Ladies and gentlemen, good day, and welcome to ICICI Bank's Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Bakhshi, Managing Director and CEO of ICICI Bank. Thank you, and over to you, sir.

Thank you. Good evening to all of you, and welcome to the ICICI Bank earnings call to discuss the results for Q1 of financial year 2025. Joining us today on this call are Sandeep Batra, Rakesh, Ajay, Anindya and Abhinek. Indian economy continues to remain resilient as reflected by high-frequency indicators, showing growth momentum such as expansion in manufacturing and services PMI, higher tax collections, real estate buoyancies and pickup in rural demand, supported by the consistent actions and initiatives of the policymakers. At ICICI Bank, our strategic focus continues to be on growing profit before tax, excluding treasury, through to the 360-degree customer-centric approach and by serving opportunities across ecosystems and micro markets. We continue to operate within our strategic framework to strengthen our franchise, maintaining high standards of governance, deepening coverage and enhancing delivery capabilities are focus areas for our risk-calibrated profitable growth. The profit before tax, excluding treasury, grew by 11.8% year-on-year to INR 140.80 billion in this quarter. The core operating profit increased by 11% year-on-year to INR 154.12 billion in this quarter. The profit after tax grew by 14.6% year-on-year to INR 110.59 billion in this quarter. Total deposits grew by 15.1% year-on-year and 0.9% sequentially at June 30, 2024. Term deposits increased by 19.9% year-on-year and 3.1% sequentially at June 30, 2024. During the quarter, average deposits grew by 17.8% year-on-year and 3.3% sequentially and average current and savings account deposits grew by 9.7% year-on-year and 5.1% sequentially. The bank's average liquidity coverage ratio for the quarter was about 123%. The domestic loan portfolio grew by 15.9% year-on-year and 3.3% sequentially at June 30, 2024. The retail loan portfolio grew by 17.1% year-on-year and 2.4% sequentially. Including nonfund-based outstanding, the retail portfolio was 46.3% of the total portfolio. The business banking portfolio grew by…

Thank you, Sandeep. I will talk about loan growth, credit quality, P&L details, growth in digital offerings, portfolio trends and performance of subsidiaries. Sandeep covered the loan growth across various segments. Coming to the growth across retail products. The mortgage portfolio grew by 14.2% year-on-year and 2.5% sequentially. Auto loans grew by 14.8% year-on-year and 1.7% sequentially. The commercial vehicles and equipment portfolio grew by 13.9% year-on-year and 2.2% sequentially. Personal loans grew by 24.9% year-on-year and 1.5% sequentially. The credit card portfolio grew by 31.3% year-on-year and 4.2% sequentially. The personal loan and credit card portfolio were 9.7% and 4.4% of the overall loan book, respectively, at June 30, 2024. The overseas loan portfolio in U.S. dollar terms grew by 5.4% year-on-year at June 30, 2024. The overseas loan portfolio was about 2.8% of the overall loan book at June 30, 2024. The non-India-linked corporate portfolio declined by 9% or about USD 24.8 million on a year-on-year basis. Of the overseas corporate portfolio, about 92% comprises Indian corporates, 6% overseas corporates with Indian linkage, 1% comprises companies owned by NRIs or PIOs and the balance 1% non-India corporate. Moving on to credit quality. The gross NPA additions were INR 59.16 billion in the current quarter compared to INR 51.39 billion in the previous quarter. There were gross NPA additions of about INR 7.21 billion from the Kisan credit card portfolio in the current quarter. We typically see higher NPA additions from the Kisan credit card portfolio in the first and third quarter of a fiscal year. Recoveries and upgrades from gross NPAs, excluding write-offs and sales, were INR 32.92 billion in the current quarter compared to INR 39.18 billion in the previous quarter. The net additions to gross NPAs were thus INR 26.24 billion in the current quarter compared…

[Operator Instructions] The first question is from the line of Mahrukh Adajania from Nuvama Institutional Equities.

Congratulations. My first question is on deposit and loan growth. So incrementally, everyone is complaining about tight deposits, there are some rate hikes that have happened as well. So are you still comfortable with, say, maybe targeting a loan growth of mid- to high-teens? And would you be comfortable increasing your LDR, since it's already lower than peers or would deposits continue to grow in line with loans? That's my first question, and then I have 2 more.

So Mahrukh, we don't target any particular level of loan growth, but we have grown our deposits quite comfortably during the quarter at average deposit growth of 17% on an average basis and 15%-plus on a period-end basis. So we don't -- the deposit flows are quite healthy and -- in terms of supporting the loan growth. As you said, the deposit rates continue to be tight. The wholesale deposit rates have not really come down during the first quarter as they do -- usually do. And of late, there has been 1 or 2 hikes in the retail deposit rate also, although in 1 case, it is at a longer tenure. So we'll have to see how the deposit market moves going ahead, but we are not -- we don't feel that as a constraint in terms of the available lending opportunities. On the lending side also, I think there is price competition in the other way, and we are seeing a fair amount of competition, particularly on the corporate side. So we'll keep calibrating both. As far as the LDR is concerned, I think this low- to mid-80s is the level of domestic LDR that we have historically operated at, and I don't see any big change in that. It may vary 1 quarter here up or down, but broadly, it should be at that level. As far as both deposit growth and loan growth are concerned, of course, over the next couple of quarters, we will also have to take into account the implications of the revised guidelines on LCR, the draft which has come, which will have some impact on both deposit markets and loan markets. So we'll have to see that as we go along as well.

Okay. So my other 2 questions. One is, if you have any rough calculation on LCR? And can we assume that 90%-95% of deposits would fall under the digitally enabled tab? And the other question is just on retail recoveries, right? So obviously -- do you see them slow down because there's a lot of -- in your customer segments, because there's a lot of discussion on customer leverage in some segments or the other, so in your set of customers, do you see the retail recoveries flowing in as smoothly as you saw last year? How does it play out?

On the first one, we -- I think it's a fairly easy calculation to do because the LCR disclosures are public. And at least, I think all the analyst reports that we've seen as of yesterday for the major banks talk about between a 10 and 14, 15 percentage point impact, and I think that's a fair estimate. On the recoveries, I think -- we have been saying for some time that the pace of recoveries will vary and may not continue at the same pace because we were still collecting out of the pool of NPAs that got created in fiscal '21 and fiscal '22. So that pace will come off, but -- and therefore, the credit costs will also normalize upwards. But as I mentioned earlier, finally, if we look at it, the credit costs for the -- are still at or below around 50 basis points and the NPA ratios, provisioning coverage are all fine. So I think that's the way we would look at it.

Next question is from the line of Nitin Aggarwal from Motilal Oswal.

Congrats on a good quarter. I have 2 questions. First is on the cards portfolio, like few other banks and NBFCs have reported acute stress in this segment and the system in general is seeing some rise in delinquencies, so how do you see the asset quality outlook here? And if you can just also provide some color on the credit cost currently versus the long period average? Some qualitative color around that will also be helpful. So that's 1 -- first question.

Yes. As far as cards is concerned, it's less than 5% of our loan portfolio. And whatever happens in the credit cost there, it has flowed into the overall numbers. I would say that it is -- we see it as a growth business, and we are investing in growth in that business in terms of both products and distribution and our offerings, so that's a business we would like to grow. On the credit cost, if you're asking about on the overall basis, I think we are -- as I said, currently, we seem to be operating at about 50 bps, this I would expect it to further normalize gradually. But what the long period average will be in the kind of portfolio construct and the systemic construct that we have now is difficult to say at this point. But I would say that it will be better than historical levels, for sure.

Okay. But Anindya, also, I mean, this credit cost outlook on the cards specifically, like how do you compare versus long period average?

No, we don't really call that out. As I said, it's about 5% of our book, but it is a book we would be very keen to grow.

Okay. Sure. And the other question is on the yield on advances, which has come down this quarter around 8 basis points. So how do you read that? Is it like that the yields have peaked out and will sustain around current levels? So how do you really read this?

No, so part of it would just be the impact of the nonaccrual on the KCC portfolio because there, unlike that is -- it's a nonaccrual of interest accrued over a slightly longer period. That would be 1 component; and others, there will be some small movements here and there, nothing really specific to call out. On lending rates per se, as I said, I think we continue to see a reasonable amount of competition, particularly on the corporate side.

Sure. And just 1 clarification on the treasury gain also, which is a higher number this quarter versus our updates that we have reported in the prior years. So some like details as to -- behind this game and how do we like see this moving?

So we would have made gains from our normal proprietary trading businesses, which trade equities, fixed income and currency. We also had some gains on our security receipts portfolio, both realized gains because there were redemptions of the security receipts. And then there would be -- the third component would largely be the mark-to-market on the fair value through P&L portfolio, which earlier, we would -- we had to only take the negative MTM impact. Now under the new guidelines on the AFS portfolio, with MTM impact either positive or negative flows to the AFS reserve. And on the fair value through P&L portfolio, whether positive or negative, it flows through to the P&L. And in this quarter, it would have been a positive impact. So those would be the 3 impacts. In the overall context, even at INR 6 billion, the treasury profit number is not -- is a pretty small component of the P&L.

[Operator Instructions] Next question is from the line of Manish Shukla from Axis Capital.

Just going back to the yield on loans question, Anindya. Q-o-Q, I appreciate that. But even if you look at Y-o-Y, the yields are 9.86% to 9.8%. During this period, the share of retail, SME and business banking has gone up, which I believe is higher yielding business, MCLR rates would be higher, GNPA proportion is lower and yet the yield on advances have not gone up. What would explain that?

No, I think the yield on advances really has been at a stable level over the last year. If you look at all the categories that you mentioned, there has been no really increase in market pricing, which would have taken the yields up. In fact, if we look at, for example, as you know, even on something like personal loans, the lending rates were at very low-teens kind of lending rates. The mortgage market has been very competitive, as has been the corporate market. So there was no real case for yields to go up. Also, on the SME and business banking side, I think we, and I would guess other private sector banks or most banks, are operating at really the upper end of the quality spectrum. So it's not in itself a high-yield business in that sense. So in that context, I think the yields are quite okay in terms of the yield movement reported.

Okay, sure. Secondly, OpEx growth for the full year, how should we really think about it relative to either balance sheet growth or income growth and if you could talk about it separately in terms of employee and nonemployee expenses?

We don't give guidance on expenses or different components of expenses. But as you would have seen, the OpEx growth has been coming down over the quarters and the adjusted growth for Q4 was also between 12% and 13%. This quarter, it is 10%-odd. So I would expect that, that should be a fair indicator. I don't think that there is anything that should take it up materially in our business-as-usual sense.

Next question is from the line of Abhishek Murarka from HSBC.

So 3 questions. One, in cards and PL, do you think any additional tightening is needed or the current growth rates, Q-o-Q growth rates allow you to filter out enough risk and this kind of Q-o-Q trend can continue?

So I think -- I don't think we are looking at really any material tightening. I mean, there is minor tweaking and refinement that we keep doing. On PL, we had taken a number of actions last year, and we -- and I think the growth rate has come off. If you look at the year-on-year growth, it has come from 24% to -- from 40% to 24%. And I'm guessing by the time we end this year, it will be closer to a 20% kind of number or lower. So there, I don't think there is anything much to be done. Cards is an ongoing refinement. But as I said, there, we want to grow the business. So to answer your question, I don't think anything major.

Okay. Perfect. Second question is on corporate loans. Now we've seen few banks growing corporate loans on a Q-o-Q basis this quarter. Is this because there is now some bit of asset quality stress in the retail side and that's why you're moving to this side or there are better rather opportunities in the space? How do we read this? And what's happening in that space, if you could give an update?

So it has nothing to do with asset quality on the retail side. I think it really depends on what opportunities come at any point in time and what is the pricing available. So we -- if you look at -- we've spoken of in this quarter also, we saw growth in the NBFC portfolio and a growth in the real estate portfolio. And some of this, of course, is at decent pricing and as well as well within our risk-reward thresholds. In the previous quarters, for a couple of quarters, our NBFC portfolio had gone down because of some prepayments, et cetera. So that has not happened this quarter. So I think if you look at it on a -- for the last several quarters, our corporate book has grown at around 10%. It could be 8% to 9% in 1 quarter, it could be 11% to 12% in another. And that is a pretty steady pace. No change in approach. Going forward, I think what we are currently seeing, again, is a fair amount of competitive intensity in that space. So we'll have to calibrate that.

Okay, perfect. And just quickly on LCR. So just as an approach now, do you need to maintain 20%, 25% additional LCR over 100 on an ongoing basis or once you're reserving higher and anyway, it is more stringent, you don't need to maintain that much surplus and that can be how you offset the impact of this new circular?

I think we have to think all that through. And we have to, I guess, look at refining both the asset and liability side of the balance sheet. But we'll have to think that through. Not something we can respond as of now.

Next question is from the line of Piran Engineer from CLSA.

Congrats on the quarter. Just sort of getting back to some of the questions that were asked earlier on yields. Now I just -- I'd be interested in your thoughts as to borrower demand has been strong for the last 2 years, the raw material cost for banks is going up; yet, none of the banks, not just you, but none of your peers have been able to pass it on to the borrowers. Why do you think that's the case really? Or is it that because there is growth, you are sacrificing NIMs?

No, it would not be correct to say that it has not been passed on at all. So I think if you look at, for example, products, even although it has been very competitive, but products like home loans, auto loans or a number of assets classes, the yields have gone up between certainly FY '22-'23, that is not going up any further now. On the corporate side, I think in 2 markets, I would say, corporate and mortgages, there is episodes of competitive intensity because I think different banks may have different motivations at various points of time.

Okay. Is it also the case that within each product the customer selection is getting better. So just getting to like Manish's question that the product mix is changing, but then in each product, you're getting to better types of customers, so the effective yield does not change. Is that is what is happening?

No, I would say that for the quality customers, the banks are quite competitive in terms of yield. And I think broadly, banks are focused on the prime -- I would say, more prime end of the spectrum.

Next question is from the line of Param Subramanian from Nomura.

Just 1 question from my side. Could you explain the quarter-on-quarter movement in networth because it's up INR 15,600 crores, whereas the profit for the quarter is INR 11,000 crores. So is there something that I'm missing?

Yes. So the revised investment guidelines became applicable in the quarter. And as we have disclosed in our stock exchange release, we recognized an AFS reserve plus retained earnings of about INR 32 billion, net of deferred tax and that the AFS reserve would have increased a little bit further based on market movements between April and June. So that would be the main component. In addition, some amount of capital and reserves get added every quarter due to stock option exercises. So that's a smaller number.

Next question is from the line of Kaitav Shah from Anand Rathi Financial Service.

Thank you. All my questions have been answered.

Thank you.

[Operator Instructions] Next question is from the line of Kunal Shah from Citigroup.

Sir, firstly, maybe if you can quantify any impact of the penal charges circular which has...

Kunal, sorry to interrupt you, can you speak through the handset, please?

Yes, if you can just quantify the impact of penal charges circular which has come through, that would be helpful? And secondly, maybe with respect to recoveries, maybe if corporate recoveries are anticipated to be relatively lower, should we see the faster normalization we had seen in one of the peer banks that impacting the credit cost immediately in one single quarter, do we expect such kind of volatility or maybe for us, as you mentioned, it should be gradual inch up or maybe gradual normalization, which will come through in the quarters?

So on the penal charges circular, we've not really put out any number, so that's not something I can share. On the recoveries part, I would just say that overall, our credit costs have been quite steady. Even in the last couple of quarters where for various reasons, the reported numbers were pretty low, we had kind of said the adjusted cost for the quarter would be around 50 bps, and that is where it is. There will always be some up and down in terms of additions, recoveries, et cetera, but that's okay. I mean -- but not something that we would want to specifically comment on.

Okay. And lastly, in terms of -- as you also indicated in terms of the retail, a couple of players have hiked by almost like 20-odd basis points. How would we take a call? Maybe are we looking to be equally competitive and increase the interest rates? And even in terms of the branch expansion, any changes compared to what you have earlier articulated in terms of the plan on an annual basis?

On the rates, we'll take a view. These are dynamic markets. So as we go along, we will take a view and based on both sort of the -- our target -- our kind of desired level of mobilization as also the maturity bucket which works for us. On the branch, no change as such.

Ladies and gentlemen, we will take that as the last question. I'll now hand the conference over to the management for closing comments.

Thank you all for taking time out on a Saturday, as always. And if any other clarifications are required, please reach out. Thank you.

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