bank's cost-to-asset ratio was 1.8%, and the cost-to-income ratio was 44.4%.

Now let me move on to the next C on credit quality. We saw a 50.2% decrease in provisions from INR6.41 billion in Q2 2011 to INR3.19 billion in Q2 of 2012. Credit costs as a percentage of average advances were 56 basis points on an annualized basis in Q2 2012.

During the quarter, our net additions gross NPL was INR1.18 billion. This comprises slippages of INR7.87 billion, and recoveries and upgrades of INR6.69 billion. We have also done write-offs of INR0.64 billion during Q2 2012. The net NPA ratio declined to 80 basis points at September 30 2011 compared to 91 basis points at June 30 2011. Our provisioning coverage ratio improved to 78.2% at September 30 2011 compared to 76.9% at June 30, 2011.

Our net restructured portfolio increased from INR19.66 billion at June 30 2011 to INR25.01 billion at September 30 2011. This is primarily on account of restructuring of loans to micro-finance institutions, which we have talked about earlier.

In the context of credit quality, given the recent market concerns, I would like to briefly talk about the Bank's power sector exposure. Our power sector loans were 5% of our total loans at September 30 2011. The exposure, including the undisbursed commitments and non-fund facilities, was at 7% of the total exposure.

Commission projects constitute about 50% of our exposure, with the remaining 50% projects being under implementation. Of the total power sector exposure, about 30% to 35% is in the nature of working capital facilities.

Again, of the project finance exposure, about 65% of them is covered by -- 65% of the capacity is covered by power purchase agreements. Of the total project finance facilities for thermal power sector, about 45% to 50% of the exposure is based on captive coal.

The Bank's exposure on outstanding advances to the power sector would trend based on the timeline of commitments, syndication and ultimate [hold] position in such cases.

As for the Bank's sensitivity analysis, the average projected DSCR for the projects that would be participating is [1.54]; and the average break-even PLF would be at 61%.

We look at projects being promoted by promoters with strong background and experience in implementing such large projects. The bulk of the projects go to the Board Credit Committee, and the Credit Committee's due diligence is very high for each of these projects. We also assume lower coal linkages and merchant power tariffs than what market assumptions [classes] the project liability.

We have not been seeing any asset quality pressure with respect to our portfolio, and will continue to monitor the developments in this sector closely.

Now let me move on to the final C on the customer centricity. The Bank continues to focus on enhancing its customer service capability and leveraging on its increasing branch network to cater to our customer base.

As a reflection of the focus on customer service, the Bank was voted the most trusted bank among the private sector banks in the Economic Times' brand equity survey for 2011. In addition, the Bank has also been ranked 10th in the list of top-50 service branch in the country. The Bank continues to take steps to provide increased functionality to its customers through various technology channels, such as ATMs and mobile banking.

Having talked about the progress on 5C, let me now move on to the key financial performance highlights for the quarter.

The net interest income increased 13.7% year-on-year basis from INR22.04 billion in Q2 2011 to INR25.06 billion in Q2 of 2012. The net interest margin remains stable at 2.61% in Q2 2012 as the increase in yield on advances and investments offset the increase in cost of funds relative to Q2 of 2011.

On a sequential basis also, the net interest margin remained stable. The NIM on domestic business was about 2.92%, whilst international NIM increased to about 1.09%. We expect the international margins, as we have said earlier, to improve toward 120 basis points by the end of the year.

Fee income grew by 6.9% on a year-on-year basis from INR15.90 billion in Q2 2011 to INR17 billion in Q2 2012. A slowdown in growth in fee income was primarily on account of corporate banking fee income, which continues to be impacted by the slowdown in new projects and financial closures.

During Q2 of 2012, there was a continued momentum in granular fee income streams such as ForEx and derivative fees, transaction banking fees, and remittance fees. The Bank will continue to focus on these revenue streams going forward.

I've already spoken about the trends in operating expenses and provisions while speaking about the 5C strategy.

As a result of the above drivers, the Bank's standalone profit increased by 21.6% from INR12.36 billion in Q2 2011 to INR15.03 billion in Q2 2012.

I'll now move on to the consolidated financial results.

The profit after tax for life insurance subsidiary was INR3.5 billion in Q2 2012 as compared to INR0.15 billion in Q2 2011. Here, I would like to mention that the non-par surplus of INR2.54 billion was not recognized in the quarterly profits for Q2 of 2011, but non-par surplus has been recognized in Q2 of 2012 after the clarification from IRDA in December 2010.

The new business premium for the Company was INR10.96 billion in Q2 2012, with the new business margins at 16%. ICICI Life's overall market share for the period April to August 2011 was 5.7%, and private market share was 14.9% based on new business retail-weighted received premiums. ICICI Life's overall market share improved from 5.1% in Q1 2012 to 6.4% for the period July to August 2011.

ICICI General recorded a 46.2% decrease in profit after tax from INR1.04 billion in Q2 2011 to INR0.56 billion in Q2 2012. This is primarily due to an increase in sourcing expenses, and a decline in the investment income. The increase in sourcing expenses primarily reflects a shift of business segments, geographies and channels where loss experience is relatively lower. The Company maintained its leadership position in the private sector with an overall market share of 9.6% up to August 2011.

I have spoken about the [revision] in the third-party motor pool loss rates as mandated by IRDA in Q4 2011, and the subsequent capital infusion that we have done in Q4 2011.

I have also mentioned that the peer review of the loss rates, the third-party multiple was being carried out, and the results of the review was expected by end of June 2011. The result of the review is still awaited, and there may be an impact on the general insurance subsidiary in case the loss rates are further revised upwards.

With respect to our overseas banking subsidiaries, I would like to mention that the financials reported for ICICI Bank Canada are based on IFRS. As per IFRS financials, ICICI Bank Canada's profit after tax for Q2 2012 was CAD5.2 million. Total assets for ICICI Bank Canada was CAD5.1 billion at September 30 2011, at the same level as compared to June 2011. The capital adequacy ratio at September 30 2011 was 29.3%.

ICICI Bank UK continued to see a balance sheet consolidation during Q2 of 2012 with the total assets declining from $5.96 billion at June 30 2011 to $5.13 billion at September 30 2011.

During the quarter, ICICI Bank UK's investment in bonds or financial institutions, excluding those in Indian entities, declined by more than half from $665 million at June 30 2011 to about $288 million at September 30 2011. The remaining investments are primarily for entities in US, Canada, and the Asian Pacific regions.

The exposure to European entities is less than $35 million, and this to UK institutions. The profit after tax for ICICI Bank UK for Q2 2012 was $2.2 million. The capital adequacy ratio was comfortable at 29.8% at September 30 2011.

As a result of the above, the consolidated profits of the Bank increased by 42.8% from INR13.95 billion in Q2 2011 to INR19.92 billion in Q2 2012. The consolidated ROE improved from 10.7% in Q2 2011, and 12% for Q1 2012 to 13.7% in Q2 2012.

I would now like to talk about our outlook for the full financial year. As I have mentioned earlier, there has been a moderation in economic growth, with a significant slowdown in new project activity. At the same time, several changes on the regulatory front are underway. Our outlook for the balance [here] is in this context.

With respect to the loan growth, we expect the overall loan growth to be about 18%, in line with the system. The international book in our overseas branches is expected to grow at about 20% to 25% in the [rupee town].

In our international branches, while our bond and loan repayments are broadly matched by inflows from the asset side, we would have to see the availability of funding at reasonable cost to support the growth in the loan book. While credit spreads have started normalizing, we would have to see how market conditions evolve further.

The domestic book is expected to grow at about 16% to 17%, with the retail portfolio growth expected to be lower, given the interest rate sensitivity of such loans. Domestic corporate loan growth will be primarily driven by demand for working capital finance and balance sheet funding, [and uptake] from the existing project approvals.

Growth in rural portfolio is expected to be in line with the balance sheet growth, primarily in view of the private sector lending requirements.

Given the decline in demand deposits in the system, CASA rate deposit mobilization has become challenging. Further, RBI, in its second quarter review of monetary policy has announced a deregulation of savings deposit rate. On a sustainable long-term basis, we do not expect this to adversely impact the margins of banks, since the increase if any in the rates would be passed on to the lending side by the banks.

We would expect the savings deposit to be priced taking into consideration that these are transactional deposits, and banks incur significant amount of costs in acquiring and servicing such deposits. However, in the near term, we would need to see how the market evolves post this deregulation, given the competitive dynamics involved. Our target would continue to be to maintain the average CASA ratio at about 38% to 40% for the financial year 2012.

We expect the margins to remain stable at 2.6%, or actually improve slightly. However, as I mentioned earlier, there could be an impact of any volatility of savings deposit rate on account of the deregulation announced recently by the RBI. International margins are expected to increase to about 120 basis points by the end of the financial year 2012.

With respect to fees, during Q1 2012, we have seen improvement in certain fee income such as transaction banking, ForEx derivatives and remittance fees. This trend continues into [Q4 of 2012]. However, fee income was impacted by a slowdown in corporate project finance related fees due to moderation in new projects and financial closure.

Going forward, growth in corporate fees will depend on any traction in new project announcements and financial closures. We expect to sustain the current fee income growth trends with an upside if new investment plans pick up.

Operating expenses in FY '12 are expected to increase by about 20%. The increase will be mainly due to the increase in employee base in FY '11, full-year cost base of Bank of Rajasthan, and the average increase of about 11% in salaries effected for the financial year 2012.

The cost to income trend for the current year is expected to be in line with the second quarter. Over the medium term, we would be working to keep the cost income ratio within the 41%/42% ratio, and the cost to asset ratio in the range of 1.7% to 1.8%.

For financial year 2012, we expect the H1 trend of [provisions] to average; that is the half-year trend of provisions to average advances to be maintained, based on the current RBI guidelines and our current assessment of asset quality trends.

With this, I conclude my opening remarks. My team and I will be happy to take your questions. Thank you.

Thank you so much. We will now begin with the question and answer session. (Operator Instructions). [Sykinun Pullowarty], Espirito Santo Securities.

Just a quick data [point]. What is the breakup of house loans in terms of the [builder] loans and (inaudible) loans (inaudible) which qualify for (inaudible)? And how has been the growth across the segment what you have seen in the last couple of quarters?

The builder loans are about close to INR100 billion within the Retail portfolio. And your other question on the size of the loans, I don't have the data right now with me, but I'll come back to you.

If you have to exclude the builder loans, the core home loans are showing similar trends towards -- the overall housing loans are showing the growth. Is that a fair assumption?

Yes, that's correct.

Okay. And the second thing is there is a sharp fall in the housing finance, ICICI Home Finance subsidiaries loan growth. It has fallen approximately by 23%. What could be the reason for such a sharp fall?

On the Housing Finance Company actually, almost the entire new business that we have been booking for the last now six or seven quarters has been in the parent Bank. To that extent the adjusted portfolio has been declining on a quarter-on-quarter basis, depending on what the repayments and prepayments are, [thereof].

So is it --? So majority of the contribution could be maybe of a prepayment kind of thing, because 23% on year-on-year basis, that on a mortgage portfolio seems very sharp?

Yes, it will include the impact of the prepayments.

Okay, no sell-down which could have been thought of in this --?

No. Only organic prepayments (inaudible).

And the second thing, sir, actually, what was the reason behind the cautious decision, or fall in the market share, especially on the retail loans while our competitors are still showing a healthy growth across the retail segment, especially on the vehicle loans and the home loans?

One of the primary reasons for our Retail book to have come down is that on the retail and secured loans, given our past experience, our view continues to be not being aggressive on this portfolio.

On the vehicle side, especially on the passenger cars, the yield pressures have been quite a bit in the market, so we decided to focus on the profitable part of this portfolio. So those are the only two reasons. Otherwise, in a portfolio like a mortgage portfolio, we continue to have a very positive outlook towards building the portfolio.

Okay, that's it from us. Thank you very much.

[Suman Dettoria], Jet Age Securities. Mr. Dettoria has disconnected his line. [Amit Ganatra, Religear] Asset Management.

A couple of questions. One is during the presentation, you mentioned about the slippages and recoveries and [upgrades]. Can you please repeat?

Just hold on a minute. Yes. The first thing I talked about is the decrease in provisions by 50.2% from INR6.41 billion to INR3.19 billion in the current quarter. I talked about the credit costs as a percentage of average advances. That was 56 basis points on an annualized basis of the loan book.

Then I talked about the net additions to gross NPLs -- gross [NPAs], which was INR1.18 billion. Then I talked about the two components which went into it. One is the slippages of INR7.87 billion, and recoveries and upgrades of INR6.69 billion, the net difference being INR1.18 billion of additions.

And so what was the addition to restructuring this quarter?

Addition to restructuring was about INR7.4 billion, and that is primarily on account of the micro finance portfolio which we have talked about in the previous calls. And so the -- and there was some -- a little bit of upgrades, so the net number went up from about INR20 billion to INR25 billion.

Okay. Last thing is you give a very detailed description of your power exposure. But [ICICI's] (inaudible) also there is a concern on the [huge real estate]exposure.

Real estate exposure, we have talked about it in the past. It is about -- we have talked about it in the context of the real estate exposures. Commercial [data] exposure actually comprising three different parts. One is the builder portfolio, which Rakesh has just now explained. Then it also has loan against property, and also it has a loan sanction to corporate, with then just not real estate as a security, it also has a cash flow backing of the corporates. So it is really a combination of all this.

The concern was probably expressed when the portfolio went up through the last year quite sharply. But since then, from June onwards, if you see from March onwards, it has been quite a flattish portfolio. So we don't have any concerns on that portfolio. We have not seen any slippages whatsoever. We don't expect any slippages also to happen in this portfolio.

Basically, on the builder portfolio, what is the kind of LTVs and what is the kind of collateral that you normally tend to have? You say that you don't see any concerns. What would be the prime reason for that?

One is that we have been getting all the payments on time, so we are not seeing any material delays in payments, and absolutely no increasing trend in delinquencies on the portfolio.

On the security structure, in all these loans it is -- the collateral cover that we'll have would be at least 1.5 to 2 times. And in many of these cases, it will be closer to 2 times the loan value.

Okay. I think that's it. Thanks for the information.

Ashish Sharma, ENAM Asset Management.

Congratulations on a good set of numbers. I just wanted to get some data points on the deposits breakup. You mentioned that for the deregulation we are evaluating how the competition will pan out going forward. Can we have some break up as to what will be the percentage of deposits which will have average balances more than (inaudible) and below (inaudible)?

We have not separately given the size-wise breakup of the deposits.

Okay, but just a ballpark figure as to what will be the composition?

Ashish, we will wait and see how the situation develops, and we'll have an appropriate response.

Okay. And just one more data point. So what will be the yield on advances for the quarter, sir?

It's about 9.3%.

9.3%.

Yes, this includes then the loan book, including domestic and the overseas countries.

9.4% for the book.

9.4%. Okay, thank you.

Jimit Doshi, Reliance Securities.

Sir, we've seen a couple of banks are already increasing their savings rate, and I believe you have 29% of your total deposits are savings. And you mentioned that your NIMs would be stable from here on. I believe if you're going to compete with other banks by increasing savings rate, you would have a hit on your NIMs, isn't it?

As I mentioned to you, the response we have seen is from a couple of small banks having increased the rate on savings deposits quickly. I mentioned that the Savings Bank accounts, as we see it, are essentially transactional deposits, not put in banks with a view to earn a large interest. Even under the current regime, if the consumer was to be focused on interest and he had other avenues to deploy the money, including term deposits with the same bank.

So I don't think really the interest is the driver for pushing the Savings Bank behavior. So in this context, we thought that it was prudent -- being a large bank, it was prudent to watch the market develop rather than rush to increase the interest rate.

We also believe that over the medium term also, either -- or partly through increasing the fee income for transactions or what we charge from the customers for transactions, and also partly through passing on the increases in the lending rates, the margins of the banking system, including ours, will get protected.

You are right. In the short term, one could always see some kind of a disruption, but we are very confident that over the medium term, we'll be able to maintain our net interest margins and actually grow them.

But is that the reason you've guided a lower cash deposit growth?

For [asset] deposit ratio, we had spoken from time to time, even prior to the October policy of RBI, we had said that the systemic trends in terms of growth in demand deposits have been under a lot of pressure. In fact, as I mentioned earlier, the October 7 data shows that the demand deposits year-on-year basis have actually declined.

So clearly in that context, while we would have liked to have a 40% on an average basis CASA ratio, the numbers came out at a bit over 38%. So we are quite happy to keep it at about 38% to 40%. So that is what I really meant. So this has got nothing to do with the deregulation of savings deposits rates at all.

All right. And sir, one more last question is, given you have loans in high risk areas, even though you've explained everything, however, do you think that by lowering the provisioning you're not keeping enough buffer for any future uncertainties?

We have consistently followed provisioning policy based on which we do the provisions. In this case, largely it is in line with the RBI, and in some specific classes it is actually even more conservative than the RBI guidelines. We continue to follow those policies in setting out provisions. And as we have said earlier, the bulk of our increase in provisions was constituted by a specific portfolio which is retail and secured loan portfolio, which by reducing the exposure to such assets, we have been able to bring down the provisioning levels.

So the reduction in provisions is something which we had anticipated. We had said earlier that the provision for the whole year would be about 80 basis points on the loan book. But given the Q2 trends, we are more confident of actually getting to a [churn] provision number rather than the 80 basis points which we had told earlier. So it could be actually lesser than that is what we believe.

And apart from this provision cover of about 78.2% which we have built, we also have another INR15 billion of standard asset provisioning which also really is a cushion for the kind of book we are building. Given that we had the bulk of our loan expansion has been in the secured loan category, we are quite confident that we are adequately provided.

Right, and lastly what is the target deposit growth number, if you have --?

Deposit growth in general will meet with our loan asset growth which we talked about at about 18% or so. But our actual deposit increase would be a combination of our fund requirements. For example, at suitable times we have gone for borrowings to meet with our -- whenever we thought that it made sense to lock into a particular rate, we have done Tier 2 borrowings. That is something which we have done in the past. And the international book is largely borrowing funded, so that part of the book really gets funded by borrowing, so we don't see a corresponding deposit growth for the increase in that loan book.

And the wholesale deposits in the past we have not been very aggressive in terms of rates. So we have consciously increased our retail deposits and the mix of total deposits to more than 65% currently. So to me, our deposit per franchise is going quite strongly. I talked about our brand rankings, etc. So we are very happy with the kind of network we have built on the kind of retail deposit accretions we are getting. But to answer your question, the number would be really driven based on the requirements rather than our ability or inability to get the deposits. So that is not the issue at all.

Okay, that is it from my side. Thank you.

Mahrukh Adajania, Standard Chartered Bank.

Just a couple of questions. Why is there a housing growth also sub 10%? Because of prepayments or something, is it?

The prepayments are not really very high. So if you look at the -- based on the incremental investments and the normal prepayments which have been there.

Okay, but this could pick up, right, going ahead?

Given the increase in the lending rates that we have seen, we are seeing some signs of actually continued slower growth in the mortgage markets.

Yes, we would seek to keep and increase the market share. But the market itself, Mahrukh, depending on being an [Infra-sensitive] segment, one has to wait and watch.

Okay. Again, the other thing I want to check is that in international loans, when did you last raise money? Sorry.

In May.

In May, okay. And that was at what rate?

It was at about LIBOR plus [250].

All right. So as of now, if you want to continue with the same pace of growth in international loans, then when would the next borrowing have to happen?

Well, clearly, as I mentioned, we are not going to be rushing into any bond issuance given the current, the secondary spreads which are at about [330]. Actually, they have gone up quite sharply, and it has come down and it is stabilizing. And from our ALM perspective, we are quite well positioned to meet the [list of the] obligations from our current [security] and the (inaudible) [FX]. So whether calibration of the future growth rate in this book would really depend upon when and at what price we'll be able to access the bond markets. So we are not really in a hurry to access these markets in the current global environment.

The reason I'm asking is actually because the retailers' rates have [deteriorated] and if that group does not pick up, then how would you still achieve your 18% year-on-year growth target if international slows down? But if there's enough liquidity on international, then it's fine.

If we look at today's loan growth, Mahrukh, it is closer to 21% on a year-on-year basis. So we do not -- and you will have the peak season demand kicking in on the loan side. We don't expect any problem in getting to about 18%, actually. It's quite comfortable.

And your total slippages of INR7.8 billion, and in the last quarter slippages were around that much as well and there was some MFI slippage. So was there any MFI slippage this quarter, MFI NPLs?

No, not really because, Mahrukh, as you know, we have a total exposure of a little over INR10 billion. Between the slippages we find the first quarter and the restructuring which we have done this quarter, the MFI exposure is accounted for. So I think [beyond] (inaudible) slip.

Okay, so the slippage was generally spread out across --?

The other slippages were part of retail and across. And it's really small cases. And almost same number we got it as upgrade. So it's not really a net slippage in that sense.

And we were expecting that the restructured portfolio would actually grow by closer to INR12 billion. So on a gross basis, it's grown by INR7 billion. So the remaining INR5 billion to INR6 billion would come in the third quarter, is it?

No, I don't have anything on now to really forecast. But we always said about INR7 billion. This is what we said about MFI; that we were not looking for any specific restructuring during the quarter. No.

Okay. Not about GTL or some such accounts that are in the restructuring [cell]?

That will come in the December quarter. It will not -- it is expected to come in the December quarter. It's currently gone to CDS. And by the time it gets implemented, it will be the December quarter when it comes in. So there'll be some increase in the December quarter on account of the specific GTL exposure that you mentioned, and there may be a further restructuring as well.

Okay, thanks. Thanks so much.

(Operator Instructions). Lyris Koh, Barclays Capital.

I just have a question about bond matures in 2012. I understand that there's quite a big amount maturing. There's about INR1.7 billion to INR2 billion next year. If funding markets remain closed, how does ICICI intend to repay these bonds?

Currently, as Kannan explained, broadly the way the ALM structure is there for us on the international side, we will be able to meet the repayments on the borrowings, the longer-term borrowings, the bond issues and the syndicated loans through the repayments that we expect from our asset book. So we will be looking at the market from a fresh funding point of view only for new growth. Otherwise, it's quite well matched in terms of the repayments.

Right. So [is there] like credit lines or anything set up just as a backup for liquidity purposes to repay these funds?

As a bank, it would really not have access to credit lines of that sort. So broadly on an ALM basis, we would have enough repayments coming in on the assets side to meet the repayments of the long-term borrowings, and while we would expect the short-term borrowings to roll over.

And from a fresh lending point of view, we would look at doing a bond issue as and when the market improves.

Okay. And regarding the ICICI UK FRN that's callable on December 1 this year, has there been any announcement made regarding that?

No, that announcement is required to be made between 15 days and 30 days before the call date, assuming the call is exercised. It will follow the normal process.

Okay. That's it from me. Thank you.

Nilanjan Karfa, Brics Securities Limited.

Quick question. You mentioned something on the expense ratio and the employee costs. Could you repeat that for me, please?

On the expenses side, it has gone up by about 23.5% on a year-on-year basis.

Right.

Then I said that the increase has been primarily because of the increase in employee expenses, because if you look at the average employee count, it was about [48,500] people for the corresponding quarter in the last year, and the present quarter we had about 59,300 employees.

59,000?

59,375. These are average numbers I'm quoting.

Sure.

Given this, I basically mentioned that the bulk of the increase in operating expenses is because of the increase in employee expenses. All non-employee expenses are broadly under control. On the employee expenses, we do not have any plans of adding incrementally to the employee base on net terms. So bulk of the salary increases we have effected, and the manpower count is already reflected in the current run rate.

So what I mentioned was that the year as a whole, operating expenses we would like to still look at about 20% growth. The operating expenses to income ratio, while we would have liked to have it at about 41% or so, it had gone up in the quarter to about 44%, not necessarily because we are overshooting the budget on operating expenses, but because you have seen the fee income growth only at about 7%. Some of the income elements are lagging a bit; has resulted in the operating expenses to income ratio going up to 44%.

What I mentioned is that the operating -- the employee manpower contracts under control, we would like to control it, but bulk of the increase has been because of the manpower expenses.

And still in the medium term we would like to target about 41% to 42% cost to income ratio. That target has not changed. Maybe it will take a little more time to meet the target. But the cost to asset ratio, as we have always said, the 1.7% to 1.8%, that we should be able to meet with. So this is what the outlook is.

Okay. And then quickly, I just have to ask in a little more detail. Of course, if I look at the employee expenses, that has gone up quite substantially. What is the reason behind that and why is the number of employees going up rather than the Bank of Rajasthan employees who have come in?

The reason is because it was planned to increase in that manner. Because we increased our branch network to 2,500 branches currently we had to man all the branches, and it was a budgeted increase in manpower.

So as I mentioned, we won't overshoot our internal targets as far as the operating expenses are concerned. It is just that the ratio has become 44% from an income perspective, because some of the income line items, like fee income, have grown only at 7%. And given the market conditions, the treasury income has not been there at all.

So it is really that which has resulted in this -- the ratio going beyond 44%.

No, that I understand. I can understand.

It's not manpower suddenly going up or anything. It was always budgeted. It was always planned. We had to increase the branch network to 2,500, and we had to man the branches. So it's not an unanticipated rise in the manpower or anything which is unforeseen.

Okay. Sir, I have to ask you, is it like you are done in terms of the manpower hiring for the next five or six quarters (multiple speakers)?

If not five or six quarters, definitely three or four quarters. We have really done on the manpower. The only thing is that two caveats I'll put that if there is any attrition, we might replace the attrition. I suppose we are talking about the stock of employees.

Sure.

The new branches, whenever we put in there will be made requests for additional manpower, but I would say that for the next three or four quarters we are pretty much done.

Okay, perfect. The second question, can I have a -- what is your average ticket size in the home loan market in this point, excluding the building loan that you have?

One second. Just hold on.

It would be about INR1.8 million or so.

INR1.8 million?

Yes.

Okay. And quickly on a third question, I was -- on this power thing, it was a pretty detailed disclosure that Kannan had given. But if I can also get in terms of the commissioning schedule, because I think the guideline says that if there is a delay of two years, you will have to restructure it, or consider -- sorry, not restructure, but consider it as a substandard asset. So in terms of timeline, can you also specify how some of these projects are at this point in time?

Sir, in terms of -- there are some delays that a few of these projects have seen, but they are typically ranging in the -- about three to six months, and maybe up to one year in a few odd cases.

But overall, as of now, we are not seeing any case which would go beyond the two-year timeframe which is given by RBI in terms of completing the project. But [we are] trying this over the next couple of years.

Okay, perfect. Thanks a lot.

Ganeshram Jayaraman, Spark Capital.

Sir, I wanted to get to understand your loan growth strategies going forward a bit better. Retail is trending down. Overseas assets are not a high priority, and commercial real estate doesn't seem to be a priority too.

Is it fair to say that Infra is going to be the big growth sector in terms of is it going to be more from the project finance? When I mean Infra, I'm more meaning [mining] to pay part of it. Is it a fair --? Infra is already 16%/17% of your loan book, Where do you see that heading towards? Not just loan book, in terms of your total exposures. So where do you want to cap it? I just want to get your sense on taking next 12 months/18 months in perspective.

Yes. Overall, as Kannan already mentioned that we are looking at a growth of about 18% for the current financial year. So within that, the retail book will lag behind on that growth.

Currently, the year-on-year growth on the secure retail loans is about close to 10%, but overall, it's about 5% to 6% because unsecured book has still declined.

We are seeing strong growth on the Domestic Corporate business, one of course led by the disbursements happening out of the past sanctions that we have done. Plus we have seen increase on the working capital related demand as well on the corporate side.

So the corporate loan book is up about 25% year on year. That is the domestic corporate book. The overseas book on a year-on-year basis in dollar terms is up about 25%.

So for the current financial year, we will see the domestic corporate book driving the growth to close to the 18% amount that we are expecting for the year.

Going forward, I think next financial year also the corporate loan growth should be reasonably robust, though of course incrementally, the new sanctions have slowed down considerably, so at some stage, that could start impacting the loan growth. But that I guess is still some time away because there is a reasonable pipeline of the past sanction which is there currently.

Per se, we don't have any specific number in terms of what we would want our Infrastructure loan book to be of the total loan portfolio. So it will see some increase from the current level because there is -- the exposures are there which have been committed but not yet disbursed.

Sure. Okay. Secondly, the INR2,500 crores of restructure advances that you have, does it include any restructured loan from your overseas book as well?

From the overseas book, yes, it would.

Can you give me a breakup in terms of the INR2,500 crores in terms of the domestic and overseas book? Is it possible?

Don't have the -- we are not really giving that breakup, but it includes the entire banks.

The entire loan book. It's not just the domestic book. Okay. Finally, the home loans that you have totally, which is both in the Bank and in your Home Finance subsidiary add up to about INR64,000 crores/INR65,000 crores. Would it be possible for you to tell us what proportion of this would have seen some kind of [tenure] increase or is it something which you [won't be having offline]? Tenure increase given the interest rate increases.

Tenure increase would actually be -- would have been seen in a very large part of the portfolio, especially given the rate hikes that have happened over the last 12 months. I don't have the number offhand, but I would guess it will be like 70%/75% of the portfolio would have seen increase in tenure.

Sure, fine. That's it from me. Thank you.

[Anan Wasdevin], Franklin Templeton.

Your branch growth also has been fairly flat. You haven't really added too many branches over the last three quarters. And, Kannan, you earlier commented that you are pretty much done in terms of staff hiring for the next three or four quarters, so can we understand why the branch growth has been flattish and what's the outlook for the next few quarters?

We have really not added many branches post the Bank of Rajasthan acquisition, so that was again on a planned basis. So we have got about 300 to 350 licenses for the current financial year, which we will open in the second half of the year. So as Kannan mentioned that the employee count would pretty much be at the same level, excluding any additions for the new branches.

So for the new branches, we will definitely add employees, and we expect to open about 300 to 350 branches in the second half of the year. Some are -- actually, a lot of it will come up only in the last quarter.

Okay. And the other question is if I look at the RIDF bonds on your book, the proportion of RIDF bonds to loans, it's about 7%, which is quite high and that is a drag on your margins. But also, the proportion has not really changed over the last one year, which means that you seem to have to add RIDF bonds in line with your loan growth. So are you not able to increase the proportion of direct priority sector lending that you're doing?

We continue to see shortfalls while on an overall basis, the priority sector lending we are able to meet. But within that, the weaker section lending, which has to be 10% of the net bank credit, and the [direct agriculture] is where we have seen shortfalls. Even for March 2011, we had a shortfall there, and that is I guess true for most of the private sector banks. So it is indeed a challenge that is there.

Would this proportion of RIDF bonds to credit loans remain fairly constant for the next few quarters?

It actually would, because on the way it works is that when you have an RIDF shortfall, the way the current guidelines are that these do all count towards priority sector in the following year. So it kind of accumulates for some time.

Okay, thank you.

[Ashwini Manwatka], (inaudible).

Out of the INR7.4 billion that has gone into restructuring, mainly on account of macro finance, do you expect any default in them?

Sorry, can you repeat the question?

The macro finance restructuring that you have undertaking in Q2, do you expect any NPAs from there?

No, nothing. We have just done the restructuring. We don't expect any until -- in the near future [some day]. Have to wait and see how they perform on the restructured terms. But as of now, sitting here, we don't anticipate immediately.

Okay. What was the hiring done in Q2 alone?

Q2 alone, the employee count was flat, so net employee addition was not there.

Net was not there, but any gross level?

Of course. There is some attrition in this business and we always do.

Okay.

But [at level], we have nothing.

Okay. And what kind of asset quality levels do you see by the end of FY '12?

No. As we have mentioned that the provisioning expenses for the whole year will be mirroring what we have done for the first half, that is from a P&L perspective. Asset quality perspective, we don't anticipate any huge slippages or anything at all for the rest of the financial year.

Okay, that's it from my side.

It's holding quite well. Asset quality there's no issue.

Okay, thank you, sir.

[Bajram Havna, Sunny D Securities]. I think Bajram Havna has disconnected the line. Jatinder Agarwal, RBS.

Two questions, one is on the security receipts. Last couple of years, we have seen that amount come down by about INR100-odd-crores every quarter. Do we actually get some cash against this? Or does it just being written down all the way to zero?

Just it is mostly actually cash which comes in against this. We also hold mark-to-market provision on it anyway. So the trend that you are seeing is on a gross basis, INR26 billion. Against that we will be holding provisions as well. Actual repayment's coming from these security receipts.

So if I have INR100 crores of gross cash receipt and I have [INR50 crores] of it is a accumulated provision that I have made against that specific security, then it comes on by INR50 crores, is it? Do you mean to say that way?

No. Mean to say is that the INR100 crores reduction per quarter that you mentioned is a cash receipt. Then we hold mark-to-market provisions based on the declared and [indeed] of the (inaudible), which is (inaudible) numbers reflected in the balance sheet.

Okay. And secondly on these international subsidiaries, what is your -- the management assessment of the regulatory environment? And how long do you plan to keep the capital on hold in some of these subsidiaries that [the notes] have not been growing for last two years?

See our management outlook on the regulatory regime there is that increasingly they will require us to lend locally if you -- deposits locally. And both these books in Canada and UK are domestic deposit-funded books. So that extent, there are going to be challenges in our ability to grow the portfolio in a reasonable risk manner, and the portfolio, which we understand very well.

So as a result, we have taken an [out-call] that we will not aggressively expand the loan book. In fact, as I mentioned earlier in the call, the UK book has further come down during the quarter. So we will continue flat to decline kind of an outlook for both the subsidiaries in Canada and UK.

From a profitability perspective, reasonable ROE will be generated, not at this level of capital, but a reduced level of capital. But I know we are -- we have just started the dialog, for example, with the Canadian regulator to see if part of the capital can be repatriated. But my own sense is that it will take some time before we get some cheer on ability to repatriate capital. 'Til then, we will manage with lower ROE, but not expanding the book aggressively. But we [look for] opportunities and have dialogs to see if we can bring part of the capital back here.

One small question on existing margins. Can we get the domestic margins and international margins for the quarter?

As I mentioned earlier, the domestic margin is 2.92%, and the international margin is 1.09%, which has improved through the year. And we expect to close the year with about 1.2% margins for international branches.

Lastly, on savings bank regulation, what do you think will make you actually act first in terms of increasing rates?

We are not planning currently any increase in rates at all.

But someone will blink first, right? So we just see the smaller banks blink mostly.

And there has been [two first already] other banks doing it, but we will wait and watch. And again, as I said earlier that with a period of time in the medium term, I think we will be able to protect the margins by charging for transactions which we give free of customers, charging it from the customers, and also passing on if any some of the increase in the lending rate. So maybe there could be some short-term disruption, but we will wait and watch, and we will be -- we will hope to maintain the margins.

Any constructive dialog with some of the peer banks on this?

No, there is constructive dialogs at all.

Perfect, thanks a lot. That's useful.

[Mudip Manuli], Macquarie Capital.

Regarding your insurance subsidiary, the NBP margins have they stabilized, or do you still see some pressure there?

The margins, NBP margins currently are at 16%. As we have said, the margins will be anything between 15% and 16%. That is something which has -- that we are quite hopeful of achieving.

And any chances -- so this is basically taking into account the 14% tax rate, is it so?

About the same.

Okay. And finally, is there any directive from the RBI that if you increase the tenure of your home loans, you have to classify them as restructured loans?

No.

Because a recent news report actually claimed today that RBI is saying that if you have increased your tenure of home loans, you have to classify it as restructured. So normally, it's done during the rate increase cycle, right, or is it --?

That's right.

Yes. So so far, there has been not issue from the RBI, correct?

No issues, yes.

Okay, thanks. Thanks a lot.

[Grudan Cheera, Value Quest Research]

So what is the exposure to airline and textile sector?

For air, the significant exposure to airline industry is only the Air India bonds which we have, which are fully backed 100% secured by Government of India guarantee. It was really a -- more like an arrangement mandate and (inaudible) loan, which is we're very much on track, so no concerns at all.

Apart from that exposures, we have not a material exposure at all to (inaudible), Kingfisher, which is -- it may be a part of the restructured loans which we have talked about earlier. That's about it. It's less than 1%, and that is not -- that's a portfolio which is -- which we are not aggressively building. So it is less than 1% of the loan book. So both these exposures are not really very significant.

Would it be possible to give the amount of the Air India bonds?

Air India bonds, the original mandate as far as arrangement was, INR55 billion, Government of India guaranteed bonds. And even from that date since we have been selling it down, so the current exposure will be lower.

Okay, lower than this. Okay. And so have you [provided] anything for GTL loan?

GTL, as we have said earlier, a part of this exposure we have converted into the equity shares. And the equity shares like any other equity shares has been mark to market. So it will be reflected at the current price in our books.

Okay.

But what mark-to-market loss, we have to take on account of debt, we have already taken it in the quarter.

Can you quantify how much was the mark-to-market loss?

Not specifically talked about these individual exposures.

Okay. Sorry, one last question. Do we have any exposure to KS Oils?

Yes, we have some exposure to KS Oils.

Would it be possible to quantify it?

No, not really. It's a small exposure.

A very, very small exposure; doesn't bother us at all.

Okay. Thanks a lot.

[Ameet Prinjandami, UTI Mutual Front].

Similar kind of interest rate for all the new customers. What would be the likely scenario of banks (inaudible) implementing for banks also? And how do you think it will play out?

The -- I didn't hear the first part of your question, but if your question was regarding the NHP guidelines on home loans, on the repayment penalty not being there for home loan floating rate launch, that is something if it is made applicable to us, the impact will not be very significant at all. So that is something we can manage without any significant impact on our financials. But neither of this is being talked about today in terms of a circular or anything, so we'll wait and watch.

And how do you think the market dynamics will change for the HFCs versus banks if such a circular is applicable for both? And as for your experience, who will be the likely beneficiary, the bankers or the housing finance companies?

Normally, what we have seen in all such regulations is that banking sector is coming under the (inaudible) first. It is being followed by NHP. That is the regime we are used to. So this time around, it is -- sorry, NHP has gone ahead and done this first. We'll have to wait and see how it develops.

And another question on the pending restructuring proposal. If you take into account all -- a lot of cases have been talked about in the media, GDL, Air India, and they report a lot of other stuff. If you take all that into account, which are under CDR pending for restructuring, what will be your exposure to the pending restructuring proposals in CDR?

First of all, to an earlier question, I think Mahrukh or someone had asked, and said that we were expecting about INR12 billion of restructuring during the quarter. We're [replacing] that that is not for the quarter. That is what was what was expected to be done this quarter has been done, but it's really meant for two quarters.

Okay.

Second on Air India, CDR proposal. As I mentioned earlier, the significant exposure to Air India is on account of the government, fully government guaranteed bonds, and that is not under the policy of CDR, so that we will [sell on] as we go along, and I don't expect that to reflect ever in our restructuring book at all.

Okay. Thanks a lot. That's it from my side.

[Hereen Dusani], Goldman Sachs.

Just if you were net off the builder loans for property growth on the mortgage side?

It would be, on a year-on-year basis about 5%.

Okay. The other question is that on the impact of pre-[prepayment] and all that part of [payment] asking can you just quantify what would be the difference between your existing borrowers -- the rate which your existing borrowers is paying, and what rate you will be acquiring new customers for a similar credit?

The operational challenge with those guidelines issued by NHP is immense, as maybe some other housing finance companies would have mentioned to you. So it's not really that one has clear risk categories of customers based on which the pricing is done, like say on the corporate side where you have a rating for each proposal. So it's very difficult to say what is a like-to-like rate, but indeed, the existing customers will be in a range of rates, and some of those rates will be higher than what a new customer could get. But to exactly compare it is quite difficult.

Okay. And again on the restructured book, if you were to think about all the proposals which are pending with the CDR, what would be the restructured book as of March '12 assuming that there is no fresh proposal which goes into the CDF? The book which is at about INR25 billion, how much approximately that would be if only the existing proposals in the CDR will be implemented?

So as we have said, the one pending restructuring that is there is GPN, and beyond that, we don't really have any large restructuring on hand as of now. There may be a couple of cases which will come in the next few months that we'll have to wait and see. But there is no big spending backlog of CDR cases right now.

Not in our --

(Inaudible), which we have talked about, which we expect to get done in the (inaudible).

[I tell them that we don't -- we are not hiring any huge pending cases or anything in CDR.

Okay. And lastly, were there any below the line adjustments in the results in the ICCIC UK in this quarter? In the network, that is.

There would have been some movement in the market to market on the results. It was very small. It was about $5 million or $6 million.

Okay.

And the other thing that whatever book we have sold, that is the UK investment book which I mentioned earlier, that has come down by about half from about a little over $600 million to a little under $300 million. So that is -- whatever little losses are there, that has gone through the P&L account for the quarter.

So the impact, the exact impact, it was $60 million on June 30, not is not $68 million, negative.

That is the -- to the first part, which is what went through [the services] what Rakesh mentioned.

So that's about $8 million increase in the -- $8 million would have gone through the results?

That's correct.

Okay. And like Canada, we have not initiated any dialog with the UK regulator yet?

No, not yet. But --

Capital base is also much smaller.

Yes, capital base is also seen from our perspective, the big significant capital is in ICICI Canada, so we give priority to that.

Sure. Thank you very much.

Thank you.

Kashyap Jhaveri, Emkay Global.

Congratulations on a good turn of numbers. I have two questions. One, if I remember correctly, we had a total MFI exposure of about INR1,000 crores of which about INR200 crores was classified in NPAs the previous quarter. And this quarter, we have restructured something like about INR750 crores. So a large part of MFI portfolio in terms of restructuring and NPAs is all done?

Absolutely.

Okay. And second question, if I understand it, is on provisioning. Have you done anything in this quarter, and if not, when do we start doing that?

Currently, we have (inaudible) RBI guidelines, and that's the guidelines. We cannot reverse that. So we are not in any further general provision in the first half of the financial year. Maybe for this year we will not be requiring to make any general provision.

Okay. So probably 1Q next year we would start doing some?

Depending on [how they are big, I think].

Okay, sir. Yes, I'm done. Yes, thank you.

Manish Shukla, Deutsche Bank.

I just want to talk on the international subsidiary losses that you have taken in the international subsidiaries. Does that also flow through P&L? And how much of that thing has been flowing through the P&L?

I'd say that -- [as losses]? As losses, Manish?

No, the point is that if you look on a quarter-to-quarter basis, or even a year-on-year basis, profits from UK subsidiary and Canada subsidiary is down substantially. Is it because of the investments that you would have sold?

Oh, no. Partly it is because the balance sheet itself is coming down in UK subsidiary, and Canada has been slight, so profits have not been growing there because of that.

What I had mentioned earlier was that apart from the decline in the balance sheet itself leading to a decline in profit growth -- a decline in profit, I also mentioned that when we brought down our UK investment book by half, whatever little profit, that losses which had to be booked, that has gone through the P&L, of course. That's what I had mentioned.

Then does that mean that the run rate that we're doing now would be a similar kind of run rate that will continue, given the fact that we are anyway not doing much in the international subsidiaries?

No, we would like to improve the profitability, because of the knocks which we had to take we have already taken. Our hope is that we should be able to increase the profits from here on.

And what was the nature of the investments that you have sold? Was it some old investments, or it's just the market-to-market that you have taken?

No, no. This is -- I would say UK used to have largest bond portfolio to financial institutions and banks. And given the euro situation and other emerging global situations, we have been quite conscious to bring down this exposure. Over the last one year, we have brought it down substantially, and that during the quarter as well, we brought it down by about $300 million. That is the part of a conscious strategy to de-risk the portfolio, and then probably keep it in safer instruments. So it's part of that strategy.

Okay. So has it been largely de-risked now, or given the -- can it further re-occur if the situation in Europe continues to remain uncertain?

As I mentioned, the $300 million of the risk exposure that we have requires a diverse spread exposure, it's largely being in Asia Pacific banks and other domains. And the Europe exposure that I mentioned too is only about [$37 million] to a UK-based institution. So we don't see any problem at all. And even if there was any nervousness about this portfolio, it will be insignificant in the overall scheme of things.

So we are pretty much done with -- to answer your question, we're pretty much done with that.

Okay, sure. And also on the insurance, if you look at the last three quarters, your assets under management have consistently been coming down, and maybe that trend is getting -- the pace is actually increasing. Is this a sign of (inaudible), and probably what to read between this is that your [relapsation] rate is pretty high, sir? It does seem to be very high. Is that a worrying sign from an insurance perspective, or you think that's a normal trend of the market.

From a month-on-month perspective, I have looked at the [sudden bursts] and relapsation, but all the quality of the book has only improved. And management has taken very specific measures to reduce the sudden bursts and improve the (technical difficulty) be aware that it's playing out well.

The primary reason for what you mentioned in terms of the assets under management reduction is one is because of the market. It is all mark to market, so given that the predominant portion of assets under management is still equity, market conditions have resulted in the mark-to-market negative portfolio, that side of portfolio itself has come down. And secondly, that we have yet to see the kind of growth in the [healthcare] premiums like in the past.

So I think the industry is still getting adjusted to the new set of products. And post-October and November, we believe that industry will get back into the positive growth rate. At the time, you will see the fresh sales adding to the [AEMs]. So I think it is because of these two components it's got I think really to do with the sudden burst and relapsation.

Okay. And after a long time, your expense ratios have started to go up on the insurance front. Again, is that because of lower top line or --?

That is just largely because of the lower top line, because from an efficiency and productivity perspective, they have improved quite a bit. And the season is really third and fourth quarters, so I would request you to look at the year as a whole number to judge on key operational efficiencies.

Right, and just a couple of data points. What's the breakup of provisions during this quarter? How much was for NPLs, how much for restructure, and were there any investment related provisions.

Most of it is for NPLs. Restructuring is quite a small provision, and there is some provisional investments. But most of it will be NPLs.

Okay, and what would the total treasury loss on equity that you would have taken?

We have not separately run that number.

Okay, but of the total treasury trading profit, negative number in the trading profit would be largely from equities; a fair assessment to make?

Actually, it would include --

Yes, I had mentioned earlier about GPL and such as affairs where there is as a part of the loan conversion or any other structural book issues in the past, whatever [conversion] equity that gets mark to market. But given that these (inaudible) have come down by 13% over the quarter, the entire mark to market on those have got reflected in the treasury line items.

Right. And lastly, just to [recap] from the rupee depreciation will not have any impact on the P&L of the Bank, right?

You are right, absolutely.

Okay, thanks a lot.

Thank you.

Thank you so much. As I see that there are no further more questions, I would like to hand the call over to Mr. N. S. Kannan for closing comments. Please go ahead, sir.

Yes, thank you once again for joining us on this call. My team and I are available for any residual questions you may have.

Thank you. Bye, goodnight.

Thank you so much. On behalf of ICICI Bank Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.

Thank you.