ICICI Bank Ltd (IBN) 2013 Q4 法說會逐字稿

Ladies and gentlemen, good day and welcome to the ICICI Bank's Q4 FY13 earnings conference call. As a reminder, for the duration of this conference, all participants' 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'd like to hand over the conference to Mr. N. S. Kannan, Executive Director and CFO at ICICI Bank. 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 March 31, 2013, which is the fourth quarter of the current financial year that is 2013, which is Q4 of 2013. As always, my remarks this evening would revolve around four key themes. First we'll talk about the domestic macroeconomic and monetary environment, that will be followed by our performance during the quarter including the performance on our 5Cs strategy, then we'll move on to our consolidated results, and finally the outlook for the full financial year 2014.

Let me start with the first part on the macroeconomic and monetary environment during the fourth quarter. Indicators of real economic activity continued to be muted and reflected moderation in growth. The growth in Index of Industrial Production, that is IIP, continued to remain volatile with 2.4% growth in January 2013 followed by a growth of 0.6% in February 2013. Cumulative growth in IIP during April 2012 to February 2013 was 0.9% compared to 3.5% in April 2011 to February 2012 period. GDP growth for the nine months ended December 2012 was 5% with moderation seen across all key sectors. Export growth was positive from January 2013 recording a growth of 4.1% in Q4 of 2013 compared to a decline of 3.6% in Q3 of 2013. Imports grew by 2% during Q4 compared to a growth of 7.1% in Q3 with the lower growth being driven by lower value of gold and oil imports while non-oil imports continued to decline.

Trade deficit stood at $191 billion during fiscal 2013 compared to $183 billion in fiscal 2012. The rupee appreciated marginally during the quarter from INR54.8 per US dollar at the end December 2012 to INR54.4 per US dollar at end-March 2013. Inflation trend showed continued moderation during the fourth quarter with Wholesale Price Index based inflation declining some 7.3% in December 2012 to 6% in March 2013. This was primarily due to a consistent moderation on manufactured products inflation, which eased from 5% in December 2012 to 4.1% in March 2013. Core inflation moderated from 4.3% in December to 3.4% in March, the lowest level since March of 2010. Fuel inflation remained high due to increase in diesel prices while food inflation eased during the quarter. The average inflation for financial year 2013 was 7.3% compared to 8.9% in financial year 2012.

Systemic liquidity remained tight during the fourth quarter with averaged daily borrowing by banks under the liquidity adjustment facility, LAF window, increasing to about INR995 billion compared to INR937 billion during the previous quarter. This was partly due to lower government spending during the quarter. Reserve Bank of India provided liquidity support by way of Open Market Operations and government securities of about INR335 billion and a reduction in cash reserve ratio by 25 basis points to 4.00%. As a result of tightening liquidity, interest rates on market instruments like commercial papers and certificate of deposits increased during the fourth quarter. The yield on the 10-year benchmark government securities remained stable at around 8% at the end-March 2013. In Q4 of 2013 given the trends in inflation and growth, Reserve Bank of India reduced the repo rates by 50 basis points with 25 basis point reduction each in January and March 2013.

Global financial markets have improved following continued monetary policy support announced by US, Japan, and the EU, and improvement in economic indicators for the US. On the domestic side; easing inflation, rationalization of diesel prices, and government's focus on containing the fiscal deposit, coupled with global liquidity conditions resulted in FII inflows remained very strong in the fourth quarter. Net FII inflows were about $13.1 billion in Q4 of 2013, the highest quarterly inflow during financial year 2013. However, despite all this, equity markets turned volatile from February 2013. Global developments like the crisis of Cyprus and domestic factors such as political uncertainties and subdued growth impacted markets. The benchmark Sensex decreased by 3.2% during Q4 to 18,836 at end-March 2013 from 19,427 at end-December 2012.

Credit offtake from scheduled commercial banks remained moderate during the fourth quarter on a year-on-year basis. Non-food credit recorded a 14% increase year-on-year at March 22, 2013 compared to a growth of 16.8% we saw the previous year. Deposit growth continued to remain moderate with total deposits recording a growth of 14.3% year-on-year at March 22, 2013 compared to a growth of 13.5% at the same time last year. Demand deposits grew by 5.9% year-on-year while time deposits grew by 15.2% at March 22, 2013.

With this overall background, I now move to part two on the performance of the Bank during the quarter. Let me begin with the progress on our 5Cs strategy. First with respect to credit growth, total advances of the Bank increased by 14.4% on a year-on-year basis from INR2.54 trillion at March 31, 2012 to INR2.9 trillion at March 31, 2013. The growth in the domestic loan portfolio was higher at 17.7% on a year-on-year basis at March 31, 2013. The growth in advances was balanced across various loan segments. From March 31 of 2013, we have revised the presentation of the domestic loan portfolio mix to better reflect the nature of the underlying loans.

The key changes are the portfolio earlier presented as rural has been segregated to loans of retail, small and medium enterprises and corporate nature, and the same have been added to the respective retail SME and domestic corporate portfolios in the presentation. Business banking loans, which form part of our retail banking group's business, have now been reclassified from SME to retail. And the builder finance portfolio, which earlier was reported as a part of the home loan portfolio within retail has been reclassified into the domestic corporate portfolio. These changes, we believe, reflect the exact nature of the underlying business. And these changes have been presented in the presentation, which has been mailed to you as such.

For your convenience, in the presentation, we have included data for March 31, 2012 and December 31, 2012 on the revised basis. My subsequent discussions on our credit growth for the year is based on this new classification. I want to say that there is no material change in the growth trends of the loan portfolios due to this change.

Growth in the retail portfolio has been increasing steadily over the last few quarters. This trend has continued into the fourth quarter as well with the organic retail portfolio, that is after excluding buyouts and the inter-bank participation certificates, growing by 25.6% on a year-on-year basis at March 31, 2013. However, during Q4, the Bank had significantly lower portfolio buyouts in the retail portfolio compared to the buyouts in Q4 of 2012, with higher investments and pass-through certificates instead. Accordingly, the overall retail loan growth, including such bought-out portfolio, was lower at 11.4% on a year-on-year basis at March 31, 2013.

The growth in the retail portfolio was driven by growth in the secured retail lending categories with outstanding mortgages increasing by about 18% and auto loans increasing by about 25%. Growth in the organic commercial business loans, that is after excluding the impact of the portfolio buyouts and IBPCs, were 16.7% on a year-on-year basis at March 31, 2013. Including the buyouts, the commercial business portfolio saw a decline of 16.1% on a year-on-year basis at March 31, 2013. The bank's unsecured retail portfolio increased by 20.6% on a year-on-year basis to INR43.1 billion at March 31, 2013. However, it is only about 1.5% of the overall loan book of the bank.

The growth in the corporate and international portfolio together was 18.1% on a year-on-year basis, driven largely by a 29.9% growth in the domestic corporate portfolio. On a sequential basis, the domestic corporate portfolio actually has reduced by about 4%. Net advances of overseas branches increased by 5.7% on a year-on-year basis in rupee terms, primarily due to the movement in the exchange rate. In dollar terms, the net advances of the overseas branches remained stable on a sequential as well as on a year-on-year basis at March 31, 2013.

Moving now on to the second C on the CASA deposits, mobilization of CASA deposits has continued to remain challenging for banks, as reflected in the systemic trends in demand deposit growth. Despite all this, the Bank has seen a healthy momentum in its CASA deposits during the fourth quarter. During Q4 of 2013, the Bank saw an increase of about INR42 billion in its savings account deposits and an increase of INR12.5 billion in the current account deposits. This resulted in an improvement of the overall CASA ratio from 40.9% at December to 41.9% at March. The Bank also saw an increasing average CASA ratio from 37.4% during Q3 to 38.1% in Q4.

Now to the third C, on costs. For the fourth quarter, operating expenses, including DMA expenses, were higher by 8.3% on a year-on-year basis. The bank's cost-to-income ratio declined to 40% in Q4, compared to 41.6% in Q4 of 2012. For the full year, the operating expenses growth was 14.8%, and the cost-to-income ratio was 40.5% as compared to 42.9% in the previous year.

Let me move on to the fourth C, on credit quality. During Q4 of 2013, the Bank saw gross additions of INR7.79 billion to its overall gross NPLs. Recoveries in Q4 was INR4.44 billion, resulting in net additions to gross NPAs of about INR3.35 billion. The Bank has also written off INR4.91 billion of NPAs during Q4. The provisioning coverage ratio was 76.8% at March 31, 2013, compared to 77.7% on December 31, 2012 and 80.4% at March 31, 2012. This decline in the provisioning coverage ratio, compared to March 2012, and December 2012 was mainly on account of write-off of unsecured retail loans and incrementally there is no change in the bank's approach to provisioning. The net NPA ratio was 64 basis points at March 31, 2013, the same level as at December 2012 and marginally higher than the March 31, 2012 net NPA ratio of 62 basis points.

Coming to restructured loans, in January 2013, RB issued guidelines requiring banks to report restructured loans at a borrower level, that is including all facilities, including those not restructured to a borrower, were there any of the facilities have been restructured. The Bank has implemented this guideline effective fiscal 2013. Accordingly, the net restructured loans at the beginning of the year as per this revised guideline were INR45.54 billion, compared to INR42.56 billion reported on the earlier basis. At December 31, 2012, there were INR45.62 billion, compared to INR41.69 billion reported on the earlier basis. Additions to the restructured portfolio were INR7.88 billion in Q4. As a result, the net restructured loans increased to INR53.15 billion at March 31, 2013. On a full-year basis, the total standard loans restructured for the Bank were about INR17 billion, half the additions of about INR34 billion that we had seen in the previous year.

Provisions for Q4 were at INR4.6 billion, as compared to INR4.69 billion in Q4 of 2012 and INR3.69 billion in Q3 of 2013. The provisions in Q4 were higher on a sequential basis on account of higher provisions on loans restructured during the quarter. Credit costs, as a percentage of average advances, were at 65 basis points on an annualized basis for Q4 of 2013. For the full year financial year 2013, provisions were INR18.03 billion, and credit cost as a percentage of average advances were 66 basis points.

Now to the fifth 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 the customer base. During the year, the Bank added 348 branches and 1,475 ATMs to its network. With this the Bank has a potential network of 3,100 branches and 10,481 ATMs at March 31, 2013. The Bank also continues to strengthen the technology channels for increasing customer convenience. The bank's Facebook initiative continues to be appreciated by the customers with a fan base for the ICICI Bank Facebook page reaching over 2 million fans currently.

Having talked about the progress on five Cs, let me now move on to the key financial performance highlights for the quarter. Net interest income increased by 22.5% year-on-year from INR31.05 billion in Q4 of 2012 to INR38.03 billion in Q4 of 2013. For the full year, the net interest income growth was 29.2% from INR107.34 billion to INR108.66 billion. The full-year net interest margin was 3.11%, an improvement of over 35 basis points compared to financial year 2012. The net interest margin for the fourth quarter was higher at 3.33%, compared to 2.01% in Q4 of 2012 and 3.07% in Q3 of 2013. The net interest margin on domestic business was about 3.7% in Q4 of 2013 and the net interest margin on international business was about 1.3%.

The improving trend in the margins is a result of our conscious focus on NIM over the last few years, including loan pricing, investment ease, funding mix, funding and costs, and deduction of drags on some factors make securitization loses. However, I would like to say that the fourth quarter NIM has come ahead of our own expectations. A substantial part of the bank-specific structural areas of net interest margin have been addressed, and going forward the NIM progression would be more closely linked to operating environment.

We believe that given the evolving interest rate, liquidity, credit and deposit growth environment and the competitive scenario, our focus would be on achieving a year-on-year net interest margin improvement of about 10 basis points in the coming year, compared to the full-year net interest margin for financial year 2013. Total non-interest income was INR22.08 billion in Q4, compared to INR22.28 billion in Q4 of 2012. During Q4 of 2013, treasury recorded a profit of INR0.93 billion compared to a profit of INR1.58 billion in Q4 of 2012 and a profit of INR2.51 billion in Q3 of 2013. The profit in Q4 of 2013 was lower on account of mark to market losses on the equity portfolio following the volatility in the equity market during the quarter.

Other income was INR3.4 billion in Q4 of 2013 compared to INR3.42 billion in Q4 of 2012 and INR1.93 billion in Q3 of 2013. During Q4 of 2013, the Bank received dividend of INR1.09 billion from ICICI Bank UK similar to the quantum we received in Q4 of 2012. Fee income increased by 2.7% from INR17.28 billion in Q4 2012 to INR17.75 billion in Q42013. Overall fee income growth continued to remain impacted by lower corporate banking fee income due to slowdown in new projects and financial closures. During Q4 of 2013, the Bank saw a healthy growth in its retail banking fees. For the full financial year 2013, total non-interest income was INR83.46 billion comprising treasury income INR4.95 billion, other income of INR9.5 billion, and fee income of INR69.01 billion. I've already spoken about the trends in the operating expenses and provisions while speaking about our 5Cs strategy. Consequent to the financial parameters I described earlier, the Bank's standalone profit after tax increased by 21.1% from INR19.02 billion in Q4 of 2012 to INR23.04 billion in Q4 of 2013. For the full year, the standalone profit after tax increased by 28.8% from INR64.65 billion in financial year 2012 to INR83.25 billion in financial year 2013.

I now move on to the consolidated results. On a full-year basis, the profit after tax for the life insurance company was INR14.96 billion in financial year 2013 compared to INR13.84 billion in financial year 2012. The profit after tax in Q4 of 2013 was INR3.54 billion as compared to INR3.28 billion in Q4 of 2012. The profit after tax was lower on a sequential basis on account of higher new business stream give the higher new business premiums in Q4 of 2013. The Q4 2013 level of net profits reflect an annualized return of about 30% on the Bank's invested capital. Following a phase of transition to the new regulatory regime, ICICI Life Insurance has started witnessing healthy year-on-year increase in volumes. The new business annualized premium equivalent for ICICI Life increased by 18.6% from INR10.77 billion in Q4 2012 to INR12.77 billion in Q4 of 2013. The new business margin for Q4 of 2013 was 15%.

The retail weighted received premium for ICICI Life increased by 16.3% during April 2012 to February 2013 compared to a 2.2% year-on-year growth for the private sector and 1.8% growth for the industry. As a result, during April 2012 to February 2013, ICICI Life maintained its market leadership in the private sector with an industry market share of 7.2% on the basis of retail weighted received premium. On a full-year basis, ICICI General Insurance has seen a significant improvement in profitability with profit after tax of INR3.06 billion in financial 2013 compared to a loss of INR4.16 billion in financial year 2012. ICICI General Insurance recorded a profit after tax of INR0.27 billion in Q4 of 2013 as compared to a loss of INR6.13 billion in the corresponding quarter Q4 2012.

As I had mentioned on the earlier results call, the Company has recognized the residual impact of actual evaluation of the third-party pool liability -- motor pool liability in Q4 2013. During the quarter, the Bank has infused about INR0.74 billion of capital in the general insurance subsidiary in view of the impact of the third-party motor pool losses recognized by the Company over the last two years. The Company maintained its leadership position in the private sector with an overall market share of 9.8% during April 2012 to February 2013.

Let me now move on to the performance of our overseas banking subsidiaries. As per IFRS financials, ICICI Bank Canada's profit after tax for Q4 of 2013 was CAD11.2 million as compared to CAD10.2 million for Q4 of 2012. For the full year financial year 2013, the profit after tax for ICICI Bank Canada was CAD43.6 million, compared to CAD34.4 million in financial year 2012. Total assets for ICICI Bank Canada were CAD5.4 billion at March 31, 2013, compared to CAD5.36 billion at December 31, 2012.

With effect from January 1, 2013, ICICI Bank Canada implemented Basel III capital adequacy framework in line with the regulatory requirements. Accordingly, the capital adequacy ratio for ICICI Bank Canada at March 31, 2013 was 33.2% as per Basel III framework, compared to the reported Basel II capital adequacy ratio of 34.5% at December 31, 2012.

ICICI Bank UK's total assets were $3.59 billion at March 31, 2013 compared to $3.98 billion at December 31, 2012. The profit after tax for ICICI Bank UK for Q4 of 2013 was $0.3 million compared to $10.5 million in Q4 of 2012. Net profit for ICICI Bank UK has declined, as during the quarter the Company increased its provisioning for the existing impaired loans. For the full-year financial year 2013, ICICI UK's profit after tax was $14.4 million compared to $25.4 million in financial year 2012. The capital adequacy ratio, even after the $100 million capital repatriation during the quarter was healthy at 30.8% at March 31, 2013.

Let me now talk about the overall consolidated profits. The consolidated profits for Q4 of 2013 increased by 37.7% to INR24.92 billion, compared to INR18.1 billion in Q4 of 2012. The consolidated profits for Q4 2012 included the impact of additional third-party motor pool losses of INR6.85 billion recognized by the General Insurance subsidiary, while the consolidated profits for the current quarter Q4 of 2013 include a significantly similar loss on account of the actuarial valuation of the pool, as I had mentioned earlier. On a full-year basis, consolidated profits increased by 25.7% from INR76.43 billion in financial year 2012 to INR96.04 billion in financial year 2013. The full-year consolidated ROE for financial year 2013 was 14.7% compared to 13% in financial year 2013. In the third quarter, the Bank had achieved its target of a 15% consolidated ROE and we have sustained the consolidated ROE, excluding the General Insurance motor pool impact at this level in the fourth quarter as well.

I would now like to talk about our outlook for financial year 2014. As I had mentioned earlier, there has been a moderation in economic growth. At the same time, several challenges on the regulatory front are underway. Our outlook for fiscal 2014 is in this overall context. With respect to loan growth, we would target domestic loan growth to be at about 20%, assuming a systemic loan growth of 17% to 18%. We would target about 25% growth in the retail portfolio, driven primarily by secured products. Domestic corporate loan growth is expected to moderate from the level seen in financial year 2013, and will be primarily driven by demand for working capital finance and balance sheet funding and offtake from existing project approvals.

The international book in our overseas branches is expected to grow at about 10%. Given the current growth trends in demand deposits in the system, our target would be to continue to maintain the average CASA ratio at the current level for financial year 2014 as well. As I mentioned earlier, we have to target an improvement of about 10 basis points in the overall net interest margins on a full-year basis.

With respect to fees, during financial year 2013, we've seen improvements in certain fee segments, such as transaction banking and retail banking fees. However, fee income was impacted by a decline in corporate lending-linked fees due to the slowdown in new projects and financial closures. The proportion of corporate lending-linked fees in the overall fee income base is now reduced to a substantially lower levels and with continued growth momentum in the other fee streams, we are targeting an improvement in fee income growth to double-digits in financial year 2014.

For financial year 2014, we would work to contain the overall provisions to average advances to about 75 basis points, based on the current RBI guidelines and our current assessment of the asset quality trends.

So with this opening remarks, we will go ahead with the question and answer. My team and I will be happy to take your questions. Thank you.

Thank you very much, sir. (Operator Instructions) Mahrukh Adajania, Standard Chartered.

Yes, hi. I just have a couple of questions on PSL first. So what was the amount of buyout included in loans in 4Q13 and what was the amount in 4Q12? And then how are you placed on your overall PSL?

In terms of the overall PSL, we might have achieved about 90% of the requirements. And as Kannan mentioned, the level of buyouts in the loan portfolio this year have been lower than last year so, of course, this year we would have done some bit more in the investment portfolio which would have come in the form of PTCs. But in the loan portfolio, the amount is clearly lower than what we had last year.

But would you have some amounts for this year and last year for the loan portfolio?

In terms of the buyouts?

Buyouts.

It's about -- it was about INR17,000 crore last year.

Okay.

And it's about INR80 million this year.

Okay, thanks. Thank you.

Thank you. Vishal Goyal, UBS.

Hi, sir. Just needed your sense on expense in the restructuring pipeline not only what you have let's say on hand, but also what do you see coming in the next one year, any sense of that would be helpful?

See, what we have currently is about INR6 billion to INR7 billion of restructuring to be done. But Vishal, given the current economic environment, while I do believe that there will be more restructuring, it will be a bit difficult to predict at this point in time. I just wanted to assure you that the efforts will be on to continuously monitor the portfolio very closely to ensure that we limit the asset quality issues. So if you're looking -- if you just see my opening remarks, the confidence we have in containing our credit losses to 75 basis points of the overall average advances clearly reflects our grip of the portfolio we have. But it will be very difficult at this stage to predict what is going to be for the full year plus you have seen the trend in the last two years, the year before last financial year 2012, the incremental restructuring was about INR34 billion, which has reduced to half that level in financial year 2013. So the efforts are on in that direction, but I can tell you that the current pipeline has about INR6 billion to INR7 billion, but we will maintain the credit cost as a percentage of average loans at 75 basis points in fiscal 2014.

And that's including any NPV loss whatever you might have to incur, correct, that 75 bps?

That is correct and also based on the revised provisioning requirements of Reserve Bank of India with regard to restructured loans.

Restructured loans, okay. And one more question on fee income, can we get some breakup of fee income as you would mention about retail national banking corporate, the just broad breakup, your overall fee?

Yes. Just hold on, Vishal. In terms of the breakup, it broadly continues to be that retail and SME form now over 50% of the total fee income and if you look at FY13 as a whole, about 50% is coming from the retail and SME segment. Within that, further breakup of retail assets and liabilities, it's again assets will be about 15% to 16%, liabilities would be about 25% and then rest will be coming from the SME and the other segments.

On the corporate side, actually the lending-linked fees has come down a lot, so that now accounts for about 30% of the corporate fees and most of the fees are now coming from the transactional banking and the FX and derivative fee income.

Okay, thanks, Rakesh.

Manish Ostwal, KR Choksey.

Congratulations on a good set of numbers. My question is, could you provide provision breakup for this quarter?

Provision, as Kannan had mentioned, is largely for the NPAs and the restructured loans. The provision of standard assets was not material this quarter, so it's mainly on the NPAs and the restructured loans.

Is there any write-back in the standard provision, sir, during the quarter?

There were some small write-back, would have been there, because of some of the dual rate loans which -- on the mortgage side, which carry a higher provision of 2%. On that portfolio there was some reduction. So there was some small write-back which was there on the standard assets.

And, secondly, in the interest income there is one item, other interest, the amount is INR440 crores, compared to INR194 crores in quarter three. So, any one-off in the INR440 crores interest on IT refund or something like that?

Interest on IT refund is something that actually comes in every year. So if you look at that other interest income line, which was there, which was about, as you mentioned, INR4.4 billion in the current quarter, that same number was about INR1.9 billion in the same quarter, and last year same quarter was about INR3 billion. For the year, the amount is about -- close to INR12 billion in both this year and the last year. It does include interest on income tax refund as well, and that has been there for each of those years. Again, as Kannan mentioned earlier, that from a margin perspective we should look at the full year margin, which was about 3.11%, and take that as a base as we get into the next year and look at expanding that margin by about 10 basis points.

And lastly, on the overall loan composition, basically in retail book will grow healthier in this year as compared to corporate book. But within the segment, which are the segments you target to grow? Could you give some sense on that?

Yes. As I mentioned, the overall retail book we are seeking [25%], whereas the overall domestic loan book will grow at about 20%. So, the retail proportion in our overall loan book will continue to increase into the next year, is how we are targeting the numbers. Within retail, mortgages and vehicle loans continue to dominate the retail portfolio. Our growth in the commercial business, which comprises commercial vehicles and commercial equipment that will continue to be calibrated, and to the extent of that benefitting the priority sector, there we will be quite active. The rest of the portfolio there, we would calibrate it depending on the economic environment.

To answer your question, the primary growth within retail is going to be mortgages on the vehicle loans.

Okay sir, thank you very much. Thank you.

Amit Premchandani, UTI Mutual Fund.

Thank you, sir. Through Agri front you have clubbed most of the rural advances to either retail and/or corporate. Is there no crop loan which you give?

That will be a part of the retail portfolio, so we have basically taken the classification, based on the customer to whom the loans have been made. So that has been classified into either retail, SME or corporate.

And in terms of reclassification, NPLs, will they get reclassified because of the reclassification on the retail book, because the historical retail NPL trend --

Yes, there would be some impact, of course, because if we are changing the overall portfolio, but there is nothing really material. As you know, in our case, almost all the NPAs were indeed coming from unsecured retail piece and some of it was from the vehicle financing, which largely continue to be in the retail portfolio. To the extent that some of rural portfolio has been classified into the retail segment now that will get added to the NPLs in the revised retail segment.

I just wanted to reemphasize that we have been having this discussion about classification of builder financing et cetera in the past so we thought it's a good time to just reclassify it so that it accurately reflects the underlying business. So that is a reason we did it and this is the time we could do it because whichever way you cut the numbers, it was not making too much of a material difference. So that is the reason why we did it so that going forward we can track based on the underlying nature of the business itself.

If I reduce the retail NPLs from the overall NPL, the gross NPL in non-retail comes at around 3%, around INR54 billion as compared to around INR36 billion last year. A 3% gross NPL for a non-retail for a private Bank is like one of the highest. So which are the segments that have contributed to that and why is it that some of the other private banks have much lower overall NPLs even in non-retail?

In non-retail, if you see -- look at the portfolio, we indeed have said in the past that we have seen some NPL additions coming in on the corporate side and -- sorry, on the SME side and some of the, I guess, the mid-sized corporates that is more of the restructuring that has happened. But I don't think that our numbers would be anything substantially different compared to other banks, which are also there in the corporate and SME lending business.

We have not seen any specific trends. On the SME portfolio itself, which continues to be 5%, there we have seen development of NPLs in every quarter; but apart from that, we have not seen any trends which was out of line with the systemic trend.

I'm just saying that because the increase in gross NPL on the non-retail front has been INR18 billion on a gross basis for the year. So is there any particular segment, sectors which you want to highlight on that? Is it only SME because the SME portfolio is almost 5% only?

SME and one particular asset indeed got added in the September quarter, which we had talked about. For example, that was discussed and that itself will account for nearly one-third of this increase and rest of it would have come from the SME and maybe a couple of mid-size corporates, which are brought into NPL. So I don't think the numbers are out of range from what we have talked about.

Okay. Thank you, sir.

Thank you. Manish Karwa, Deutsche Bank.

Yes, hi. This -- the reclassification that we have done, have we done it on behest of RBI or we ourself decided to do this?

No, we ourselves decided to do it. It has got nothing to do with RBI. We did it in the context of the truly underlying business nature of this portfolio and based on some of the conversations all us have in the past in terms of classification of builder loan, et cetera, and generally in line with the other banks. So those are the reasons, nothing to do with RBI or anything. This is -- in any case, financials are not changing at all.

Sure.

It's only a matter of presenting in the financials in terms of how the businesses are organized, that continues to be the same.

Okay. And even on the restructuring front, now do we -- RBI says for the public sector or RBI generally says that loans which are two years old should be classified or restructured loans which are performing for two years should -- can be taken out of restructuring reporting, but we are doing it for one year. We are still doing it for one year or we have changed that as well?

So that -- we are not doing it as per the RBI guidelines itself. If you look at the past, it so happens that wherever the one-year period would have got over and we would have upgraded, there in all those cases, the two-year period also has got over. So anyway, not much of an impact which is there either ways on that.

Okay.

And in any case, like we have articulated in the past, the slippages for us out of restructured loans into NPL has been very minimal. So by the passage of time, whether it is one or two years, bulk of the portfolio for us gets upgraded. So it's not -- it's too much of a concern for us.

Sure. And what would be your domestic NIMs and international NIMs for fourth quarter?

3.7% on the --

3.7% would be the domestic NIM for the fourth quarter and international NIM would about 1.3% for the quarter.

Okay.

And we still continue to live with a lot of liquidity in the international portfolio. And when we talked about a 10 basis point expansion in the overall NIM, we are expecting the international division to increase their net interest margins into the financial year 2014.

Okay. And lastly on your life insurance subsidiary, after a long time expense ratio has actually increased. Something to read out here due to product changes or why have expenses gone up and actually -- your events have actually gone up and your growth has also been reasonably okay.

So there is some increase, which has happened from about 18% to 19% so part of it would be linked to the change in the profile of the product that we are doing for the mix has indeed changed over the last two or three years and that would be the --

Primary reason.

Okay. And the reduction in margin that we have seen this year, should we assume now that the margin settle at these levels or there can be further downside to that?

We have to see because as you know, the guidelines on the traditional products have also come, which will take effect from this financial year. So as those come through, we will have to see how the margins go.

As of now, we have asked them to maintain it at around the current level, which is 15%.

Okay, cool. Thank you.

Thank you. (inaudible) Edelweiss Securities.

Hi. This is Nilesh here. Just wanted to understand more on the margins. Basically we've seen a good sequential pickup in margins on the domestic side and you've kind of articulated that this was kind of come off -- basically next year you're looking at about 10 bps improvement so on a YoY basis you're looking at about 3.21%. Now does that mean that from here on probably there could be some quarters where actually the margins will start trending down or we kind of build up on this margins here for the quarter?

So as Kannan mentioned, we're looking at about a 10 basis point increase, you should not take it as a precise number of 3.21% for the coming financial year at conversion, there will be a lot of variables in how the margin develops. I think for the next year as I said 3.1% is the base that we should take. Every quarter there is some impact which comes in. For example in earlier periods, we used to have a much higher funding cost in the March quarter, which comes -- which used to come in and was impacting the margin in the first quarter. And then as someone earlier mentioned, there is interest and income tax refund, which comes in a particular period, the other interest income which is there. So overall, 3.1% is the base and on that I think is where we would start seeing some improvement in the margin, partly it will come on the overseas business. We have talked about the fact that we think that the margin there should be in region of 1.4% to 1.5%. We continue to have excess liquidity in the overseas branches currently thereby depressing the margins, which are currently at about 1.3%. So on an annual basis, I guess is where we should look at how the margins would trend. On a quarter-on-quarter basis, it will depend on how things move during the year. At some stage, I'm sure banks will reduce their base rate that will have an immediate impact on margins for the Bank while it will recover later. So quarter-on-quarter, it's difficult to give specific guidance on how the margins will trend.

Sure, Rakesh. Just for this quarter specifically, this -- the increased (inaudible) that's on the domestic side, was it more let on the yield on advances or it was like cost containment?

No, largely on the cost side, our deposit costs have been coming down and given the tenure of these deposits when they were contracted compared to that rate, then current rates are softer. And secondly that as we have seen, the other issues has actually inched up so those were a few reasons, but predominantly the reasons have been on the funding side.

Okay. And so the reason I mentioned this because was this -- as you mentioned earlier that this came as a surprise so was there any other factor besides this in terms of -- ?

No, no, we've been sort of pushing the net interest margin quite hard because of the system and last quarter, there were -- our average CASA ratio had come down somewhat. So the emphasis was a lot on the daily average CASA during the fourth quarter so that has gone up about -- just about 38% now. So those are the reasons and then as Rakesh mentioned, there are moving parts so finally this number came at a slightly higher level than what we had anticipated. And to answer your earlier question on going forward, the mix of international loans in the overall loan is also likely to come down because the growth outlook we have on the international book is 10% whereas the domestic loan growth is expected to be at 20%. So that mix also would be positive. So we -- I mean -- so at this stage we are quite confident of expanding the NIM by 10 basis points into the next year.

And some outlook in terms of the performance for subsidiaries going into next year. The reason I'm asking this is, basically, this year we've seen a strong performance on the standalone Bank and the profit growth -- the subsidiaries, if you knock off the losses because of the third-party pool, had been kind of lower than what we've seen for the standalone bank. How does it lay out for the next year, because the large part, we are kind of getting a substantial chunk of dividend from the subsidiaries too? So, just wanted to get your --

Just on the standalone Bank itself, the drivers would be further expansion of ROA through the net interest margin expansion, containing the cost below 40% cost/income ratio, trying to push the fee income, getting to just about double-digit growth is what we have talked about. And on the credit cards, containing to 75 basis points. With that we do believe that there is still some scope for improvement of ROA from the current level. That is how we will sort of drive the bank-side strategy.

In the subsidiaries, one set of subsidiaries, the international subsidiaries, there we would continue to discuss with the regulators on getting some sort of capital back further. So, that will help the ROE expansion on the subsidiary side.

But for domestic subsidiaries, if you ask, the ICICI general insurance is completely back on track now. Anyway they have consolidate their market leadership by about close to 10% market share. With all the drag of this motor pool getting over, soon we would be expecting them to earn profits consistently, so that they can start paying dividend. Already they are earning about 18% ROE on the invested capital there. So, that we believe can improve into the next year. That is the path we have for general insurance.

Life insurance, as we mentioned earlier, the growth is back on track, but expecting the profit to grow at a huge rate will be difficult, because already they are earning 30% ROE on the invested capital there. There the approach could be that to make sure that there is top-line growth actually. I mean that is going to be the focus.

Rest of the subsidiaries, if you look at ICICI Securities primary dealership, they have made better profits and they are very much back on track. ICICI Securities largely depends on the market conditions, we'll have to wait and see, but that would continue to be profitable, better than the current financial -- better than financial year 2013 is what we hope.

So, like this we have specifically set targets and strategic path for each of the subsidiaries, but definitely the focus on subsidiaries continue. And some of the Board members of the parent, the whole-time Directors, we are nominees on the subsidiary (inaudible) and we'll push this strategy in the subsidiaries and the (inaudible).

Sir, just to end -- conclude this, sir, basically then what you are saying that the share of dividend in the -- if you're just probably looking at this as the standalone bank, but then on the ROE basis would continue to remain constant for the next year?

Our endeavor would be to slightly increase it every year, because we have seen some increase that just happened over the last year, and we would seek to increase it from the current level, because if you see the last couple of years, ICICI General could not pay dividends. Yes, of course, ICICI Life is paying a large dividend, and as I mentioned earlier that dividend cannot grow at a much higher rate. But we're expecting continued dividend flows from UK and Canada. So, I think the objective would be to increase the dividend streams, not just be satisfied with the current level.

Sure. Great. Thank you very much, gentlemen.

Thank you.

(Operator Instructions) [Prashant Shaw], Mandate Securities.

Thank you. Most of my question have been answered. Just wanted your view. You already achieved your ROE target for -- which you had kept for two years later. Could you quantify what your next target would be?

No, ROA on a standalone basis, we are at 1.66.

Yes. So you had a target of about 1.7 by FY15. So you are almost close to that right now?

Yes, what we think at this stage, based on how it has panned out, is to take it to anything between 1.7 to 1.8 actually, so that is something we're quite confident of. And beyond that we do believe that we still have some scope to improve the risk-weighted assets part of the equation. And then with some of the rationalization of capital from the subsidiaries, we to believe that the ROE can be expanded. So that is the kind of path we have. To answer your question, it's more like 1.7 to 1.8, is something which we look at, at this stage, and then see how the interest rate regime evolves into the next year before targeting further amount.

Okay, thank you very much.

Thank you. Thanks, sir.

Anand Vasudevan, Franklin Templeton.

Yes, hi. Can you give an update on the findings of the money laundering in KYC investigations, both in the Bank and in the Life Insurance subsidiary?

Yes. One second, Anand. See, as you know, Anand, we had appointed an Internal Enquiry Committee to look into the allegations made by the news portal and we also appointed Deloitte as an external consultant to carry out the detailed forensic analysis of the transactions in the branches appearing in the videos. The Internal Enquiry Committee has submitted its final report and the external firm has also submitted its interim report.

So based on this, our key findings so far have been that no actual transactions have been found to have taken place, pursuant to the specific instances shown by the news portal and based on the enquiry thus far, no other transactions of this type have also been found at the concerned branches. The blank's procedures, as you know, to implement a KYC and anti-money laundering statutes, regulations have been found to be satisfactory. It may be noted that the issue relating to the adherence to KYC norms and not money laundering. That is the issue we are talking about. Certain suggestions have been made for further strengthening some processes, based on this enquiry reports that is being taken up for implementation and we do believe that it's all transactional errors, beyond showing any pattern to us.

The effectiveness of these controls give us confidence that in case an attempt was actually made to put through an unexplained transaction, it would have either got rejected or detected and reported to the appropriate authorities. That kind of confidence we have today. However, having said all this, the conduct of some of the concerned employees, as we have seen in the video, is clearly in violation of the bank's code of conduct and we are -- we will take appropriate action in respect of the employees. And, as of now, they continue to be in suspension, pending a final action to be taken on them.

As regards RBI, we are not in a position to comment on investigation conducted by the regulator, because it will be up to the discretion of RBI to make public any of the findings in this context. So this is the broad sense we have. So clearly we do not see it at all as any of anti-money laundering issue at all. If at all there are any transactional errors, which is the normal to be observed in a large bank like us, but having said that such incidence, there is always some learning and we will tighten the processes going forward.

Okay. And does that conclusion on the anti-money laundering piece, does that hold for the Life Insurance subsidiary as well?

Yes, absolutely. Very similar process we have adopted for Life Insurance Company as well. There also we had Deloitte looking at the -- as an external consultant looking at it. They also had an Internal Enquiry Committee, which has submitted the report. The conclusions had been broadly the same and clearly in their case also they find that employee behavior, in terms of talking, to be violative of the code of conduct and they will also take action accordingly.

Okay. Thanks.

Thank you. Thanks, Anand.

Rakesh Kumar, Elara Capital.

Hi. One question pertaining to the margin, like we are expecting close to (inaudible) improvement in the margin. So is it like coming from the -- is it, say it, for the -- like liability side on the domestic front? Like, where do we see this improvement in this figure?

It would actually come from the oversees business. As we said, we expect the margins to improve somewhat in the oversees business, just given the deployment of funds which are currently available with us. And the overall mix would continue to again move towards domestic, because we expect oversees loan growth to clearly be lower than what we are seeing on the domestic business side. So that should help in the overall margin. On the domestic side, clearly from a lending perspective, I think there will be pressures on these in the current financial year given the kind of overall trade growth that we are seeing. So in terms of funding, I think there will be opportunities for the funding cost overall to go down, but again, there could be some tiny mismatches between how the asset yields move and cost of funds move. So that we have to see how that happens, but I think it'll have to come from the funding side and the overseas businesses.

Asset side will be on overseas, domestic will be on the funding side.

Okay. And secondly like we are expecting some improvement on the ROA front also for the next year, is that right?

That's right.

Okay. So like we have given the guidance that 10 bps improvement in margin and like around 10 bps increase in the credit cost from 66 bps to around 75 bps. So on the risk adjusted basis, like there is -- like it will be flat basically?

On ROA?

Yes. On the risk adjusted margin like for the credit cost, it will -- there would not be any improvement. So the improvement is basically coming from either operating expenses side or maybe from the fee income side?

Yes. In fact, both because fee income as we have seen, we saw 2.9% growth in the current financial year which we expect. Now that as Rakesh mentioned, we have a much lower base for the project type fee income -- project type lending related fee income on the denominator, we are expecting the fee income to increase to some double-digit kind of growth into financial year 2014. Cost income ratio, as we said, we are going to bring it down below 40%, that is the target today. Based on those two key variables plus the margin expansion, yes of course, the provisions will be flat. We do believe that we can take the ROA up in fact, expand the ROA into the next year between 1.7% to 1.8% and that is the target.

Okay. On the employee expenses side like for this full year compared to previous year, we have seen a decline like it has been very constant throughout in the four quarters. So like what are the number of employers we had and what we have added on a gross basis, net basis. So like just to understand that.

So we have added about 4,000 employees during the year. We started with slightly above 58,000 in March 2012 and currently we are at slightly above 62,000 in terms of total employees. So we saw an increase of about 4,000 in the number of employees.

And what could be the wage inflation may be for this year, FY13?

For FY13, the increase in salaries would have been about 8% to 10%.

8% to 10%. And we are expecting similar kind of range for the next year or wage inflation?

Yes, it will be similar.

Yes.

Okay. Thanks, sir. Thanks a lot.

Thank you. Jitendra Agarwal, CIMB.

Good evening, sir. Two questions in data points and then one on thought process. First, can we get the quarterly movement of gross NPLs?

Added INR7.79 billion of NPLs and deletions including the upgrades were INR4.44 billion and write-off was INR4.91 billion. So we moved from INR98.03 billion to INR96.47 billion.

Secondly, within the term deposits, can we get the mix of wholesale and retail?

Of the overall deposits, the retail is about close to 69% to 70% of the total domestic deposits. That is the disclosure that we make.

69% to 70% of the domestic deposits.

Domestic deposits is from the retail business segment.

Okay. So that would include your savings, current, and then retail term; right?

That's within the term deposits, retail would be about 55% or so.

Yes, that is good enough. And one is about this -- two weeks ago or three weeks ago we saw this news of INR700,000 crores of projects which are stalled where the finance minister was given the list and incremental action is being taken. Can you give a broad sense as to how much of these projects are on the ground in terms of banks actually having exposures and just for your bank, what is your sense as to what could be the size of these projects?

I don't think we have done any tallying of that INR700,000 crore number to our portfolio is such. As we have said in the past, our infra portfolio is less than 15% of our exposure, which is split broadly evenly between power and other sectors. In the other sectors, the project exposure is actually less. For instance in telecom et cetera, we have no project exposure and broadly on the non-power part, there are no issues as well. On the power part, out of the 6.9% or so of our exposure that is to power currently.

Okay.

About half continues to be as you know projects under implementation. And there as that is a finite set of projects that we are monitoring quite closely with respect to their commissioning dates and what is going to be the fuel source and what are the sensitivities to various fuel sources and operating -- and the level of operations that's required for them to service debt. So that's the way in which we continue to look at the portfolio. And overall infra exposure as a percentage of our total exposure has been slightly coming down in fact, it's about 12.5% as opposed to 13% point something we had earlier. So it's a question of the concern is around non-announcement of new large projects, not so much around the monitoring of the existing projects, which we'll continue to monitor. So that is the consensus of the future credit growth and the investment related growth of the country itself. That seems to be a bigger issue than -- as we have said earlier, we continue to believe that we have selected projects in a much better manner and over a period of time, those projects should behave quite well. So that confidence we continue to have.

And just lastly not so relevant probably for your book, could you give some sense of what is happening on the commercial vehicle and construction equipment business?

In terms of the incremental demand, clearly there is a slowdown, which is there in that segment and we have seen that reflected in our book itself. From a credit prospective, we are not seeing any stress in terms of increase in delinquencies on the overall portfolio. But as you rightly said, we really have not in the last maybe three or four years grown that book very aggressively so we would not really be the first people to see that kind of a stress on the portfolio. But from an incremental demand perspective, clearly there's a slowdown and there would be some delays in payments and all that, which would be happening on the portfolio.

Would we have increased LTVs in that segment for whatever little disbursements we did during the year?

Not really.

Okay, perfect. That is good enough. Thank you.

Thank you. [Nitesh Kamni], Bank of America.

Yes, I just have a couple of questions. One is you gave for the quarter, can I have the breakup of NPLs additions and recoveries of write-offs for the full year?

Additions were about INR37 billion.

Okay.

Deletions are about INR19.7 billion and write-offs are about INR16 billion.

Okay. And Rakesh, one more thing. Can you give some idea about your overseas ALM for fiscal '14 in terms of on the asset and the liability side? How is it playing out?

So in terms of the repayments which are there in FY14, the amounts are clearly lesser than what was there in FY13 and that's the reason that we were looking at about 10% growth in the balance sheet. So in terms of repayments, about $1.8 billion is what we are expecting on the bond issues and the borrowings that we have as the total repayments and we are expecting similar kind of collection to happen from our loan portfolio as well. So that portfolio on the ALM side isn't well matched so depending on the market, we would look at doing incremental fund raising to grow the portfolio.

Then finally, what's your branch expansion strategy? I mean you're 3,100 odd and probably the other guy -- other player is very close. So is there any thought process behind that or probably you'll just dwell into executing your last two years of branch expansion getting them to optimal level?

We will continue to expand branches and I think we will expand by 10% to 15% the network next year and probably the year after as well. And this is of course coming through a mix of urban/metro branches and a large proportion is actually coming in the rural/semi-urban areas. So that level of expansion, it will continue.

So out of the 3,100, how many would be like in the semi-urban and rural, specifically rural small micro branches?

Out of 3,100, about 14% of the branches are in rural centers. These are as per the RBI definition, and about 32% are in semi-urban centers. About 45%, 46% is in semi-urban and rural centers.

Just a clarification on this -- incrementally you seem to make 25% in the rural alone, right? Of every four branches one branch has to be rural, if I'm not wrong.

Yes.

Okay. Alright, thank you so much.

Amit Ganatra, Religare Asset Management

Could please repeat the incremental restructuring that you've done during the quarter?

Yes, incremental restructuring, INR7.8 billion.

[INR780 crores], okay, thank you.

Yes, [INR780 crores]

Do you have any further question Mr. Ganatra?

No, no.

Saikiran Pulavarthi, Espirito Santo.

Sir, one mega question, can you just repeat what is the interest on IT refund for this current quarter, as well as for the full year, please?

We have not specifically given those numbers.

Okay. Is there any reason why we have seen a substantial spike up in the other interest income?

I've just said, it is a combination of income, such as interest on IT refund, as well as some other line items, like a swap, which vary. But if you look at the year as a whole, we have been getting about INR12 billion and that's what has been there in the line item. Again, to go back to the margin discussion, we said 3.11% is the annual net interest margin for FY13, which we think will go up by 10 basis points, after taking into account all such interest-related revenue streams. So, I think that gives a broader sense of where we are on that.

Sir, one more follow-up question on the earlier infrastructure and then power sector. You mentioned that you are closely monitoring the projects under construction, especially on the power side. Do you foresee a scenario for restructuring with the potential COD postponement for the next financial year?

We have always been communicating that while based on our sensitivities as to fuel supply and our understanding of where each of the projects are, we believe that all of these projects would be able to service their debt. But these are long justification projects and there could be many factors that come up during the construction period or after. So, it would be possible that few of the projects may need to get restructured at some point in time. But in case the operating level of the project in the initial years, because of fuel or whatever, is not adequate that there's a cash flow gap in the initial years. And again, given that these are 10 to 12 year loan funding assets for much longer kind of productive life, we don't expect to take really an economic loss on these exposures.

And Sir, one question on the retail asset pricing, did the competition increase in almost all of your products, especially on the retail side? How do you see the pricing scenario as of now?

It has been always a competitive market and I would say it has become more competitive from a price perspective over the last six to nine months with one of the large banks being quite competitive. Our view is, if you look at [initially] the competition is in two products, which is mortgages and autos. In auto, for not just last year, but for the last quite a few years, our strategy has been to do a reasonable level of volumes to fulfill the customer need for that product, and basically we're not really targeting any huge market share et cetera in the auto loan business, given the profitability dynamics of the business.

In mortgages, we continue to match -- broadly match pricing in the market and because we see that as a long-term product, which is a high engagement relationship product and also a product with opportunities for cross-sell and you basically end up acquiring a good quality customer. So in that product, we remain competitive and we continue to grow our volume. But if you look at the mortgage and related base businesses as -- if you look at just probably the incremental profitability of a INR30 lakh mortgage loan, it doesn't look so great, but if you look at the business in totality in terms of that mortgage, higher value mortgages, some loan against property, the builder financing that you do for residential properties, which ultimately translate into retail lending, the overall profitability is still quite okay. And part of the portfolio, of course, also gives you priority buildup. So that remains a very focused product for us. Auto, we continue with that strategy of doing reasonable volumes. And again, all these products, if you look at it, we are -- very gradually increasing market share, from maybe single digit to just about getting into double digit or a little more and double digit this year and we've been gradually increasing our volumes month-on-month through -- of course, we have to be more or less parity priced and more by expanding distribution, expanding (inaudible) rather than doing any price war kind of situation to get back market share.

And probably last question on the accounting policy side, how will we account a recovery from written-off FX? Is it reported in other income or is it netted off against the provision line? Thank you.

It is taken in the provision line item by us.

Thanks. That's it from my side.

Thank you.

Adarsh. P, PL India.

Yes. Hi, Kannan and Rakesh. Just one question on, again, the corporate fee side. You all said 30% is balance sheet and 70% is the other line. Just wanted to understand, in FY13, what could have been the growth on the non-balance sheet kind of fee income on the corporate side? That shouldn't have got impacted a lot. So just wanted a sense of how that's grown?

That could have grown for the year about 15% or around that level, but there is some impact there as well, because if you look at the non-fund based businesses, it has not been growing that well for banks, [LCs] bank guarantees, with the overall economy slowing down, but there is some impact on the non-fund business as well. For example, if you look at our outstandings in the non-fund business required in the risk-weighted assets, you would find that there is not much of a growth in the current year and I suspect that would be the case for many of the banks.

Right. So the non-fund base is the part of the 70%?

Yes.

And you're saying, in spite of that this book could've done about 15% growth or ex that?

With that.

With that.

With that it would have grown 15%?

That's right.

Seems, yes.

The commercial banking and the FX linked fees.

Okay. Because if I just do 50% in retail, SMEs would have been fine. 70% of the other 50% would have grown 15%. Just the contraction in the other 15%, which is 30% of the corporate book looks a relatively very large number, like it looks like 30%, 40%, 50% contraction. So I'm just trying to -- this 15% in the rest 70% looks very large to me.

We report here 30% less contraction.

Okay, understood. And this number, say, in from FY11 levels could have been even more at 50%, 60%-odd percent types?

Of a decline compared to FY11?

Yes. Means FY11, not '12, because you would have seen two years of declines, no?

Yes. It will be 50%.

Understood. Yes. Thanks.

Thank you.

[Swapna Naik, Bajaj FinServ].

Hello?

Yes, please.

My questions have been answered. Thank you.

Thank you.

Nilanjan Karfa, Jefferies.

Hi, Kannan. Hi, Rakesh. Quickly on this, you know, you talked about -- we changed our composition or the presentation of the loan book. And you talked about (inaudible) sell-down buyout? And across line items, could you just repeat that part, the growth in each of those sub-components?

Yes, just a minute. So if we look at the mortgages, the mortgage growth was 18% on a year-on-year basis, auto loans was 25%, commercial business loans which is commercial vehicles and construction equipment was 16.7% on a year-on-year basis excluding the impact of the lower level of buyouts and IBPCs as of this year-end. If you include the impact of buyouts and IBPCs, then that piece of the portfolio actually declined by 16% on a year-on-year basis.

(inaudible).

Yes.

Okay.

And the unsecured retail portfolio grew by 20%.

Okay. So when you give out the guidance so let's say retail of 25%, is that like -- I'm sorry, organic totally or it includes some buyout portfolios?

Would be based primarily on our organic kind of business.

Okay. And on the international side, the 10% growth is on a pure dollar basis right not on rupee basis?

Yes, rupee we can't really predict so well.

Right.

So, plans are made assuming that the rupee is constant.

Okay. And on the fee side, again just -- we just heard this explanation again so retail and SME for FY13 contributed 50%, right?

That's right.

And corporate was 30%.

Corporate was pretty much the balance 50%. Within that 50%, about 70% would be from the commercial banking and FX side and about 30% would be from the lending portfolio.

Okay. Could I have what was the breakup in FY12 and how do you see that in FY14 let's say for example?

FY12, the wholesale piece was somewhat higher than this year in terms of the overall contribution. We have seen the retail and SME piece go down -- go up a couple of percentage points compared to FY12. In FY14, it's very difficult to give a segment wise estimate of the growth. As Kannan mentioned, overall fee income we are looking at double-digit kind of a growth so we would definitely expect some improvement in the wholesale fee income in terms of the fact that the lending linked fees have already come down a lot. So from this base, it should not decline much from the current level.

Okay. Because if I recall -- just after asking the question, I recall that you used to say corporate used to be -- corporate to retail used to be 80%, 20% sort of thing, right?

No. That would never be (inaudible).

Okay.

It was more like 40% to 50%.

Okay. So even after retail growing at 25% and you still expect the retail to hold let's say around 50% odd, half of that -- fee income?

It would be 50% to 60%, but on the corporate side while the lending side fee income has come down; as you said earlier, we have really got the engine on transaction banking really growing. So the endeavor would be to keep the ratios broadly in the current level and then grow the overall fee income by 10% next year.

Okay. And just actually delve it -- you say that the transactional part of corporate banking has improved, but the corporates are really not doing that great so how is this component going up?

In the last few years we have made a concerted effort to expand our commercial banking business. We set up a separate vertical kind of to do it and reorganize the way our branches functioned and to handle the corporate rate finance and related businesses.

Now the focus is on (inaudible) technology and service, all the three components. We also have had and continue to have a very larger market FX business. So those -- our market shares are quite healthy now in both those businesses.

Okay -- you disclose your off balance sheet item including your FX and structured products so that is down on a YoY basis if I'm not mistaken, right? Okay. Sorry, one question, it's mentioned somewhere on the UK side, you made a substantial amount of provision. Could you explain what that was?

No, that is normal step-up provisions on a collective basis for the portfolio so that is why the profit sort of came down. But otherwise also for the whole year, the UK business made profit.

No, but was there anything specific that happened in Q4, which made you step-up provisions?

Not specifically, it has just happened. It's not the existing asset from a basis of step-up provisions, it just happened so there's nothing -- no specific big asset or anything that's happened.

As you know, the profits in the UK subsidiary anyway is at a low level because of the low ROE there so it's about $4 million to $5 million a quarter kind of a number.

Correct.

When you're talking about some provision made, that is how that manages, it's not any logic amount there.

Okay. Alright. Thanks a lot.

Thank you. Anish Tawakley, Barclays.

Hi, Kannan. Hi, Rakesh. My questions are predominantly on the loan mix. So the domestic corporate book has grown 30% year-on-year, which is higher than your expectations at the start of the year, I guess you were indicating about 20% growth there. So one, what has turned out differently there? Second, on the I guess -- I'm just working on the reclassification, this includes about INR10,000 crores it looks like or INR9,000 crores of builder loans. Could you talk about the growth in that segment also in particular? And thirdly in the mortgage piece, how much is LAF and how is that growing?

So the builder loans have grown as I mentioned at least around -- it was around INR90 billion in March 2012 which was included in the retail portfolio. That has grown by about 20% during the year and now about INR110 billion is included in the corporate portfolio for March 2013. Overall, domestic corporate as you know, we were actually running at a higher level till December also. We were running close to this kind of a number of around 30%. One thing which we had talked about in the earlier quarters also was that last year in March 2012, we had done some IBPCs where we had sold down a part of our corporate portfolio about INR45 billion to INR50 billion given that the funding cost was quite high. So for a short period of time we had used IBPC to sell down a part of that portfolio so that itself makes a difference of about 4% to 5% in the growth. So taking that into consideration, the growth has been in line with what we were expecting for the year. Of course again, as Kannan mentioned, that going into FY 2014 we would expect the growth on this corporate book to clearly be lower than what we have seen in for FY13.

No. Rakesh, I guess the question is you have still a fair chunk I guess of undisbursed sanctions and leaving aside the IBPCs, how much of that like if you don't do any IBPCs, what would that just sort of bring on to the book?

Sorry.

I mean the undisbursed project finance sanctions, what does that imply? Like I guess those will get disbursed over time.

They are no longer large numbers actually if you look at on the book because as again we mentioned early, if you look at the last 18 or 24 months, we are really not seeing much of fresh activity happening. So we will still have some disbursement coming off of the sanctions, but they are no longer very significant in the context of the overall loan portfolio.

Okay. And I guess the question is, Rakesh, I mean you have now one of the lowest funding costs in the business, right, and you obviously have surplus capital so who buys loans from you from a cheaper funding cost perspective really?

No, this was March 2012.

I understand, but even then you were -- you had very good CASA ratio.

If you look at incremental at that point of time, the wholesale deposit rates would have been close to 10% so it does make just a pure -- it's a --

No. From your perspective it make sense, but I guess the wholesale funding rates are the same for others also so who buys it?

Someone who would want to have a balance sheet (inaudible) would be keen to buy that portfolio.

They buy it at net interest rate. Got it. And could you just answer the question on LAF expense, how much is LAF?

And just to reconfirm, IBPC was in March 2012 not this year.

Yes, I understand.

And LAF would be around 15% to 20% of the mortgages of the home loan portfolio.

And is that growing faster or slower than the portfolio overall -- mortgage portfolio?

Broadly around similar kind of growth.

Okay. Thanks a lot.

Thank you. Parag Jariwala, Macquarie Securities.

Yes, sir. Just one small data point. Your restructuring during the quarter was around INR8 billion, does it include any large or chunky account? I mean if you can give just industry name and proportion?

Actually, mostly what has happened, it was a CDR. These are companies, which are -- these are maybe a handful of accounts.

Okay. So there is no concentration here?

I mean since the number itself is less than INR8 billion so even if you assume that there are four, five accounts, it's been individual accounts, average size of INR2 billion or thereabout.

Okay. And sir, I mean last quarter there is some classification because last quarter when your restructuring number got reported, it was INR41.7 billion and that has been slightly upgraded I think. Is there any change in some norms or have you followed something like that?

Yes. As I mentioned earlier, RBI has come out with revised norms for reporting restructure. What we have said is that even when if a borrower -- to the same borrower we have four, five facilities and only one facility out of that got restructured, you have to report the entire borrower exposure as restructured.

Okay. So now --

Earlier we were doing that thing. One of the loans -- five loans was only restructured, only one loan we would have -- that loan outstanding we would have reported as a restructured asset. So that has changed into the entire borrower level outstanding to be reported now. So that is the only change both in the opening balance and the closing balance.

Okay. So that is for the last quarter, but if I have to see for the earlier quarter, can I roughly assume that similar proportion could be the number for borrower wise as well?

We have given the restated numbers for March -- December and March, which incorporates the impact of this guideline. So in each -- so if you look at the March and December numbers, see they are roughly about INR3 billion higher which is due to this guideline.

Okay. That's it. Thank you.

Thank you. Participants, that was your last question. I would now like to hand the floor back to Mr. N.S. Kannan for closing comments. Over to you, sir.

Thank you once again for your time and patience and we do hope that we have answered all your questions to your satisfaction. My team and I are available in case you have any further questions, we can take them offline. Thank you. Bye, bye.

Thank you, sir. 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.