Good day ladies and gentlemen, and welcome to Q1 2016 Results Conference Call for ICICI Bank. As a reminder, all participant lines will be in a listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]. Please note, that this conference is being recorded. I now hand the conference over to Mr. N.S. Kannan, Executive Director of ICICI Bank. Thank you and over to you, Mr. Kannan.

Thank you. Good evening and welcome to the conference call on the financial results of ICICI Bank for the quarter ended June 30, 2015, that's the first quarter of this fiscal year 2016. In my remarks today, I will cover for the macroeconomic and the monetary environment, then we will move on to our performance during the quarter, including performance on our 5C strategy, then we’ll talk about performance of our subsidiaries as well as the consolidated results of the bank, and finally the outlook going forward. So let me start with the first part, on the macroeconomic and monetary environment. On the growth front, the International Monetary Fund has lowered the global growth forecast for 2015 from 3.5% to 3.3%. IMF has revised the forecast downwards for both the advanced as well as the emerging market economies. The three key global developments that we saw; one is the focus on the timing of increasing interest rates by the U.S. Fed. Two, the sovereign debt default by Greece, and the third bailout package being negotiated with the Eurozone; and three, moderation in growth and stock market volatility in China. At the same time, we saw global commodity prices subdued during the quarter. So coming to the trends in the domestic economy, the industrial activity as measured by the Index of Industrial Production, IIP, recorded a year-on-year increase of 3% in April-May 2015, compared to a growth of 3.3% in Q4 of 2015. Growth in capital goods production was positive, while consumer goods production remained during April-May 2015. Retail inflation measured by the Consumer Price Index, CPI increased from 5.3% in March 2015 to 5.4% in June. The increase was largely on account of food prices and the impact of increase in service tax rate on service sector inflation. The Wholesale…

Ladies and gentlemen, the management line has been disconnected. Request you to kindly stay on hold, while we reconnect the management. Thank you.

Yeah I am sorry we go disconnected briefly. I was talking about our iMobile initiative. I want to say that it has a range of options for transfer of funds, including transferring money to phone contacts and allows cash withdrawal by the beneficiary by any ATM of ICICI Bank without using a card. Customers can also apply for loans and pay utility bills. iMobile is available on all mobile platforms including Android, iOS, Java, Windows and Blackberry. Customer response to the new app has been very positive. We have seen the monthly activation of iMobile by customers growing by close to 60% and the monthly value of transactions increasing by about 50%, since the launch of the app. Our digital mobile wallet, Pockets, has seen over 1 million downloads, with significant interest from non-ICICI Bank customers. The e-wallet is amongst India's most comprehensive wallets, which can be used to pay on all websites and mobile apps in the country. We are the largest provider of online remittance services to India, and the first to offer remittance service via mobile phone. We are the only bank in India today, which offers NRIs, the facility of remittances through Facebook. We have also focused on providing self-service options to our customers at our branches in recent years, our fully automated 24/7 Touch Banking branches, now see over 1 million transactions per month The 1,000 self-service kiosks, as well as the cash acceptor machines which we deployed in our branches, during fiscal 2015, have resulted in a significant pick up in automated transactions and branches. Our initiatives and payment solutions include contactless card payments, transit card solutions for metro and bus transport, and electronic toll collection. We are focusing on scaling up each of these initiative in the payment space. During the quarter, we…

Thank you very much, sir. [Operator Instructions]. The first question is from the line of Mahrukh Adajania from IDFC Securities. Please go ahead.

Hi. Just a couple of questions on Life. Have the margins now bottomed out?

Yeah the margins, if you see actually, there is a small improvement in the margins vis-à-vis the fourth quarter, of about 20 basis points. So our goal is to improve the margins from here, by increasing the mix of protection in the business, as well as by continuing to be, very cost efficient.

All right. And what would be the dividends on life insurance this quarter?

Would be about --

Bit lower, INR2 billion.

Okay. And on the main bank, we heard on TV that the amount of 5/25 is less than 1,000 crores. What is the actual amount and number of cases?

The actual amount is less than 1,000 crores.

700, 600, 500, what is it?

The number of cases, it is amount which is less than INR10 billion. There is nothing really to talk about much there, because there are few cases and the aggregate amount is less than INR10 billion. That's why its not a big amount really for us.

And you know, some banks have a big pipeline of 5/25, as in that the cases they are working on. So would you have any such pipeline or any such number, which you think would go under 5/25 over the next few quarters?

There is nothing like -- there is a pipeline to be implemented today. But we will have to say that, as the economic conditions develop and the project environment develops during the year, we will have to wait and see. But as of now, there is nothing we are implementing, apart from what we have said just now.

Got it. Okay. Thank you.

Thank you. Next question is from the line of Gaurav Agarwal from E&R Advisors. Please go ahead.

Hello sir. Good evening. Sir, this less than INR10 billion of 5/25, was it earlier a part of restructured book, or it is a standard book?

It’s a standard loan.

It’s a standard loan?

It continues to be standard. The 5/25 refinancing can be done for completed viable projects. So it is a standard completed project, in which refinancing has been done to extend the maturity of the loan, in line with the economic life of the project.

Sure. And sir, the ARC number of INR5.2 billion, have I got it right? Was it a net number or a gross number?

That is the gross value.

Gross number.

Sir may I have the net number please, excluding provisions?

We don't really give that number. I mean, we have explained the movement in NPAs in terms of the additions, deletions, write-offs and gross sales to ARCs. So its in that context that we have given the INR5.2 billion, as we consistently give every quarter.

Sure. Thank you.

The next question is from the line of Roshan Chutkey from ICICI. Please go ahead.

Thanks for taking my question sir. What is the sequential growth in your SMA-2 exposure?

We do not make disclosures on the SMA-2 loans.

Not even sequential growth?

No.

Please qualitatively comment whether its --

Qualitative comment I can tell you that during the quarter, as I mentioned, one of the clear focus for us has been closely monitoring the corporate asset quality. I would say that during the quarter, things have been stable in terms of the asset quality environment. They have not really deteriorated for us. So that is the color I can give you on a qualitative basis, and that is why you have seen the numbers that develop. And some of the restructuring, as I mentioned during my opening remarks, clearly are front-loaded, because all the cases which are referred to before March 31, had to be completed. So that spillover was really what was done. So that is being done. So beyond that, as I said, there is no immediate pipeline for restructuring, and the credit environment has been quite stable, and we have also been focusing a lot on monitoring those assets. So that is the qualitative color I can give you.

Sure. Thank you. And what is the percentage standard in your restructured book?

Sorry, I didn't the question?

I mean, how much of your restructured book is standard, what percentage?

We disclosed the ARC --

Number we have disclosed, which is INR126 million of net assets, is indeed standard restructured loan.

Thank you so much.

Thank you. Next question is from the line of Sagar from Anvil. Please go ahead.

Hello.

Yeah, hi.

Yeah hi. I would like to know, for this quarter -- I was a bit late on the conference call, what was the amount that you have done for restructuring?

About INR19.62 billion.

The slippages were how much for this quarter, total?

INR2.92 billion of slippages from restructured loans to NPAs for the quarter.

For the quarter? And total slippages, for this quarter?

INR16.7 billion.

Okay, so 1,600 crores. See I would like to understand sir, one thing; actually last time you were mentioning, that 8,500 crore you had given the guidance, for the total stressed assets. Now just tell me, whether I am right, this guidance means, slippages from restructure, slippages from the standard, as well as the restructuring? Out of that --

So we have not given any 8,400 crore number. What we have said and what we have again said today is, that we expect the additions to restructure and -- non-perfomring loans this year to be lower than last year.

Lower than last year. See sir, just assuming that they will be lower than last year. So you mean to say, these all [indiscernible] together, right? Slippages from restructured, slippages from the standard as well as the restructuring?

Yes. There is some mobile noise disturbance in the line, so let me clarify; what we had said was that the NPA additions and the amount added to the restructured loans for financial year 2016, will be less than what we had for financial year 2015.

Okay. NPA additions for 2016?

Will be less than -- based on our current estimate, let me clarify, that we have had the NPA additions in the first quarter of INR16.72 billion. This number for the year as a whole last year, INR0.78 billion [ph].

Sorry, repeat it once?

INR80.78 billion for the year as a whole. Based on our current assessments and estimates, we expect this number for this whole year to be less than last year.

So this number -- okay, this 8,000 crore slippages would be less than last year. I got it.

From current estimates; similarly on the restructured loans have done about INR54 billion of incremental restructuring in the last year.

Sorry to interrupt. Mr. Sagar may I request, if you have a mobile phone, please keep the phone near to you; because there's static coming in from your line.

The restructured loans, in the last year, we added INR54 billion to restructured loans incrementally. In the first quarter, we have added about INR20 billion, that is INR19.62 billion. So that whole year number is also expected to be less than last year, a little bit of frontloading has happened in the first quarter because of the regulatory guidelines. So this is what we have said and this is what we are seeking to achieve this year.

I got it.

Thank you. Next question is from the line of Kaushal Patel from IndiaNivesh Securities. Please go ahead.

Thank you so much for taking my question. First question is, regarding your branch expansion plans. As you have discussed, digital and electronic transactions from retail side has been increasing. So like going forward, what will be your strategy, as far as branch expansion is concerned?

Given the overall level of branches we have currently we do believe that for the next two, three years at least, we will be adding anything between 300 to 400 branches per year. So that branch expansion strategy will continue, and we will look at establishing those branches in places which make sense for us.

Okay. And sir, within that, like what will be the mix, like rural/urban?

It will be broadly balanced. I mean, we are roughly 50% metro/urban, 50% semi-urban and rural. So that mix may not really change, too meaningfully.

Okay. And one more sir, what is your outstanding as of June?

INR11 billion. You asked security receipts, right?

Yes sir.

Yeah. INR11 billion.

Okay. One more question, regarding that stressed assets, as we have been discussing so much of NPAs and restructuring, if we exclude like all this restructuring cases and NPAs, so how do you see stress from the standard assets? What I mean to -- I would like to ask you like, how do you see stress into economy? Is there any improvement within economy and you see that there will not be any incremental stress from -- even in the sectors which are not right now in the stress? So how do you see overall macro picture?

Yeah, the macro pictures -- before that little bit of macro pictures, I talked about the incremental additions expected for restructured loans and NPLs, that I have already articulated, we are trying to work towards that. On the macro side, we believe that the credit environment has clearly not deteriorated during the quarter. We do believe that things are inching up slowly. Several indicators to look at, whether it is on the infrastructure side, the kind of efforts which are being taken to clear the stalled projects, or if you look at some of the indicators such as the dispatches by Coal India. Those kind of indicators give us a belief that things could only get better from here on. So our sense is that, I mean, nobody can predict clearly what is going to happen, but the general sense we have is that things can only get better than here. The pace can be something which can be debated from our side. Having said that, our focus on asset monitoring, especially on the corporate assets, will really continue.

Thank you sir.

Thank you. The next question is from the line of Anand Laddha from HDFC Mutual Fund. Please go ahead.

Hello sir. Sir, two questions on my side. Just wanted to understand, this quarter, 60, 70 crores [ph] to purchase. If you can give some color on this, how much was from the corporate sector, how much was from the SME? What could be the quantum of the largest account?

So as we have said in the earlier quarters, the slippages into the entry book, it is spread across largely the corporate and SME segment. So of course, unlike the last quarter, we did not have a very large account slipping into the NPA book. But it is still mainly coming in from the corporate and SME segment. The retail segment has largely been stable.

Okay. Also if I am not wrong, last time, you have been indicating that there is a gas-based exposure you had to a power project in Maharashtra. That has been a [indiscernible]. So can you update us what's happening on that project? It will continue to be a standard asset?

That is a standard asset for us. So what is -- as we have said it -- earlier, that's the only gas based power exposure that we have. So during the quarter, we have seen some positive movement in that exposure, in the sense that, given the gas subsidy scheme which is there, plus we have got a contract from Indian Railways. So we believe that over the next couple of quarters, there are developments that can happen, which would kind of held this exposure for the banks. So as of now, there are two things that banks are working on; one is in terms of getting the plant to start operating, based on this contract that they have got. Plus, we are also looking at the terminal, this is being split out as a separate business, and there, a part of the loan exposure of banks can be transferred, which will be independently a viable set up. So I think over the next two quarters, you will get clear visibility on the way forward on this exposure. So as of now, it is a standard exposure that we have. As you would recollect in the past, we had restructured that loan, but since then, it had got upgraded about three or four years back. So it’s a standard asset for us.

Okay. That's all from my side. Thank you.

Thank you. Next question is from the line of Adarsh P from Nomura. Please go ahead.

Yeah, hi. Couple of questions, first one on the overseas margin, you mentioned cost of funds have come down in the rated [ph] margins. So just wanted to check, is it just a bit of a short term gap in ALM that has led to this, or do you think this trend is sustainable there?

Yeah. If you look at the liquidity conditions in the overseas markets, they are very benign today. And our sense is that, 1.7%, 1.8% kind of a net interest margin on the overseas book would be a sustainable level of margins there. You have seen it in the past as well. This time it was a bit of an extra margin we got, because of the cost of borrowing coming down quite sharply during this period.

And based on the repricing that would happen on the asset side, you don't have to pass this on. The benefit will come more on the funding side, which doesn't need to get passed on.

Our strategy for this book is that, you know, whatever incremental lending we do; A, it will be calibrated to the funding and the ability to raise funds as well as the cost of funds. And secondly, we would like to do the lending, so that we prefer the margins at about 1.7%, 1.8% levels. That's how we will operate it. And having said all this, the outlook for growth of that book will be -- the percentage growth would be lesser, compared to the domestic book, which will also come up. Mixed perspective will help the overall margins of the bank, which we expect to maintain, same as last year, despite domestic interest rates decline. That is the way we are looking at the margins.

And can you kind of just qualitatively talk about how the risk nature of that book would be -- some part of this stressed asset maybe financed there as well so? Can we sort of understand, if there is no need to pass on, lower funding costs, is it because the customers there don't have the bargaining power or?

I think that -- Kannan mentioned the improvement in the margin that you have seen YOY is one, because of deployment of excess liquidity, and second, because we had some opportunities to reprice our existing borrowings downwards. There is not much of incremental lending, which has happened. In terms of the portfolio, as such, it is quite similar to what we have in India, in terms of largely the corporates would be the same names that we have in the domestic book. So there is no real difference in that context. And the margin improvement is mainly on an existing borrowing, we had some opportunity to reprice, and which has given us that 10-15 basis point kind of an improvement, which is there.

Perfect. Second question was on the slippage from the restructured book. Last year, it contributed more than 50% of these slippages. We have seen some bit of respite there. I know these things can be lumpy, so I just wanted to qualitatively get your sense on how the performance of the standard restructured book is? And if there is any difference from where it was, like three-six months back or you can see lumpy slippages going forward from that book?

Yeah see, if you look at our outstanding restructured book of INR126 billion, there over a period of time, the concentration risk has really come down. In Q4 of last year, where there was a blip, I had mentioned that, that the lumpy accounts get restructured, this ratio gets skewed, depending on which quarter that happens. But going forward, if you want me to give a general color of the restructured book, the maximum exposure would be probably about 5% also, of the total restructured outstanding. So the kind of volatility we have seen in a couple of quarters in the past and the kind of volatility you're talking about, that will be much more muted going forward because the overall concentration risk in terms of the lumpiness has really come down in the restructured book.

Okay. So the largest account you're saying, maybe 500 crores, 600 crores, so it can't add to that lumpiness, or will not cause such lumpiness?

Exactly what I am saying. And also, that's about -- as I said, 5% of the restructured outstanding would be the largest account today.

Okay. That is pretty helpful. And just one last clarification on what [indiscernible] said. So 5/25, you all indicated refinancing that has been less than 1,000; because systems still has a lot of pipeline, just to clarify, your exposure in accounts that you may not be the lead bank is also -- as of now, on all the pipelines, for accounts being referred, you would not have any exposure, or is that a fair statement to make?

As I said that, during the quarter, we have implemented a few cases which account for less than INR10 billion of outstanding loans for us. So going forward, we will have to see. If there are any more cases as and when that happens, we will see that.

But there would be section [ph] balances in terms of ascertaining the viability, looking at their independent viability study, all the vendors agreeing to move forward. So I think, there will be enough section balances to ensure that it is done in a very prudent manner, rather than using it wherever a single bank wants to use it. So I think, that is the color we can give, standing here, this year, and then we will see, as we go along, what are the project delays and what are the kind of things and what are the -- the cases where you have to implement this, we will look at it as and when the situation arises in the future.

This is helpful, thanks a lot Rakesh and Kannan.

Thank you. The next question is from the line of MB Mahesh from Kotak Securities. Please go ahead.

Yeah. Good evening sir. Couple of questions; first is on the loan book; if you look at the Basel disclosures, this time around, there has been an increase in the power exposure on a QoQ basis by a good amount? Just trying to understand from 29,000 crores to about 32,000 crores. Just wanted to check, any specific reason for such a large increase in the specific quarter?

I will just answer that question. As I mentioned, one of the strategies in the corporate portfolio for the last couple of quarters and going forward as well, would be to focus on some of the better rated corporates, in terms of expanding our book. So as a part of this core strategy, we would be looking at both private sector units as well as public sector units, which are well rated. So while I don't want to name a particular client, but I can tell you that this would be operating well rated public sector kind of a unit, there we would have [indiscernible].

Okay. Thanks. Just a subsequent question on the retail side, on the growth side. So nearly about some six, seven quarters, we seem to be growing the retail book in a very tight band between 23% and 25%. Any specific reason that you're kind of either controlling yourself the moment you reach 25, or you do not -- you feel that this is the threshold limit, the one we should not want to increase?

No, no. It is a completely derived number arising out of our strategy. So I don't think, we have a particular band in which we want to grow. We would like to grow it, in a sensible manner, plus keeping the asset quality under control and then carefully look at the policies and procedures and expanding our locations and so on. So our focus, as the articulated strategy, is to expand on the secured credit, which comprises mortgages and automobile loans. Look at commercial vehicles as soon as the opportunity arises, and do it within strict asset quality parameters; and on the unsecured loans, to look at predominantly our own customers, and see how we can upsell and cross-sell. So that has been the articulated strategy on the retail side. In doing this strategy, and also our branches sticking in, in terms of sourcing. If you remember, five, six years back, predominantly we were relying on direct marketing agents, and our own reliance on them has come down over a period of time, and branches are contributing a lot in terms of incremental sourcing. So as it kicks in, this is the path it has taken us to. Our estimate is based on that, we would continue to put over the 25% kind of growth. And we also do a profiling in terms of what is the repayments out of the past firms, and what is the incremental disbursements. Based on that, we sort of derive that number, and then that is what we have told you.

Okay, thanks. And then my one last question, this is the first quarter we have seen an increase in the gross NPL and the retail portfolio, its up from INR33 billion to about INR36 billion?

Again I would like to just say that, these incremental numbers, you will have to look at the context of the overall retail book. This is more than INR1 trillion; more than INR1.5 trillion. And then, that constituting 43% of the loan book. But I can tell you that, in terms of the quality of the portfolio, as well as the credit costs, it is doing extremely well. So there shouldn't be any confirm, regarding the asset quality of the retail book.

Sure. Thanks a lot.

Thank you.

Thank you. The next question is from the line of Amit Premchandani from UTI Mutual Fund. Please go ahead.

Good evening sir, and thanks for the opportunity. There were some news reports on one of the PSU banks, have actually qualified one of the coal block asset purchase of Indian corporates in Australia as an NPL. And our understanding is that, you had also funded some of the coal block assets, of the Indian corporates. So if you can help us with the status of that account or generally the coal block assets that you had funded in Australia?

As we have said already, we will not be able to discuss individual exposures per se. I do not know, which bank you are talking about or which asset you would be talking about, it’s very difficult to comment on that. So indeed, we have financed a couple of overseas acquisitions for coal mine in the past. And there have been some challenges there, but overall, we are monitoring those assets very closely, and we believe that those assets should be doing fine going forward.

We have a clear path going forward.

And sir, also there was one news report about -- you can skip the question, but generally, there was a report about the default of one of the large corporates in one of the bonds I think. And one of the bonds I think, [indiscernible] rating agencies have put it as a default. And that corporate has also sold out lot of assets. So generally, how is the progress in that corporate? Is everything as per schedule in terms of asset sales, and has any money come to the banks after the asset sales?

In this case, I assume that you're talking about the JP exposures? So there, as they have also commented and there has been a technical default in a small amount of debentures that they have outstanding. And they believe that should get corrected over time. From the bank's point of view, we really don't have much change in our view, on the exposure compared to where we were a couple of quarters back. The good thing is that, asset sales have happened and the cash from those sales would be coming into the company over the next few months. So that will definitely ease up some of the liquidity challenges that they have been facing. And that should definitely be helpful. Going forward, I think they may need to look at further sales also. So that's something that banks are kind of in dialog with the borrower group.

But sir, whether the exposure of the banks through that corporate bolt-on [ph] because of asset sales?

Going forward, the expectation, as the cash -- get the cash for the sales that have been consummated. That would be used to bring down the exposure that banks have to the group.

So there is schedule for realizing those monies, and there could be temporary mismatches that probably [indiscernible] to handle it there. But beyond that, the expected proceeds of the sales are already done, as well as the expected future divestments, should really help the company as well as the lenders.

Thank you, sir. That's it from my side.

Thank you.

Thank you. Next question is from the line of Manish Karwa from Deutsche Bank. Please go ahead.

Yeah hi, good evening. On the fee income front, you mentioned retail is now 63% of total fees? And at what rate, retail is growing for us on the fee line?

Yeah about 15 -- it has been growing at about -- depending on the order between 15% and 20%, it has been growing. So that is a number.

And we are confident that retail at least will grow at 15%, 20% this year as well?

That's correct. And then we are targeting that, and then at some point in time, the corporate also will grow and as they have articulated earlier, the target is to first get to the double digit growth of fee income, some time as early as possible. That is what we are trying to drive internally.

No. Then just looking at the pure math, it means that we will actually do double digit, because at 60%, its growing at say 20%, so you are already in double digit fee income category this year, plus corporate at least will grow some bit, because the base already has got corrected last year?

See, while I don't want to put a number to it, clearly, the internal targets are higher than just saying it is a double digit growth. But given that where we are coming off, from 6.8% kind of a growth and 9%, I would probably wait for a quarter or so before I can clearly tell you that it will grow at a much higher rate. So corporate, as I said in my opening remarks, has declined. So that is where we are currently. But we are hoping that from here on, we should be able to grow it much better than what we have put out so far.

And just, on the corporate fees, which is a portion which is declining; is it the FX piece or everything has declined, or it’s these particular one or two elements which have declined?

So our own sense is, that the transaction banking side, it has increased, it has not declined. On the FX, depending on the market conditions, quarter-to-quarter, there has been some volatility across banks. But my sense is that, on the FX fees, we would have only increased our market share. So it is largely a lending related kind of an area or any lumpy kind of a fee income that is where the stress has been.

Okay. And you mentioned to one of the question that you expect stress to be lower this year. So do you mean that both slippages would be lower and restructuring obviously would be lower? Do you mean even slippages would be lower compared to the INR80 billion of slippages last year?

As we stand today and as we look at all the numbers, that is the expectation. Individually, it’s of this line item, that is NPA addition line item and restructuring addition line item. Both of the line items, individually, you would like to do better than last year in terms of incremental slippages.

Okay, so that's clarified. And can I get a break up of this quarter provisioning?

Standard provisioning -- general provisioning is about INR1.3 billion and the balance would be specific provisioning for NPAs and restructured loans?

How much would be for restructuring, if you can give?

We don't give those numbers separately. It’s aggregated for the entire loans.

Okay, fine. Don't worry. Thank you so much.

Thank you. [Operator Instructions]. The next question is from the line of Mayank from Goldman Sachs. Please go ahead.

Sorry. All my questions have been answered.

Thank you. Next question is from the line of Anurag Mantry from Jefferies. Please go ahead.

Good evening sir, just a couple of questions. Firstly on your other expenses, just wanted to know why there has been an uptick in that, given that there haven't really been any branch additions as such? And if you can give any guidance on how that will look basically, when the branches etcetera, get added?

Other expenses increase, we are largely looking at it on a year-on-year basis, that's why it’s sort of a double digit kind of a way. The better way to look at those other expenses other than employees would be the sequential numbers, and if you look at across the line items that you have seen, probably some areas like repair and maintenance have gone up somewhat. That is also because, not just the branches added in the recent past, but also on the cumulative basis, we have a much higher branches than the physical [indiscernible] today. So apart from that, we don't see any one-off for a specific area, where we have seen any blip happening. Our control on expenses will continue and we expect that our cost income ratio would be similar, if not better than last year. So that is how we are focusing on the cost control. So we don't see any other patterns apart from what I have mentioned.

Right. And the other question is, can you tell us the outstanding balance of provisions for NPA?

Just a second.

INR88.84 billion.

This is the outstanding balance of provision for NPA?

That's correct.

Right. 88.4?

88.84.

88.84. Thanks.

Hi Rakesh. Sorry, this is Nilanjan. Just wanted to quickly check; in Q4, you were actually guiding to this impairment formation that is net of slippage from restructure at about INR89 billion. Given what you are seeing today, in terms of looking at individual items you want to, which is less than 80.78 and less than 54, are you getting a comfort situation that -- on the restructuring that probably, as you had highlighted in the past, because the lumpiness has gone, concentration has, it seems, gone, much more comfortable on your restructured book than you were three months back?

That is correct, and as we had said in the previous quarter, in the March quarter we had a very lumpy exposure slipping from restructure into the NPA category, the number became so high at INR22 billion. So going forward, as we had said that we would expect that number to be lower. So its not that we will not see any slippages from restructuring. There would be slippages that happen from restructuring, but the lumpiness of that will not be of the same magnitude that we saw in the last financial year. So overall, the slippages from restructuring to NPA will definitely be lower than what we saw last year.

Okay. But which number do you want us to track? So do we look at the INR89 billion or should we look at this 80 plus 54 number?

I think because the way people track -- some of the people are tracking this gross addition number which Kannan referred to, and they will be tracking it net of the slippage. So either ways you look at it, I think -- because each of the numbers you are looking at being lowest in FI 2016 compared to FI 2015, the NPA addition, the restructure addition as well as the slippage from restructuring. So its fine, whichever way you look, but it should be lower than last year is what we have expected.

That's very-very helpful. Thank you so much guys.

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

Thanks for taking my question. I actually wanted to ask the OpEx growth at 8%, it is actually fairly low. And you are not adding that many metro branches. Its also a bit different from what the peers are doing. So what's the thinking there, and when would you ramp up this growth? I mean is it --

No. The operating expenses, we are extremely focused that in terms of investment expenditure, whatever is required to be done, we are not going to add to those expenses. Our focus is on the productivity, as well as wasteful expenditure being cut. That is going to be the focus on OpEx. I'd say, answering to the previous question, non-employee expenses is really growing at a double digit growth rate, tracking basically the kind of footprint we have expanded over a period of time. If you look at the employee expenses, the growth has been muted. As you know, some of the retirement and those kind of provisions, there would be lesser growth there. In fact sequentially, this would actually be a lesser number, because of the fixed income environment, where the yields are high. So that is how it is really happening.

That's benefited on the pension side?

Yeah it’s on the pension side. All the liabilities on a year-on-year basis. If you look at it, those would really be muted. On the employees as I mentioned, on a year-on-year basis, there would be reduction in the number of employees, whereas sequentially, we are expanding number of employees. So wherever -- and I also mentioned the 2,300 employees have been added in areas like retail, which should be focused on deposit growth. So we would focus on investment; definitely, wherever its required to be invested, we will invest. Simultaneously, we would ask for more productivity, as well as cutting out any flab or wasteful [indiscernible] that gets created. So that is going to be the focus on operating expenses, and we will try to improve upon, if not hitting it at the same level on the cost income ratio compared to last year.

And you don't feel the need to add more metro branches in particular? Because others have picked up there?

As we have mentioned, we would add branches across. In metros also, there is a deepening opportunity, and as Anindya mentioned, the mix of branches to be added in the future would broadly mirror what we have currently. So it will be across all the locations that we will add.

Anish, Anindya here. If you look at -- while the pace of additions and different categories of branches may be different at different points of time. I think the outstanding to our branch network, in metros is quite comparable. In recent years, we have front-ended some of the rural kind of branch openings, rural and semi urban branch openings. And the mix of branch openings, we forward would probably be much more balanced, which implies a higher addition than you have seen in metro and urban.

Okay. Thanks.

Thank you. Next question is from the line of Mangesh Kulkarni from Almondz Global Securities. Please go ahead.

Thank you for giving me an opportunity. I just wanted to know, with many new banks -- couple of the new banks coming in, do you see some kind of pressure on this employee -- mid level as well as operational level attrition happening?

No, attrition is very much under control. In fact, attrition is lower than what we would have expected. We absolutely don't have any pressure right now. There is of course few employees here and there could get poached. But overall basis, actually, employment enrollment is such that we have no pressure whatsoever on attrition.

Okay. And in terms of one media news which came, say around 15 days back about the housing loan subsidiary. So what is the development there?

Well the development is that, since we have this subsidiary which has been in this business for a long time; obviously there are people who are talking to us, in saying that whether they can bite off us. So there has been interest around that subsidiary, and people have been talking to us. But we are yet to take a final decision in this regard.

Okay. In that case, are we looking for some kind of JV kind of this thing or complete exit out of --

As I said, we cannot comment today, because we have not taken any decision. But just to look at the way we have operated the housing finance business, is that the bank has got excess capital as I mentioned to you, that is pretty much higher than the minimum capital adequacy requirements. And incrementally, large part of the home loans is being booked at the parent. From a business perspective if you look at mortgages and we continue to expand that predominantly using the parent's balance sheet.

Right okay. Thank you, sir.

Thank you. Next question is from the line of Vishal Goyal from UBS. Please go ahead.

Hi. Thanks for taking my question. Sir one question is on the rating profile of our corporate book. Any color on that?

No, we don't make a disclosure on the rating-wise cut of the portfolio. But overall basis, I can tell you that the credit environment have been quite stable in the recent months. So that's the broad color I can tell you. And then incrementally, as I said, on the corporate banking side there, we have seen some growth in the quarter. Incrementally, bulk of the corporate lending has been to operating higher rated corporates, both in the private sector and the public sector. So the most qualitative color is that it is getting better, but we don't make any disclosure, in terms of rating wise cut.

Okay. And then also, we -- when you compare your RWA to total assets, we obviously see your number higher, and I think -- is it because of project lending or higher proportion of corporate?

There are various reasons, when you compare RWA to total assets, then the composition of assets, you have to compare across banks. We have in these, larger proportion of non-fund assets which are there. On the loan portfolio, we have the overseas book, where typically from an external rating perspective, that will largely be unrated, given the nature of the loans which are there --

Which is 24% of our loan book today.

So because of those reasons. Otherwise there is no other difference which should be there.

Specifically in the last quarter kind of -- if you look at, RBI has come out with specific guidelines, saying that for the market and operational risk, we increase the risk weight. But in line with what is [indiscernible] in the Basel III. So all those things will have to be looked at, in terms of looking at the risk weight intensity of the balance sheet.

Okay. And sir, can you share your -- domestic corporate book is fully externally rated, or there also you will have unrated?

It will not be fully externally rated, because that challenge always continues for all banks. So all banks would have -- in the range of, I don't know, between 50% to 70%, kind of rating which would be available for banks. We also would have, some of the portfolio which is unrated. Of course, we have a very robust internal rating mechanism, so all of these loans would be internally rated.

Okay. And last question, on the housing finance subsidiary, what would be the motive, if at all, to basically sell it? Because it’s a good arbitrage opportunity whenever you guys want to use that vehicle to book home loans. Is RBI forcing you to sell it out, or --?

We have explained in the past as well, that subsidiary exists, it has its own model that it is following. But the bulk of the mortgage business is in ICICI Bank, which is also kind of known and evident. And from time to time, people reach out to us, to say whether there would be an interest in divesting it, and I think one of such possible expressions of interest found is very into the media. But we have not taken any decision to divest a subsidiary, it continues to be a wholly-owned subsidiary of ICICI Bank.

Thank you. All the best.

Thank you.

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Kannan for his closing comments.

Thank you for being on the call. I think we have answered most of your questions satisfactorily. Should you have any further questions, my team and I are available to clarify. Thank you very much.

Thank you very much members of the management. Ladies and gentlemen, on behalf of ICICI Bank, that concludes this conference call. Thank you for joining us and you may now disconnect your lines.