The Federal Bank Limited

Ladies and gentlemen, good day and welcome to the Q4 FY26 conference call hosted by Federal Bank. 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. Should you need assistance during this conference, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Suvik Roy, Head, Investors Nations, The Petrol Bank Limited. Thank you and over to you sir.

Thank you so much. Good evening and a very warm welcome to everyone on the call. Thank you for taking time to join us today and for your continued engagement with the bank. We definitely value these interactions and look forward to sharing our annual performance as well and along with of course our outlook for the year. We will share with the opening remarks from our MD and our EV will walk you through the key highlights of the year and with the strategic priorities going forward. This will be of course followed by a detailed Q&A like we always do. With that, over to you.

Thank you, Shabbir. Good afternoon, everyone. Before Renkat takes you through the detailed financial performance for the quarter, I would like to share a few reflections as we close out the last year. This marks my first full financial year as MD and CEO of the bank. Over the past 18 months period, our efforts have been directed towards sharpening execution, strengthening our core and aligning the organization firmly with our long-term strategic priorities that we had shared in the analyst meet last year. Our Q4 performance reflects a strong operational quarter with outcomes that are consistent with the direction we have articulated throughout the year. The progress we have seen is not incidental. It is a result of deliberate actions taken across both sides of the balance sheet. We have had a record quarter on several metrics that details of which Venkat will cover later. On the liabilities front, we have undertaken a calibrated restructuring of our deposit profile. Our focus has been on improving the quality and granularity of deposits with a clear pivot toward retail liabilities. We hit a milestone of over 1 lakh crore in CASA. Our sharp focus on CASA and specifically CAR is clearly showing results. As a result of this approach, we have consciously reduced our reliance on high-value deposits, which has contributed to a more stable and cost-efficient funding base. At the same time, we continue to build on our traditional strengths. Our NRI franchise remains a key differentiator and we have further strengthened our leadership position in this segment. NRI deposits have now crossed 1 lakh cost alongside a continued increase in market share, reinforcing the strength and resilience of this franchise. On the asset side, we remain committed to a calibrated shift in our portfolio mix This is inherently a medium-term journey and we are encouraged by the traction seen across most of our identified focus segments. Growth has been broad-based and aligned with our objective of improving risk-adjusted returns in a market where we have seen intense and sometimes irrational rate competition. Our free income trajectory during the year has been extremely encouraging, reflecting improved cross-sell, better product penetration and a more diversified revenue profile. Profitability metrics have also shown resilience. Our ROA has now reverted back to the pre-rate cut levels supported by improved margins and disciplined cost management. During the quarter, we also launched our rent management business. This is an important step in building a stronger mass affluent franchise as well as deepening customer engagement enhancing our SQL and building a more comprehensive financial services proposition for our clients. In parallel, we have taken a more scientific and data-driven approach to our physical network strategy. Our branch expansion and restructuring initiatives are now guided by detailed studies undertaken by us along with reputed experts in the domain. This is helping us build a more efficient, well-distributed and future-ready branch network. In line with our recent brand refresh, our branches have begun transitioning to a renewed and refreshed outlook. The project on reimagining our branch operating model is also making very good progress. As we look ahead, our focus remains unchanged, consistent execution, disciplined growth and continuous strengthening of the franchise. With that, I will hand it over to Venkat to take you through the numbers in more detail.

Thank you Maniyan and good evening to all of you. Before I give my comments, let me start by congratulating my colleague Manikandan for becoming the CFO of the bank and I welcome him to this key position in the bank and wishing you all the very best Mani. Thank you. Thank you all for joining us today. I trust you have had a chance to review our investor presentation and disclosure. I will focus on the key financial and balance sheet developments from the final quarter. But before that, a few comments on the macro environment. The Q4 macro landscape remained largely resilient with growth momentum strong and inflation within the RBI's 2-6% tolerance band. Headline CPI averaged approximately 3.1% for the quarter. The core inflation narrative remains constructive and core CPI averaged around 2.1% for the quarter, reflecting continued supply-side efficiency and absence of broad demand-side pressure. Food inflation was contained early in the quarter but picked up towards March, reaching 3.87%. And this is a trend which we have to monitor going into Q1 FY27. On the policy side, RBI held the repo rates at 5.25%, following 125 basis points of easing through calendar 2025. The principal macro risk to FLAG is obviously the West Asia conflict, which escalated late in the quarter, 28 FLAG onwards, and introduced volatility into global energy markets. The full inflationary pass through is expected to reflect from Q1, some later part of Q1 FY27. That said, India's macro fundamentals remain on strong footing. The operating environment while carrying new uncertainties into FY27 remains fundamentally strong. Our focus on high quality credit and balance sheet discipline has kept us well buffered against external uncertainty. The deliberate shift in our portfolio towards secured and granular assets over the past few years has positioned us well. Now coming to the performance for the final quarter. It was a quarter of robust execution. Let me call out that the numbers I am going to spell out are on the underlying performance metrics which will be detailing our core earning trajectory excluding impact of one of these. You would have seen in the We have called out some one-off gains and the impact of that. We delivered 1145 crore in net profit representing nearly 10% sequential growth. Now this is the highest ever quarterly net profit for the bank. The performance was driven by healthy NIIC income and discipline cost management and tight monitoring of our asset quality. As we have emphasized before, these outcomes are the result of deliberate shift in our balance sheet towards a more granular and durable process. The total business asset 31st March stood at 5,78,959 crores, growing at 4.63% COQ and nearly 12% YOY. Our livelihood franchise remains the bedrock of our stability. CASA balances crossed the 1 lakh crore mark to close at 1 lakh 3,390 crore, growing 8.26% sequentially and nearly 21% YOY. Our NRE deposits, which is our moat, reached a significant milestone crossing the 1 lakh crore mark to close at 1 lakh 2,620 crore. This represents a robust 13.2% YOY increase, underscoring the deepening thrust and strong engagement. Our TATA ratio improved to 32.94%, an increase of 87 bits QoQ and 271 basis points 501. This is among some of the best in the industry. The steady improvement in our funding mix is materially enhancing our durability with the cost of deposits declining 5 basis points QoQ to 5.43%. On advances, our gross advances closed at 268,369 crores, up 3.65% sequentially and nearly 15% YOY. Growth continues to be left as a segment. We have consciously prioritized for superior risk for this record. Commercial banking grew nearly 6% QOQ and 26% YOY, maintaining its position as a primary growth engine. Agriculture and Agri and Microfinance both saw healthy traction, growing 5% and 7.28% QoQ respectively. Our CGC business saw a sharp uptick of 8.5% sequentially. Our Gold Loan portfolio delivered a robust performance once again, growing 26% YOY and 9% QoQ. This momentum in Gold Loan growth has been maintained despite the fact that we were downsizing the book of a specific sub-segment to ensure full alignment with the latest regulatory framework. Our last portfolio extended by 8% to a few, reflecting strong underlying demand and our focused approach. We expect this growth trajectory to further accelerate in the coming quarter as we continue to deepen our penetration in this high-convection segment. In the business banking, we saw a growth of 6% Y01. This was a conscious decision to prioritize portfolio health and yield protection. While our commitment to the MSME sector remains steadfast, our focus is on calibrated growth. Our corporate and institutional banking book remains essentially a flat geo-cube reflecting a deliberate shift towards credit collectivity. Amid global geopolitical noise and evolving trade dynamics, we have prioritized portfolio quality and pricing discipline over headline volume. It takes portions within high-rated counterparties. We are preserving capital and reinforcing the long-term resilience of our wholesale balance sheets. Now coming to margins and core income, NIM for a quarter was 2716.66 crore, growing 2.4% QOQ and 14.2% YOY. NIM expanded to 3.20% up to basis sequentially. This was supported by a further reduction in funding cost within the overall cost of funds declining 4 basis points to 5.46%. The other major fallout is on the fee income. This is again a record best ever. It stood at 990.92 crore, a strong growth of 10.5% QOQ and 24% YOY. Total other income reached 1145 crores. T-growth remains well distributed and continues to strengthen the quality of earnings. Our cost-to-income ratio improved to 52.86%, down 106 basis points sequentially, which reflects the operating leverage within the sanctuary. During the quarter, we expanded our physical presence by adding 39 new branches, Staying consistent with our calibrator and like Maniyan mentioned, data-driven approach to network expansion. Our asset quality metrics continue to remain strong with GNPA and NNPA both at decadal best. GNPA declined to 1.62% and NNPA is down to 0.37, down 5 basis points, QOQ marking another all-time low for the past. Our provision coverage ratio excluding technical write-offs increased to 36.55% up 141 bits sequentially. Credit cost for a quarter was maintained at 47.47 bits, reflecting our high standards of underwriting and portfolio quality. As Manmohan mentioned earlier, both ROAs and links are reached for the three rate cut levels. ROE increased to 1.24% of 9 basis points sequentially. If you recollect Q1, it was 1% ROE and we have ended the year at 1.24. ROE improved to 12.47% and expansion of 79 basis points UOQ. To conclude, Q4 reinforces the fact that we are building a more stable, margin-led and resilient franchise. Our priorities remain unchanged strengthening the liability franchise, growing interest in segments, and maintaining a tight grip on credit quality and cost. While global uncertainties, including the situation in West Asia, require us to remain watchful, the granular and secure nature of our balance sheets ensures we are well positioned across sectors. We move into the new fiscal year with a focus on risk-adjusted profitability and consistency of outcomes. Thank you and we will now open up for questions.

Thank you very much. We will now begin the question and answer session.

Operator, before we start, just a small request from our end to all participants. If you can please keep your questions to a maximum of two and refrain from repeating points that have already been covered. That will help us ensure that we can take questions from everyone on the call. Thank you.

Please go ahead. Thank you very much. Ladies and gentlemen, if you wish to ask questions, you may press star and 1 on your touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Rikin Shah from IISL Capital. Please go ahead.

Hi, good evening and thank you for the opportunity. Manish, first of all, compliments on continued traction in your CASA and fee execution for the last few quarters. I had a few questions, but maybe I'll come back later with more questions. So, I'll restrict myself to two first. Given the balance sheet realignment that you were doing this year, both your loan and deposit growth has been below system. in FY26. Now, once this realignment which seems to be largely done, could you comment on the growth outlook going ahead? So, that's the first question. Second one is on staff expenses, which declined about 9% sequentially. I'm presuming that is due to lower retirement provisions in this quarter. If you could quantify the same so that we can understand the normalized trends. And lastly, just a clarification one.

You know, the one-time provisions of 464 456 crore are included in PCR.

Why not in contingent provisions? Why are they, you know, included in the provision coverage? So, those are my three questions.

Okay. Answering your first one, Richard, if you look at our deposit growth, I think it is important to go below the surface. If you look at the surface, the deposit growth seems lower than the system. But if you just go one level down and look at our asset growth, it is significantly more than the system, right, in terms of growth rate. So, now our retail term deposit growth is higher than the system and what has actually, we have grown our wholesale deposits negatively during the year and that is a measure of strength rather than weakness is the way we read the situation because As you know, the wholesale deposit rates were fairly elevated during, especially during the last quarter and in the last few quarters actually. So, the fact that we could fund our balance sheet with low cost liabilities and retail income deposit is a measure of strength and not weakness. So, and we think we have also resorted to very low borrowings during the year. So, therefore, we have a lot of gunpowder and fee to fund growth going forward. So, we feel fairly confident on the liabilities. Even on the asset side, again, I would request you to go one level deeper than just looking at the broad headline number. Because if you take all the mediating areas that we have chosen and we have taken, that we want to grow have all grown extremely handsomely whether it is gold at 9 or you know lap at 8 or you know all of them actually each of them have grown extremely handsomely so we feel fairly confident and remain focused on growing these segments because it is important for us to be focused on profitable growth and there is enough opportunity in building growth on that business. And we think we can increase traction from going from here, not lesser traction. That's about the growth question part.

I have some optimistic comments for FY27, if you can. I mean, fair points, the points that you clarified are well taken. But if you could offer any guidance on FY27, that would be helpful on growth.

So, Rikin, all I would tell you is that we have clearly seen acceleration in all the areas we have chosen and we will continue to, you know, build this acceleration and it will get better. If you recall, last quarter YOY looked 8, today it is looking 13, right? So, obviously, there is traction building up and we are confident of building traction further from here. Let me leave the guidance at that.

Okay, sure.

The second question you asked was about the staff cost. We don't want to quantify that because there are provisions that happen through the year and things like that. Those are not easily quantifiable as to what exact impact that has had. But all I would say is that this is normal course of business. It happens during cycles. There are gains and negatives. We treat them as delay. So, that is on the second. On the third, on the provisions,

The conditions remain the same for withdrawal, both floating entry and floating standard. But let me make it very clear, we don't have any particular portfolio where we want to provide this for, there is no concern. So first thing I want to make it very clear is there is nothing which we have specific to offset this again. Having said that, the fact that it's a one time gain, we want it to be conservative and create a buffer and this We believe we can, as per the graph guidelines, we can use it during the ECL transition which is around the corner.

Got it. Thank you.

Thank you. Next question comes from the line of Akshay Jain from Autonomous. Please go ahead. Thank you sir, thank you for the opportunity. So my question is again on growth.

So how does the war change the outlook on growth? You have indicated that the war led to increased remittances during the early days.

But now since things have settled, how is the remittance trend versus historical rates? And will it warrant that you look at growth assumptions on both deposit and loan side? That's my first question on growth. and numbers from margins so that you know now the focus has denied us so how should we look at margins 20 to x27 so is there any further deposit repricing left or you know or is it more or less done so that goes on a two-way street right answering your second one first there is still scope for deposit repricing as we have we are also guided that our deposit pricing goes

into next I mean the first quarter of the this year as well as maybe early part of the next second quarter as well. So, there is some still some deposit re-pricing potential that is possible from here where we stand. So, and of course, but our NIM expansion as you can see from our numbers is not only a deposit repricing story. It is a mixed story on the library side on TASA. It is on repricing of deposits. It is mixed on term deposits, retail versus wholesale. It is a mixed story on the asset side, medium yield assets versus low yield assets. So it is a complex story. It is not a one trick pony. So, there are multiple levers we still have to work on expansion of NIM from here. If you really look at our NIMs of last year versus this year full year, if you just take the last full year NIM versus this full year NIM, you will notice that we have just lost about two basis points in our NIM over the entire year basis. That's probably one of the lowest in the sector. There are very few banks which have been able to defend their NIM as well as that. So, our NIM story is about multiple levers being pulled and we are confident that we will continue to remain agile and build that NIM expansion from here. So, that is on the NIM part. Your second part was on the remittance and that story. So, again, let me just clarify. While our remittance story was good and NR deposit story was good and we crossed 1 lakh crore deposits of NR, our NR term and SAR put together have crossed 1 lakh crore, the fact remains that our resident SAR and resident CAR and resident term deposit have grown even faster than our NR growth. So, it is... it's not that our balance sheet is driven the growth is being driven by NR remittances and NR deposits again it is a multiple lever story so just clarifying that and remittances as of now remain elevated but you know I don't know how this plays out is anybody's guess but my sense is that unless you see significant job losses and returning Indians from UAE for good into India, I don't think this story is likely to change immediately. Of course, whether that happens or not, I can't predict. But if that doesn't happen, I think the Middle East will be in a rebuild mode and that will probably need more people to go there and therefore, robustness of that remittance may continue. So, I would say, early to say anything negative about it, as of now, we are seeing positive things. So, thank you sir and just a follow up on margins. So, you know we are seeing that you know even larger banks are facing it difficult to pass on the December 25 basis point rate card. So, like how is federal placed on this front and number two is there any day count impact on NIMS this quarter?

Is there any day count impact?

Yeah. So, it is, the account impact is there, but, I mean, we just take it in our stride. It is there, of course, the account impact is there. So, just answering your last one first. Before that, going back, you know, of course, we have to compete in the market and we have to pass on the rates as is required. So, obviously, you know, like I mentioned, we have defended our name does not mean the defense came only through assets or liabilities, right? Obviously, our asset yields would have dropped and our costs would have dropped and we would have maintained, we have maintained the name. So, you know, as I said, as long as in the segment that we want to build growth, we continue to find the risk return okay, we are happy to compete and grow. Yeah. Only when we find that the risk-return trade-offs and the ROEs are not good enough is when we are hesitant. But just now we are not seeing that in our chosen areas of growth. Of course, I will be happy to get some more yield zone assets. But, you know, that is another thing we are working on. We are also increasing the discipline on pricing through pricing tools, RAROP-based tools and things like that. All that is, of course, part of the, you know, execution process which we are which we remain focused.

Okay, sir. Thank you for the answer.

And just to repeat that both on NIM as well as on ROA, we are back to our pre-rate cut cycle level. And those were at the peak of the cycle and what we have now are at the bottom of the cycle. So, I would like to believe that there is a qualitative difference between the same name and ROA between them and now. Understood.

Thank you sir.

Thank you. Our next question comes from line of Piran engineer from CLSA. Please go ahead.

Hi team, thanks and congrats on the good set of numbers. Just firstly, sir, as we think about calibrating or we have been calibrating business banking growth, you said because of yields and asset quality, won't that impact our current account growth?

No, so Pira, no, that is not impacting our current account growth. That is, at some level they are connected, but it is not that they are 100% connected. If both work, yes, I agree that both will feed into each other and will be better, but having said that we can grow our current amount irrespective of what we do on DUV.

Okay, and our target CASA ratio is 36% space, right?

Why not? We have moved, as you know, we are close to 33% now, right? 32.94% or whatever. We are almost 300 basis points up since we started this journey, right? So, if we can do that in 12 months, why should we not 12 to 12, 15, 18 months, we have done that. So, there is no reason for us not to believe 36 is gettable at some point, yes.

Fair enough. So, secondly, just on free income growth now, last year, we have done much better than last year's. Now, one part of it was just rationalizing fees across various products. It will be like a one-time reset, right? Now, from this base, how should we think about the drivers of fee income growth or the drivers of a fee-to-asset ratio upward going forward?

Right. So, you know, in the past also I have said that there are fees apart from general banking fees which we have reset some of it and we have worked on increasing them. There are three key drivers of fee. One, credit card fees. Second, wealth management fees and third, trade and forex fees. So, we have seen some traction in trade and forex but we can do more. We believe we can do more. In card, we are growing fairly at a good flip and I think we will continue to build that and that journey is just about begun and wealth is journey has just not even begun. I mean, I would say we are just a few months into that business. So, I think there are enough levers again there for us to continue driving fees.

Got it, got it.

And just the last question for Venkat sir, so now that you've moved on from the CSO role, what functions will you be overseeing?

No, no, he will oversee the CFO role. CFO will report it to him. It's more a separation than giving up the role. We have separated the role of CFO from Venkat. So, Mani will be the CFO and he will report to Venkat. Since he has now been elevated to the ED level, he has other functions.

Don't worry, most of the time he is rolling up to me only.

Understood, understood.

So, broadly, as you know, many of the support functions, many of them, apart from GFO, IT ops, many of them which roll up into Venkat. Got it, got it.

Yeah, okay, so that's it from mine. Thank you and wish you all the best and thank you once again for not discontinuing the Saturday while of practice. Thank you for that.

You have taken your feedback seriously. So far. Next question please.

Next question comes from the line of Kunal Shah from CD2. Please go ahead.

Yeah, thanks for taking the question. So firstly, after this one-time provisioning that we have done, does it seem our credit card outlook maybe would we require a slightly lower provision given that we have already scaled it up? Or maybe transitioning into ECL, we would still continue to maintain like say 45-50 basis points of credit cross guidance.

Yes, so our credit cross guidance is not influenced by this action. This action is primarily as a transition into ECL. Primarily that is the purpose of this extraction taken. Just to clear Kunal, our credit card guidance has been 50 to 60 basis points in the past. Of course, we have done better than that in this year, but broadly we have, if you take the year, we are about 56 basis points.

Yeah, maybe last few couple of quarters it's been between 45 to 50, but we still continue with 50 to 60 basis points of guidance.

There is a guidance there, especially we don't want to meddle with the guidance just now. In view of the uncertainty in the environment just now, we don't want to review our guidance for now. But having said that if the situation clears and there is better clarity on this Middle East and other geopolitical issues, We will review and let you know. But right now, we don't want to change our guidance on that.

Sure. And in terms of the exposure link to Middle East, maybe on the liability side, we know the proportion which is there on the NR deposit. But looking at our presence out there in South, would there be on the retail side, maybe what percentage of maybe the portfolio could be exposed to Middle East and could there be any risk out there?

You are talking about asset side portfolio? Yeah, the asset side.

Yeah. Maybe particularly for maybe the families which are based out of Middle East and we would have given them the loans over here. Okay.

So, all I can tell you is that it is not a large exposure. NR segment per se is a more liability-centric segment than an asset-centric segment. So, it's not a large exposure. And like I mentioned a while back, unless we see job losses and people returning back to India kind of a situation, we don't see, we don't expect trouble. Just having told you that we have gone through this situation post-Covid as well, right, when a lot of disruption on this front we saw. But even then the credit costs were reasonably controlled and stable. So, we, as of now, we have no reason to believe that it will be dramatically higher. It will have high impact.

Sure. And just one last clarification. If the entire IT favorable orders have been considered in this quarter because the filings which have been done and the benefit which is moving in, there is some deviation of that. So, will there be more that will come through in the first quarter or largely it is accounted for?

No, no. What we have reported is almost close to about 1500 crores of the approximately 1500 crores of refund. Now refund has three parts to that. One impact of that is interest on that refund that you've got which is the 456 crore number that you see in our as a one-off. The second is tax provision reversal which is 115 crore roughly number is there. That is the second. And third is a balance sheet. Rest of it is a balance sheet item which is excess tax paid refunded back. So, all the 1500 crore that we have reported earlier have been accounted for in this.

Okay, so 900, 950 is directly into the balance sheet.

Yes, that's right. Roughly. We have brought it. 150, 115 and the balance sheet. Perfect. Thank you. It gives the other assets on the balance sheet.

Got it. Got it. Yeah. Thanks. That's helpful. Yeah. Thank you. Thank you.

Our next question comes from the line of MD Mahesh from Kotak Securities. Please go ahead.

Hi, Mahesh. Hey, hi. Hey, hi there. A couple of questions on my side. First, again, continuing on what Kunal asked also,

On the ECL side, if you could just kind of give us some color on, does the 50 to 58 points of credit card that you are guiding continue in that regime as well?

Or is there a reassessment to that number? No, that we will have to reassess, Mahesh. That is, as things stand today, you know, our past guidance was that. So, all I said was we are not changing the guidance just now. ECL change in... change in the West Asia situation and all that are events which we have not built into that. If you were to ignore the EDSM crisis today, if you could just kind of give us how are you thinking about how the ECL changed the provision stream? Mahesh, yeah, it's still too early we are assessing that. Let's come back to you with the proper studied response on that rather than quick response. As you know, this came only two days back. We are still evaluating what the full implications will be. We will come back to you. Okay. The second question is that in terms of the given conditions at which we are today, would you delay the kind of riskiness of the profile that you are trying to build today? Will there be some delay to it or you would say that there is nothing required at this stage, we can continue with the current plans that you are having? Let's assume that if you are building your lab book, if you want to build your personal loan book or your credit card book or your MSF book a little bit faster, does this things change today or you say that it's not required right now? No, no, no. I think nothing has changed in our plan. I think As of now, we have no reason to rethink our plan. Nothing has happened which makes us rethink or re-evaluate our plan. We will continue to build that. We will continue to focus. If you have seen, we have begun in a small way to build the MFI last quarter. So, I think our plans do not change. Card we are building, as you have seen, that is unsecured. Nothing changes in our mind. Just now. Sir, you are clarifying that the change is internal.

policy till what can you take your gold loan portfolio to see currently Mahesh the gold loan portfolio is around little less than 14% and we have a second type of any outer limit but it's well within our risk appetite and we take up all let's say if it goes closer to 20% we'll re-evaluate at that time and decide whether it's appropriate or not but nothing like a feeling at this stage ok perfect thank you yeah

Thanks. Thank you. Our next question comes from the line of Jayamundra from ICICI Securities.

Please go ahead. Hi, sir. Good evening and thanks for the opportunity. The first question on gold loan practices. So gold loan, of course, the prices vary quite a lot. And even in third quarter, they would have varied from more than 15,000 per gram to

or maybe 16, 16 and a half thousand per gram to now 15,000 or below.

Do you calculate the gold prices on a daily basis or you do some one month, two month average or there is a cap at the upper level? How does this work?

I'll ask Harsh to answer that. So what we do is, the two things which we do,

So, when we take the last 30 working days average gold price and the previous days gold price, the lower of the two is taken. That's the normal code. In times of extra volatility, we reduce the RTD also. I mean, we reduce the RTD also. That's what we can see here.

Does it answer your question? No, so we take the lower of the two, last day as well as average of last 30 days as well as last day. We take the lower of the who and apply. And apart from that, depending on volatility, like in March 4th, when we saw increased volatility, he has also increased the margin there so that we protect the portfolio. At this point of time, our gold portfolio is below 54%.

Right. That is very helpful. And second question is that on cost to income, we had a

guidance that we gave in the strategy day does that hold or you know any thoughts on that cost to income and guidance.

So if you see our numbers even this quarter and if you adjust for the one time we are in the 53 range right and we have always guided that we will remain in this range bound in this 53, 55, 56 kind of range bound we will remain depending on the quality it has some seasonality impact as well. But right now, we have again no reason to change our guidance on that. We will stick with our guidance. We have done slightly better than the guidance in the year, but I would say we would right now keep the guidance.

Sure. Thank you and all the best. Thanks. Thank you. Our next question comes from the line of Param Subramanian from Investech. Please go ahead.

Hi, good evening. Thanks for taking my question. Congrats on the quarter, sir.

So, my question is on the, in slide 17, you are showing your overall retail banking, your retail advances and that is, you know, the overall retail book is flat YY.

Now, I picked up at the beginning you mentioned that there is some deposit repricing left, the repo rate cut pressures look like they are behind. Would it be fair to assume that you will now start pushing the pedal on this if you have not been doing for the last year or so? So, primarily Param, if you look at one of the retail thing that affects our growth, overall retail growth is the home loan business, right? our lap is growing, our gold is growing, our agri is growing, CDC is growing, MFI is growing. So, there are majority of, but the rate of the home loan book is large. So, which is the largest book and therefore, that overall drags our growth number down on retail. On home loan, I am quite clear that we will remain agile if we think our, if the pricing gets in the range where that risk return trade-off is acceptable to us, we will, as a product, we don't have anything against it. Just now, the current market price is what, you know, on a lighter note, you know, 15 years, home loans are getting priced at 7.15 and deposits are going at higher rates than that. That's what So, we are going to see a test pushing the pedal on that. So, as and when it makes more sense to us, yes, we will look at it. Perfect, sir. Credit card, all the retail segments. Other than home loan as a product, also probably to some extent, again, also the rate pressures have been high, but more driven by home loan. So, home loan is something that drags it down.

Yeah, got it, sir.

Sir, again, now, on the mix, right, where are we right now in our journey, sir? I mean, you've made great progress on, say, setting the mix towards medium yield, as you've called out.

But where are we as in any medium term target because I was just checking the analyst meet presentation that you made in February last year. So, the classifications I think are slightly different. So, any numbers you call out it does not make sense. So, it is low, medium, high that you are calling out in slide 19.

Yeah, 19. No, so, Param, that journey is still, as I said in my early, this is a medium term journey, right? Because it's a book. Incrementally, we can change the volumes quickly, but the book takes time to do. And if you look at our journey in the last, say, one year, March 25 to March 26, our low yield book has dropped from 52.2 to 49.8 kind of numbers, right? And it's about to 2.5% movement and our mid-year yielding segment has moved by again similar number about 2.5%, right. But the more interesting part if you ask me going forward in the what has to come is also the high yielding book, right. If we try to, our cards have been consistently growing, MFIP has begun to grow again. We have begun to grow again. So I think there is potential to grow some of that. So I think this journey is still, we are on similar journey. I don't think we have reached where we want to reach. So, one last question if I may. So, on the corporate book, I mean, what we can see in terms of data, it seems to suggest that the corporate spreads are improving. So, would you, is that something that's a growth avenue for next year? Because I'm just trying to understand because, you know, low yielding is still like, you know, 50% of your book, what you're calling out in that file.

Housing, you're saying, you know, we're still going to be cautious.

So, is corporate something that you're more positive on growth going into next year? So corporate two things I would tell you. One is of course within corporate we are also putting more focus on the big market rather than very large corporate which gives us a yield uptick. So that last year almost 75% plus of our NTD acquisitions have been more in the mid-market companies rather than the large companies. So, that is one effort that is going on that will show up in terms of yield. But the second more important thing about corporate is, you know, unlike retail, in the corporate it is Probably easier to target wallet, revenue wallet and get a better share of that and therefore things like I mentioned trade forex and you know current economy. You see our self-funding ratio has gone up in corporate. So you know liability business, our CMS platform has continued to do well. So, I think there is opportunity in the corporate to look at a customer level revenue and do better, more easily than it is in the retail side, right? In retail side, cross-selling is a more difficult proposition. So, I would say in corporate, yeah, we don't want to grow corporate at 80-50% kind of rates, but early double digits, we are happy to Keep growing that but there our focus will be to increase profit and increase profitability rather than just the book. Operating less of the book book business right. It is book and new business. Perfect.

Very useful. Thank you so much sir. Congrats on the quarter and especially the phenomenal progress on Kasa. Thank you. Thank you.

Thank you. Our next question comes from the line of Nitin Nagarwal from Motilal Oswal. Please go ahead.

Hi, good evening everyone and congrats on a strong quarter. I have one question like on the branch expansion. We have opened like lower branches this year versus what we opened last couple of years. So how critical is branch expansion for us to sustain this liability in the Casa Mix growth as that has been one of the key focus area. So how do you think about that?

So, Nitin, if you recall in our earlier calls, we have discussed that we, in the first half of the year, we deliberately went slow because we wanted to bring more science into evaluation of our existing network and how we plan our future network, which is an exercise we did. We also wanted to work on rebranding and redesigning our branches going forward. So, we have decided that we will keep the number low in the first half and as we get comfort with that x right we will start building the branch network back and of course we finished that exercise and we have as you know we did a brand new relaunch we have a new branch layout also in place now the design in place we have also completed the exercise about studying our network we have also come to conclusions on what we need to what restructuring of existing network we need to do in terms of relocation relocation restructuring a branch, relocating a branch and things like that. So, now we have more comfort and that's why you see in the last quarter alone we have added over 30 branches, 39 branches, 39 branches in the last quarter. We think the we will continue to be focused as of now we plan to launch about 100 branches in the next year. So, yes branches are important in the liability strategy but remember the part of the restructure exercise and relocation exercise will also improve productivity of the existing network. So, our CASA growth is not again just a number of Just an outcome of new branches that we will put. It is also about how to get more out of existing network and that is an important consideration for us in the future.

Right. Got it, sir. Thank you, Manim, sir. Thanks so much. Thank you. Our next question is from the line of Rohit Ahuja from Lotus Line Ventures. Please go ahead. Hi. Thanks for the opportunity. Hi, sir.

You have demonstrated strong operating leverage with cost income falling sharply and ROA improving to around 1.36%. How do you see this going forward? Like what could be the drivers that could possibly take it above 1.5%? And do you see any execution risk that could prevent that from happening?

Rohit, first let me just put a note of caution on that. If you notice our deck, we have with one-off and without one-off stated. So, in fact, in entire commentary that Venkat used, he used the without one-off ratio, right? So, with one-off, it looks like 1.36 but without one-off, it is 1.24. So, just for the purpose of clarity, I thought I will mention that. Having said that, yes, journey is to where you are saying and that is something that we will continue to work on and That, as I said again, all the three at a broad level, as I always say, that there are very few simple things to do. They are not as simple as I, of course, that was in a lighter way. But, liability costs and therefore, mix and right mix on the liability of liability, right mix on the asset side, second, and three, growth. The fourth potential can be the cost cost aspect but as I have always guided in our next 12 to 18 months journey I think we don't want to guide on cost too much but on the other three we want to continue maintaining that momentum of improvement as you can see we touched 1% ROA three quarters back we are up to 1.24 just now so let's see what we can maintain of course this was a exceptional cycle rate rate change cycle, but yes we our objective is to continue the trajectory of expanding both NIM fees to assets as well as ROA ROE therefore, resultant.

Thank you.

Our next question is from the line of Anand Dama from MK Global, please go ahead.

Sir, can you tell me what is the LCR for our quarter? 190. Okay, and you plan to maintain it around these levels or you would want to take it up?

Yes, we are comfortable with 115 to 120 range.

Secondly, I think you talked about the, you know, there are no job losses as yet and so you do not see any immediate retail stress. But on the MSME and the business banking side, do you see some stress customers coming and talking about that they've been stressed at this point of time and some of the restructuring? What's the ground situation at this point of time?

Anand, based on our current portfolio behavior, we have no reason to report any stress. As you have seen our sleep ages, they have remained 0.74% which is low and it's in very acceptable range that it has been all the time. So, and even looking at our current SMA 1.2, we have no reason to believe that there is any stress building up in our portfolio just now. But this is all always an evolving situation and I don't know how deep this problem gets. But all I would say is I don't have anything to report as on today.

So, the provision that we have made this in this current water floating provision that is more towards ECL than the CCA contract.

Yes, absolutely correct. Floating provision has nothing whatsoever to do with asset quality. Our asset quality remains absolutely robust, no deterioration in it. This is primarily as a transition to ECL. Yes, clearly. And sir, what will be the overall ECL impact if we have assessed, if we can read on all of it? We will come back to you on this. We have not yet fully assessed the impact. There are, of course, this is just two days old final. We will work on that and come back with our numbers. Based on the older, based on the older guidelines, say October 2025, what will be the impact? No, but not as a new guideline. There is a lot of change, Anand, because the floors, I mean, there is a lot of change from old guideline to the draft there was a lot of change. I think what has not changed is draft to this outcome not much has changed but we will assess the full impact and come back.

Sure sir.

All I can tell you is that our asset quality is reasonable and robust. Whatever impact we will have of course it will be an industry wide impact and therefore we do hope that given our robust asset quality our impact should be Thank you.

Our next question comes from the line of Jayant Kharote from Axis Capital. Please go ahead.

Thank you for the opportunity and congrats on a great set of numbers. The first question is on the LCI disclosures. I see it's fallen below 120%. This is almost like a 20% point YY decline and it's been heading and moving down. What is your internal mode level threshold and what is your comfort level to operate at? And the context of this question is as we are accelerating on growth, the ask from our CASA growth will probably move beyond 20% next year if this LCR is not gone to the same quantum.

No, no. So, third, this LCR with respect to CASA and all that, I don't know. That is a complex question. So, I will not get into that. All I would say is we are currently operating at about 120% roughly. We are comfortable operating at 115 to 120%. And in fact, we have consciously brought it down from earlier levels of 135, 140 that we used to maintain earlier. The higher LCR than required is also an in-destroyer. So, it's a conscious car and we are quite comfortable with 115, 120 or as you know regulatory requirement is 100.

So, we are quite comfortable with that. So, 115 to 120 is your comfort zone. Yes. Yes. Second question is, with regard to your credit card book growth, it is moving quite differently from the industry, you know, 23% YY. Is this, what is the growth in interest as in assets and try to assume the transactional growth will be much higher at 30-35% in the future.

Okay. I'll ask Virat to take that question. Yeah. In terms of Your assumption is correct. The growth of transactors is pretty robust because bulk of the credit cards, organic credit cards that we issue are given to our existing customers. So, from that point of view, the transactional percentage is growing. But having said that, the overall interest earning book has also seen some growth and more on the price side rather than the revolver side.

This is very excellent, sir. Thank you and all the best. Thank you. Thanks, Jainth. And operator, with this, we'll close the call. And thank you all for joining us today. I'd like to give a shout-out to Manish sir on his appointment as the CEO of the FAC. And we wish you all the best. On that note, in the password floor, if you have further queries, feel free to reach out to us. We'll be available for further help. Thank you so much and have a lovely day.

Thank you.

Thank you. Thank you. On behalf of Federal Bank, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.