ICICI Bank Limited (IBN) Q3 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the ICICI Bank Q3 FY 2017 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode. And 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 Ms. Chanda Kochhar, MD and CEO of ICICI Bank. Thank you, and over to you, ma’am.

Good evening to all of you. I will make some brief opening remarks and then Kannan will take you through the details of the results. On the previous Analyst Calls, I had summarized the Bank’s strategic priorities for FY 2017 and formal 4 x 4 Agenda covering Portfolio Quality and Enhancing Franchise. So just to reiterate, on portfolio quality, we said we will focus on four key things; proactive monitoring of loan portfolio across all businesses, improvement in credit mix driven by focus on retail and lending to higher rated corporate; third, reduction in the concentration risk; and fourth, resolution of stress cases. On enhancing our franchise, we said we will focus on sustaining the robust funding profile, maintaining digital leadership and customer franchise, continued focus on cost efficiency and largely focus on capital efficiency, including unlocking value at subsidiaries. So we continue to focus on this agenda and move in line with the direction that we set out for ourselves as for this agenda. Coming specifically to this quarter, the key development, of course, after our previous call was the withdrawal of 500 and 1,000 rupee currency note that just be specified bank notes or SBNs as legal tender, this movement resulted in an increase in formal financial savings, which is also given us strong impetus to digital payments. The growth in total deposits for the banking system has actually increased to about 15.2% year-on-year by December 23, 2016. So in this context, the few key trends for ICICI Bank was, firstly, we saw a very robust attrition to counter deposits. There was an accretion of 26,000, or 267.04 billion to the CASA account deposits during Q3 2017. The year-on-year growth in savings deposits was 30%. The Bank CASA ratio has increased from 45.7% on September 30, 2016 to 49.9% on December 31, 2016. The Bank took a number of initiatives with a focus on servicing customers after that announcement of this demonetization. But because it was not just on customer service, we also continued to be at the forefront of offering technology-enabled services to further increase convenience to our customers. So during the quarter, we continued to enhance our focus on launching new technology-based offerings, as well as increasing communication and activation of digital channels for our customer account. One of the very important and powerful launches that we made during the quarter was Eazypay,and this is India’s first mobile app for merchants, where merchants can accept payments on mobile phones to multiple modes, whether it be UPI, credit cards, debit cards, Internet banking, pockets et cetera. And we’re seeing robust trends in merchants addition through both point of sales terminals, as well as through this Eazypay application. During Q3 FY 2017, we witnessed growth trends in our digital transactions. The activation rates for our iMobile application was higher by 84% in December compared to October 2016. The volume and value of mobile banking transactions in December 2016 was 52% higher and 35% higher, respectively, compared to October. The activation of Internet banking by customers in December almost doubled compared to October, and our digital wallet offering Pockets also witnessed a huge increase in activation rates and usage. These growth trends coming on in existing large base of digital transactions even prior to demonetization actually underscored the strength of our Bank’s digital offering. The Bank has also seen robust sense in use of UPIs. Over 2.4 million accounts have now – the Virtual Payment Addresses or the VPA handle is created using our Bank applications, which I think is amongst the highest for us the Bank here. The volume and value of debit card transactions has also increased in December. The volume was 128% higher than value was 100% higher compared to October 2016. Similarly, there has been a good increase in the credit card transactions as well. ICICI Bank was also India’s first bank to implement interoperable Electronic Toll Collection. We’re the largest player based on the number of RFID tax issued for an Electronic Toll Collections. For these nine months ended 31, December 2016, the non-branch channels accounts were close to 95% of all our savings account transactions. And within that, the digital channels like Internet, mobile, POS, et cetera account for about 73% of our savings bank transaction. Coming to loan growth, the non-food credit growth for the banking system actually decreased from 10.6% year-on-year at September to 5.3% by December 23. And within this, the growth in retail credit also decreased to about 15.2% by November 12, 2016, based on the latest available RBI data. But I’m very happy to say that for the Banks, the overall domestic loan growth is 12% year-on-year basis, so which is more than doubled the rate of growth in non-food credit for the banking system. The growth for the bank continues to be driven by retail business and our retail portfolio has grown by 17.8% year-on-year. We also had a reduction in our international book, which has reduced by about 16%. So overall, you see our portfolio growing by 5%, but within that, as I said, domestic loan growth is 12% and retail specifically is 17.8%. We continue to focus on reorienting our balance sheet towards low risk and more granular portfolio. So our share of retail loans and total loans have now increased to 48.9% as of 31 December, 2016. In addition, our aggregate exposure to the identified industries, such as, power, iron and steel, mining, cement and bricks has decreased from 16.2% on 31 March, 2012 to 13.3% on March 2016 and further to 12.4% in December 2016. We continue to focus on resolution and exposure deduction in identified areas. And we have reported our exposure to companies that were internally rated below investment grade in these key sectors. On the previous call, we have shared the reduction that was achieved in these exposures and mentioned that based on the transactions announced and in the public domain, we expect further resolution in this portfolio subject to necessary approvals and completion of transactions. So on that basis during Q3 of FY 2017, we saw further net exposure reduction and rating improvements in this portfolio to the extent of INR20.12 billion. Taking the overall reduction in exposure and rating movements during the nine months to INR44.73 billion. We also further expect resolution in this portfolio going forward, subject to necessary approvals and completion of the announced transaction. With respect to the profit and loss I’d like to mention that the domestic net interest margins have increased compared to Q2 2017. The domestic margin was 3.51 in Q3 FY 2017. The growth in fee income has also improved substantially. The fee income, which was growing at about 3.8% year-on-year for the first half of FY 2017 has improved to 10.3% year-on-year in the third quarter of FY 2017. The profits before provisions and tax, excluding the gains on shareholding in ICICI Life in Q3 and Q2 increased by 3.9% on a year-on-year basis and 11.1% on a sequential basis. So, as you know that in Q3 of FY 2016 and also in Q2 FY 2017 we had gains from stake sale of life insurance. So if we remove that we have actually seen an increase in profit before provisions and tax. So, we believe that we are well positioned to leverage the growth opportunities in the coming years. We have a strong deposit franchise, we have robust capital levels. We have significant value in our subsidiaries. We continue to make investments to strengthen our franchise even on the technology side and we also continue to work towards resolution and reduction of strength exposure. I’ll now hand over to Kannan.

Thank you and good evening to all of you. I’ll now talk about our performance on growth and credit quality. I’ll then talk on the P&L details, subsidiaries, as well as capital. First on growth, the retail portfolio grew by 18% on a year-on-year basis. Within the retail portfolio, the mortgages and auto portfolios grew by 17% and 13% on a year-on-year basis respectively. Growth in the business banking and rural lending segments was 12% and 20% on a year-on-year basis respectively. Commercial vehicle and equipment loans grew by 15% year-on-year. The unsecured credit card and personal loan portfolio folio grew by 40% year-on-year to INR199.16 billion and was about 4.4% of the overall loan book as of December 31, 2016. We continue to grow the unsecured credit card and personal loan portfolio, primarily driven by a focus on cross-sell. Growth in the domestic corporate portfolio was 4% year-on-year basis. We continue to focus on lending to better rated clients and work towards reducing exposures in sectors impacted by the challenging operating environment. If we exclude NPAs restructured loans and loans to companies included in the drill down exposure, growth in the domestic corporate portfolio was higher. The SME portfolio grew by 6.6% on a year-on-year basis and now constitutes 4.6% of our total loans. In rupee terms, the net advances of the overseas branches declined by 16.1% on a year-on-year basis as of December. In U.S. dollar terms, the net advances of the overseas branches decreased by 18.3% on a year on basis as of December 31, 2016. In the overseas branches loans against FCNR deposits of $870 million matured during the third quarter. Moving on to the funding side, total deposits grew by 14.2% year-on-year to INR4.65 trillion as of December 31, 2016. On the FCNR deposits mobilized in Q3, deposits aggregating to about, actually of the FCNR deposits mobilized in Q3 of 2014 deposits aggregated to about $1.75 billion matured during the quarter. There was an attrition of INR185.12 billion to savings account deposit and INR81.93 billion to current account deposits in Q3 of 2017. On a period end basis, current and savings account deposits grew by 26% year-on-year. On a daily average business current and savings account deposits grew higher by 29.2% on a year-on-year basis, on a daily average basis the CASA ratio improved significantly from 41.5% in Q2 of 2017 to 44.8% in Q3 of 2017. Moving on now to the credit quality, during the third quarter, the gross additions to NPAs reduced INR70.37 billion from INR80.29 billion in the preceding quarter. The gross additions to NPAs in Q3 of 2017 included slippages from restructured loans of INR2.39 billion. Slippages out of loans to companies internally rated below investment grade in key sectors was INR29.43 billion and devilment of non-fund based exposure relating to accounts already classified as non-performing loans in the prior periods that we have been disclosing for the past few quarters was INR17.99 billion. That’s about 75% of the corporate and SME, NPA additions compared to these categories. The retail portfolio had gross NPA addition of INR4.29 billion and recoveries and upgrades of INR4.34 billion during the third quarter of 2017. During the quarter, aggregate deletion from NPA due to recoveries and upgrades were INR6.25 billion. The Bank sold gross NPAs aggregating to INR0.87 billion during the quarter. The Bank’s net non-performing asset ratio was 3.96% as of December 31, 2016 compared to 3.21% as of September 30, 2016. Moving onto the restructured loans, the net restructured loans were at INR64.07 billion as of December 31, 2016, compared to INR63.36 billion as of September 30, 2016. While announcing our results for the quarter ended March 31, 2016, we had stated that there were continued uncertainties in respect of certain sectors due to theweak global economic environment, sharp downturn in the commodity cycle, gradual nature of the domestic economic recovery and also high leverage. The key sectors identified by us in this context were power, iron and steel, mining, cement and rigs. The Bank had reported the exposure comprising both fund as well as non-fund-based outstanding to companies in the sectors that were internally rated below investment grade across domestic, corporate, SME as well as international branches portfolios, and to promote the entities internally rated below investment grade where the underlying partly related to these sectors. On Slide 33 of our presentation, we have provided the movement in these exposures between September 30, 2016 and December 31, 2016. The aggregate fund-based limits and non-fund-based outstanding to companies that were internally rated below investment grade in these sectors and promoter entities decreased from INR324.9 billion as of September 2016 to INR275.36 billion as of December, reflecting the following: One there was a net reduction in exposure of INR21.23 billion; two, loans with exposure aggregating to INR1.11 billion were downgraded to below investment grade during the quarter; and three, loans classified as non-performing during the quarter were INR29.43 billion. As I said, please refer to Slide 33 for further details. Based on the transactions announced and in the public domain, we expect a significant further resolution in the above exposure going forward subject to necessary approvals and completion of transactions. The Bank continues to work on the balance exposures. However, it may take time for these resolutions, given the challenges and operating in recovery environment. Our focus will continue to remain on maximizing the Bank’s economic recovery and finding optimal solutions. The exposure to company’s internally rated below investment grade in key sectors and promoter entities of INR275.36 billion includes non-fund-based outstanding in respect of accounts included included in this portfolio, where the non-fund-based outstanding has been classified as non-performing. Apart from this, the non-fund-based outstanding to borrowers classified as non-performing was to pinpoint INR84 billion at December 31, 2016, compared to INR32.86 billion at September 30, 2016. Further, the exposure to company’s internally rated below investment grade in key sectors and promoter entities of INR275.36 billion, excludes net exposure of INR5.31 billion to a central public sector own undertaking engaged in gas-based power generations. These details are disclosed below the table in Slide 33. As of December 31, 2016, we had outstanding loan of INR34 billion, where strategic debt restructuring that is SDR had been implemented, of which about INR28 billion that loans already classified as non-performing or restructured are to companies that were internally rated below investment grade in the key sectors that is power, iron and steel, mining, cement and rigs. The outstanding portfolio of performing loans for which refinancing under the 5/25 scheme has been implemented was about INR33 billion as of December 2016, of which about INR24 billion were loans to companies internally rated below investment grade in the key sectors mentioned above. The Banks had not implemented this scheme for sustainable structuring of stressed asset, that S4A scheme for any account as of December 31, 2016. Moving onto the provisions, the provisions were INR27.13 billion in the third quarter of 2017, compared to INR70.83 billion in the preceding quarter, which had included additional provision of INR35.88 billion. Provisions were INR28.44 billion in the corresponding quarter last year. For this quarter, there was a drawdown of INR5.27 billion from the collective contingency and related reserve. There was no drawdown on addition to floating provisions during the quarter. The provisioning coverage ratio on non-performing loans, including the cumulative, technical and prudential write-off and floating provisions made during the quarter – the floating provisions made was 57.1%. As we had mentioned earlier, we expect NPA additions to remain elevated for the next quarter as well. Moving onto P&L details. Net interest income was INR53.63 billion in the third quarter of 2017. The net interest margin was at 3.12% in the third quarter of 2017, compared to 3.13% in the preceding quarter. The domestic NIM was at 3.51% in Q3 of 2017, compared to 3.41% in the preceding quarter. The international margins were at 0.83% in the third quarter of 2017, compared to 1.65% in the preceding quarter. The international margin were impacted by higher non-accrual of interest income on NPAs in the third quarter of 2017. There was interest on income tax refund of INR1.39 billion in the third quarter, compared to INR1.11 billion in the preceding quarter and INR1.23 billion in the corresponding quarter last year. Going forward, the yield on advances will continue to be impacted by non-accrual of income on non-performing assets and implementation of resolution plans for stressed borrowers. There has also been some moderation in the loan growth in the banking system. Incrementally, there would be some impact of reduction of MCLR in January 2017, which will be partly offset by the declining and funding costs. Total non-interest income was INR39.39 billion in the third quarter of 2017, compared to INR42.16 billion in the third quarter of 2016. Looking at the components of this non-interest income, the fee income improved, as I said, the growth in fee income improved and it was driven by a pickup in retail fees, which grew by 18% on a year-on-year basis. Growth in retail fees was driven by higher transaction banking fees from liability customers, increase in credit card fees, fees relating to distribution of third-party products, and higher product fees. Retail fees constituted about 71% of the overall fees for the third quarter. Treasury recorded a profit of INR8.93 billion in the third quarter. In the corresponding quarter last year, treasury had recorded a profit of INR1.98 billion, excluding the gains of INR12.43 billion relating to the sale of shareholding and ICICI Life in the corresponding quarter last year. Other income was INR5.51 billion. The dividend from the subsidiaries was INR4.56 billion, including INR1.38 billion of dividend from ICICI Life. The Banks had exchange rate gains of INR0.82 billion in relation to overseas operations in the third quarter, compared to gains of INR1.42 billion in the corresponding quarter last year. ICICI Life, along with its Q2 2017 results had announced that the company’s Board will consider dividend proposals on a half yearly basis going forward. Accordingly, the Bank will not receive dividend income from ICICI Life in the fourth quarter of 2017. On operating expenses, the Bank’s cost to income ratio was at 40.6% in the third quarter of 2017 and 33.7% in the nine months of 2017. Excluding the gain on sale of shares of ICICI Life, the cost to income ratio would have been 41% in the nine months of 2017. Operating expenses increased by 21.5% on a year-on-year basis in Q3 of 2017. The increase was mainly due to a 23.4% year-on-year increase in employee expenses, which among other factors includes the impact of decline in yields on provisions for retirement benefits in the third quarter of 2017. The Bank added 6,803 employees in the nine months of 2017, and had 80,899 employees as of December 31, 2016. Non-employee expenses increased by 20.4% on a year-on-year basis in Q3 of 2017. We would continue to focus on cost efficiency, while investing in the franchise as required. The Bank standalone profit before provisions and tax was INR55.24 billion in the third quarter. I have already discussed the provisions for the quarter, so moving onto the standalone profit after-tax, it was INR24.42 billion in the third quarter of 2017, compared to INR31.02 billion in the preceding quarter and INR30.18 billion in the corresponding quarter last year. Moving onto subsidies. The profit after-tax for ICICI Life for the third quarter of 2017 was INR4.5 billion compared to INR4.35 billion in Q3 of 2016. The new business margin on actual cost based on Indian Embedded Value or IEV methodology was at 9.4% in the nine months of 2017, compared to 8% in FY 2016 and 5.7% in FY 2015. The improvement in margins was driven by an increase in proportion of protection business from 1.6% in FY 2015 and 2.7% in FY 2016 to 3.9% in nine months of FY 2017. The company continues to retain its market leadership among the private players with the new business market share of about 13% in the nine months of 2017. The profit after-tax of ICICI General increased from INR1.3 billion in Q3 of 2016 to INR2.2 billion in Q3 of 2017. The gross written premium of ICICI General grew by 33.5% on a year-on-year basis to INR82.5 billion in the nine months of 2017, compared to about 31% year-on-year growth for the industry. The company continues to retain its market leadership among the private sector players and had a market share of about 8.8% during the nine months of 2017. The profit after-tax of ICICI AMC increased by 61% year-on-year from INR0.82 billion in Q3 of 2016 to INR1.32 billion in Q3 of 2017. With average assets under management of about INR2.3 trillion for the quarter, ICICI AMC continues to be the largest mutual funds in India. The profit after-tax of ICICI Securities was at INR0.88 billion in the third quarter of 2017 compared to INR0.55 billion in the third quarter of 2016. The profit after-tax of ICICI Securities Primary Dealership was INR1.82 billion in the third quarter of 2017, compared to 0.63 billion in the corresponding quarter last year. Let me now move on to the performance of our overseas banking subsidiaries. The Bank’s total equity investment in ICICI Bank UK and ICICI Bank Canada has reduced from a 11% of the net worth as of March 2010 to 4.4% as of December 30, 2016. ICICI Bank Canada’s total assets were C$6.45 billion as of December 31, 2016 and loans and advances were C$5.75 billion as of December 2016. ICICI Bank Canada reported a net loss of C$34.6 million in the third quarter compared to a net profit of C$5.4 million in the third quarter of 2016. This is on account of higher provisions on existing impaired loans, primarily India linked loans. The net NPA ratio for ICICI Bank Canada has decreased from 2.29% as of December 31, 2015 to 1.22% at September 30, 2016 and further decrease to 0.4% as of December 31, 2016. The capital adequacy ratio of ICICI Bank Canada was 24.7% as of December 31, 2016. Moving on to ICICI Bank UK, the total assets were US$3.42 billion as of December 31, 2016. Loans and advances were US$2.34 billion as of December, compared to US$2.51 billion as of September 2016. The decrease in loans and advances in Q3 of 2017 was on account of repayment of loans against FCNR deposits during the quarter. The profit after-tax in the third quarter of 2017 was US$1.7 million compared to US$0.6 million in the third quarter of 2016. The capital adequacy ratio was 19.8% as of December 2016. The consolidated profit after-tax was INR26.11 billion in the third quarter of 2017, compared to INR31.22 billion in the corresponding quarter last year and INR29.79 billion in the preceding quarter. Moving on to capital. The Bank had a Tier 1 capital adequacy ratio of 13.33% and total standalone capital adequacy ratio of 16.73%, including profits for the nine months of 2017. The Bank’s consolidated Tier 1 capital adequacy ratio and the total consolidated capital adequacy ratio, including profits for the nine months of 2017 were 13.51% and 16.82%, respectively. The capital ratios, as you can see are significantly higher than the regulatory requirements. The banks pre-provisioning earnings, strong capital position, and value created in the subsidiaries give the bank the ability to absorb the impact of challenges in the operating and recovery environment for the corporate business, while driving the growth in the identified areas of opportunity opportunities. To sum up, during the third quarter of 2017, one, there was further improvement in our funding profile, driven by deposit flows after the announcement of demonetization of specified banknotes. Two, there was further strong momentum in the use of our digital offering. Three, we selectively grew our loan portfolio. Four, we continue to focus on resolution and recovery in the corporate segment. And five, we continue to maintain healthy capital adequacy ratios. With this I close my remarks and we will now be happy to take your question. Thank you very much.

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

Hi. Just a couple of questions, firstly what was the slippage from restructure this quarter?

The slippage from restructure was about INR2.4 billion during the quarter.

2.4?

Yes.

Okay. From the watchlist it was around 29?

That’s right.

And what was it from, what was the slippage outside the watchlist?

So, as I mentioned Mahrukh there is another big component which is the non-fund-based outstanding in respect of NPL devolving and becoming fund based and that amount was about INR18 billion. So that’s why I referred to Slide 33. On Slide 33, we have the drill down list and below that we have some notes. Note number one talks about INR5 billion of net exposure to that Central BSU entity in the power generation and in the last bullet point there, we have talked about the net non-fund-based outstanding to borrowers classified as non-performing loan that as of December is INR15.8 billion. This number was close to about INR34 billion as of the previous quarter.

Got it. And just if you look at your watchlist, it’s in public resolutions of two accounts that are in public domain, so can we expect that by March around 80 billion to 90 billion of the watchlist will anyway go away as in get upgraded?

We have not given a particular amount or time period. I can only say that the resolutions, which are in the public domain are well underway and we hope to complete the resolution as we go along. Again, as I said the resolutions can lead to a significant reduction in the watchlist or the drill down list. We have stopped then in terms of our approach, but rest assured we are working on not just those cases, which are being quoted in the public domain. We also are working on the rest of the cases in the drill down list.

Okay. Because – also if you read the recent press articles there are many papers who talk about some resolution in SR and then Bhusan JSW has made a public statement, so that’s in the press. And then if you talk to banks they are not too confident of these resolutions happening anytime soon. Whereas if you read the press article or if you read by what JW is seeing you get some – a different picture, so where do we stand on this? Do we expect resolution in some of these accounts in the next 5 months to 6 months, or because of the Kingfisher case and see to banks probably now going slower, it will take longer?

We have always said that the recovery, as well as the decisioning environment has been quite challenging, not just now even over the last year or so we have made that statement. We continue to navigate the environment and we continue to press forward on all the resolutions. So the challenges in the decisioning and the recovery environment is the key reason why we are not specifically giving you a timeframe or the amounts, but again, I can only reiterate that in each of these cases in the public domain resolution, as well is not in the public domain we press forward in terms of our recovery efforts, but we keep talking to other bankers, we keep looking at various ways, including the several tools which have been given by RBI to arrive at case specific resolutions, that effort is on.

Just one more follow-up question on that, because in between there were articles on IBM meets of bankers to hasten up the whole resolution process, because it was going quite slowly through the JLF, banks were taking longer time to reach resolutions, so has that changed and do you think that relative to last quarter things have improved in terms of cutting short the timelines on resolution or they haven’t?

My sense is that that effort has started. A few meetings have been held, but clearly that has helped in arriving at a common understanding among the top management of the relevant institutions involved. But it is too early to say that it will yield much faster results are early results that we will have to wait and see, but I can just say that that has helped in arriving at a common understanding on key large cases in terms of the fast forward.

Okay. Thanks a lot. Thank you.

Thank you.

Thank you. The next question is from the line of Pavan Ahluwalia from Laburnum Capital. Please go ahead.

Yes, thank you. My question relates to net interest margin going forward, so you had said a couple of quarters ago that you expect to be able to keep the net interest margin north of 3, is that still an aspiration that you’re sticking to, obviously this quarter’s net interest margin looks pretty elevated and I don’t think anyone expects that that would be maintained, but what’s a safe range where you feel comfortable you could maintain net interest margins, factoring in the likely base of interest reversals and the various other factors that you talked about?

As we have been saying through the year that the key impact for us in the current financial year is coming from the non-accrual of income on the NPAs and cases where SDR and all has been implemented. So that impact will definitely continue in the current year and may be a couple of quarters into the next financial year, but we have been doing pretty well in terms of the funding costs, so that is kind of providing us some buffer. Of course with the developments in the December quarter our CASA went up a fair bit and we have to see going forward how much of the CASA is retained and how much of it drains out over time. The other key thing, which has happened is the sharp reduction in lending rates that we are seeing because of the much lower loan growth in the systems, indeed the competition has increased in terms of the pricing of loans. So, there are quite a few moving parts, which are there around it and what we can say is that in terms of the funding cost and the incremental lending that we are doing, we’re kind of ensuring that the margins are pretty healthy for us on that basis. So, the only impact, which will come in is from the non-accrual of loan and – at some stage that impact should start – negative impact should start reducing into the next financial year.

So does that mean you would be confident of maintaining a medium term at least a 3% NIM?

We have not talked about any specific number, but yes definitely that is something that we will…

That will be the endeavor and just to supplement what Rakesh said, if we just look at our presentation Slide number 36, the rate at which the cost of deposits has been coming down that has been quite nice and we at 5.3%. So that has really helped us in terms of withstanding the pressures both on account of non-accruals, as well as the lending pricing pressures in the market.

Okay and I have just one more question, which is, we are seeing an increasing number of large corporate accessing the bond market directly and basically bypassing bank, and all these corporate have historically been anchor, clients, customers, co-clients of ICICI Bank, as you would see that portion of credit move away, how should we think about, what your corporate book is likely to look like, is it likely to be more mid-corporate, you know smaller companies that go and access the bond market as easily. And given that you will see the headwind of the corporate – the larger corporate credits moving away, what kind of growth rate can we expect on the corporate side?

Yes. So if I first look at the environment, you’re absolutely right that some of the larger corporates who has – who have the ability to access the bond market have been moving towards bond market. Our approach to tap this part of the business has been to run an active treasury, which we have been doing. And if you look at ICICI group, there are two entities who are extremely active in the origination and syndication in sell-down market, which is ICICI Bank itself, as well as ICICI Securities Primary Dealership. And if you look at ICICI Bank alone, in the league table rankings, we’ll be in the top two or three depending on which area to look at. And both ICICI Bank and ICICI [indiscernible] will be in the top five in the market. So our approach here has been that be careful about which credit we pickup, but play a very active role in the – in retaining these clients through participating in the bond market. Now, if we come to the loan markets, even in this quarter if we look at it, our corporate growth, we would say that has been very robust and had met with our expectations, because sometimes when I look at total corporate books, which includes various types of assets not just a desirable segment of the corporate which you would like to grow, but it also includes other restructured portfolio in sales and so on. If you really knock it off, we do believe that we have a very good play across the segments of the corporate mid, as well as large corporate. I think that effort will continue subject over concentration risk, which we have talked about in the previous calls. So my sense is that, whether it is a loan market or the bond market, we believe that we’re ideally positioned to tap this market, which we’re doing in good measure already, so that is what I want to assure you.

And that is close to 15%.

Yes. So if we really look at the kind of growth we have seen in the desirable segment of corporate, it is actually in mid-teens even now. So we do believe that that approach we’ll continue.

Thank you.

Thank you. The next question is from the line of Vishal Goyal from UBS Securities. Please go ahead.

Hi, congratulations on a good set of numbers. Are you in pretty strong fee income in this quarter, despite disruptions and waivers on lot of things. So it seems that this looks sustainable, but do you think, there were anything one-time, or anything, which may not occur in the next quarter?

So let’s see, if we look at the fee income, I talked about the bigger component of growth has been retail. And retail has grown at 18%-plus levels on a year-on-year basis. And within retail if you look at it, as you said, that despite the pressures we have seen in terms of MDR fees or ATM fees, because of demonetization, net-net we still could put out an 18% growth. This has also been made partly because of the third-party distribution, which had quite – gone quite strong. And in terms of the product fee, we’ve been activate – able to activate a larger number of branches over the few years now. So it is just that we’re getting into a situation, where we have talked in the past about growth in the fee income and we’re getting to a situation from here, where we feel that the growth can be sustained, of course, we’ll have to wait and see how it moves. But just to assure you, there is no big one-time thing here, which has changed the numbers. It has been a granular all the way.

So basically a double-digit growth, we can expect growth for that, that’s what we’re – I was just trying to…

We have said that before that has always been our aspiration,. So we’re getting closer there now, that’s what I would say. But and I want to assure you that there’s no one-time here and hopefully, we will see it more income here.

Okay. And another question actually is on the watchlist and outside watchlist. It seems, I mean, a lot of things are in pipeline right now within watchlist, but what is outside watchlist, the portfolio? And we’re still – we’re seeing around 20%, 25% kind of NPA formation from that watchlist. So I mean, apart from NPA, how is that watchlist moving? You think there’s in last one year, there’s incremental deterioration, or you think that portfolio is improving only?

So outside of the drilldown list, which is as there are – there the stress which is there is more company specific and it’s not really anything, which is sector specific maybe aside from say something like construction, where the reason for us not including it into the key sectors was that a higher part of that portfolio already was kind of either non-performing or restructured. Other than that, it is a set of companies, which is pretty straight across sectors. And the other key difference compared to the drilldown exposure is that, these exposures outside the drilldown list are less lumpy than the exposures that we have in the drilldown list. Of course, given that it is corporate exposure, there are, I would say a few cases, which are reasonably lumpy outside of the key sectors also. And that is what, we’re kind of monitoring closely. So as we have said from the beginning of the year that we expect a higher part of the incremental NPA additions to come from the drilldown list or the restructured portfolio, or linked through the existing NPA book and the – that kind of thing will still continue. So I think going forward, for the next couple of quarters also we will see some pressure coming in from the outside of the drilldown list.

So just to clarify, Vishal, now that we’re on the topic. The drilldown list moment has been given in Slide 32 of presentation, not 33, as I mentioned in my remarks.

Yes. So, got it. I think last quarter I think somewhere we said that, NPAs should peak like by quarter four. And so you – I’m assuming, you will continue to believe that?

I think we have said that for the year, as a whole in FY 2017. The NPA additions will continue to be elevated and so will the trade cost be. And I think that is how it has turned out to be. So that there’s no real change in that kind of an expectation. And these exposures are indeed lumpy, so on a quarter-on-quarter basis, it’s very difficult to kind of say as to when it would be.

Okay. All the best. Thank you.

Thank you.

Thank you. The next question is from the line of Veekesh Gandhi from Bank of America. Please go ahead.

Yes, hi congratulations. Just had one quick question on your – so if I look at your SME book and business banking, which probably make up for more or less the same, I mean, the size might be different, but they add up to like 8%, 9% of your total loan book. I mean, if I look at your few other competition banks, they will be like close to 15%, 17%. So just wanted to get your thoughts on how are you looking to grow this book, or probably it will be in this range for sometime, because I would like to believe that obviously, the risk-adjusted margin then this books are far better than let’s say your AAA corporate lending?

So, if I look at the SME book, the growth was somewhat neutral during the quarter, because we had some repayments happening in this portfolio. Otherwise in terms of our strategy, these have been incrementally doing more disbursements in this portfolio. The approach to this portfolio has been to further granulize the book in terms of ticket sizes that is why it is taking a little longer. But our – these two both business banking, as you mentioned on SME, the – both those segments are growth segments for us. And I agree with you on a risk-adjusted basis, they do – from here on, they do present us a good opportunity. It is just that it is coming up, because we’re granulizing the portfolio in terms of tickets sizes further as we go along.

So aside of the repayments that you would have seen of the share of the – the SME grew by some 6.5% and business banking by 12%. But on our, let’s say, medium to longer-term basis, can we expect like a 15%, 20% growth combined?

Yes, it should be there. So even if you look at the SME portfolio, because actually if you look at the last couple of quarters and on a sequential basis, the portfolio has been growing well. As Kannan mentioned, there were some exposures overall, which we had kind of brought down in the portfolio. So if you look at from last December 2015 till June 2016, the portfolio had declined actually. And from there on, it has been growing and it will definitely be growing in the region of 15% to 20% going forward. Of course, there are some disruptions overall in the economy that is – that I’m keeping aside. And similarly on the business banking side, the reason that the growth slowed down this year was because of the overall environment. Otherwise, again, there the growth should be closer to 15% to 20% and that’s what our plan is.

Perfect. And just one small data point. Your retail home loan book is 54.6%, in this how much will be lap?

54.6% of the retail…

…of the retail book.

Sorry. I…

Yeah, yeah, we’re just…

Yeah, yeah

…we were clarifying that it’s 54% of the retail book.

Yes ma’am, so basically 55% of your retail book is home loans, I just want to know if you have…

Yes, sorry, Veekesh, within the home loan portfolio, the lap is around 17%.

Within – okay, 17%.

17, yeah.

Okay. Thank you all the best.

Thank you. Thank you.

Thank you.

Thank you. The next question is from the line of Nilesh Parikh from Edelweiss Securities. Please go ahead.

Yes. Hi. So, Kannan, you mentioned that the Q4 also will see elevated slippages. Now, just wanted to kind of two months to get into the new year, financial year. Now just wanted some color in terms of we still have about INR27,000 crores odd of these drilldown list still remaining to be resolved. And on top of that, there is obviously about 1,500 of the non-based limits, which are still standing there. I just wanted to get a sense when we talk about that Q4 being elevated and from there on, do we expect higher pace of resolutions coming through or we may have to look at something similar in terms of these slippages going forward?

So you are saying is slippages going beyond Q4, is that your question?

Yeah, yeah. Given that we still have about INR27,000 crores of the drilldown list which needs to be resolved, yeah.

So, in terms of the – the resolutions is something which we of course are working along with all other banks. The – as Kannan described in detail earlier that there are challenges there and the progress has been slow. So we would be hoping that in the next financial year that pace of recovery should improve, but it’s very difficult to be sure of that given the trend that we have seen in the last year or so. So while in a couple of larger exposures we have been able to make significant progress, but there are other exposures where similar progress has not been made. So the effort will definitely be there to improve recoveries and we are hopeful of that happening. But we can’t be certain on that. Of course we’ll give a much better sense of the FY 2018 numbers in terms of our expectations of slippages when we come out with our…

Full-year…

…full-year results. Overall, I think, from a year as a whole, again, as we have said earlier given the number that which we’re running in the current financial year, the overall additions in FY 2018 will definitely be lower, but how sharp that deduction is is something that we can talk about once we announce our March quarter results.

Okay. And these non-fund based limits, I mean, are part of the NPLs. Now, how should we -- bulk of that has already flown through in terms of the NPLs. What were the balance like, given that are we seeing any kind of positive movement on the balance or it’s just a matter of time that slips into NPLs there?

It is actually a mix, some of it would be something like a financial guarantee, which more likely…

Would get invoked.

…would get invoked at some stage. Some of it could be the performance kind of guarantee, which may not get invoked. So I can say that it would not be as lumpy as what we have seen in the current quarter, but there would be some of this which gets converted into fund based going forward on a quarter-on-quarter basis.

Okay. And these are also – so just these are from the existing NPLs right, so?

Yeah, so, the addition the non-fund exposure that we have in the drilldown list, in addition to that we have INR15.84 billion of non-fund.

So this we have been disclosing for the last two three quarters. In Slide number 32 if you see the fifth footnote, it talks about the non-fund based outstanding of borrowers classified as non-performing at INR16 billion. This number was close to INR32 billion, INR33 billion in the previous quarter. So that is where you have seen the slippage happening in this quarter. And as Rakesh mentioned, this will be a combination of performance type guarantees and financial guarantees. The financial guarantees are more likely to get invoked and the performance guarantee, as long as the company is running and they are performing on the contract, they may not get invoked. So that will be the difference. It will be a mix of those two in the balance.

Okay, fine. Thank you. Thanks.

Thank you. The next question is from the line of Parag Jariwala from Religare Capital Markets. Please go ahead.

Yes, thank you. What is your non-fund-based outstanding to the restructured asset? And is that a part of a watchlist number, or how do you classify that?

So we would have non-fund-based limits to restructured loans. It’s approximately INR20 billion. I can confirm that number in a bit, but it will be approximately INR20 billion.

And it’s not been included in the below investment grade category, right. So that can potentially also once defunded or something that’s divided to NPAs, it can also flow into the addition numbers, right?

It can flow into the restructured loan outstanding number that we get, it can flow into that. These are standard restructured loans, so which have the non-fund rate limits like any other borrower, that’s about INR20 billion.

Okay. Okay, yes. Thank you.

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

Yes, hi. I just wanted to understand on the in-fields which have happened. Are you getting interest, what is the quantum of NPLs on which you are still getting some cash increase? And as that plane changing for the better in this quarter versus the previous quarters?

I’m not given such a…

No, n o, just a qualitative thing. Are you seeing better than like steel companies in this environment are doing reasonably well. So I would assume that a lot of steel in-fields that you would have, they would be paying you some cash interest.

Yes, that is so. So really case-to-case basis and steel case, yes, we are getting, because the EBITDA is being generated. Some of that gets us the funds.

[indiscernible]

Yes, that is happening. Steel cases, it is happening, but it is really case by case, Manish.

But would you say that it’s only for the steel sector and hence not happening for other sectors on the NPLs that is – I’m trying to gauge, what kind of recovery that you could stop potentially get if things get better on – in some of these sectors, especially in steel as we are seeing?

So during the quarter if you look at our NPL collection, we have been getting in smaller cases, they’ve been getting trickles of money is coming in in smaller cases that we have seen happened not just steel, but that smaller case, also we have seen some recoveries happening.

Okay. But that drained apart from steel and probably has not changed in any other sector?

That’s right.

Okay. And in your drilldown down list that you give, what will make you upgrade sectors like say as cement, promoter entities, where we know that deals have almost consummated. And at some stage you probably will upgrade it, but what is the trigger that you are looking for?

It should be completed.

So those cases, I think effectively the whole deal we’ll have to get completed in cases where it is being sold off, those are sectors being sold off to an another better entity. It will get upgraded when it really really becomes that the entities exposure. So it really – that that has to be consummated, so that is why in the intermediate, it will continue to be show in this list.

Thank you. And lastly, Rakesh, I just wanted to reconcile the standalone with the consolidated number. If I just add all the profits that you have for all the subsidiaries and just subtract the minority interest doesn’t work that way. Is it something which I’m missing in-between?

Have you looked at the dividend? I think these are the two big items for the dividend calculation of the minority interest.

But in this quarter, there wasn’t any dividend, right?

Well, we had the significant dividend it talks about. As I mentioned in my remarks, INR4.5 billion has been the dividends from the subsidies during the quarter.

Okay. So that would be the main thing?

Yes, that and we’ll have to really look at our current holding in those companies minority interest. We have had some sale in those subsidies sale of stake. So we’ll have to adjust for that in terms of the current stake. So those would be the two reasons.

And if you’re looking at the nine months number, one additional reason will be for in Q2 when we sold our ICICI Prudential share in the IPO, the – in the consolidated financials, it will be – the cost would be different than the standalone branches, so we disclosed that time that the gains were lower by about INR5.5 billion.

Okay. Okay, thank you so much.

Thank you.

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

Yes. Hi, good evening. I had a question on margin. So you mentioned the overseas margin 32.8%, was it right?

Yes.

Yes, it is correct, and I also mentioned that it is on account of – primarily on account of topping of accruals on the slippages into NPL of foreign currency loans.

So and – sorry if I missed that, but what’s the NPA percentages like or what’s been the movement in the overseas look?

Look, when we disclosed the overall number of INR70 billion of slippages, that includes both domestic as well as overseas branches if it’s been in the form foreign currency loans to those borrowers.

And is it safe to say that some some part of this will mean revert, because it will be more interest reversals rather than just an NPA increase. So you will see some of it come back, what’s the more sustainable overseas margin number now?

So, it will definitely mean revert, but the near-term as we did that, because the NPA additions would still be there. There would be some more incremental impact, which would be there. So to that extent it would not go back to the earlier level immediately. So the sustainable margin on the overseas book should definitely be no closer to 1.4%, 1.5%. But given the level of NPAs, which have happened over the last year or so, it will take sometime to get back to those levels.

Understand. Perfect. That’s about it. Thanks a lot.

Yep.

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

Thanks. So the first question is related to the watchlist thing. So in the starting of the year like, we had a INR525 billion of watchlist. And in the nine months, we have seen slippage of close to INR233 billion, out of which INR121 billion one is from the watchlist and remaining from Odyssey and non-funded development. But all the remaining slippers had actually come from non-watchlist that is posted on 30%. So going ahead from here like how do we see that, how much slippage would come from the non-watchlisting, because the percentage number, 30% of the total slip is coming from the other areas, it will be large number actually.

To be more precise, it’s something in the region of around 24%, 25% because part of the NPAs have come from the retail portfolio at the normal run rate, which is there. So, I think, one thing is that from the beginning of the year when we said that a large part of NPAs will come from the identified sectors, it is around these kind of levels, which we talked about. So even going forward there will be additions which will come from outside of this drilldown list and the restructured loans and the NPA-related portfolio. Overall, there is clearly still some stress in the economy, which is there, and these are borrow specific, company specific kind of issues which are there. So these are not really a single sector specific thing which we have covered drilldown exposure list.

We had always said we are giving a drilldown of the below investment grade companies in these specific sectors. There could be stress outside these six sectors as well.

And secondly the recognition of the NPL in the Canadian subsidiary, was that related to the Indian steel company, the loan given in the U.S.?

So, there was – actually in the current quarter, there was no significant addition to NPAs in the Canadian subsidiary, this was provisions taken on the existing NPAs which were there in the Canadian subsidiary.

Yeah, it is India linked – Indian borrower group linked and not a steel company and it had already become NPL in the past and the good news there is that, as you say, if you look at the asset quality numbers, the NPA has come down to 0.4% now as of December. So it is more like providing for something which has been already recognized that has happened in Canadian book.

Okay, thanks a lot. Thanks.

Thank you. The next question is from the line of Suresh Ganapathy from Macquarie Capital Securities. Please go ahead.

Yeah, just a quick question. Are you with the RBI dispensation for small-value accounts?

Yes, we have gone by the circular.

Okay.

That we have availed of that dispensation. The amount is about INR1 billion. It didn’t – it was not a big number in the overall context of the bank.

Okay. And any qualitative feedback on how SMEs are doing because we are hearing a lot of negative development, even ahead of GST and also because of demonetization, quite a lot of stress in that sector. So, do you think there can be some negative surprises from that segment?

So, as we had discussed earlier Suresh that SME portfolio itself as a percentage, it has come down to about 4%, 4.5%, so – and it is a much more granular book. So we don’t see any disproportionate stress going forward. Some of the very small cases, we also got some prepayments as well. So we don’t see any significant negative impact going forward due to demonetization or otherwise.

Okay. Finally, the growth in ICICI Prudential premiums have been pretty good. I mean, what explains this because it’s quite surprising in a demonetization quarter you have got such a large premium flow? Had there been cash deposits, which have been accepted at the Life Insurance Company and therefore the premium sales have been strong? What explains this dichotomy which has happened?

See, it is completely based on the company’s strategy and the bank distribution, which has worked very well. If you look at the company itself they stopped accepting cash for premiums two years back. So that is probably is one of the few companies, which has stopped accepting premium by cash. So I don’t think that would have made any difference.

Okay.

It is overall distribution working well and the company’s set up for customer friendly products are doing well during this period. So I do not see any other factor really coming in, which has led to the growth.

And also overall there was a growth in the…

As you know the – while indeed ICICI Bank is a larger distributor, the bank assurance mix of the company has ranged between around 60%, lower in some quarter, maybe little higher in others. This quarter I think it was worse. There has been no – all the channels have grown broadly this year.

Okay. And what about the company’s view on the open architectural model, will you guys be deceptive towards it or is the board thinking of considering such a case in future, I mean, any such feedback on that?

The open architecture – the option to go open architecture is already there. The bank has so far not exercised it.

Okay.

Thank you. The next question is from the line of Alpesh Mehta from Motilal Oswal Securities. Please go ahead.

Hello.

Yes.

Yes, hi, good. Congrats for the good set of numbers. Just two clarification. In between of the quarter, RBI had come out with the guideline related to SDR and S4A interest accounting, any impact of that in the current quarter margins?

That impact has been there for us, we actually have been not accruing on these loans from the earlier quarters itself. So there was no one-off impact which came for us in this quarter.

Okay. So we were – we are not accruing interest on all this loans. And in terms of overlap order for the watchlist versus the SDR and S4A, I believe our entire portfolio is largely there in the watchlist, right?

I think, Kannan, gave the numbers of the total SDR that we have done of INR34 billion.

Okay.

INR28 billion were loans already classified as NPA or restructured or in the drilldown list, so the balance INR6 billion is outside of it. And similarly on 5/25 of the performing loans, which are – which we have implemented 5/25, INR33 billion, about INR24 billion is from the drilldown list and the balance INR9 billion is outside of it.

Okay. And lastly, what’s the share of retail fees and the overall fees.

Slightly over 70%.

70%. Okay, thank you. And just last request, if you guys can send the PPT earlier because it was after the call started, we received after 15 minutes.

Yes, I think we kind of got delayed this time, we will ensure that in future.

I’m sorry, we’ll ensure that in the future.

Thank you so much.

Thank you the next question is from the line of Srinivasan R from IDBI Federal Life. Please go ahead.

Hi, thanks. Just wanted to quickly check what is the – if you could get some sense of what is the total proportion of MCLR linked loans in your overall book and more specifically, if you can talk about within the home loan segment of what it is and some trends, if you can, throw some light. Thanks.

Of the domestic book, about the 20% is linked to MCLR for us.

And within home loans, is there anything that you could comment on?

Within home loans, it’s largely floating, but it will be linked to the various benchmarks, which are there.

And any sense in terms of how it has moved over the last two, three quarters, I mean, from what percentage it has increased to 20, if you could show some light.

I don’t have the numbers.

Sure, no worries.

It started off from April 1, 2016, so every quarter it has been increasing in that sense, whatever incrementally we’re doing is MCLR linked.

Sure. Thanks. Thanks a lot.

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

Hi, just one the cost of funds. How low can we go? Because when I look at one quarter, it looks like large part of net flow has been the lower-cost funds. So as we move towards the next few months and deposits kind of move out. Should we expect MCLR starts going up or do we have the other four or five different variables that can be tweaked to keep the fund, cost of funding lower? Not just for you, but obviously the sense of how the private [ph] banking system would be thinking about this?

On the cost of funds actually there are not too many variables in the sense that one is the proportion of CASA deposits that we would have. Second is the interest rate on the CASA deposits itself, so that is the savings deposit rate and then the term deposit rates, which are there.

Correct.

In the near-term, given the amount of liquidity, which has come in the system and the overall general lack of credit demand, one would expect that on the deposit cost, the term deposit cost, banks should still have the ability to, at some stage, maybe lower interest rates further from the current level also. So that is something, which could kind of keep the overall cost of funding on the lower side going forward also. So that is how we have to look at it. Of course, the overall CASA percentage, there will be a decline, which will happen for the banking system as some of these deposits get withdrawn or deployed alternatively by the customers. But we’ll have to see whether how gradual that decline is, but there’s still some ability that the banking system would have in reducing the cost of deposits on the term deposit side just given the liquidity in the system.

Right, and quickly if I can, on the 5/25 in SDR. Correct me if I’m wrong, I think last quarter, did we say 5/25 outstanding was about INR27 billion and now it has gone up to INR33 billon?

Yes, yes.

So what has gone up? Is it drawdown on existing sanctions?

No. We would have done the – we implemented 5/25 additionally in those cases.

Could we have additions please, the standard ones, the standard ones which are obviously not in watchlist or restructured?

So that is the number which you said, so the INR27 billion of implemented went up to INR33 billion, INR6 billion was the implementation that we had in the current quarter for 5/25.

Right. And the same thing would be about 500 addition in the SDR portfolio as well?

Yes.

Yes. So that’s why they give the outstanding number on a quarter-on-quarter basis.

Right. And could we have the number of employees, as of the December quarter end.

Yeah.

And while you are searching, just wanted to get a sense, what’s the strategy of retaining the savings account, current account, I’m sure will flow out to a very large extent or is it totally beyond anyone’s control?

The employee count is 80,900 compared to it was about 80,475 at September.

Right.

And on the savings bank account, it is nearly continuing to enhance the franchise considering that it is a transaction account, the more and more we make it sticky in terms of giving all the benefits of transaction including through digital channels to the customers that we have always said that rather than paying additional interest that should be the way in which we should be adding to savings bank account. That strategy will continue. And in the opening remarks that’s what we had mentioned that even during this demonetization period the customers franchise got further enhanced through our digital solutions. So I think the key for us is that to make sure that we give more and more transaction capabilities through the savings bank account to our savings bank customers including through the digital payment channels various utilities payments and whatever the day-to-day management of funds, if we can manage it through the facilities that we give to savings bank account that is the way we believe that we can enhance the franchise. That has been our clear approach and that is what we have pushed over years.

So what do you think a couple of other banks have said they would be able to retain 30%? Do you think that’s reasonable number to work with?

So I don’t think we’re in a position today just that they have come out of demonetization to predict really how much will stay. But our endeavor would be to make sure that on an average basis – not looking at the period and so much, but on an average basis we’ll continue to focus on the CASA. So that focus will continue, but how much will stay will be very difficult to predict, because we are just coming out of the demonetization period, so we’ll have to wait for a couple of months before we can really make a statement on that.

Sure and sorry, I had to ask one more question. When I look at the loan book, substantial increases happened in the personal and credit cards, it also looks like the proportion of financing in vehicle loans has gone up, I think probably in a historical sense as well. Should we be worried about it and given demonetization and obviously we are still not sure how this is going to pan out, do you think on this, the CIBIL score itself are sacrosanct?

So for our experience has been that they are indeed sacrosanct, so if we look at our own month on book kind of scores compared to the vintage, we are well within our own estimates of development of any asset quality pressures in these books. And our own focus has been to cross-sell to our existing customers through branches, the personal loans and credit cards. I think as long as our focus is there including the usage of CIBIL scores, we do believe that this would be a robust portfolio. So at this level which is only about 4.5% of the overall loan book as of December, we don’t have any concerns on this portfolio.

Right, thank you so much.

Thank you.

Thank you. The next question is from the line of Manish Agarwalla from PhillipCapital. Please go ahead.

Yeah, thanks for the opportunity. Just can you give us some sense on the coverage ratio? We understand that a lot of large account is on the verge of resolution where we have to take some kind of haircut, so what kind of coverage ratio do you think is it comfortable win and for you?

You know we have said that around the existing coverage ratio based on our past experience through the last cycle, we have said in the past that we are quite comfortable at the current levels. It is just that mathematically that number will change depending on the incremental slippages and you would see it going up only when there is some abatement of the incremental slippages of the quarter, because we do provide based on the IRAC norms of RBI, so we’ll have to really wait for it to happen before the ratio can be taken up. But to answer your question specifically, we are okay with the existing PCR for the NPLs.

Yeah, second question is on the non-funded book for the balance drilldown list, so can you share what is the non-funded exposure for INR275 billion of balance drilldown list?

So that is already included in that.

No, existing NPAs…

Yeah. So just to clarify, the INR275 billion includes the non-funded exposure in respect of those assets. The other ones -- these are all non NPLs, the other one we talked about is an NPL because our NPL ratios are calculated based on the fund that’s outstanding in respect of them. We have disclosed separately the non-fund based outstanding in respect of the fund based exposures which has been classified as NPL and put in the balance sheet. So that number was about INR30 billion to INR33 billion earlier, it has come down to INR16 billion now.

Okay, so the INR275 billion includes total exposure?

Yes, yes, for the [indiscernible] with both non-fund and fund included together.

…together.

Yeah, thanks, thanks a lot.

Thank you. [Operator Instructions] The next question is from the line of Nitin Aggarwal, Antique Stock Broking.

Yeah, hi, thanks for the opportunity. Sir, if I look at the equity investment in subsidiaries, there is an increase in the equity investment in the Canadian subsidiary, so what have actually driven that? Because I believe in the past we have been looking to repatriate capital back?

You just check the number, there is no increase in equity in the Canadian subsidiary, we’ll just look at the numbers we have not infused any further capital, there is no increase.

Okay this is on slide 58 if you look at…

Which page number?

Sorry, I think this is my mistake, this is my mistake. You are right there is no increase.

No increase.

Yeah, there is no increase. Sorry. And secondly, if you can quantify the interest reversal that you have done on the overseas assets this quarter?

We don’t disclose separately the interest reversals on accounts.

Okay thanks.

Thank you. The next question is from the line of Pankaj Agarwal from Ambit Capital. Please go ahead.

Yeah, hi, can you share some details on how your retail loan disbursements are looking like in the month of January? Are they higher than December or still lower than December levels or equal to December levels?

During the December quarter approximate -- in the month of November the disbursements came down and we saw some of that going back to a higher level in the month of December. For the current March quarter we will talk about it once the quarter ends, it is just too early to kind of talk about that. But overall we do expect that from the much lower levels of disbursements that industry and we saw in the month of number, there would be an improvement which we will continue to see.

But do you think that overall disbursements in March quarter could be at the level of pre-demonetization levels or it would take more time before you reach those levels?

Difficult to say because interest rates have come down so that should be good for the customers, so overall we would definitely hope for it to -- we have said that by the month of March we’ll expect things to go back to the earlier levels, now whether for the full quarter it is there or not, we’ll have to just see.

Okay. And out of your total loan book how much is floating rate loan book?

76% of the domestic book is floating rate.

Okay 76%, so out of that 20% will be MCR and 55% would be base rate, right, that’s the right interpretation?

Yes.

Okay thank you, thank you very much.

Thank you. The next question is from the line of Abhishek Murarka from JM Financial. Please go ahead.

Yeah, good evening, thanks. I think most questions have been answered, so just one data keeping question. What is the outstanding SRs with you right now?

It is about INR28 billion, it’s on -- it will be on, I’ll just tell you a slide on which it will be, it’s about INR28 billion.

Okay, so it is the same as the last quarter?

Yeah, we didn’t…

Yeah, we didn’t sell much.

Okay, and S4A I believe is nil anyways?

Yeah, we have not implemented any asset.

Right, right. Okay, thanks. That was it.

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

Good evening. Just two questions, one, on the CASA ratio side for the month of Jan, is this number on an average basis up or down? There is a qualitative feedback on how sticky the CASA ratio is as we speak today? And the second question is on the earlier question that you had asked, you had given on the coverage ratio, just trying to understand on the dissolution that you are kind of discussing with various parties, what kind of haircuts are being kind of discussed out here and do you have sufficient coverage based on these numbers? And specifically if you can discuss on the power sector side the reduction that you have seen this quarter, is it more driven by better performance of the company and if you could give your overall sense on the power portfolio as well? Thanks.

So on the CASA side, I think we would not want to comment on the trends in January. I think as we earlier said, we will have to see during this quarter what is the overall trend in terms of withdrawals or reduction on the CASA deposits, it is too early for us to kind of have a sense on that. On the drilldown exposure, the moment which was there on the power sector was not really to do with an improvement in the Company’s performance, so that is not the scenario there. Overall, I think as Kannan mentioned, in terms of the coverage ratio that we have on the NPAs, we believe that given the past trends in the portfolio that is something which would be adequate, of course it is lower than the coverage ratio that we used to have till a few quarters back and that reduction has happened because of the increase in NPAs over the last year or so. But overall, given the past experience, we would still be fine with the kind of coverage that we have. In terms of the various resolution that we are working upon, the amount of sacrifice involved would vary from case to case and the case itself could be, it could be an NPA, it could be a restructured loan, it could be a stressed loan, so it is very difficult to kind of give an overall comment on that. But sufficed to say that from our perspective we would want to look at resolutions and we believe that we hold adequate provisions to kind of progressive resolutions as long as all the banks are also kind of doing that.

Just one question on that, on the power side, in your overall portfolio, given that this portion -- this particular portfolio has not seen too much of impairment so far. Where are you seeing this going in the next one year or so?

I think in terms of the overall power sector, if you look at the portfolio which is there in the drilldown list itself when we started the year, that is the portfolio which is the below investment grade portfolio. So that definitely reflects the stressed part of the power portfolio. In addition to that there is just this one exposure that we have which is that the gas-based power plant which is there, which we have given as part of footnote on slide 32. So in terms of overall stress, it is captured in the drilldown list, beyond that I don’t think we have really any concerns.

Perfect. Just one clarification, you are not seeing any additions at all in the sub investment grade is it, in these portfolios?

In these portfolios, again as we had mentioned in the month of April that a very comprehensive exercise has been done by the risk team over the last couple of years to ensure that the internal credit ratings reflect the risk on that portfolio, so that is why we were pretty confident that we would not really be seeing any significant downgrades. We had seen some downgrades we would see, a small amount over the last couple of quarters. Otherwise we have seen, for example, some downgrades outside of these sectors also so it’s not that we have not seen any downgrades, but in these sectors we have not seen any lumpy downgrades at all.

Sure thanks.

[Operator Instructions] The next question is from the line of Rohan Mandora from Equirus Securities. Please go ahead.

Sir, thank you for taking my question. Sir, if you could just share how is the fresh sanctioning pipeline for home loans, as well as other retail programs post demonetization? How is the tender and what is the outlook going ahead?

After the sharp slowdown in the month of November, we have seen an improvement which has happened in the month of December. And as I said earlier, we will see this quarter how it goes. The lowering of interest rate should definitely help, but there is of course an overhang of the expectation of people -- customers on the property prices, so we’ll have to see how this quarter progresses. We would expect on the normal circumstances over the next two, three months things should get back to normal levels.

Okay so the other section number of inquiries that have come in, may be geographically if there is some trend that you would share?

There is an overall increase in December and further an overall increase in January, so actually it’s not geographically very different.

Okay, thank you.

Thank you. The next question is from the line of Jinal Fofalia from Alfa Advisors. Please go ahead.

Sir, could you just tell us the disbursement growth for the previous quarter?

We actually don’t disclose the disbursement numbers.

Okay, fine, thank you.

Thank you. The next question is from the line of Karthik V from Investec. Please go ahead.

Thanks for the opportunity. If you could -- actually the reason for the increase of our restructured book despite of the slippage of INR240 crores...

We can’t hear you, there is a lot of echo from yours.

Karthik, may I request you to speak on the handset mode please.

Yeah, yeah, sorry for that. The increase in our restructured book despite the slippage of INR240 crores and the increase in our NPAs of Home Finance subsidiary?

On the restructured loans space there was a couple of small cases which got restructured during the quarter which were projects on implementation, so that is why the number broadly -- it just was marginally higher compared to the December -- compared to the September levels. And your second question was, in the ICICI Home Finance Company there was one midsized real estate exposure which slipped into the NPA bucket during the quarter and that is the reason why the NPA ratio went up for the Home Finance Company.

Thank you and just one last question. Overall what would -- from an overall economy or our Bank performance perspective give you confidence to come out with guidance in terms of metrics like credit costs or margins?

Actually the whole impact on credit costs and margins will depend on a lot of factors around the ecosystem, including not just what changes happened in the economy or the specific industries, but how the ecosystems move around the Bank’s decision making around the legal processes and so on. So I think it is not very prudent to give quarter vice forward-looking statements here.

All right, thank you so much.

Thank you. Ladies and gentlemen, due to time constraints that was the last question. I now hand the conference over to Ms. Chanda Kochhar for closing comments.

Well, thank you. I think we had a extensive comprehensive set of questions and discussion, so thank you all for sparing the time.

Thank you. On behalf of ICICI Bank, that concludes this conference call. Thank you for joining us and you may now disconnect your lines.