ICICI Bank Ltd (IBN) 2013 Q2 法說會逐字稿

Good evening, ladies and gentlemen, and welcome to the Q2 FY 2013 Earnings Conference Call of ICICI Bank. As a reminder, all participants' lines will be in the listen-only mode. And there will an opportunity for you to ask questions at the end of today's presentation. (Operator Instructions)

I would now like to hand over the conference to Mr. N. S. Kannan. Thank you and over to you, sir.

Thank you. Good evening, and welcome to the conference call on the financial results of ICICI Bank for the quarter ended September 30, 2012, which is the second quarter of the current financial year 2013, that is Q2 of 2013. As always, my remarks this evening would revolve around four key themes. First, the domestic macroeconomic and monetary environment, which will be followed by our performance during the quarter, including performance on our 5C strategy, then our consolidated results, and finally we'll move on to the outlook for the full financial year 2013.

Let me start with the first part on the macroeconomic and monetary environment during the second quarter. During the second quarter, there was an improvement in market sentiment both globally and in India, following important liquidity and monetary policy measures in the US and Europe and the announcement of several policy measures in India. However, the impact of these is yet to be seen on economic growth trends, which continued to remain subdued both globally and domestically.

In India, industrial activity continued to remain weak with a slowdown across mining, manufacturing and electricity sectors. The index of industrial production has increased by 0.4% during April to August 2012, compared to a growth of 5.6% in April to August 2011. In August 2012, there were some encouraging trends seen in the capital goods and consumer goods segments, with overall IIP growth of 2.7% during the month.

Reflective of the continued slowdown in economic activity, the GDP growth estimates for fiscal 2013 have been revised downwards by most agencies to the range of 5.5% to 6%. Even at this level India would continue to be among the fastest-growing economies in the world, given the downward revision in growth estimate for most countries.

On the external front, exports continued to decline for the fifth consecutive month in September 2012, with a decline for the first six months of fiscal 2013 at 6.8%. The deceleration in exports has been sharper than imports, with a decline in imports during April to September 2012 at 4.4%. Import growth turned positive in September 2012 due to a sharp increase in oil import bill. On the positive side, data released for Q1 of 2013 shows a reduction in the current account deficit from 4.2% of GDP in the previous financial year to 3.9% of GDP in Q1 2013, with the balance of payment registering a marginal surplus compared to a negative balance of 1.2% of GDP in the previous financial year.

Inflationary trends have continued to persist. Inflation measured by the Wholesale Price Index remained at about 7.5% in July and August of 2012, an increase of 7.8% in September 2012 largely reflecting the impact of the increase in diesel prices during the month. On the positive side, food inflation eased during September 2012 to 7.9% from 9.1% in August 2012, while core inflation, which is manufactured products excluding food products, remained stable at around 5.6%.

The systemic liquidity eased significantly during the second quarter with average daily borrowings by banks from RBI under the LAF window reducing to about INR464 billion during Q2 of 2013 from about INR969 billion during the previous quarter.

Interest rates on market instruments like commercial papers and certificate of deposits declined during the quarter. Our three-month CP rates, which were at about 9.6% in June, moderated about 8.8% in September. A similar trend was seen in CD rates as well.

The yield on 10-year benchmark government securities was range bond. It was 8.15% at end September 2012 compared to 8.18% at end June 2012.

During the second quarter, the Reserve Bank of India reduced the Statutory Liquidity Ratio, SLR, by 100 basis points from 24% to 23% in August 2012 and the Cash Reserve Ratio, CRR, by 25 basis points from 4.75% to 4.5% in September 2012. The repo rate was maintained at 8% during the quarter in view of the inflation risks.

Equity markets saw a marked improvement in September 2012, reflecting the positive global and domestic developments during August-September 2012. Liquidity and monetary measures announced by the ECB and US Federal Reserve, and also the policy measures announced in India improved the market sentiment very significantly. Net inflows from foreign institutional investors improved to $7.14 billion in Q2 of 2013 with over 57% of the inflows coming in September 2012 alone.

The benchmark BSE Sensex rose by 7.6% during Q2 2013 to 18,762 at end [December] 2012. The rupee appreciated against dollar by 6.4% from INR56.3 per US dollar at end June 2012 to INR52.7 per US dollar at end September 2012. Credit offtakes from the scheduled commercial banks remained moderate during Q2 of 2013. Non-food credit recorded a 15.4% increase year-on-year at October 5, 2012 compared to a growth of 16.1% at June 2012, and 19.4% at October 7, 2011. Similar trends were seen with respect to deposit growth as well.

Total deposit growth was 13.9% on a year-on-year basis at October 5, 2012 compared to a growth of 13.4% at June 29, 2012, and 17.5% at October 7 of 2011. Demand deposits grew by 5.6% year-on-year at October 5, 2012. However, during the period March 30 to October 5, 2012, demand deposits have declined by INR1.29 trillion. Growth in time deposits decelerated from 17.7% at March 30, 2012 to 14.8% year-on-year at October 5, 2012.

With this background, I now move on to part two on the performance of the Bank during the quarter. Let me begin with the progress on our 5C strategy.

First with respect to credit growth, total advances of the Bank increased by 17.6% on a year-on-year basis from INR2.34 trillion at September 30, 2011 to INR2.75 trillion at September 30 of 2012. The growth in total advances was balanced across various loan segments.

Growth in the retail portfolio has been increasing steadily over the last few quarters. This trend has continued in Q2 as well, with the retail portfolio growing by 14% on a year-on-year basis at September 30, 2012 compared to 10.3% year-on-year growth we saw at June 30, 2012. Outstanding retail loan portfolio at September 30, 2012 was INR933 billion.

The growth in the retail portfolio was again driven by growth in the secured retail lending categories, with outstanding mortgages increasing by 11.5%, auto loans increasing by 26.6% and commercial business loans increasing by 22.7% on a year-on-year basis. The unsecured retail portfolio for the Bank was INR35 billion at September 30, 2012, at about the same level as at June 30 of 2012.

Moving on to cooperate and international portfolio, the growth in corporate and international portfolio was 21% on a year-on-year basis, driven largely by a 38.4% growth in the domestic corporate portfolio. The increase in the corporate portfolio was in part due to maturities of Inter Bank Participation Certificates issued in the previous quarters. Excluding these, growth in the domestic corporate portfolio would have been lower at 27% on a year-on-year basis at September 30, 2012. The domestic corporate loan portfolio also includes some short-term loans to high-quality corporates that will mature during the year.

Net advances of overseas branches increased by 6.3% on a year-on-year basis in rupee terms. During Q2 of 2013, the appreciation of rupee had a negative impact on the growth on the net advances of our overseas portfolio, resulting in a sequential decline of 5.5% compared to June 30, 2012. In dollar terms, the net advances of the overseas branches remained stable on a sequential basis.

Moving on to the next C, CASA deposits. The Bank maintained the CASA ratio at 40.7% at September 30, 2012. On an absolute basis, the Bank's savings account deposit increased by about INR27 billion and current account deposits increased by about INR30 billion in Q2 of 2013. The average CASA ratio for the banks during Q2 was 37.5%.

On the next C, on costs, for Q2 2013, operating expenses, including DMA expenses, was higher by 17.3% on a year-on-year basis. The Bank's cost-to-income ratio declined to 40.9% in Q2 of 2013 compared to 41.8% in the previous quarter, with the cost-to-asset ratio declining to 1.8% in Q2 compared to 1.84% in the previous quarter.

Let me now move on to the next C, on the credit quality. The Bank continues to see near zero net slippages from the retail portfolio. While the SME portfolio continues to see higher-than-normal slippages, given that the Bank's SME portfolio is small at about 5% of the advances, does not have any material impact on the Bank's asset quality.

In the corporate segment, during Q2 of 2013, the Bank classified its loan outstanding to a media company aggregating about INR5 billion as non-performing, resulting in an increase in the additions to NPAs as compared to the previous quarters. Including the addition of this loan, the Bank saw gross additions of INR12.2 billion to its overall gross NPAs compared to gross additions of INR8.68 billion in Q1 of 2013. Recoveries in Q2 of 2013 were INR5.58 billion, resulting in net addition to gross NPA of INR6.62 billion. The Bank has also written off INR5.06 billion of NPAs during Q2 of 2013.

The net NPA ratio was 66 basis points at September 30, 2012, as compared to the 61 basis points at June 30, 2012, and 80 basis points at September 30 of 2011. The provisioning coverage ratio was 78.7% at September 30, 2012 compared to 80.6% at June 30, 2012, and 78.2% at September 30 of 2011.

The Bank has provided for 85% of its loans to the media company in Q2 2013 itself and does not expect any material impact on the profit and loss account on this account going forward. This provisioning of 85% has been taken through the P&L account. As a result, provisions for Q2 of 2013 have increased to INR5.08 billion from INR3.19 billion in Q2 of 2012 and INR4.66 billion in Q2 of 2012 (sic - see press release).

Credit cards as a percentage of average advances were at about 74 basis points for Q2 of 2013 and about 72 basis points for H1 of 2013 on an annualized basis, so these have been in line with what we have been articulating in the past. For the full year of financial year 2013, the Bank expects the credit cards to average loans to be at about 75 basis points as we have articulated earlier.

Additions to restructuring portfolio were INR1.39 billion during Q2 of 2013, offset by deletions and repayments during the quarter. As a result, the net restructured loans were stable at about INR41.58 billion at September 30, 2012 compared to INR41.72 billion at June 30 of 2012.

The final C on customer centricity. The Bank continues to focus on enhancing its customer service capability and leveraging on its increased branch network to cater to its customer base. During Q2 of 2013, the Bank added 640 ATMs to its network, taking the total number of ATMs to 10,006 at September 30, 2012 to supplement its branch network of 2,772 branches at the same date.

The Bank also focuses on increasing convenience for customers while transacting through different channels and introduced various technology-based platforms in Q2 of 2013. These include a 24/7 electronic branches, which can be used for conducting all banking transactions. Currently there are 25 such electronic branches across 18 locations in the country.

The Bank has also recently launched a unique MySavings Rewards Program, under which all savings account customers will earn rewards on the regular banking transactions with ICICI Bank. Further, the Bank's Facebook initiative continues to be appreciated by customers with close to 960,000 fans for our Facebook page. The Bank has recently been ranked fifth among the banks and financial services firms globally in terms of Facebook fan base.

Having talked about the progress on 5Cs, let me now move on to the key financial performance highlights for the quarter. Net interest income increased 34.5% on a year-on-year basis from INR25.06 billion in Q2 of 2012 to INR33.71 billion in Q2 of 2013. Net interest margin was maintained at 3% for the third successive quarter and reflected an increase of about 40 basis points from 2.61% in Q2 of 2012.

The international NIM declined on a sequential basis from 1.6% in the previous quarter to 1.22% in Q2 of 2013. The sequential decline was on account of the excess liquidity maintained in the international business as the Bank met the $1.7 billion bond redemption in early October 2012 and on account of the pending deployment of the proceeds of the recent foreign currency bond issuance we had made. Further, the issue expenses of the bond issuances were expensed upfront, resulting in about 15 basis points impact on the international NIMs in Q2 of 2013. The NIM on domestic business increased to 3.43% in Q2 of 2013, as compared to 3.32% in Q1 of 2013 and 2.92% in Q2 of 2012, with the sequential increase being driven by lower cost of funds during the quarter due to the reduction in term deposit rates since the beginning of the year.

The non-interest income increased by 17.4% from INR17.4 billion in Q2 of 2012 to INR20.43 billion in Q2 of 2013. During the quarter, treasury recorded a profit of INR1.72 billion as compared to a loss of INR0.8 billion in Q2 of 2012 and a loss of INR0.21 billion in Q1 of 2013. The profit in Q2 2013 was on account of the proprietary trading gains and gains on the fixed income portfolio. Further, the Bank had losses on its security receipts portfolio in the previous quarters, which was not the case during the current quarter. The Bank does not expect any significant losses on its security receipt portfolio going forward.

Other income for the Bank increased by 34.2% from INR1.2 billion in Q2 of 2012 to INR1.62 billion in Q2 of 2013, primarily due to higher dividend received from subsidiaries. In Q2 of 2013, the Bank has continued to receive dividend from ICICI Life. There was no dividend payment by ICICI Life in Q2 of 2012, as dividend payout in ICICI Life commenced from the third quarter of last fiscal. On a sequential basis, dividend from subsidiaries was lower, as Q1 of 2013 included the dividend received from ICICI Bank Canada of INR1.33 billion.

Fee income increased marginally from INR17 billion in Q2 of 2012 to INR17.09 billion in Q2 of 2013. The Bank's fee income growth continued to remain impacted by lower corporate banking fee income due to slowdown in new projects and financial closures. During Q2 of 2013, there was continued momentum in granular fee income streams such as transaction banking fees, as well as retail asset fees.

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 before tax increased by 31.9% from INR20.35 billion in Q2 of 2012 to INR26.85 billion in Q2 of 2013. The Bank's standalone profit after tax increased by 30.1% from INR15.03 billion in Q2 of 2012 to INR19.56 billion in Q2 of 2013.

Let me now move on to the consolidated results. The profit after tax for the life insurance subsidiary was INR3.96 billion in Q2 of 2013 as compared to INR3.5 billion in Q2 of 2012. This level of net profits reflects an annualized return of above 30% on the Bank's invested capital in ICICI Life.

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 for ICICI Life increased by 14.5% from INR11.8 billion in H1 of 2012 to INR13.5 billion in H1 of 2013. The new business margins for Q2 2013 was 15%.

The retail weighted received premium for ICICI Life increased by 25.2% in April to August 2012 compared to a 0.7% year-on-year decline for the private sector and 24.1% growth for the insurance industry. During April to August 2012, ICICI Life maintained its market leadership in the private sector with an industry market share of 5.8% on the basis of retail weighted received premiums.

ICICI General, our non-life subsidiary, recorded a 80.4% increase in profit after tax from INR0.56 billion in Q2 of 2012 to INR1.01 billion in Q2 of 2013, driven by increase in gross premiums and investment income. The Company maintained its leadership position in the private sector with overall market share of 8.9% during April to August 2012.

As I had mentioned during the first-quarter results call, during FY 2013 ICICI General is expected to have some impact of the motor third-party business in the coming quarters, as the liability for the period financial year 2007 to financial year 2012 would be actuarially valued for the first time and due to any share of the declined pool accruing to the Company. However, despite this impact we expect the Company to be profitable in FY 2013.

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 2013 was CAD12.2 million as compared to CAD5.2 million for Q2 2012 and CAD11.9 million in Q1 of 2013. The total assets for ICICI Bank Canada were CAD5.28 billion at September 30, 2012 as compared to CAD5.32 billion at June 30, 2012. The capital adequacy ratio at September 30, 2012 was 34.1%.

ICICI Bank UK's total assets were $3.81 billion at September 30, 2012, a marginal decline from $3.86 billion at June 30, 2012. The profit after tax for ICICI Bank UK for Q2 2013 was $4.3 million as compared to $2.2 million in Q2 of 2012 and $4.4 million in Q1 of 2013. The capital adequacy ratio was 33.6% at September 30, 2012.

Now let me talk about the overall consolidated profits. The consolidated profits for Q2 of 2013 increased by 20% to INR23.9 billion compared to INR19.92 billion in Q2 of 2012. The consolidated ROE improved from 13.7% in Q2 of 2012 to 14.8% in Q2 of 2013.

I would now like 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 new project activity. Our outlook for fiscal 2013 is 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 retail portfolio and continued offtake out of the past project sanctions and working capital demand in the corporate segment. We currently estimate the system growth for FY 2013 to be about 17% to 18% and, accordingly, we expect our domestic loan growth to be about 20% for the full year. However, given the large amount of repayments in the overseas loan portfolio in financial year 2013, you would expect our overseas loan book growth to be in single digits in dollar terms in financial year 2013.

For the full year -- the financial year 2013, the Bank would target to maintain an average CASA ratio of about 38% to 40%. With respect to margins, while there is some uncertainty in the system interest rates and the trend in lending and deposit rates going forward, which could result in some volatility in quarterly margins, we would endeavor to achieve overall margin of about 3% for the full year, financial year 2013 as compared to 2.73% for the full year, financial year 2012.

While international NIMs declined on a sequential basis to 1.22% in Q2 due to the reasons I discussed earlier, we expect to maintain the international NIMs at about 1.5% on a steady state basis. For financial year 2013, given the lack of pickup in corporate lending activity, we expect the fee income growth to remain subdued. The Bank will focus on improving its overall fee income growth.

With respect to operating expenses, we would be working to keep the cost-to-income ratio at about 41% to 42%, as articulated earlier. With respect to credit costs, the Bank expects the overall credit cost to be about 75 basis points for the full year, financial year 2013, based on the current RBI guidelines and our current assessment of the asset quality trends.

The Bank expects to achieve continued improvement in the standalone return on assets from 1.5% in financial year 2012 to about 1.7% over the next two years. The Bank would target an exit run rate of 15% for the consolidated ROE by the end of this financial year. Our growth strategy would continue to be balanced as against the risk and profitability, given the overall global and domestic environment.

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

Thank you very much. (Operator Instructions) Jayesh Asher, Morgan Stanley.

That was an error. No questions from my side.

Vishal Goyal, UBS Securities.

Hi, sir. The question actually is about the retail segment. Almost every bank is now trying to do retail, especially the PSU banks due to lack of corporate demand, and you also have been for the last two years kind of re-entering the market, while you're not cutting down rates. What are the -- the way you're differentiating yourself now when the competition is intense in the retail segment.

Yes. See, Vishal, as we have articulated, our market share in retail had come down from about a 25% to 30% level, for example, in mortgages to about 5%, 6% and we have slowly improved it to over 7% to 8%. So yes, of course, there are competitive pressures in terms of rates, but given the fact that our turnaround times and the propositions such as home search are very strong propositions for us from a consumer perspective, plus given the fact that we are trying to sort of improve our market share from a very low levels of 7% to 8%. We don't think we have to really compromise too much on the margins or any quality to achieve our objectives. So we are quite confident of getting to 15% plus kind of a growth for the year as a whole despite the competition in the retail portfolio.

And same for the CVs and cars you said?

Yes. See, our focus would be on -- continued to be on retail secured loans. When I say 15% plus, I mean that for the total retail secured portfolio that will be the kind of growth rates. Unsecured loans, still we would be focusing on doing it only for our existing liability customers, so there I do not expect that kind of a growth rate. It will probably stabilize at the current -- around the current level. So I would say that largely what I mentioned is [so far] across all the retail secured portfolio segments.

Fair enough. And, sir, one question on the branch licensing by RBI, how difficult it's to get the metro branch licenses these days, plus will it lead to any kind of inorganic approach in terms of growth for branches?

No, I think, if at all things have got a bit easy, I would say, on getting licenses from RBI for branches, and we have articulated that we would like to put out about 200, 250 branches in this current financial year. For that kind of an aspiration, I don't think we need to really pursue any other strategy other than just applying to RBI and getting the licenses.

Sir, even the metro and Tier 1 you're getting it easily now?

Yes, better than before. I mean, it is not coming in the way of executing our strategy.

Fair enough. Thank you very much.

Thank you.

Manish Karwa, Deutsche Bank.

Yes, hi, Kannan. I just had my question on fees. If you look at every other private sector bank have actually seen better trends in fees, especially in this quarter, but somehow our fees have been pretty lagging on the overall. Is it to do with our breakup of fees or how do you see these things?

See, yes, I have seen fee growth numbers of around 20% in the market, but if you look at those banks, largely the fee driver has been the retail assets. And in the case if you mentioned the retail assets have been growing at 20% plus actually. So given that our retail assets has just about started growing in double digits and it has gone up to 14% kind of a growth, obviously, that part of the fee income growth has been more subdued for us compared to some of our competitors. So that is clearly one reason.

And second at the starting base, we had a much higher share of project finance or large corporate lending type fee income. So that has gone down, that has actually declined. So those are the two reasons and whatever best we could do in terms of increasing the granular base of our fee income such as commercial banking and products we have done and the focus will continue to be there. But we do recognize that short-term adjustment phase in terms of fee income proportions getting adjusted, we'll have to go through that phase. That is a phase we are in, but as I mentioned in my opening remarks, the endeavor would be to grow the fee income on an overall basis.

Okay. And roughly what will be our breakup of fees in terms of retail, corporate, asset-backed liability driven?

Yes, retail would be about 50% of the fee income. So the corporate fee income, including commercial banking and everything would be about 40%, and the balance would be international, rural, those are the areas.

Okay. And lastly, you mentioned that you would target an exit ROA of 1.7%, which is more than a 10 BPs increase from current levels. Where do you see this increase in ROA coming from? Or would it come from lower provisions going forward or would it come from better margins or better fees?

Actually I mentioned that we would get to a standalone ROA of 1.7% over two years, that's what I had mentioned in the opening remarks. And that kind of would be that going forward, clearly while our immediate focus is to maintain the margins at 3% over the medium term we would like to increase the margins. That will be one of the key areas of improvement. And fee income growth, as you have seen, it is more like a flat growth. We would see that to be expanded.

And our own sense is that the provisioning should stabilize at about 75 basis points. So given these three drivers and a little bit of more efficiency on the cost side, because our medium-term endeavor would be to bring the cost-to-income ratio to just under 40%. So if these four things happen, so we can achieve that, so that is something which we articulated. On the exit side, exit quarter, what I meant was that we'll get to the consolidated ROE of 15% in the exit quarter. So there also given that we have got 14.8% consolidated ROE for the quarter, we are quite confident of achieving that as well.

Okay. And lastly a small question, how much dividend did we get from IPruLife this quarter?

Yes, as I had mentioned earlier, every quarter we've been getting about INR750 million and that has been the trend during the quarter as well.

Okay. Thanks a lot.

Thank you.

Mahrukh Adajania, Standard Chartered.

So we heard on TV that the restructuring pipeline is around INR5 billion, that would be the correct number?

Yes, see, we look at the CDR references. For the system as a whole, CDR is at about INR480 billion, in that our share was about INR5 billion. So that is what is mentioned and it is the correct number.

Okay. And just in terms of growth in auto loans, I mean, of course there was a discussion on retail loans even earlier on, but that just remains flattish quarter-on-quarter, so what trends are you seeing there?

No, again, Mahrukh, given our market share -- starting market share, we are seeing an increase in the automobile segment as well. Just the car loan alone, if you look at it, the growth was closer to about 5% or so. I mean there are competitive pressures as well. So one has to calibrate the growth. But we are okay with these kind of volumes given that the overall aspiration for retail asset growth for us is 15% plus.

Okay, perfect. Thanks.

Suresh Ganapathy, Maquarie.

Yes, hi. Just had one question on provisions, out of this INR5 billion that you provided this quarter, INR4.3 billion itself has gone towards Deccan. And how much would be your general asset provisioning?

See, yes, you're right. Large part of the provision had gone towards Deccan through the P&L. And if you really look at the general provisioning, we got a benefit in terms of the exchange rates of -- rupee appreciating because of which the incremental general provisioning was close to zero. So that was a significant improvement compared to the previous quarter. So that is the one -- that is where we made some savings. And second is that on the retail side, we got much better-than-anticipated write-backs. So those two sort of cushioned the provision for the quarter. So that's how the numbers actually stacked up. So those are the two positives in terms of incremental general provisioning being close to zero and the retail write-backs being very significant during the quarter.

No, but on an absolute basis, Q-o-Q, there has been growth in loan book, right? I mean, so how can a GP write-back happen, I mean, still not very clear on this benefits of INR appreciation?

I didn't say write-back.

Okay.

I said that incrementally the provision requirement for GP was close to zero, that is because that the exchange rate on rupee in terms of both the loan receivables, as well as derivative mark to market had gone down, because of which there was no need for an additional provision to be made despite the growth in the balance sheet.

Okay, thanks. Thanks so much, Kannan. Yes.

Adarsh Parasrampuria, Prabhudas Lilladher.

Yes just one question on the lease and other income line, you all mentioned that the losses from the SR book has come off now, so is it like safe to assume that the loss last year of INR400 crores probably from here on ceases to come, like will that become zero more or less from here on?

Yes, more or less, what you said is right. Clearly, INR4 billion kind of number we don't expect it to be repeated at all. There could be a little bit of further positioning required depending on the NAV on a quarterly basis, but we don't expect that to materially change our numbers. So that the bulk of the drag is behind us actually.

Okay. And the other question was on the bulkiness on the domestic corporate book. You all had made a comment, I just kind of missed that. If you could just throw some light again on that of the domestic corporate book?

On the domestic corporate book, I was talking about the growth. And what I was mentioning was that there was some assets which were sold, corporate assets which was sold through the IBPC mechanism in their last quarter -- in the previous financial year, that is the March quarter. So that sort of came back to our balance sheet during the second quarter now. So if you adjust for that, I mentioned that the domestic corporate portfolio growth rate would have been lower at 27% rather than suggested by the same computation of numbers from the balance sheet.

Understand. And you all have some short-term corporate loans, which probably retire. So what could be the quantum of that?

Don't have any specific thing.

Understand, yes.

But I can again tell you that our domestic growth rate for the year will -- I mean, we're expecting it to be about 20% with the retail growing at 15% plus within that.

Okay, thanks. That's it from my side.

Okay.

Saikiran Pulavarthi, Espirito Santo.

Yes. Just quickly on the average CASA has seen a sharp fall on a quarter-on-quarter basis of 160 basis points. Can you just explain why [we saw] and then how do you see that moving going forward?

Yes. See, as I mentioned in my outlook for the year, we would hope to keep it in the 38% to 40% kind of range. And if you look at what has happened over the quarter, clearly the savings account momentum continues well and we don't anticipate any issues there. But the current accounts have been quite volatile and the system as a whole also, the demand deposits are not grown by much. So that is where we see an area of sort of vulnerability in terms of ability to grow CASA. But this is something we had articulated earlier as well to say that average CASA is more like 37%, 38% in the short run, that has got pretty much borne out by their numbers.

Any early signs of weakness? Of course, you had -- they're demonstrated reasonably well on the savings bank deposits. But the competition growing at 6% -- sorry, offering 6% interest rates, do you see that as a threat in terms of incremental acquisition?

See, on the savings bank account, we will -- we continue to believe that the savings bank account behavior is going to be based on a transaction pattern of the customers and not the interest rate seeking pattern. It's not an investment type account, it's more a transactional account. That continues to be our belief. And so our own approach in this regard has been more like giving more -- the ability of the customer to do more transactions. And in fact, as I articulated about our MySavings Rewards Program, our approach has been more like how do we incentivize transactions in the savings bank account, how do we reward the customers for being loyal with us in terms of transactions. So that is the path we have taken rather than the interest rate path and we do believe that that'll be something which will help us.

And we have analyzed the patterns in terms of savings account and we have no reasons to believe that we need to do anything at all on the interest rate side of savings account. So that approach will continue. It's only that the current account for the system itself, given the liquidity pressures for the system, given the corporate profitability, et cetera, there have been -- for the system as a whole itself there has been lot of pressure on the current accounts. That is where we will continue to granularize it, we'll continue to take several steps in terms of getting a fair share of payment opportunities in the system, but there we can foresee some pressure.

Thanks a lot. A couple of questions on the data side. If you can just share us the builder loan portfolio number and also the corporate loan breakup in terms of working capital and then term lending, that will be of help. Thanks.

Builder loan continues to be about 3% to 3.5% of our total loan portfolio. We have not seen any significant increase in that portfolio. Overall on the corporate portfolio, the breakup of working capital would be about 30% or so of the total domestic corporate book.

You said domestic corporate, out of which 30% is working capital?

Yes.

Well, thanks a lot. That's it from my side.

Rakesh Kumar, Dolat Capital.

Hi. Just one question on the domestic corporate side and the rural side basically this quarter we have seen slight decrease in the book. Also on the vehicle loan side there is a slight decrease in the book on a sequential basis. So basically the (inaudible) book, we are increasing like we are willing to increase or how do -- we are meeting that PSL requirement if we are in turn decreasing our rural book?

On the priority sector, as you know, with the recent guidelines that have come over the last -- in the current financial year and the changes that RBI has made over the last year or so, clearly all the private sector banks will face challenges in terms of meeting their priority sector lending requirement. So of course, it's a requirement which is there for the year-end and what happens and you will see it across many banks is that the portfolio does decline somewhat during the year. So we did miss our numbers for March 2012 on the priority sector both in terms of overall and direct, [agri consumer numbers]. So we are trying to ensure that over the next few years in the medium term we meet our overall numbers. But it is clearly a challenge which is there for all the banks, and it's not that only we are facing that challenge.

Secondly, on this vehicle loan part, that portfolio also there is a bit of a contraction, so is it due to the competition what we see in the market or we are intentionally not trying to -- some segment -- some sub-segment of that portfolio, so --

Actually vehicle loans, as Kannan mentioned, has seen reasonably good growth on a year-on-year basis. Again, what happens in part of the portfolio, especially commercial vehicles portfolio, is that private banks like us do buy out some of those portfolios from non-bank finance companies. And some of that portfolio would have matured during the quarter. That is why you are seeing a sequential decline. But in terms of incremental disbursements for us, the growth was reasonably strong. And Y-o-Y growth continues to be quite strong.

So what portion of that buyout book could have matured?

It would be about maybe INR20 billion or so.

Okay, thanks. Thanks a lot.

(Operator Instructions) Anand Vasudevan, Franklin Templeton.

Hi, good evening. There were some press reports and this was a few weeks ago that the government maybe would consider holding back or limit its own business that it gives to private banks that fall sort of PSL requirements. So just want to know what's the actual situation here and is there any risk of loss of business going forward from this?

Hi, Anand. I mean there is actually no risk of loss of business because that business is not all that significant for us. So this -- the mainly, but there is always -- as you would recall, there is always this debate about whether government business should be given to a private sector bank and it has always been given in a fairly limited way. So I don't think we are a large player in that business, and therefore, maybe it's some kind of opportunity loss, but not a big -- something that is going to go away from the existing revenue streams or balance sheet, even if such a directive were to be implemented.

And again, there are different types of government business that are the consumer to government payments or collections like tax and so on. Those are largely unimpacted. This mainly pertains to where our bank is acting as an agent of the government, [disbursal of money], so on and so forth. Some of those could be impacted to some extent, but we don't think it's a significant [touch].

Okay. One more question. Kannan mentioned that you benefited from some retail -- unexpected write-back from the retail portfolio. I'd like to understand a bit more about that, so what products were these from? And generally a retail behavior is not unexpected, so what was the reason for this?

Yes. Well, I didn't say unexpected, I said that more than anticipated numbers. And this is -- for the past provisions we had made across the asset classes, we have been able to recover some money. So that was a significant write-back during the quarter. So that along with the -- no need for additional provisioning, on the general provisioning side sort of cushioned the impact of the large provision we had to take on the media account. So it's more like -- it can possibly repeat, but it is more like those kind of granular accounts from where it came.

Okay. Are you still seeing write-backs from the unsecured piece as well?

Yes, we are seeing. Yes, that's right.

Okay. Thank you.

Annan Ludda, HDFC Mutual Fund.

Hi. I just wanted to understand what sort of collateral the Bank is having against the media account? Hello?

We would really not want to discuss individual cases in terms of collateral and specific [new structures].

[But I think no] -- again having taken the substantial position, we'll continue to see what recovery we can do, and then maximize the recovery for the Bank and then protect the interest of the Bank. That endeavor will be there and we'll have to wait and see how this full space sort of pans out as we move forward. So we sort of protected our P&L by taking a large provision. So that is the approach we have taken just to be prudent about it. So that's --

No. Why I asked this question, because (inaudible) has been taking a large hit on the exposure, and that's why I was wondering what sort of collateral the whole industry has on the account?

That would be largely from the perspective of what has happened to the cricket team, et cetera. So I mean everybody has been taking probably a prudential step, given the developments in the case. So that is the way I would like to put it on rather than our specific collateral or lack of it.

Right. I'm sorry I'm taking one more corporate name. TATA has been in the media that has defaulted, Crisil [has been sending] downgrade to a default, [it's line course]. So just wanted to have your view on the same. Does the Bank have any exposure or has a corporate approach for restructuring?

So we have exposure to the group as a whole. Our main exposure is for the coal mine in Australia, where -- and our exposure to the -- we have exposure to few of their domestic projects. On this particular case, of the particular Crisil thing, I understand I think it's been widely reported that there was a delay in repayment over short-term loan to a specific bank.

Okay.

To a specific bank. The group, as a whole, has significant receivables from SEBs, which is putting some strain on liquidity, but they have not approached us for any restructuring and there is no plan to restructure any of our accounts with the (inaudible).

Okay. Because there was today also this article which says that the group has not taken delivery of its goods from the customer and they wanted to auction those things?

Well, my -- our understanding is that their issue is not about -- not taking deliveries about the quantum of customs duty to be paid, where probably would clarify with them directly. But I think they are expecting some duty drawback or a lower level of duty given the purpose (inaudible) has been listing and the customs is [reputing] that. So I don't think it's a thing of not having the money to pay for (inaudible).

That's all from my side. Thank you.

Nithin Kumar, Quant Capital.

Yeah. Hi, good evening, sir. Just one small question. How open would the Bank be to inorganic growth going ahead, we have already done quite a few acquisitions in the past?

Currently, the Bank is not considering a merger or acquisition of any bank, but this is not something that is core to our strategy, but opportunistically if an opportunity comes I guess, we would look at it. But currently we are not considering M&A of any bank.

Okay. Thank you, sir.

Hiren Dasani, Goldman Sachs Asset Management.

Yes, just one question on the life insurance premium number, et cetera, has there been any restatement for the September 11 quarter, that is last year same quarter?

No. One second, yes, one sec.

So maybe reclassification between the renewal premiums and the --?

There is no such reclassification, no. No, what is the background if we can just say --

I mean your last year Q2 presentation mentions renewal premium of about INR23.1 billion, current year presentation mentions about INR24.6 billion. Even the total premium this -- I mean the latest presentation mentions about INR34 billion for the last year same quarter, whereas last year it was -- I mean, total premium, there is not much difference, but maybe some reclassification during the renewal in the --

Well, there has been minor change because of some IRDA clarification which came subsequently. Otherwise, there is no restatement or any reclassification in that sense.

Okay. Thank you. That's it, yet.

Nilanjan Karfa, BRICS Securities.

Hi. Quick question on the retail side, not specific to (inaudible) but as a sector, we have been through the slowdown period mainly from the industrial side, what's your view on the retail [pi] and the entire pi in the sector? Just see if you can throw some light other than the competition part of it?

We believe that the sector as a whole continues to grow because even if you look at this year, wage growth in the country has been quite strong. I think even if you look at the latest set of numbers, wage growth has been in double digits. And while incrementally employment in some sectors may have slowed down, we are not seeing reduction and so on. So we believe that the retail loan growth for the industry will continue to be there.

And as Kannan mentioned, given that we are starting off from a relatively small base in terms of market share, even if we increase our market share slightly, which we are doing in terms of incremental volume, we should be able to get to a 15% kind of growth on the retail portfolio by the end of the year. And if you look at over the last few quarters, we have gone from 7% to 10% to just about 14% in this quarter and that trend should continue.

Okay. And specific [in an offshoot of this], are you incrementally targeting customers towards the credit card base, the EMI base, just wanted to understand that?

Credit card customers on a -- payment of credits cards on EMI?

Yes, correct.

I don't think we have any specific push on the product. In any case, our unsecured credit card and personal loan put together is just about flat. So we are not growing that business very aggressively and we are not pushing specifically on EMI-based products.

Okay. Okay. Fair enough. And a small suggestion, you put out a balance sheet every quarter for the standalone. It will be great to have a consolidated balance sheet actually because we have been talking about [consol] ROE for quite some time.

Sure. We'll evaluate that definitely.

Thank you.

MB Mahesh, Kotak Securities.

Yes. Can we have the breakup of the infrastructure book?

Sorry to interrupt, Mr. Mahesh, you are sounding very (inaudible).

Yes. Can we have the breakup of your infrastructure portfolio between power and non-power?

Yes, the power exposure broadly remains at the same level at about 7%, and overall is about 13%, 13.5%, the rest of the -- apart from power, the balance would be distributed across telecom, roads and ports.

This has remained unchanged over FY12?

Broadly, yes. Broadly, yes. That's right.

Okay. The second question is, from an asset quality perspective any updates on how this portfolio is doing with respect to delays in the implementation right now or some --?

Yes, as we have articulated earlier, power projects indeed we have seen some projects where delays have happened. But incrementally there have been some positive developments in terms of coal block allocation, et cetera. So we don't see -- the things have not really -- that means no adverse developments since we talked earlier. So it's okay. I mean, it is -- every project has to be carefully monitored given the environment. But other than that, we don't expect any significant slippages which will cause us any concern.

The second question on the margin side, you mentioned that there is a possibility that margins could improve in the second half of this year. Could you just elaborate as to where is it coming from? Is it from the cost side or (multiple speakers)?

What I was mentioning was that our immediate priority is to stabilize the margins at about 3%, so that is our immediate priority. To a question on how -- what is the levers available to increase the ROI to 1.7%, I mentioned that margin in the medium term could improve. But to answer your specific question on what are the levers which are available for increase in margin is, if you see the Q2 numbers, the international margin had come down to 1.22%. So that is a -- clearly, it's because of certain specific issues relating to excess liquidity we had, that we expect it to be deployed and incremental lending we are doing it with reasonable margins.

So with that expanding to 1.4%, 1.5%, there would be a positive movement in the margin. That is an immediate lever which is available. And both in domestic, as well as international, we are very conscious of protecting the margins and having to expand them over the medium term. So those measures will, according to us, [again] improvement in margins over the medium term. So that's really the approach we have in protecting and eventually expanding margins.

Sure. Thanks. Just one data point. What will be your share of wholesale deposits today in your overall term deposits?

Retail banking group accounts for 70% of our total deposit base.

The total deposits?

Retail deposits will account for 70% of the total deposit base.

Okay. Thanks a lot.

Yes.

Kashyap Jhaveri, Emkay Global.

Yes, hi. Congratulations on a good set of numbers. I have two questions. One is, on the non-funded side, would we have exposure to even those corporates to which there is no funded exposure? And question two is that, you have highlighted about credit cost begin at about 70 basis points, 75 basis points, does it also take into account any probable slippages which could raise from the non-funded exposure side?

It would -- generally we would not have only non-fund exposure to a corporate or if any. But it would be possible in some cases where you may have only non-fund exposure as well which could be a few cases (multiple speakers).

And in those cases also from our credit appraisal perspective, we will do an appraisal and go to the authorities as if -- I mean, there is no real difference in terms of assessment between fund and non-fund base. So you should have a sort of comfort that in terms of credit appraisal, the rigor of analysis would be same, even if in some cases we have taken only non-fund based exposure.

And the credit losses that Kannan talked about, it factors in our overall exposure, including fund and non-fund based exposures.

Okay. And whatever slippages that we have seen till date or probably over last couple of quarters, if -- any of those corporates have got a non-funded exposure, would that be immediately classified or it will be classified only once it comes or [turns] as a non-funded -- sorry, as a funded exposure?

It would typically happen as and when it gets into funded position. But what practically happens is that, by the time a company gets into an NPA scenario, it would have typically drawn down on most of the lines and (inaudible) and all that would have happened in most cases. So it's not that there will be some large non-fund still be outstanding against the NPA cases. That's practically the way it happens. You won't really have too much of non-fund exposure left once a company is classified.

Okay, okay. Sure, yes, that's it from my side. Thank you.

Thank you.

Thanks.

Thank you.

Mudit Painuly, Max Life Insurance.

Yes. I had a couple of questions. First one, regarding your power exposure. Out of this 1% power exposure, how much would be under construction and not operational, and how much would be the gas-based power projects?

The construction and under implementation split is -- sorry, operating power project and under construction is a 50-50 split out of that 7%. Under construction part, we will not have any gas exposure, any significant gas exposure.

Okay. And wanted to understand more about your 20% loan guidance, what would be the key driver, because as I see your retail growth would be around 15% odd and your -- and I believe project lending would not be that bullish. So what would basically drive it, because your working capital is only 30% of the loan book?

The retail adds 15% and the corporate, as you've seen currently, running at slightly higher than 20%. As you rightly said, it is based mostly on the past sanctions that we have on the term loans and the working capital growth that we are seeing. So we believe that the past sanctions which are there are good enough for seeing the growth of 20% for the year on an overall basis. Plus in the second half, you would typically find that lending related to priority sector will also increase. So you will find the book, which is not grown or actually declined, the rural book in the first half. [That will give] growth in the second half as well. So overall, that gives us comfort that we should be around the 20% number for the year.

Would lack of sanctions be an issue, be a bigger issue in the next year (inaudible)?

If the current trend continues and things don't change from here, it would be impacting the loan growth for the banking system.

Our own plan is that by that time the retail should start kicking in for us and it will be a much higher percentage growth than we are seeing now.

Okay. Just one quick question on your retail, given that mortgage so essential, what could be the disbursal and repayment in this year's first half compared to, let's say, next year -- last year's first half disbursals and repayments, you could give us some color there.

We have reported that outstanding loans on the mortgage. There's no big change in the repayment trends that we have seen.

So that has got yield or what do you think --?

It has continued to be in the similar level as what it was earlier. There's no real change in terms of repayment. The incremental disbursements have been growing at a much faster pace now.

Okay, okay. Okay, fine, thanks. Thanks a lot.

Thank you.

Mark Lien, Lazard Asset Management.

Hi, Kannan. Hi, Kannan. You mentioned the NIM expansion being helped by the lower cost of funding. Could you give us an assessment of your -- of where competitive pressures are in respect of loan yields? I mean, if loan yields were to decline in this environment that could perhaps limit the margin progress we've made through cheaper funding?

Yes, thanks for joining the call. So we do see some pressures in terms of retail lending. But as far as the corporate lending is concerned, we are not seeing any yield pressures at all. Given the economic environment, given the situation currently, we are able to -- both for foreign currency borrowings, as well as domestic borrowings, on the corporate sector, we are able to protect and expand our NIMs. That's not a problem. There is no pressures as such.

But if you look at it on the retail side, especially mortgages and automobile loans, there have been yield pressures. So that is where, as I mentioned earlier, our own proposition has been more than the rate per se, which will broadly match with the competition. Beyond that we would be focusing on the turnaround times, customer convenience or propositions such as home search for the customer. So those are the type of steps we have taken. And given that our market share is only about 7% to 8% currently, we do not -- for our kind of aspiration of 15% kind of a growth, we don't really have to undercut by much and compromise on our margins to do that lending. So given -- despite those pressures, we are quite confident that we will be able to protect our domestic net interest margins.

Thank you very much.

Thank you.

Thank you. I would now like to hand the floor back to Mr. N. S. Kannan for closing comments. Over to you, sir.

Yes. Thank you once again for all of you to join the call, and we have pretty much tried to cover bulk of your anticipated queries in the opening remarks itself. And if you still have further queries, my team and I will be available to take -- to answer those questions. Thank you once again. Goodbye. Good night.

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