Ladies and gentlemen, good day, and welcome to ICICI Bank Limited Q3 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, MD and CEO, ICICI Bank. Thank you, and over to you, sir.

Thank you. Good evening to all of you, and welcome to the ICICI...

Sir, sorry to interrupt you, you're sounding a little distant.

Thank you. Good evening to all of you, and welcome to the ICICI Bank earnings call to discuss the results for Q3 of FY '25. Joining us today on this call are Sandeep Batra, Rakesh, Ajay, Anindya and Abhinek. The operating environment for the banking system continues to be dynamic based on evolving global and domestic economic factors. We would continue to monitor domestic inflation, liquidity, rates and uncertainties in the global environment. At ICICI Bank, our strategic focus continues to be on growing profit before tax, excluding treasury through 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 12.8% year-on-year and 3.2% quarter-on-quarter to INR 152.89 billion in this quarter. The core operating profit increased by 13.1% year-on-year and 2.9% quarter-on-quarter to INR 165.16 billion in this quarter. Excluding dividend income from subsidiaries, the core operating profit increased by 14.7% year-on-year and 3.3% quarter-on-quarter to INR 160.07 billion in this quarter. The profit after tax grew by 14.8% year-on-year to INR 117.92 billion in this quarter. Total deposits grew by 14.1% year-on-year and 1.5% sequentially at December 31, 2024. During the quarter, average deposits grew by 13.7% year-on-year and 2.1% sequentially and average current and savings account deposits grew by 12.6% year-on-year and 2.3% sequentially. The bank's average liquidity coverage ratio for the quarter was about 123%. The domestic loan portfolio grew by 15.1% year-on-year and 3.2% sequentially at December 31, 2024. The retail loan portfolio grew by 10.5% year-on-year and 1.4% sequentially. Including nonfund-based outstanding, the retail portfolio was 43.9% of the total portfolio. The…

Thank you, Sandeep. I will talk about loan growth, credit quality, P&L details, technology initiatives, portfolio trends and the performance of subsidiaries. Sandeep covered the loan growth across various segments. Coming to the growth across retail products, the mortgage portfolio grew by 11.4% year-on-year and 2.1% sequentially. Auto loans grew by 6.6% year-on-year and 1.7% sequentially. The commercial vehicles and equipment portfolio grew by 7.4% year-on-year and 1.7% sequentially. Personal loans grew by 8.8% year-on-year and declined 1.3% sequentially. The credit card portfolio grew by 17.9% year-on-year and 2.8% sequentially. The personal loans and credit card portfolio were 9.2% and 4.3% of the overall loan book, respectively, at December 31, 2024. The overseas loan portfolio in U.S. dollar terms declined 21.2% year-on-year at December 31, 2024. The overseas loan portfolio was about 2.4% of the overall loan book at December 31, 2024. Of the overseas corporate portfolio, about 90% comprises Indian corporates. Moving on to credit quality. The gross NPA additions were INR 60.85 billion in the current quarter compared to INR 59.16 billion in the first quarter of the current fiscal year and INR 50.73 billion in the previous quarter, i.e., the second quarter. Recoveries and upgrades from gross NPAs, excluding write-offs and sales, were INR 33.92 billion in the current quarter compared to INR 32.92 billion in the first quarter of the current fiscal year and INR 33.19 billion in the previous quarter. The net additions to gross NPAs were thus, INR 26.93 billion in the current quarter compared to INR 26.24 billion in the first quarter of the current fiscal year and INR 17.54 billion in the previous quarter. The gross NPA additions from the retail and rural portfolios were INR 53.04 billion in the current quarter compared to INR 52.04 billion in the first quarter of…

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

My first question is on provisioning. So what would be the utilization or reversal of provisions this quarter because provisioning on nonfund have gone down and you explained that, that's because the exposure has only gone down and then restructuring or resolution provisions have also gone down. So what would be the number? Or it's just the 2 of...

No, we don't give the number of write-back separately. I think what we are seeing overall on the credit cost side is that on the retail, business banking portfolios, it continues to be quite stable. On the corporate portfolio, incrementally, there is practically no credit cost or NPL provisioning but we are seeing a continuous improvement in the quality of the portfolios that we have been calling out over the years, such as the nonfund outstanding to NPLs or restructured assets or the BB and below portfolio. We also continue to see some recoveries from accounts written off in the past. So I think that's contributing to the provision line. Overall, as we've been saying, the provisions do vary a little bit from quarter-to-quarter, both because of the loan book and because of other factors, for example, over the last -- maybe not the last quarter but previous 2, 3 quarters, we had ups and downs in, for example, the AIF-related provisioning. But I think overall, we continue to be within sort of the 50 bps that we have been talking of in previous calls, the reported number for this quarter being 37 bps.

Got it. Fair enough. And just on deposit growth, so the sequential run rate is a bit softer this time. That's just because of the liquidity environment or any comments there?

I think it's because of the funding requirement. So if you see system loan growth did slow down a little bit, which is, to a lesser extent, reflected in our portfolio as well. There was a CRR cut effective the middle of December. And we also saw some reduction if you look at our investor presentation in our RIDF portfolio and so on. So it's really a function of the requirement. We also were able to take in some very cost-effective refinance borrowings. So it's really that we continue to maintain very strong liquidity. Our LCR actually went up slightly this quarter average for the quarter was 123%. So it's more driven by the requirement than anything else.

Okay. I just wanted one last clarification. So you have called out gross farm slippages. I mean, you always do call out. So thank you for that. But would there be a comparable number for second quarter or it's just first and third only, like if you want to...

Largely, it comes in the first and third only.

Next question is from the line of Rikin Shah from IIFL.

Just one question, and it's on operating cost -- operating expenses. So they have been flattish for the last 3 quarters and this is despite the tech expenses that you have been incurring. Just wanted to understand how much further flex do we have to manage the OpEx at the current levels? Or alternatively, when do you see that kind of picking up in line with your business growth? And data keeping question would be, what would be the outstanding employee headcount as of end of December?

So the headcount does keep evolving in line with our requirements of how we want to staff the bank and what is the requirement at any point in time. We continue to invest in branches. As you would have seen, we've added 129 in the current quarter. Overall, when we look at costs, I think the way -- we feel that we do have a large cost base, and there are always opportunities for bringing in efficiencies in that cost base by streamlining our internal processes, integrating workflows and removing redundancies, which are not required. So I think that's an ongoing journey, both in terms of how do we sort of leverage the cost base much better. And at the same time, we continue to invest in the growth requirements of the business as well as in things like IT security and reliability. So that's a process, which goes on. I would feel that our aim would be to, as I said, leverage the cost base -- continue to leverage the cost base better. And we don't think that there needs to be -- needs to go to a sort of linear relationship with the top line.

Perfect. Very helpful. And would you be able to quantify the outstanding headcount as of December?

We give that number on an annual basis now. So we've not been giving it.

Next question is from the line of Kunal Shah from Citigroup.

Yes. Firstly, on the yield side. So last time you indicated the impact of number of days also being there. So this time, when we look at the overall decline in yields of 8-odd basis points, is it primarily on account of KCC or there has been any impact of the days? And would it be fair to assume that this day count would entirely unwind in 4Q and there should be a positive bias towards the yields?

We will -- so as far as the movement from Q2 to Q3 is concerned, you're right, it's largely the impact of the KCC because there a longer period of interest accrual gets reversed in that quarter. As far as the day count impact, et cetera, for going forward, wouldn't really want to -- we had said, I think, last quarter that Q4 has a lesser number of days. So just mathematically, you would see some unwinding.

Okay. So that should be there. And secondly, on the corporate banking side, generally, maybe we are more focused in terms of the risk return approach. This quarter, we have seen a decent level of growth on the corporate side, while retail, there is some slowdown because of the unsecured lending. But otherwise, maybe is the pricing intensity easing over there? Would it be slightly margin dilutive? We have not seen the impact this quarter. So how should we look at the overall corporate banking growth?

I think that it's not -- I wouldn't say it is going to be margin dilutive and so on. We have to look at -- the way we look at it is we look at the overall relationship with the corporate. I think we don't want to take very chunky, finely priced long-term exposures just for the sake of loan growth. That's not our approach at all. But we do have an ongoing relationship with corporates where there could be periodic working capital requirements or short-term lending requirements or longer-term requirements where indeed it does meet our overall sort of P&L aspirations. So we keep looking -- I think we have a very active franchise and engagement with corporate clients across the spectrum, and we keep taking advantage of those opportunities to work with them as and when they come up and fit our sort of approach.

And there was increase also in BBB and above, okay, by almost like 210-odd basis points. So this is maybe incremental growth coming in from there or maybe business banking, how should we read that, yes?

I think that -- I think it is -- it would largely be an upgrade from the BB because as you can see the BB portfolio has reduced and that...

Yes, that's 60 basis points, yes.

That will reflect partly in the increase in the BBB. Of course, we could be doing incremental BBB lending also. I mean it's investment grade for that but we have limits on how much of that we would do.

[Operator Instructions] Next question is from the line of Piran Engineer from CLSA.

Congrats on another steady quarter. Just firstly, on retail products, a couple of ones, mortgages, we were growing at 16%, 17%, now down to 11%. Is that more a function of pricing in the industry or just overall slowdown? And same for vehicle loans, we understand that this year was a slowdown but what's your house outlook for next year?

So mortgages, of course, I think there is an element of price competition, which is there and which has been there so -- over a period of time. But there has been, I would say, the incremental disbursements have not been growing as much. They continue to hold up. As you are aware, overall, there seems to be continued momentum in the mid- and higher segments of the market and maybe some softening in the more affordable type of segment. On vehicle loans, I think it's more a function of the underlying sort of asset class itself because we are primarily in new cars financing. And there, I think we had -- if you look at actually last year or early part of this year, we had a pretty good run maybe from -- more recently, the market has slowed. I think it will go through its ups and downs as customers replace or as new models come, which typically create their sort of wave of excitement in the market. I guess it will -- you will see it go from a good quarter to bad quarter over the next -- that's the way it will work.

Okay. Okay. Fair enough. Secondly, just on business banking, now this has been a product that you'll as well as your peers have gone really strong on, what really can go wrong for the industry 2 years later? Because today, everything looks hunky-dory but is there some part, which you are missing here because it seems like almost a fairy-tale business.

So I think if you look at the bigger picture of the way this business has evolved over the last few years, I think -- at the customer level, I feel that the -- there's been a great deal of formalization and the introduction of GST and the digitization of the business and a fairly high degree of digital adoption by this customer segment itself and a reasonable level of credit discipline. I think in India, we are one of the countries where you have the commercial bureau as well. So that certainly helps. So I think that there is a fair degree of formalization, digitization and credit discipline. That helps banks like us for whom this segment becomes much more underwritable. Also, we look at this segment as a -- from a holistic perspective, this is -- we have a very strong Customer 360 focus in this segment, and we really look at not just the lending piece but also the -- all the transaction banking and the liability piece as well. So in that sense, it's a segment, which is we want to focus on. From a credit perspective, 2, 3 things. I think one is that it's a reasonably well-secured segment. So you do get -- particularly in the more granular sections of the portfolio, you do have collateral as well. Second, the portfolio itself is quite granular and quite diversified. So it's not -- it will hopefully behave more like a retail portfolio rather than a corporate portfolio where a single borrower or a couple of borrowers can create more damage. But -- and of course, it's a portfolio where you have to keep monitoring and you have to have a very close eye on what is happening with the borrowers. It's -- a lot of it is working capital, which also helps because you are -- you see the way that the account is being operated and how it is behaving. So it has to be tightly managed in terms of not just the initial underwriting, but also keeping a close eye on borrower behavior through the appropriate portfolio monitoring mechanism. I think as of now, we are very, very comfortable with the quality of the portfolio.

Got it. And it's fair to say that the credit cost in this business are lower than your retail book, right?

Yes, currently, that would be the case, yes.

[Operator Instructions] Next question is from the line of Nitin Aggarwal from Motilal Oswal.

So I have a few questions. First is on the fee income. We have seen a good traction in fee income this quarter. So now with margins being constantly like under pressure and likely to remain so as the cycle turns, is it fair to say that fee income will continue to gain share as a percentage of total income? And what kind of opportunities in particular are we looking at in respect to transaction banking over the year?

So we don't really get into the proportion piece. I think we have an overall PPOP objective, and we look at what is the way to sort of maximize that. I think specifically on fees, as we have said, we believe that our transacting platforms are pretty strong. And the whole objective is to get more and more adoption of those by our existing customers and acquire more and more new customers on the strength of those platforms across the entire spectrum from large corporates to small businesses. Cards and payments is also a focus area, which is doing well for us. So I would say we have seen a pretty decent growth across cards and payments, transaction banking, the FX and derivatives part of transaction banking as well as the pure lending-linked fees that are related to loan disbursals or renewals or sanctions and so on. So it's really -- so I think we will continue to look at that and try to drive adoption of our platforms and -- as much as possible.

Right. And the second question is around the trade-off between, say, growth and the focus around asset quality. Because if I see while bank has done a very good job in navigating through this environment, and yet delivering one of the better growth among the larger banks. But if I look at in context to that, the slippages have also been just 6% Y-o-Y growth in slippages and the slippage rate has actually come down. So how are we like assessing this asset quality situation and strategizing on growth? Because it's a very sort of a fine [indiscernible] we need to maintain between the 2. So are we tightening too much? Or how are we actually reading it [indiscernible] on the growth part?

So as I spoke, I don't think concerns on asset quality are really holding us back from growth. I mean we definitely see growth -- a good growth opportunity. As I mentioned, on the corporate sector continues to do -- which is 20% of our portfolio continues to do very well. And at the margin, we are actually continuing to see some clawbacks of past provisioning or losses that we may have taken. Again, now close to 20% -- 17%, 18% of the portfolio now is the whole business banking space, which we talked about in some detail. So we certainly see very good growth opportunity there. On the retail side, I would say that on the secured side, I think the slippages have been quite stable. They will keep going up in absolute terms as the portfolio grows and seasons. But I think our credit experience has been pretty stable. Unsecured, as we have commented in the past, we have seen, as has the whole system, some increase in delinquencies and NPL additions over the last maybe 6 quarters or -- 6 quarters. And we have taken corrective actions on that because of which, for example, you see the personal loan portfolio flattening out this quarter. But I think there also, the trends have stabilized. And hopefully, as these actions feed through more, maybe a couple of quarters down the line we should start seeing some improvement. But even for the moment, I think we are quite stable and all of these are anyway getting absorbed in a very healthy credit cost number. So as of today, I don't think we see that trade-off. And to the extent we needed to make that trade-off, particularly on the PL side, I think we've made it.

Next question is from the line of Parasrampuria from Nomura.

Congratulations on another great quarter. Firstly, on CASA. So if I look at both your daily average CASA, which you report and the period end, for the last 3 quarters, both these numbers have actually been in a band, which is not the case for the rest of the system. And especially your SA growth is pretty healthy at 13%. I think most of your peer group would be at a low single-digit sort of number. So what is driving this outperformance?

So I guess the way we approach this is that we don't really pursue any particular type of deposit. I think what we want to achieve is that we should increase our share of business with existing customers and acquire new good customers, and they should do as much of their banking as possible through us. And whatever shape that takes, it could be CA or SA or a fixed deposit, we would want a bigger portion of that share. So we don't really, therefore, drive any particular number in this regard. I think this approach has worked well because I think probably the conversation with the customer is really about doing more banking with us rather than getting a particular deposit or type of deposit. I think our digital platforms do help because once the customer becomes digitally active and starts using those platforms, the stickiness and therefore, the balances tend to go up.

Okay. Got it, Anindya. But it's not any change in the product offering or pricing or any such thing at all, right?

No, no, no, none at all.

Okay. Fair enough. Secondly, Anindya, I don't know if you mentioned this earlier but just on the employee cost, the absolute number is down for 2 quarters in a row now. So what is driving that?

So that -- there are many variables, for example, provisions for retirees and things like that, which do impact it on a sequential basis.

Okay. And headcount reduction as well, the gross number?

That is something, as I said, that's a moving number. There could be in a quarter some reduction, and then it will come back up later as and when we hire to meet our requirements.

Next question is from the line of Chintan Joshi from Autonomous.

Anindya, two questions. If I can pick up your comment about kind of the provisioning cost, you are indicating that the underlying level is comfortable around 50 basis points. Should we think about this also in the context of the next year? And the reason to ask the question is mainly because you've recycled about 30 basis points of provisions. Actually, that's incorrect. Your provisions to loans number has come down from 2% to 1.7%, and we are not sure how much of that is recycled through the P&L. So just trying to understand what could be a sustainable level as we look into the next 12, 18 months?

No, there is nothing called recycling. I mean we give that absolute number. As you are aware, in part of that number is the INR 131 billion of contingency provision, which is really a fixed -- sort of a fixed number that we, I think, reached that level by March of 2023. And thereafter, we have not been making further contingency provisions. As I said, apart from the retail provisioning and so on, on the corporate side, there are always some releases which come -- which are really reflective of improvement in the quality of the portfolio or recoveries that we have made. So that's the way it works. The numbers are all there. I don't want to -- we don't really give an outlook for next year. But as we have always been saying, these numbers could inch up but we don't see anything, which worries us particularly or where we see any dramatic increase.

Okay. And then the second question was on the RIDF. Your requirements -- your RIDF number has been coming down for a while now. I'm just wondering, are there any shortfalls building up on the balance sheet that RBI may ask you to increase this balance down the line or take on some more PSLC? Or are you very comfortably placed even in the more difficult segments of the PSL? Just wondering how much of this is sustainable or if we should factor some increase down the line?

So the number is so small now that even if you factor some increase, I don't think it will have too much of an impact. We, of course, do significant PSLC purchases, particularly for the small farmer category. While on most other categories, we are in a surplus position. And we have been -- so that's a cost that has been getting reflected in the P&L over the years. Hopefully, we will be able to still meet the compliance targets. But at INR 17,000 crores portfolio on this balance sheet now, it's -- sorry, INR 15,000 crores, pardon me, portfolio on this balance sheet now, it's not too relevant a number even if it goes up somewhat.

Okay. And a quick data question. How much of the business banking book is unsecured?

So we don't split that out.

No worries.

It would be largely unsecured book.

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

As always, thank you for taking time out on a Saturday evening and we can take any other questions you have offline. Thank you very much.

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.