ICICI Bank Ltd (IBN) 2013 Q1 法說會逐字稿

Ladies and gentlemen, good day and welcome to the ICICI Bank Q1 2013 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. Kannan, Executive Director and CFO of ICICI Bank. Thank you, and over to you, sir.

Thank you. Good evening. Welcome to the conference call on the financial results of ICICI Bank for the quarter ended June 30, 2012, which is the first quarter of the financial-year 2013, that is, Q1 2013.

As always, my remarks this evening would revolve around four key themes, first, the domestic macroeconomic and monetary environment, followed by our performance during the quarter, including performance on our 5C strategy. Then we'll move on to our consolidated financial results and, finally, the outlook for the full financial-year 2013. Let me start with the first part on the macroeconomic and monetary environment during the first quarter.

Global economic conditions, as we know, continued to remain uncertain during the quarter. While the concerns of a sovereign default and the possibility of Greece exiting the Eurozone abated, the possibility of a prolonged economic recession remains, with the data indicating that even the core economies in the region are slowing down.

On the domestic front, inflation risks persisted, even as there were indications of growth slowdown and weak investment climate. The index of industrial production, IIP, was considerably weak during the quarter, recording a decline of 0.9% in April and a growth of 2.4% in May 2012 on a year-on-year basis. Merchandise exports growth, which slowed since the second quarter of fiscal 2012, continued to moderate and recorded a decline of 0.7% during April-May 2012 on a cumulative basis.

The deceleration in imports was sharper, with the decline of 2.4% during the same period, mirroring the slowdown in growth and investments. The GDP growth for fiscal 2012 was 6.5% as compared to advance estimates of 6.9%.

Overall inflation eased slightly, from 7.69% in March 2012 to 7.25% in June 2012. However, food inflation rose from 10.11% to 10.81% during the period. Fuel and manufactured products inflation eased during Q1, while core inflation, which is the manufactured products excluding food products, remained flat at around 5%.

Systemic liquidity eased during the first quarter of fiscal 2013 compared to the fourth quarter of the last fiscal. The average daily borrowings by banks under the LAF window came down to about INR970b during Q1 2013, from about INR1.4 trillion during the Q4 of 2012. Liquidity pressures have further eased in July 2012, with the average LAF borrowings reducing further to less than INR500b.

Interest rates on market instruments like Commercial Papers and Certificate of Deposits normalized during the quarter with the easing of liquidity in the system. The three-month CP rates, which had crossed 11% during Q4 2012, moderated to about 9.5% during Q1 2013. A similar trend was seen in the CD rates as well.

Considering a reduction in inflation recorded in the fourth quarter of fiscal 2012 and signs of slowdown in growth, the RBI reduced the repo rate by 50 basis points in April 2012. However, with inflationary trends persisting subsequently, the RBI left the policy rates unchanged in the subsequent policy announcements. The yield on the 10-year benchmark government securities eased during Q1 of 2013, with the yields declining by about 40 basis points to 8.2% during Q1 of 2013.

Equity markets remained volatile during the first quarter of fiscal 2013, mainly due to uncertainties around the resolution to the European debt crisis and weak domestic macroeconomic data. FII inflows during Q1 of 2013 were $724m on a net basis. Benchmark BSE Sensex moved from 17,404 at March 30, 2012 to a low of 15,948 in May 2012, before increasing to 17,430 at June 29, 2012.

The Rupee depreciated significantly against the dollar by about 10%, from INR51.2 per US dollar at end March 2012 to INR56.3 per US dollar at end June 2012. RBI announced several measures to arrest the Rupee movement, including enhancing foreign investment limit in government securities by $5b to $20b; allowing long-term investors like sovereign wealth funds, endowment funds, insurance pension funds to invest in government securities; relaxing external commercial borrowing norms for manufacturing and infra companies etcetera.

Credit off take from scheduled commercial banks remained moderate during Q1 of 2013 on a year-on-year basis. Non-food credit recorded a 17.4% increase year on year at July 13, 2012, compared to a growth of 16.8% at March 23, 2012 and 19.3% at March 30, 2012. Similar trends were seen with respect to deposit growth as well. Total deposit growth recorded a 14.7% increase year on year at July 13, 2012, compared to a growth of 13.5% at March 23, 2012 and 17.4% at March 30, 2012. It moderated to 13.4% at June 29, 2012.

Demand deposits grew by 6.6% year-on-year basis at July 13, 2012, compared to 15.3% at March 30, 2012 and a decline of 2.6% at March 23, 2012. Growth in time deposits decelerated from 17.7% at March 30, 2012 to a growth of 15.6% at July 13, 2012.

So with this background let me now move on to part two, which is ICICI Bank's performance during the quarter, including our performance on our 5C strategy.

With respect to credit growth the total advances for the Bank increased by 21.6% on a year-on-year basis from INR2.21 trillion at June 30, 2011 to INR2.68 trillion at June 30, 2012. The growth was largely driven by domestic corporate loans, which increased by 28.3% on a year-on-year basis. And net advances of overseas branches increased by 34.5% on a year-on-year basis. The depreciation of the rupee had a positive impact on the growth of the net advances of our overseas branches. Excluding this impact the year-on-year growth on the overseas advances would have been about 8.1%.

Growth in the retail loan portfolio increased to 10.3% on a year-on-year basis at June 30, 2012, compared to 7.7% growth we had at March 31, 2012. The growth in the retail portfolio was driven by growth in the secured retail lending categories, with outstanding mortgages increasing by about 9%, auto loans increasing by 17% and commercial business loans increasing by 22.7% on a year-on-year basis. The unsecured retail portfolio for the Bank was INR35.5b at June 30, 2012, at about the same level as it was at March 31, 2012.

Let me move to the next C on CASA deposits. Mobilization of CASA deposits has been challenging, given the volatility in demand deposits in the system as I described earlier. Despite this the Bank maintained its average CASA ratio. The average CASA ratio during Q1 was 39.1%, at about the same level as in the previous quarter.

On an absolute basis the Bank's savings account deposits grew by INR18.77b in Q1 of 2013. Overall the current account deposits declined by INR42.19b, which has been the systemic trend as well. The period-end CASA ratio for the Bank was 40.6% at June 30, 2012 as compared to 43.5% at March 31, 2012.

The next C, on costs, for Q1 2013 operating expenses including DMA expenses were higher by 16.7% on a year-on-year basis. On a sequential basis the operating expenses have declined by 4.4% due to lower bonus provision we have made in Q1 2013 as compared to Q4 of 2012. For Q1 of 2013 the Bank's cost-to-asset ratio was 1.8% and the cost-to-income ratio was 41.8%. So we have seen a moderation in these ratios.

Let me now move on to the next C, on credit quality. Provisions remained at broadly the same levels on a year-on-year basis as well as on a sequential basis. Provisions were INR4.66b in Q1 of 2013 compared to INR4.54b in Q1 of 2012 and INR4.69b in Q4 of 2012.

Credit costs as a percentage of average advances were at 71 basis points during the quarter on an annualized basis. On a sequential basis provisions remained largely unchanged as lower restructuring provisions were partly offset by standard asset provisioning of about INR0.76b in Q1 2013, reflecting a growth in our loan book.

During Q1 of 2013 our gross additions to gross NPAs was INR8.68b as compared to gross additions of INR30.62b during the full-year, financial-year 2012. Our recoveries in Q1 2013 were INR4b, resulting in net additions to gross NPAs of INR4.68b. We have also written-off INR1.2b during Q1 of 2013.

On a full year basis the Bank does not expect the credit costs to average loans to exceed 75 basis points, as we have articulated earlier. The net NPA ratio was 61 basis points at June 30, 2012 as compared to 62 basis points as of March 31, 2012.

Our provisioning coverage ratio was 80.6% at June 30, 2012 as compared to 80.4% at March 31, 2012. The net restructured assets portfolio decreased from INR42.56b at March 31, 2012 to INR41.72b at June 30, 2012, primarily due to the sale during the quarter of the Bank's loan to Kingfisher Airlines, classified as standard restructured at March 31, 2012. During Q1 2013 the Bank saw gross additions of INR3.5b to its net restructured portfolio.

The final C, on customer centricity. The Bank continue to focus on enhancing customer service capability and leveraging on its increased branch network to cater to the expanding customer base. During Q1 of 2013 the Bank added 360 ATMs to its network, taking the total number of ATMs to 9,366 at June 30, 2012 to supplement its branch network of 2,755 branches at the same date.

The Bank also focused on increasing convenience for customers while transacting through various channels. Accordingly, during Q1 the Bank enhanced its website to offer a differentiated portal experience to different customer segments. This enabled faster access to services based on individual needs. The Bank's Facebook initiative continues to be appreciated by customers, with over 650,000 fans for the ICICI Bank Facebook page.

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

The net interest income increased 32.4% year-on-year basis, from INR24.11b in Q1 of 2012 to INR31.93b in Q1 of 2013. The net interest margin improved from 2.61% in first quarter of the last financial year to 3.01% in Q1 of 2013, an increase of 40 basis points. On a sequential basis the net interest margin was at a similar level as compared to 3.01% in Q4 of 2012.

The NIM on domestic business was 3.32% in Q1 2013 as compared to the same level in Q4 of 2012 and 2.94% in Q1 of 2012. International NIM improved from 1.52% in Q4 of 2012 to 1.60% in Q1 of 2013 on account of re-pricing of some of our assets.

Let me move on to the fee income. Fee income increased by 4.4% on a year-on-year basis from INR15.78b in Q1 of 2012 to INR16.47b in Q1 2013. Continued moderation in fee income growth was primarily on account of corporate banking fee income, which remains impacted by the slowdown in new projects and financial closures. During Q1 of 2013 there was continued momentum in granular fee income streams, such as ForEx and derivative fees, transaction banking fees as well as remittance fees. In addition, the Bank has also seen growth in retail asset fees in Q1 of 2013.

Let me move on to the other income. The other income for the Bank increased from INR0.9b in Q1 of 2012 to INR2.54b in Q1 of 2013, primarily due to higher dividend received from the subsidiaries. In Q1 of 2013 the Bank received dividend of INR1.33b from ICICI Bank Canada, following the approval from their regulator, OSFI.

Further, in Q1 of 2013 the Bank has continued to receive dividend from ICICI Life, which had not been the case in first quarter of the last financial year as dividend payouts by ICICI Life commenced from the third quarter of the last fiscal.

Let me move on to the treasury income. During Q1 of 2013 treasury recorded a loss of INR0.21b as compared to a loss of INR0.25b in Q1 of 2012 and a profit of INR1.58b in the Q4 of 2012. The loss in Q1 2013 was primarily on account of the loss on security receipts and losses on the Bank's equity investment, offset, in part, by proprietary trading gains and gains on fixed income portfolio.

I have already spoken about the trends in operating expenses and provisions in the context of 5Cs strategy. As a result of these above drivers the Bank's standalone profit before tax increased by 39.5%, from INR17.8b in Q1 of 2012 to INR24.83b in Q1 of 2013. The Bank's standalone profit after tax increased by 36.3%, from INR13.32b in Q1 of 2012 to INR18.15b in Q1 of 2013.

Let me now move on to the consolidated results. The profit after tax for the life insurance subsidiary was INR3.49b in Q1 of 2013 as compared to INR3.39b in Q1 of 2012. This level of net profits reflects an annualized return of about 28.5% on the Bank's invested capital in the life insurance subsidiary.

Following a phase of transition to a new regulatory regime ICICI Life has started witnessing healthy year-on-year increase in volumes. The new business annualized premium equivalent, that is, the APE for ICICI Life, increased by 28.1% (sic - see presentation "28.7%") from INR4.43b in Q1 of last fiscal to INR5.7b in Q1 of this fiscal. The new business margin for Q1 2013 was around 15%.

The retail weighted received premium for ICICI Life increased by 30% in Q1 2013 compared to a 2.8% year-on-year decline for the private sector and 26.3% growth for the industry. So ICICI Life maintained its market leadership in the private sector with an industry market share of 5.3% on the basis of the retail weighted received premium for Q1 of 2013.

Moving on to ICICI General Insurance, it recorded a 107.5% increase in profit after tax from INR0.4b in Q1 of 2012 to INR0.83b in Q1 of 2013, driven by an increase in gross premiums and investment income. The company maintained its leadership position in the private sector with an overall market share of 8.7% in Q1 of 2013.

As I had mentioned during the fourth-quarter results call, during financial-year 2013 ICICI General would have some impact of the motor third-party business as the liability is actuarially valued periodically and due to any share of the declined pool accruing to the company. However, despite this impact we continue to expect the company to be profitable in financial-year 2013.

With respect to our overseas banking subsidiaries, I'd 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 Q1 of 2013 was [rupees] CAD11.9m as compared to CAD12.3m for Q1 of 2012. Total assets for ICICI Bank Canada were CAD5.32b at June 30, 2012, a marginal increase as compared to March 31 numbers. The capital adequacy ratio was 31.8%.

ICICI Bank UK continued to see balance sheet consolidation during the quarter, with total assets declining from $4.08b at March 31, 2012 to $3.86b at June 30, 2012. The profit after tax of ICICI Bank UK for Q1 of this fiscal was $4.4m compared to $5m in Q1 of 2012. Capital adequacy ratio was 34.1% at June 30, 2012.

Now let me talk about the overall consolidated profit. The consolidated profits for Q1 of 2013 increased by 24.6% to INR20.77b compared to INR16.67b in Q1 of fiscal 2012. The consolidated ROE improved from 12% in the first quarter of last fiscal to 13.3% now.

I now want to talk about our outlook for fiscal 2013. As I mentioned earlier, there has been a moderation in economic growth with a significant slowdown in the new project activity. At the same time several changes on the regulatory front are underway. Our outlook for fiscal 2013 has to be viewed in this overall context.

For fiscal 2013 we estimate our domestic loan growth to be slightly above the system growth, driven primarily by growth in the retail portfolio and continued off take out of past project sanctions and working capital demand in the corporate segment. We currently estimate the system growth for fiscal 2013 to be about 17% to 18% and, accordingly, expect our domestic loan growth to be about 20% for the full year.

However, given the current environment and the large amount of repayments on the overseas branch portfolio in 2013, we expect our overseas loan book to remain flat or probably decline marginally in financial-year 2013.

The target for average CASA ratio would continue to remain at about 38% to 40% range. With respect to margins, while there is some uncertainty on the system interest rates and trends in lending and deposit rates going forward, the Bank would endeavor to achieve an overall margin of about 3% for this full year, financial-year 2013 as compared to 2.73% for the full year, financial-year 2012.

For the fiscal 2013 we'll continue to expect an overall fee income growth to reach double digits, driven primarily by the momentum in granular streams such as ForEx and derivative fees, transaction banking fees, remittance fees and retail asset fees.

With respect to operating expenses, we would be working to keep the cost-to-income ratio at about 41% to 42%, as we have articulated earlier. With respect to credit costs, the Bank expects that it would be required to make standard asset provisioning going forward. However, overall credit costs, including such standard asset provisioning, is not expected to exceed 75 basis points for the full-year 2013, based on the current RBI guidelines and our current assessment of asset quality trends.

Based on these drivers we expect to achieve a continued improvement in the standalone return on assets from 1.5% in last financial year to about 1.7% over the next two years. The Bank would target to reach an exit run rate of 15% for our consolidated ROE by the end of this financial year. Our growth strategy will continue to be balanced vis a vis the risk and the profitability, given the overall global and domestic environment.

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

Thank you. (Operator Instructions). We have the first question from the line of Suresh Ganapathy from Macquarie. Please go ahead.

Yes, hi, I just had a question on the revised PSL guidelines which got released about a week before. I wanted to know whether it would have any impact in the sense that how much was -- proportion of your portfolio would have to be declassified. Just to give an example, lending to housing finance companies have been declassified and also certain companies in the supply chain of the agri sector has been declassified, or, rather, reduced. So can you just give us some indication there?

Yes, there would be some impact, because we were hoping on the RIDF on an outstanding basis to be reckoned for computation of the priority sector obligations. That is not to be and some of the areas they have declassified, but there are always some positives as well in the guidelines.

For example, they have talked about the outstanding book of home loans being considered for the priority sector. They've also talked about corporates -- lending to corporates being eligible for priority sector. They have also talked about buyout being classified as a priority sector.

So it's sort of a mixed bag. There are some positives. There are some negatives. So, however, we would continue with our strategy of granularly building this portfolio and these challenges which I talked about will be there across the banking system.

So relatively we don't expect to be disproportionately impacted and, as we have articulated earlier, in the base case itself we are factoring in some kind of a shortfall in computing our expected RIDF investments through the year. We don't expect those estimates to change significantly having looked at those guidelines.

No. This outstanding RIDF, anyway, was not allowed to be computed as a part of PSL, right, in the earlier guidelines also. You don't take Nair Committee, but the normal ones currently?

I agree with you. But given the Nair Committee recommendations we are hoping that would happen, which is not to be now.

Okay. So can you quantify what could be the declassified amount in your book, say, as of FY '12 if you were to declassify them as PSL?

We would need to -- because these are guidelines have just come so we will have to look at each of these clauses and do a full assessment of the portfolio in terms of what the declassification could be and what could be the additional things which could get classified as PSL. So there is a not a specific number that we would be able to offer right now in terms of what the exact quantitative impact would be.

Okay, fine. And just, lastly, the security receipts what could be the losses this quarter?

About INR1b.

Okay, thanks, Rakesh.

Thank you. The next question is from the line of Subramaniam PS from Sundaram Mutual Funds. Please go ahead.

Sir, good afternoon. Three questions. Firstly, on the revised restructuring rounds if you were to adhere to these rounds how would our restructure loan book look like. Would it be any different from the number that you have disclosed now?

In terms of -- there are no guidelines which have come. This is a working group report which is there, so we will have to look at what the exact guideline comes in terms of the classification of restructured loans and upgradations.

So what the report currently says is that the upgradation of restructured loans should be linked to existing guidelines of RBI for restructured loans, so when your general provision requirement on restructured loans normalize or the risk-weighted assets normalize as per the current guideline. The same criteria should be used for upgrading standard assets out of the restructured category.

So currently, as you are aware, we grew our reporting based on one-year period of payment performance, post the payment starting from the restructured company. And that is the same criteria which is given by RBI for the risk-weighted assets. So a restructured loan carries a 125% risk-weighted asset risk weight until one year of payment performance, when it reverts down to 100%, so we are using the same criteria currently.

They, of course, additionally mentioned about the general provision criteria also being included, so once the final guidelines come out we would get a sense of what exactly would be the impact. But overall, in terms of the general provision increase and other impact, it's not going to be a significant impact for us, given our current portfolio.

Okay, secondly, on this dividend that you've started getting from your Canadian subsidiary. Just could you share with us what the tax implication of this would be in terms o both the Canadian subsidiary and also the Indian Bank?

We would be paying 15% tax on the dividend income that we receive from our overseas subsidiaries.

Okay, sure. And, thirdly, on the branch expansion we've seen quite muted growth in the number of branches. I just want to -- and also CASA growth being very low. So I just wanted to know what is the outlook on branch expansion and what was the reason for growing slow on branch expansion.

With branch expansion we have pretty much implemented what we had articulated. About 200 to 250 branches is what we had said. And there are some few branches out of that cycle to be completed, which we are doing.

On CASA itself I would like that to be split into savings account and current account. If you look at the savings account on a year-on-year basis we have seen a growth of about 16%. And while the period-end numbers you'll see during the quarter expansion of about INR19b, the average CASA improvement was much higher than that, keeping -- average SA movement was much higher than that, keeping the CASA ratio on an average basis at about 39%. So there is no real concern from a savings account perspective.

Current account, yes, there is a general concern from a systemic level, because if we look at some of the banks who have declared the numbers also, there also we have seen a significant sequential decline of current accounts. That is more like an industry phenomenon, given the corporate cash accrual performance and given that the corporates are getting sensitive about leaving cash without earning any interest. So that is a phenomenon, but we'll have to ride through the cycle to make sure that we maintain the market share in that space.

So my sense is that, SA, we you don't have any concerns and then our branch expansion plan [we'll have to] -- similar numbers, for about 200 to 250 branches this year we'll implement, and that is going to be the pace of thing. But we don't have any specific concern on SA. I think it's a good performance, given the environment.

Sure, sir. And one last question, sir. Apart from this dividend from the Canadian subsidiary, what was the other -- what was the quantum of the other dividend income which we received from the (multiple speakers)?

The primary -- the other primary component is the dividends from ICICI Life of about INR750m, that's INR75 crores. And, as we have said earlier, that's the kind of number we expect every quarter. So those should be the two significant components in the other income line.

Right. So even the Canadian subsidiary would start giving a dividend every quarter from here?

No, no, this kind of number will not repeat every quarter for Canadian subsidiary. As we said, this is the first time we got this dividend from -- after OSFI approval. These kind of numbers you can probably -- subject to regulatory approval, you can expect this numbers to come on an annual basis, but it will come in a specific quarter depending on when we get the approval.

Sure, sir. Thanks. That is it from my side. Thank you.

Thank you.

Thank you. Before we take the next question, we would like to remind participants to limit their questions to two during the initial round. The next question is from the line of Saikiran from Espirito Santo. Please go ahead.

Hi. Just quickly on your margin guidance, I believe last time you mentioned about 10 basis points to 15 basis points improvement and then now you are talking of 300 basis points improvement. Can you just explain what has changed in the last quarter to improve the guidance?

It is just that we have been internally focusing a lot in margin improvement. And if we look at the international margins it has come to about 1.6% to end the quarter. And domestic margins we have been able to maintain sequentially at about 3.32%. So it is just that we have been quite disciplined in terms of incremental lending and wherever there was opportunities to re-price we have been doing it.

So we are now confident of saying that we will get to 3% for the fiscal-year 2013. So it's just a focus and then ensuring that all the opportunities for re-pricing are fully utilized.

And, just quickly, if you can comment on the domestic advances growth for this year; how this could pan out between retail versus corporate.

No, see, what we have said earlier is that on the retail side, ideally, we would like to get to anything between 15% to 20% depending on the market, which is what we are pursuing internally. So we'll get somewhere in that range at the end of the year.

The corporate -- yes, of course, there are still -- the corporate performance, if we look at sales growth of large corporates, has been of the order of 17% or so, so that will entail a lot of working capital demand. And on the project side, whatever projects we have approved in the past those disbursements are happening. So that could actually be -- the domestic corporate side could be ahead of 20% plus. So those are the two elements we are quite focused on.

International side even in this quarter, as you have seen, there has been a marginal sequential decline of advances on a dollar basis. The high growth which you've have seen is essentially on account of rupee-dollar exchange rate movement.

Just couple of data points and if you can just help us with builder loan number and then DMA expense number?

Builder loans is about 3%, 3.5% of our loan book. The DMA expense is a small number which is included in the overall OpEx. It's just about INR50 crores to INR60 crores.

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

Thank you.

Thank you. The next question is from the line of Ashish Sharma from ENAM Asset Management. Please go ahead.

Yes, I just wanted to get a sense on this commercial loans. We are seeing that -- quarter on quarter we are see -- there's a traction in the book. What are the segments you are targeting in commercial loans, sir?

By corporate, you mean the corporate loan book?

No, the retail, sir. The commercial business.

Commercial business is largely the (multiple speakers) vehicle business largely and part of that also qualifies for priority sector. We call it commercial business because there is some component of commercial equipment is also there in that. Construction equipment is also there in that, but predominantly it will be commercial vehicles.

So in CV which segments we are targeting? Is it LCV, or higher loan traction? Because quarter on quarter we are seeing quite a sizeable increase in that portfolio.

Largely the MCV segment is what we are focusing on, medium commercial vehicles, and that segment has been growing.

Okay. And in --

Growth -- just to clarify, those numbers are YOY growth, that is, June over June of last year.

Surely, sir. Surely. And in terms of your yields you mention that we are seeing the EV pricing benefits, but in terms of yields are the yields stable and do we expect yields to improve from here on?

It will be really dependent on the kind of the policy environment for interest rates. And we expect the yields to be stable. And over a period of time maybe the funding cost will come down as the interests come down and the market and we have seen the wholesale CD rates coming down already. So that is why we are able to confidently say that we'll be able to maintain a margin of 3% for the current financial year.

The 3% is consolidated. Where do you see domestic NIMs stabilizing?

You can say at around the same levels, actually, because 1.6% for the international NIM would be around the peak actually. So you can pretty much look at similar kind of numbers.

So you don't expect any further improvement in domestic NIM from 3.3% level? This is a stable number you expect going forward?

Currently, we can -- we are able to see the stable numbers at this level, but of course we'll have to just keep on evaluating how the yields and costs move in the system. And then we will -- I can only assure you that we will be completely focused on protecting the 3% margins.

Thank you and all the best for the next quarter.

Thanks a lot. Thank you.

Thank you. The next question is from the line of Jyothi Kumar from Spark Capital. Please go ahead.

Yes, good evening, this is Ganeshram here. I wanted to get -- and just for a couple of questions. One is on the restructured assets which have been upgraded from that category. Have you reversed any provisions, or have you adjusted it against fresher provisions? That's number one. If any, could you quantify that amount, please?

The amount would be negligible for the quarter.

Okay. And, secondly, on your overseas -- the restructured assets from your overseas loan book, I presume that will be included in your close to INR4,200 crores of restructured book. If it is indeed so, could you just tell me how the regulator in the overseas regions is looking at restructuring the way we do and not the way it's done in those specific geographies?

So the way it would happen it will vary from geography to geography and, as you know, we are present across a lot of geographies. So it will depend on each regulator how they treat the impaired loan or a restructured loan.

So the guidelines that we follow, what we have said is that we from asset classification purposes one looks at -- if the asset is in, say, Singapore, we will have to go by whatever the regulatory requirement at Singapore is and, of course, RBI will always be overriding. So it will be the -- in terms of asset classification the worst of the two which would get followed.

So you are saying that RBI rules will override the regulatory requirement in those (multiple speakers).

No, RBI -- it will be worse of the two for asset classification.

Okay, worse of the two. No, in that sense does the -- in most of the countries we find the regulation a lot tighter. In that case we should not be having too much loans restructured from the overseas book -- loan book. Is that a fair assumption to make?

Not having too much is a fair assumption to make but, indeed, there are times when we would end up restructuring loans in the overseas branches as well.

Okay, okay. Lastly, from the total pool of your restructured assets, I mean restructured over the last, say, two, three years, could you tell me the proportion which has turned into NPA, got repaid, total upgradations and -- so that I could kind of work back the calculation on -- the closing pool, which is now about INR4,200 crores?

What we have said is that to about 5% of our asset -- 5% to 6% of the restructuring that we have done have really slipped into NPA. The balance have either -- the outstandings have reduced as per the normal repayment schedule and based on payment performance we have been upgraded out of restructuring.

So the 5% slippage will be on the net of INR4,200 crores, or on the total cumulative restructure you have done?

It'll broadly be on the total cumulative restructuring.

Could you tell me that number please?

Well, as I said, it's -- that number is -- the way we report our restructured assets is that we take an asset out of restructure after one year of satisfactory payment performance.

Okay, fine. Thank you. That is it from me.

Thank you. The next question is from the line of Mahrukh Adajania from Standard Chartered. Please go ahead.

Hi, in terms of --

Ms. Adajania, I'm sorry, we cannot hear you.

Hi, can you hear me now?

Yes, please go ahead.

Yes.

Yes, hi. I just wanted to check in terms of slippages was it again all retail, or anything specific there?

So it continues to be the trend that we have seen over the last few quarters. It includes retail it includes some delinquencies that we have seen on the SME and the mid-market kind of clients as well, so that is the overall composition of the addition to --

Okay. And now there is no visible large restructuring pipeline. Is that correct?

That's correct. If you look at the CDR references also today, our exposure to on those cases are not much, actually.

Okay. And in terms of any of the under implementation power projects, the scenario -- the asset quality scenario doesn't change from what was indicated in the fourth quarter, right?

That's correct, yes.

(Inaudible).

Okay, thanks. Thanks a lot.

Thank you.

Thank you. The next question is from the line of Anish Tawakley from Barclays. Please go ahead.

Congrats, Kannan, on a very good set of numbers.

Thank you.

I had two questions. One, if I look at the mix of growth in this quarter, right, on a quarter-on-quarter basis domestic corporate loan book has grown 15% within the quarter, while retail has been roughly flat, growing at about 1.3%. So when -- which quarter would we expect to see the retail loan growth pick up? That's really the first question. And what happens to domestic corporate for the rest of the year? Do we expect it to remain roughly flat going forward?

No, on the retail side if I look at the run rate and the movement on disbursements it has been a very healthy trend. So as we speak it is happening, I can say that. And then our focus will be to get to 15% to 20%, as I mentioned earlier, by the end of the year. So the momentum will be across the year is what we feel. So right now the branch-based sourcing and whatever enablers we have to put in place we believe we have done so. So on retail you can expect going forward a uniform growth through the next several months.

The 15 -- sorry, you are saying 20 percentage growth rate we should expect in retail also for the year?

Into 20. I am just saying 15 to 20 because we will have to -- we are just about come out of a single-digit growth rate to double-digit growth rate just now. I'm just being cautious to say 15% to 20%. But we are seeing that kind of a visibility going forward uniformly through the year.

Then on the corporate side we had working capital-led demand also, a lot of short-term demand also we had. So with that, as well as the retail put together, the -- what we have articulated to say that we will grow slightly ahead of the system. We are very hopeful of delivering that.

All right. I guess corporate would do 15%, even it remained flat right through the year. It would show a 15% year-on-year growth.

It could be higher also, because I guess working capital demand would demand would depend on the opportunities and the sales growth of [corporates], but we do have a pipeline of projects which have been sanctioned were partly disbursed, where, as the implementation proceeds, there will be continuous moment in terms of disbursements. So it would be probably ahead of the number what you mention, more than that.

And restructured we should -- restructuring we would expect at the current rate for the year?

No, see, as of now, if I look at the pipeline to be restructured, that is not a significant amount. So to that extent I would say that we are closer to the peak in terms of outstanding restructured assets. But again, given the environment there could always be one or two slippages one has to watch out for. Not that I have those assets on the table now, but it can always happen, given the environment we are all living in. Other than that, I can say it is close to peak number on an outstanding basis.

But only outstandings? There will be some -- like some that will fallout, so actually then it will keep on declining, right? Because the addition now is only -- is quite low.

Yes, I agree with you. But if we look at the fourth quarter, what we had restructured, that was -- if I remember right that was about INR13b to INR14b. So that upgradation would be possible only after one-year of actual payment performance. So we have to give time for that to happen before you can see a large-scale deletion from restructured assets.

I guess, Kannan, what I was looking at was if I look at restructuring last year, right, in the first quarter it was INR1.5b, --

Yes.

-- second quarter it was INR7.5b. Now this INR7.5b will start dropping off.

There will typically be a moratorium period also --

If there is a moratorium period then we have to look for actual one-year of payment performance.

Okay, so it's after the moratorium?

Yes, we have to wait for the actual payment for a year. So if there is a moratorium then (multiple speakers) the time period will start reckoning only after the first payment due happens.

Okay, I didn't realize that. Thanks a lot.

Otherwise things can be misused. So that is a discipline we have put.

Okay. Thank you very much and congratulations once again.

Thank you. Thank you, Anish.

Thank you. The next question is from the line of Surendra Shetty from UBS. Please go ahead.

Hi, thanks for taking my question. Can you please give me a break up of the impairment provision done during the quarter, say, for NPA and restructuring?

Of the total provisioning, about INR750m is for the -- on the standard assets the general provision that we have made. The balance would largely be for the non-performing assets. The provisioning for restructure is a very small number for the current quarter.

Okay. And my second question is are you looking for USD bond market going forward?

We keep evaluating that opportunity, but if -- we do have some repayments coming up of our March bond issue, so we have evaluated repayment of that in the -- looking at our overall ALM.

So from a repayment of our bond liabilities we don't have to go for a fresh issue, that, I wanted to assure you, because if we look at the repayments out of our assets it is broadly matching with the repayments on bond liabilities, so ALM for this year it's quite perfectly matched.

But at the same time there is a decent pipeline of cases from corporate customers for foreign currency, but we will keep evaluating and looking at our secondary spreads. And if we think that we can protect our net interest margins at about 1.5% that is the time when we will go for an issue.

Okay. And can you give me an amount of loan growth due to FX movement?

If I look at the international book alone the year-on-year growth on a rupee basis was about 35%. If I strip off the rupee-dollar movement it was about 8% international book alone. So that is only on the international book. If I superimpose that dollar growth of international book and the overall growth it would have been about 15% growth.

Okay, great. And, lastly, looking at the LDR it seems lately you have gone above 100%. Do you think you will be scaling down the lending?

No, see, LDR being 100% has to be viewed in the context of our overseas branches being dependent on bond type of liabilities for their growth. So, there, if you look at it the deposit funding is quite limited there. That's why the LDR on an overall basis looks high. So if I keep that -- the overseas branches aside, and if you look at LDR on the domestic book, the best rate would be about 77% and it is very typically in the 70% to 77% type of range, which we are quite comfortable with.

Okay. Thank you very much.

Thank you.

Thank you. The next question is from the line of Bajrang Bafna from Sunidhi Securities. Please go ahead.

Hi, congrats for a good set of numbers.

Thank you.

Could you please give us a sense on your exposure of FITL in your overall loan book for last two years, that is, FY '11 and FY '12?

We cannot disclose the FITL numbers. We don't do that.

The funded interest term loans in your overall loan book, can you say -- yes.

Those numbers are not in the public domain.

Okay. And my second question is predominantly pertaining to the last question on -- because of the ForEx movement the net interest margin which you are saying on consol level 3%, what was of that portion is predominantly mark-to-market gain that we have got because of the ForEx NIM -- the international NIMs?

The net interest margin --

Yes, that 3% that you have reported, some part of it's because the rupee has appreciated, let's say, from 51 to 55, so once we consol that dollar net interest margin is getting consolidated in the rupee terms. So if you could give us a sense what portion of that is predominantly because of that ForEx movement.

The NIM, that the net interest margin will not change, because even the loans, as Kannan just mentioned, that also in rupee terms has grown because of the rupee depreciation, [so would] have the net interest income. So there is no impact on the net interest margin or no benefit that one gets on the overseas margin because of the rupee movement.

But on absolute terms?

In absolute terms there is, indeed, some impact which is there, which would on an overall basis if you look at for the quarter will not be more than, I would say, a couple of percentage points of impact of the overall NII. So it's not a major impact to it there.

Okay. Thank you.

Thank you. The next question is from the line of Nilanjan Karfa from BRICS Securities. Please go ahead.

Hi, thanks for taking the question. The first one is on the restructuring pipeline. I heard Kannan say that the current pipeline doesn't look -- very small. What about I think the Lanco's of the world have for restructuring. I think HCC's have been restructured or they have been approved. Can you just share in terms of the GVK, GMR's, which probably might need a restructuring, how does that look in the near future?

We wouldn't want to comment on case-specific names. But as far as HCC is concerned that restructuring is approved and given effect to. And in terms of the rest of the portfolio, as we said, we have a relatively small number where cases are already referred to CDR and are pending there. And beyond that currently we have no identified pipeline of restructuring.

But, as Kannan said, given the environment it is quite possible as things remain volatile and as we proceed that we may have the -- one or two accounts which may require to be restructured, but there is no planned restructuring at this point of time.

Okay. Related to that, for example, -- and I am talking about the [real most] example, for example, if Lanco comes for restructuring and is approved. You also funded their coal mine purchase. Does that also fall into the CDR automatically?

I am sorry.

The mine purchase of Lanco in Australia--

Yes.

Will it automatically fall into the CDR if, for example, Lanco were to come to -- for restructuring?

No, practically in the sense that if a lender chooses to restructure then that lender has to make a reference to CDR and CDR has to accept the reference and then the loan can get restructured. But you know that that is the process that CDR follows.

Okay. I understand there's a sep -- there could be a separate facility, right. But when you look at a consolidated basis the Lanco Industry, I think, if the consolidated entity comes for restructuring will all its facilities gets restructured is probably my question?

A very hypothetical question. As Anindya mentioned, it will depend on a case-by-case basis in terms of which facilities would get restructured, or would not for a particular entity, whether it'll be with our rupee loans or dollar loans, whether there are multiple lenders involved, which entities are there. So it's very difficult to answer. If you take name of a case we would really not be able to [cooperate].

Just to -- and to stay with the same example, for instance, some of Lanco Group entities some of their project SPVs have, indeed, got restructured last year, but it's not as though every loan to the Group has got restructured.

Yes, there was a power company, right?

Yes, where we did not have a [reserve], but other banks have restructured it, but the rest of the exposures continue to be as they were.

Okay, okay. Secondly, on the CDR there was this proposal of promoter bringing in 25% if -- I think that was discussed. But the latest -- the draft guideline does not specify. Can you give us a color of what's happening out there?

So, there, I think the intention has been that the promoter -- the contribution should be higher is what some banks should look at while restructuring. So that is the general view which is there and I assume that banks would go by that.

In the system.

Okay. Last question, can you please share what the run rate of the dividend would look like from all the subsidiaries included?

It will be difficult again, because it'll depend on each quarter. As Kannan mentioned, some of the entities would be paying annual dividends, so like in --

No, no, I'm asking for the annual number.

Annual number one should look at what we got as a dividend last year. There would be a growth on that which would mainly come from one that ICICI Prudential Life Insurance started paying only from the second quarter of last year. So we'll get the full-year dividends from ICICI Prudential. The rest of the numbers would be a function of individual profits of the companies, but we would definitely expect the dividend income from subsidiaries to grow at a good pace for the year.

Okay. That is all. Thank you.

Thank you. The next question is from the line of Ramnath Venkateswaran from Birla Sun Life Insurance. Please go ahead.

Yes, hi, good evening, sir. I just wanted to get your sense on the NBAP margin in the insurance subsidiary. There it seems to have reported NBAP margin is down to 15%. Now, is this because of the change in product mix, or some of the factors, if you can just help me understand that?

Yes, it is based on the products which have been sold during the quarter and the product mix. The endeavor would be to keep the NBAP margins between 15% to 16%. That is a kind of outlook we have on the NBAP margin.

Okay. So it has got to do largely with the fact that you have changed the product mix and that is the reason why you are seeing that kind of thing?

That's what is selling currently in the new regulatory regime, yes.

Right. So then one last question that if I -- is on the -- if we look at the other subsidiary, ICICI Home Finance, that has consistently been seeing a decline in its loan book. So is this because of run off, or it is being -- is there a movement from the Home Finance to the parent entity because of --

The bulk of the home loans in the past -- in the recent past we have been booking in the Bank; one of the reasons why the home loan of the subsidiary has been going down. But they also do have a plan of going to the next level of cities and expanding the book, so we are hopeful of arresting the decline this year of book and then grow it from thereon.

Okay. Sir, just a related question would be then if -- given the fact that you are already doing this through the Bank, the purpose of an NBFC for -- specifically for the Home Finance?

We [were good] to have a subsidiary, NBFC, so we intend to continue with that subsidiary.

Okay. So it could probably look at other kind of operations in the future or something like that?

It will continue to be in the housing finance space only and it will continue to be a 100% subsidiary of the Bank. And in our presentations we've been disclosing the asset liability composition as well as the asset quality. There should not be any concern from an investor/analyst perspective in terms of the activities that happen in the subsidiary.

Right, right. Thank you, sir. Thank you so much.

Thank you.

Thank you. The next question is from the line of M. Mahesh from Kotak Securities.

Good evening. My first question is, there was a recent guideline on this off-balance sheet related exposure on mark-to-market conversion into loans. Just wanted to understand, based on your exposure that you have on your off-balance sheet side, are you seeing any strong trends of clients asking for conversion of these loans?

Which guideline is this is, Mahesh?

This is an [MPM] which came out last week, which said that if you are converting off-balance sheet, your mark-to-market related positives which you have with your clients should converting into loans as compared to a cash. There is a little bit of guideline given against it. I just wanted to check whether clients are paying their mark-to-market on time?

There are no issues at all which are there that we have found in this area. So, indeed, some years back for a period of time there were some issues, but there is absolutely nothing that we have see in the last few quarters and we don't expect any challenges on this.

At all.

Sure. Second question on -- again on the retail loan side. You've said that disbursement has been healthy. Could you just quantify what has been the trends on that front in the current quarter? What has been the kind of disbursements in your housing loans or retail loans?

The overall disbursements that we have done for the quarter on retail side is about INR78b and, within that, the home loan total would be about INR50b. And overall disbursements are up about 40% on a year-on-year basis.

Sure, and one last question, if I may. The unsecured piece on the retail side seems to be more or less flat over the last couple of quarters. Have you started lending in this particular portfolio now?

Yes, we have little bit of lending and little bit of growth in our credit card business as well. But you won't see that really expand as a proportion of the balance sheet, because our focus has been on doing this lending to our existing customers. So, yes, probably the decline has been arrested, but don't expect a big expansion in this portfolio as such.

Sure, thanks a lot.

Thank you.

Thank you. Ladies and gentlemen, due to time constraints that was the last question. I would now like to hand the floor back to Mr. Kannan for closing comments. Please go ahead, sir.

Yes, thank you again for participating in this call. And now my team and I am available for any of your questions offline. Thank you very much.

Thank you, Mr. Kannan. Ladies and gentlemen, on behalf of ICICI Bank that concludes this conference call. Thank you for joining us. You may now disconnect your lines. Thank you.