State Bank of India

Good day and welcome to State Bank of India Q1 FY23 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be no optionality for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjay Kapoor, General Manager, PPR from State Bank of India. Thank you and over to you, Mr. Kapoor.

Namaste and good evening, ladies and gentlemen. I am Sanjay Kapoor, General Manager, Performance Planning and Review. On behalf of the top management of SPI, I extend a warm welcome to all joining us today on SPI's Q1 FY23 earnings conference call.

On the call today, we have with us our chairman, Mr. Dinesh Kumar Khara, Mr. C.S. Sethi, Managing Director, International Banking, Global Markets and Technology, Mr. Swaminathan J, Managing Director, Corporate Banking and Subsidiaries, Mr. Ashwini Kumar Tiwari, Managing Director, Risk Compliance and SARGI, Mr. Alok Kumar Chaudhary, Managing Director, Retail Business and Operations, Mrs. Saloni Narayan, Deputy Managing Director, Finance. Mr. Pawan Kumar Kedia, Chief General Manager, Financial Control. Mr. Charanjit Akra, Chief Financial Officer.

Before I request the Chairman to give a brief summary of the Bank's Q1 FY23 performance and the strategic initiatives undertaken, I would like to read out the Safe Harbour Statement.

Safe Harbour Provision. Certain statements in these slides are forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual outcome may differ materially from those included in these statements due to a variety of factors. Thank you. Now I would request Chairman Sir to make his opening remarks. Good evening ladies and gentlemen. Welcome and thank you for joining this conference call. I start by thanking all our stakeholders, including our customers, analysts and employees, for their unceasing support and trust in us. I also express my gratitude to our shareholders and other financial market participants who have supported and valued the bank through the challenging times in the past few quarters. The effects of the pandemic have subdued to a large extent thanks to the government's massive vaccination program with doses administered to more than 200 crore persons, an astounding milestone. The economy is almost on track, with the exception of air travel and removal of other containment measures by most other countries. However, the volatile geopolitical situation still poses a downside risk. The Indian economy remains resilient despite global headwinds, resulting in rise in inflation, surge in crude prices, increase in commodity prices and disruption in supply chains. The global output has contracted in the second quarter of this year going to the downturn in China and Russia. RBI has already raised the repo rate by 140 basis points this financial year to bring down the inflation in its most recent monetary policy statements on August 5, 2022. The RBI continued to remain focused on withdrawal of accommodation so as to ensure that the inflation remains within the target while supporting growth. Further heightened interest rate and resultant tightening of liquidity can't be ruled out to tackle higher inflation. Increased commodity and energy prices require putting pressure on global supply chains. The increase in urban consumption, improvement in rural demand and agriculture and the life and the likelihood of a normal monsoon will help the economy in gaining traction going forward. The government's CABEX program and improved capacity utilization will support investment activity. The economic activity has continued to move forward as per the data available for the quarter-first of FY23, despite global risk. The GST collection at 1.49 trillion in July 2022 has been the second highest ever remaining above 1.4 trillion for the fifth consecutive month, showing the strength of the economy. I now present some of the key highlights of our performance in Q1 of 2023. The balance sheet size of the bank has crossed the milestone of 50 lakh crores, which is a reflection of the funding of Trust and Faith placed on us by our esteemed customers. We are committed to adding value to our stakeholders by continuously improving our product and services. As regards business, the bank's advances grew by 14.93% and deposit grew by 8.73% on a YOY basis. Our international banking witnessed a robust credit growth at 22.39% on YOY basis, 15% in dollar terms, and deposit growth at 30.63%, 23% in dollar terms. The net interest income has increased by 12.87% YOY and net interest margin has increased by 8 basis point YOY to 3.23%. The non-interest income has declined by 80.44% YOY mainly because of MTM losses. This has resulted in reduction in operating profit by 32.79% YOY. The core operating profit of excluding MTM impact has increased by 14.39% YOY. The MTM losses have also impacted ROA of the bank which has come down by 9 basis points YOY to 0.48% and ROE of the bank which has declined by 203 basis points to 10.09% due to consequent decline in net profit. If we recalculate the profitability after excluding the MTM losses, the original ROE and ROE would be 0.89% and 18.57% respectively, which is on the expected line and on track of our medium-term guidance. Our AFS book stands at 6,31,530 crores as of 30 June 2022, with 60% in GSEC SES and 23% in highly rated corporate bonds. we saw it hit on account of MTM losses amounting to 6,549 crores. We do not see any actual loss in this book and as the rates soften, the MTM losses will be recovered. During the year, we have the redemption of 84,000 crores from the AFS book which will also bring down the MTM losses. Further provision of 1,534 were made for the investment depreciation during the quarter. The momentum in retail advances continues to show a growth of 18.58% in Q1 of FY23 on YOY basis. Corporate SME and degree advances have shown a robust growth of 10.57%, 10.01% and 9.82% respectively on YOY basis. Our leadership position in home loan continues. The individual mortgage portfolio for the bank has the best quarter one performance ever. The home loan application registered a three times jump, sanctioning value terms doubled over the same period last year. The individual mortgage portfolio registered its highest quarter one growth of 13,425 crores despite industry witnessing a heightened interest rate from the historical growth. The home loan portfolio grew by 13.77%. on a YOY basis. As far as asset quality is concerned, the bank's gross NPA and net NPA as on June 22 was at 3.91% and 1% respectively, which is an improvement of 141 basis points and 77 basis points respectively on YOY basis. The slippage ratio for June 22 is 1.38%, which is an improvement by 109 basis points YOY. We have been able to contain the credit costs at 0.61% as against 0.79% in June 21. The net NP of the bank has been brought down to 1%, which is a result of focus and continuous attention in this area. We have been constantly trying and surrendering to maintain the bank's loan asset quality. The digital leadership journey of the bank is continuing. More than 96.6% of the transactions are now routed through alternate channels. The registered users on Zono have already crossed 5.25 crores, a big milestone and which has created a significant value for the bank. 65% of the new savings accounts are open through UNO. We have now more than 100 online marketplace partners for UNO. The bank will come out with only UNO, which is UNO 2.0, with many more advanced features and functionalities. The bank is leveraging its analytics in a big way. for taking forward its strategic goals. We have totally revamped our contact center which will add lot of value for the bank and create a superior customer experience. Most of services will be available for convenience of the customers relating to account inquiry, statement of account, debit card related services, digital banking and other miscellaneous services. It will also be used for pre-delinquency reminders, soft recovery for NP accounts, early bucket collection outreach, proactive outreach for digital handholding, besides some routine banking inquiries. With the economy picking up, we see growth in credit off-stakes to continue. Our focus is also on increasing the CASA ratio with more emphasis on bringing our current account book and to maintain our leadership position in savings and deposits. With increase in credit off-stakes, we will better utilize our liabilities to improve the key ratios. These outcomes demonstrate the resilience of the bank, supported by our constant improving process-oriented culture, the expertise and the vision of our leadership teams, and the quality of employees amidst the present volatile geopolitical situation. Before I conclude my opening remarks, I would like to thank you all for your consistent support to the bank. We remain committed to reward your trust in us with superior sustainable returns over the long term. My team and I are now open to take your questions. Thank you.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchscreen telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the questions are assembled. Participants, you may press star and 1 to ask a question. The first question is from the line of Maruka Jania from Edelweiss. Please go ahead.

Hello. Good evening. So, my first question is on international loans. So, we do have a breakup of domestic corporate loans in the presentation, but there is a strong growth in international loans as well. So, which are the sectors that have contributed to international growth? Say, maybe the top two to three sectors. Is it the oil companies borrowing? Which are the sectors?

Actually, when it comes to international book cover, a major growth would have come from the syndicated loans. So, we would not have the sector wise per say but nevertheless the growth is essentially coming through I think we can come out with some kind of a details relating to whether it is syndicated loan or it is trade finance those kind of details we can certainly provide but majorly it is coming from the syndicated finance and also trade finance syndicated loans and the trade finance are the two major products in which we have witnessed the growth And it is also, these are the geographies where these syndicated loans have come in from. And also, I would also like to mention that both the places, USA and UK, both the places have got decent trade finance growth also because there are many platforms which are available, which helps us in sort of really ensuring that we underwrite decent loan growth from this particular product.

Yes, sir, I'm asking because other PSU banks have also seen a very sharp rise in international loans and this has been happening in general for the segment for the last two to three quarters. So, suddenly, why has there been higher focus on overseas loans because they are growing faster than domestic corporate?

No, I would, I'm unable to comment about other protesters. We have concerned, we had introduced a product which is a factoring product was introduced by us about a year and a half almost three years back and that is something which has helped us to participate on various platforms which are available in USA and UK and so I think that is one of the major reasons for the growth which we have witnessed in the international banking group and I think we have witnessed similar growth last year also but if you look at it our Growth in dollar terms is actually 15% when it comes to the international book.

Okay, and so most of the incremental growth in this quarter will be syndicated, not trade financed.

Is that a fair assumption? Yeah, it would be syndicated as well as trade financed.

Okay, so both would be kind of equal.

Yeah.

Okay, and so the other question is on provision. So, the standard asset provisions are negative and the flow chart that you gave on the breakdown of provisions that are not reckoned for calculating net MTAs, that stock of cumulative provisions has also declined sequentially. So, has there been a drawdown of existing provisions? Why are standard asset provisions negative during the quarter?

Just one second, sir.

Sure. Just one second, let me get the details. Yes, sir. What's the question?

What is the question?

Yes, sir. There is actually is a right back of 1295 crore which is essentially attributed to It's a combination of It's actually a combination of right back right back taken from prison for COVID restructuring which is essentially attributed to the reduction in the exposure under the restructuring and additional normal prison of 300 crore were made for the credit growth. So, net of that is actually getting reflected here in 1295 crores. Okay.

So, basically there was a write-back of 1595 crores.

Yeah.

Because of COVID restructuring. Yeah. I mean drawdown. Okay. Okay. And so, my last question is on personal loans. So, what will be the maximum and average ticket size and what will be the share of private versus government?

The average ticket size is 5.97 lakh is the average ticket size and out of this 95% is given to the customers who are maintaining the salary accounts. And when we look at this 95%, almost about 85% would be for the government employees only. And the remaining is defense courses, government employees, and the quasi-government would be about 90%. Out of this 95%, 5% would be large corporates, which are well-rated corporates. So, that's how it is. It is packed up.

Got it. And the maximum ticket size would be?

About, almost about 6 lakh, 5.97 is the... That is average. That's average. Maximum will be, will go up to... We have actually recently launched another product, which is RTFG, but which has actually grown well. So, there the maximum ticket size can go even up to 30 lakh. But, as of now, our maximum ticket size will be in the range of 20-25 lakh rupees.

Got it. And so, my last question on this thing is that the business development expenses are the highest component of other operating expenses by value. So, these agents will be sourcing what loans? Express credit or some other loan? I am assuming that DSA commission.

Actually, when it comes to various acquisition expense, it is essentially on account of the home loans. Home loans are the one and also the PSLC certificates which we buy. For that also, whatever fees will, whatever premium is paid, that will also come under this.

Got it, sir.

Thank you. We are not using any of the outposting agents for interest credit.

Okay, sir. Got it. Thank you. Thanks a lot.

Thank you. Next question is on the line of Mona Chetan from Dollar Capital. Please go ahead.

Yeah. Hi, sir. Good evening. So, my first question is on slippages. If you could share the breakup of slippages and if there was any one-off in terms of interest reversal this quarter?

Breakup of slippages you mean? Yeah. See, when it comes to the breakup of slippages, yeah. break off of slippages are essentially about 9700 code which is coming from SME is 3000 code AGRI is about 2700 code per segment is 2353 code so which is which actually add up to 8070 code then CAG was 320 code and CTG was 1335 code so that's how it is and out of that we have already recovered 2800 code already has been recovered till now.

Okay. And were there any one-offs in interest reversal from say the aggregate or something?

No, no, no.

There was no one-off. Okay. So, what was the reason behind the decline, sequential decline in margins?

Sequential decline in?

Margins.

As far as the last quarter was concerned, we had some 600 crores of income tax refunds, which was interest on the income tax refund, which is not available this year. This quarter, this quarter it is not available.

Got it. And secondly, on the reset of EDLR loans, so what is the basis of these resets? What is the time period of resets? Sorry, I could not... On what basis are the EBLR loans reset, the repo-linked loans reset in your case?

Actually, it happens on the first of the quarter, first of the following month. First of the following month. See, most of our EBLR loans are repo-linked loans, okay? And suppose the repo is this month,

any day of the month this month and first of the subsequent month the reset is reset ok sure got it and just finally on the double G and below book we noticed that there was a rise in the share of double G and below book from 11% to 13% Q on Q anything any if you could give some color on it what is leading to the increase

Yeah, majority of them are the state government loans which are not rated. So that is the reason why this kind of a behavior is seen.

Okay, so there was a rise in state government loans essentially.

Not really. Actually, if you look at it, it has come down. It has come down from 14% to 13%. But WB and Willow are essentially those are the loans which are there.

Okay, sure, sure. Sure. Just finally, on the retail and SME, you know, how is the underlying demand and do you see any risk to it from the elevated inflation level?

See, we have till now when it comes to retail, we have not seen the demand tapering off. We have a decent visibility of the demand and I hope that it will continue. When it comes to SME, SME also there is a reasonably good pipeline if I may say so this year in the first quarter perhaps after many many years we have seen the SMA segment witnessing a growth so that way I think it has I don't I hope that we will continue to see the decent trajectory of growth in the SMA segment too sure thank you that was very useful and all the best thank you thank you

Next question is from the line of Jayamundra from BMK Securities. Please go ahead.

Yeah, hi, sir. Good evening and thanks for the opportunity. So the first question is regarding your savings account rate. So SBI savings rate is linked to repo and now with yesterday rate hike, the star rate by formula is very, very similar, I mean, almost similar to the floor of 270 that we offer. So just wanted to check if there is a way to assume that incremental repo rate hike would now be flowing to the savings account card rate. Is that case to assume? No, I think this is not a right assumption because our savings rate is not linked to repo.

Your mic is on? Yeah, maybe you can hear.

Yeah. So more than 1 lakh, it is linked with external dense mass. But the stipulation is that it will be 2.75% below the repo rate. So under these circumstances, even if the repo rate becomes 5.40, then minus 2.75, it comes to 2.65. So it is still more than the derivative number. We are giving 2.70% up to 1 lakh. And technically by going by this formula, we should have reduced this number to 2.65 or even below. But because we value our franchisee, that is why we do not use this formula to the disadvantage of people. And even if repo has been enhanced, the rate will remain same. So the question is, sir, incrementally, now that your formula derived rate and your floor of 270, are almost similar, there is only 5 basis point gap. So, whatever incremental repo rate hike, should one assume that, you know, the salient account rate will also be reflecting that? No, I think we will be very mindful of our, of our economy. See, 2.70 we haven't given irrespective of whether it is 1 lakh or more deposits. If you had gone by the formula, then this for more than 1 lakh, the rate would have been lesser than 2.70. So, we have already been incurring 2.70 in the entire balance.

So, even now, despite the incremental increase, this cost is not going to increase, neither it will reflect in the 7 million interest rate.

Even going forward, right?

Yeah, yeah. Even going forward at this rate. this increase happened in going forward going forward increase repo rate is above 5.45 also then what happens is if the we can always calibrate the spread according to what the actual demand would be understood second question is that on EBLR in last 3 months less than 3 months there is a cumulative 140 basis point rate increase And the card rate on all floating rate loans on retail SMEs, they clearly would have increased by 140 basis point rise.

So, do you think the credit demand is healthy enough to absorb this increased 140 basis point rate? Or do you think that, you know, irrespective of 140 basis point rate height in EBLR, the effective interest charge to the customer could be lesser than 140 basis point? on a floating rate.

I think this is a part of the market dynamics. We are taking a call, but nevertheless, the kind of trend which we are seeing, we don't emphasize the demand tippling of, even if, because, you know, actually when it comes to the retail loan book, retail loan book, it is linked, directly linked to the actual number. And when it comes to the corporate loan book it is all linked to the various benchmarks and also spread over whatever the benchmark is risk spread over the risk premium over the benchmark that's how it is it works out but when it comes to the final pricing the risk spread accordingly gets registered depending upon the risk appetite and the market dynamics so that's how really it works out And last two things sir, if you have the ECGLS number outstanding disbursement and NPA there? Yeah, ECGLS we had 32,000 crore was the total amount in both restructuring 1 and 2. It has already come down to about 28,000 crore and out of this 28,000 crore, this 4,000 crore was the reduction. About 2,000 crore is on... I would say essentially on account of the repayment and 2000 crore is the NPA which is upon. So this is about restructured, right? Yeah, restructured. I am asking on ECGLS. ECGLS also I think 41,000 crore was the total disbursement.

41,000 crore is the peak level in this and out of that 1.9 crore 1.91% is there.

That is the NPA policy. Okay. Lastly sir, the credit growth it is running at 15%.

QOQ is also healthy but it looks like that part of that is because of the low base of last year on YY basis. Sir, how confident you would be to sustain this

15% growth for the rest of the financial year I am quite hopeful the reason behind is kind of a term loan and also the under utilization of the working capital which is all aggregating to almost 5 trillion and the pipeline is almost 1.2 trillion so I am quite hopeful that we should be able to sustain this in the subsequent quarter right and finally the last question can I request you to please come back and listen sure thanks sir

Thank you. Next question is from Kunal Shah from ICICI security. Please go ahead.

Yeah. Hi sir. So firstly on this declining yield on advances on a quarter on quarter basis. So in fact we have hiked MCLR. There would have been PBLR linked loans as well. Plus sequentially the growth is largely from the retail side. So what is actually leading to this declining yield on advances? Is it like more competitive rate pressure which is coming in on the corporate and the SME front. And with the revised EBLR, how should we see the trend in next couple of quarters?

I think sequentially perhaps may not be a right way because normally towards the end of the financial year, there are multiple other channels of revenue which are available for various accounts. and maybe that may not be the right way and that is the reason why we are comparing on a sequential basis and on a sequential basis this is an improvement actually if we look at it I mean YOY basis it's an improvement though sequentially it looks like to be a reduction because invariably we have seen that here and there are multiple other I mean multiple other sources which actually improves the, which are the yield announcers.

Okay. So, how should be the trend? Maybe with this EGLR high, it can be an EGLR high. How should we look at it from here on?

We hope it to be improving going forward. July onwards it should start looking up. If you will look at this graph also, you will probably see. this trend line also very clearly indicates June is low and it does speak to the towards March quarter after quarter it went up so it's a similar situation we hope that we should be appreciative to have a similar trend or maybe better towards in the in the coming quarters sure and overall in terms of the deposit growth so I think it is slightly below the system average as well now

So, definitely in terms of the hikes, our hike on the deposit side has been lower compared to none of the other private banks. So, what would be the stance out there? Is it like till 69-70 odd percent of daily ratio is comfortable and we can further allow it to expand without clicking too much on the deposit side? Would that be the call or maybe we will see some action on the deposit rates as well to maybe garner a higher deposit model?

We are very closely focusing on the NIM and within that boundary condition, if at all we will get a chance to show up our deposit, we will certainly do. But nevertheless, as of now, our credit deposit ratio is at about 63%. And if we look at the redemption which will happen during the current financial year, both from our AFS and HTM book, it will be almost at about 1.5 trillion. So, We will be very closely looking at a couple of variables. One, of course, as I mentioned, the availability of liquidity. Second, we will be very mindful of our ventures into the liability sector. And also, thirdly, that what are the deployment opportunities which are available and the price at which we can deploy this money. So, these are some of the variables which will be kept in mind for deciding the interest rate increases and deposits.

Sure. And one last question on miscellaneous income. So, there is recovery from OCA, but still miscellaneous income is significantly down. So, what is the element which we actually didn't get?

In fact, on an average, it used to be like 2000-3000 crores and this time it is only 475. Miscellaneous income is essentially...

Well, there is a half decline both year on year as well as quarter on quarter.

No, actually mid-year income also will have a situation where quarter poor would normally have the kind of dividend income which we get and also derivative is the other component. So, these are, I mean, last year we had a dividend income of about yeah so last year we had a dividend income of of about 500 crore but this year it is negative and also when it comes to recovery in return of accounts last year we had a one-time recovery of about 1892 crores

in fissure which is not there this year so that is the reason why this is behaving like this okay okay and derivatives also would be a part of it yeah derivatives is another component some knock on derivative which would have been there in this quarter yeah okay okay yeah okay thank you thank you next question is from the man of others from tlsa please go ahead

Congrats on good numbers. I have two questions. First on margins. When we were having the last quarter... Sir, your voice is not very clear.

Can I request you to speak through the handset? Okay.

Hopefully, this is better. So, this checking on margins, our outlook presented last quarter was that given how things are panning out marginally, which is 22.

You can just update how do you see the increase in this little more.

Okay, just a question sir, what would be your margin outlook incrementally?

We are hoping it to be in line with the kind of trend which you have seen in the past and also what we have also already recorded till now. Sir, is there a change because if you go back to the fourth quarter, clearly the margin outlook looked a lot more stronger. So, is there anything that you are seeing in the market which makes you believe that margins now should be like slattish rather than going up? No, I think I would rather expect the margin to go from 3.23.

Got it, sir. And, sir, second question is on capital.

While we are better than regulatory requirements, growth has certainly picked up in the last few months. Do you anticipate that bank may need to show up a little bit of capital now given how well the stock is done and number two, growth is certainly holding up a lot better? We have already got the approval from the board for raising 81 and 82 was about 11,000 crores. In the current, in fact, in this month itself, I think we have already retained about 2000 crores. So, about 9000 crores is the incremental which will be available, which we will be using. So, I think hopefully, we will be very closely watching the situation and definitely we will look at the options what all can be tapped to see to it that we have adequate capital available.

And sir, what will be the threshold to consider

equity raise because we are close to 10%. Many banks operate at better CT1s and obviously the growth is better than what we've seen in the last few years. So what is the threshold when you would think about seriously looking at equity raises? Well, actually we have a couple of other options but we have not really deliberated at the board level so it is not in order for me to really share those plans in this form.

Got it sir. This is helpful. Thanks a lot.

Thank you.

Thank you. The next question is from the line of Abhishek Murartha from HSBC. Please go ahead.

Yeah, hello. Good evening and thanks for taking my question.

So, just a couple of data giving questions. What is your ACR right now?

It's about 130. 130 percent.

okay and currently how much excess liquidity would you be carrying I know you said that there's about a one and a half lakh crore of redemption coming from the investment book apart from that no no we will excess liquidity sorry I think you may not have been able to hear me I will unmute

So, we have suction liquidity in terms of our excess SLR, number one. Number two, I think there is about 83,000 crores worth AFS portfolio is coming up for redemption this year, the rest of the year. So, I think there should not be any problem in terms of funding any credit growth which is actually to happen. And there is no, absolute no liquidity concerns even if the liquidity in the market tightens.

Sir, how much excess SLR did you say?

Excess SLR is about 3.8%. 3.8 lakh crore. 3.8 lakh crore. 3.8 lakh crore. In fact, we have got a total exemption from HTM and AFS aggregating to about 1.50 lakh crore.

Right.

Which is actually coming up in the current financial year.

So, if you could actually hold off any increase in TD rates for a while, while this liquidity gets deployed, that is what I was trying to understand.

That's a very small, as I mentioned that, you know, deposit is a franchise also. So, we have to keep that in mind. But nevertheless, what you mentioned, that very clearly reflects that we have got the muscle power, if at all we could decide. We always explore all the ways of raising the resources. not necessarily the deposits as we said. Deposits, of course, as Fakhar mentioned, we have 22,000 branches. Obviously, you know, our deposit mobilization will continue.

Got it. And so, just a couple of questions on Express Tellage. One is, what is, what would be the mix of new versus repeat customers there? And broadly, these, you know, higher MTAs in the quarter, that would have come from giving you know 80-85% government or quasi government that will come from that same cohort right?

Actually this is express credit NPA it is I would say it's more of an aberration because whenever some of the state governments are unable to pay some salary at a point of time then you know it really turns out to be NPA but as and when the salary gets paid it gets registered also so that would be the scenario About your other question relating to how much should be the new versus how much should be the existing, I would, we will not have that data right now available to us. We have not looked at it from that lens.

Okay. But anytime you, somebody, some customer wants to roll over an excess credit loan, what should be the rules around that? How much should we have to pay back or something to roll over?

It depends upon what is their salary and depending upon that we are extending it. It's a EMI-NMI ratio which we really look at it.

Okay. Okay, I'll take it off then.

Thank you. Thanks for this clarification.

Thank you. Next question is from Ashok Ajmera from Aspen Global.

Hello.

Yes, Ayurveda.

Dr. Rajiv Rajiv. Sir, while we appreciate, sir, that the operating profit, but for this MTM losses would have been 19,302 crores. Sir,

Does it mean that we can assume that the operating profit for the whole year of the bank would be around in the range of about 78,000 to 80,000 crores?

Number one. Yes, sir. We hope so. And secondly, sir, this is a loss on spend and revaluation of investment, which is 6,549 crores.

So, is it, what is the component, I mean, of the loss which has already been booked and the MTM on the revaluation?

It is actually on account of MTM. We have not really incurred any loss. It's all revaluation.

Okay, so heading only says that the loss on Spain oblique revaluation of the investment, isn't it?

That is a format, so that's why it is mentioned. Yeah, I understand, sir. So, sir, now going forward, now with this 50 basis point again further rise, How do we, what do we expect on the treasury front going forward in the next three quarters? Any estimate of, you know, further likely MTM or how much we are cushioned for further MTM losses on the treasury front, sir? We are actually, we are cushioned for 5.45%. 5.75%. Sorry, 5.74%. 7.45 and if I may say so the way the situation stands you would observe that yesterday when the rate hike was there for 50 basis points the yield moved up from 7.10 to 7.30 so that is something which is a I mean if I read into that kind of a trend then you know Even if the next hike happens from RBI, which will be somewhere in September 28th to Cartier, it's too early to say that what will be the interest rate hike because they normally get guided by the inflation trajectory. And if it all passes the guide for the future, we have seen that about two months back, the inflation was trailing at around 7.9, about two and a half months back. Exactly. And from that level, it has already come to about 6.7. So, what will be the situation from now onwards? If at all the past trend continues, then one may expect the inflation to be within 6%. And who knows, if at all it is something, it may not really lead to any kind of inflation, but it is all subject to various assumptions. So, having said that, we are, as I mentioned that, we have already booked the MTM losses to the extent of 7.45%. So, we hope that we should not have any more such instances for providing for the for the depreciation on the on the AFS book.

Okay, sir. Coming to that this provisioning we said that we have taken the benefit of some of the buffers of the provision which are there in this quarter.

How much buffer is left which can be utilized in case the higher provisions required in future?

I would like to say that

The 7800 code is the poison which is available for the restructured assets. So that can always be used and whatever we have used is essentially wherever the repayment has happened. So to that extent only we have used. We have not used otherwise. 7800 code is the additional poison for the restructured account. Got it, sir. Sir, on the advanced credit front, our credit growth especially in the domestic book is muted if you take the corporate book except that yes international book is grown very healthy where the margins are but very less or limited so going forward when you say that we are aiming 15% of the growth it means in the next three quarters including the August now which is going July August also we may grow our total credit to about 12.5% for the remaining three quarters now We hope so because when we, if I look at the underutilization of the working capital limit in the corporate accounts, which is almost as high as 2.5 trillion. Similarly, when it comes to term loans, which are unavailable, this is also 2.5 trillion. And the proposals in pipeline are about 1.2 trillion. So that is what is stacked up even if the term loans will not start available immediately or may not get dispersed immediately. Still I expect that we should have a situation where we can easily think in terms of going to the extent of both 0.5 to 3 lakh crore into the corporate book. We are at both 8.75 that's where the corporate book is concerned. So that is the kind of expectation which I have. So if at all that comes and the kind of growth which you have witnessed into the retail side, that I think will continue. Even FME also we have started seeing the protection and the pipeline is also there. So I think all put together, I expect that there should be a decent sustainable growth in the remaining three quarters.

Thank you. Sachin, I'll request you to come back in the questions here for a follow-up question. The next question is from the man of Nitin Agarwal from Motilal Oswal. Please go ahead.

Yeah, hi, good evening everyone and thanks for the opportunity. Sir, this court, like many other PSU banks, has reported controlled treasury losses and some of them have reported profits as well. So, just wanted to check if we have done any transfer of securities from AFS to exchange during the quarter and related to it, do you think that the mix of AFS portfolio which is like still looks high may should be reduced given how the rate cycle is placed out?

No, we have done the transfer of securities but unfortunately we could not avail the benefits. Soon thereafter, there was a 40 basis point increase announced by RGI which led to the elites moving up. So, we really could not take much of benefit. We went for the transfer of securities also. But as of now, we have got a decent algo room available in the HTM and whatever securities are maturing in AFS and whenever we are buying new securities, we are only putting in the HTM. Right.

And this mix of AFS sir which is 42% does it seem like comfortable or any any thoughts around reducing this mix?

Sorry what? Sorry I could not get you.

The mix of AFS investments, the mix of AFS investments in the total investment book at over 40% this number seems comfortable or any there have been any thoughts to reduce this number also?

Yeah, if I can respond, sir.

I think, so we have adequate room in the HTM portfolio. Magnum of 23% is what we can put in HTM. Our strategy would be that whatever maturing, you know, portfolio is there, it would be directly going to the HTM. See, primarily, I think most of the credit growth will now be funded. So, the investment book may not grow as much as it has grown in the past two years. Even if we have to invest, I think we have adequate room to move to STM. So, to answer your question specifically, I think our AFS portfolio probably will be coming. Yeah, otherwise also if you look at the industry level numbers, the launches book is growing at about 14% and the deposit growth is at about 8.4%. So, which very clearly means that the treasury book of the banks will not probably grow as it has grown in the past. Right sir.

And the second question is like, particularly we have seen that in line with improvements with the trajectory from first quarter to fourth quarter, our credit costs also improved. Now in this quarter, we have reported a credit cost of 61 basis points. So how do you see the trajectory now going ahead for FY20 and any other for FY24?

Actually, you know, when it comes to metro, though we keep on reviewing it very closely, but there are always the element of uncertainties. more so in the current kind of a scenario, but nevertheless, our effort will be to bring it down to the extent possible. I mean, that we have assured. We will not be able to give any kind of a guidance on this particular aspect.

Okay. Thanks, Mohan. Wish you all the best.

Thank you. The next question is from the line of Ayushi Shah from Endivision Investor. Please go ahead.

Hi sir, congratulations on a great quarter. So, in the beginning of the presentation, you mentioned that you were planning on increasing your CASA book by focusing on the savings account part of things. So, I just wanted to get an overall idea about how exactly you plan on doing that because there is such intense competition in the market going on right now. So, how do you plan on ensuring growth?

We will be trying to reach out to the competition.

So, basically by raising rates?

No, no. We are actually digital is something which is actually growing very well. And almost about 65% of our accounts are getting opened digitally. So, which means that we are in a position to offer the convenience to the customers. And also the kind of product bouquet which we offer it is complete in all respects. There is no reason for us not to be really sharing the mindset of the customers and getting their accounts. And CSP is one of our focus efforts and we will continue to send them that green card.

Maybe, I don't want to add something.

Yes, so, in Kata, what I gently, if you find last couple of years, there was a huge increase in second-hand deposits as well as TDR. So, on the ground, it was being considered that whatever is coming is fine. But with competition intensifying we have also now told, communicate to the ground that the CASA has to be a priority and that is why on a daily basis the opening of accounts as well as increasing contact with the say premium customers or high value customers so that they can deposit more and transact more in our accounts so that the balances also increase. So it is two problems. One, acquisition of new valuable customers so that we open accounts where there is higher possibility of increase in balances number two with whatever customers we have making relationship more rich so that the balances in the account increase we will also try to increase product per customer so that the stickiness as well as the float around it that also improves so it is both acquisition strategy as well as relationship strategy which will lead to better CASA.

Okay, sir. So, that is very good to hear. And, sir, is there any guidance about like the CASA ratio that you would have for the coming 2 to 5 years?

See, in this case, what we will do is we understand the importance of CASA as everybody in the bank understands. So, the endeavor will be to increase as much CASA as possible. We have our internal, say, benchmarks and internal aspirations as to where we could go. But there is a single, structurally as a bank, we are a bank where people trust a lot. So they bring a lot of term deposits to us and the growth rate of CASA and the growth rate of TDR is normally a bit skewed because we have higher growth in TDR because of customer stress. So, then percentage may not feel much, but in absolute numbers, it will surely increase.

All right, sir. Thank you so much and all the best.

Thank you. Next question is from the line of Anand Dama from MP Global. Please go ahead.

Yes, sir. Thank you for the opportunity. Sir, again the question on the treasury front. So, we said that basically there is a redemption of about 1.5 trillion of investments. So, whether that could lead to higher realized losses going forward, number one. And number two is that, what is the status on our investment substitution reserve? Where does it stand? Do we have a shortfall over there? And whether that is also to be made up going forward, leading to higher provisions over there?

See, when it comes to 1.5 crore trillion, which I mentioned, this is a reduction which is due in the normal course in the current year. So, which means that we will not book any loss in this redemption process. It is actually, yeah, it is something which, and we don't have any stress NPI in the book as of now. So, that is one thing which will happen. And the second question is relating to, sorry, I missed out the second question. Investment fluctuation reserve. Investment fluctuation reserve. Investment fluctuation reserve, we are in the process of, I think,

So, what is the outstanding in the IFR and is there any shortfall over there?

No, there is some shortfall but we are actually building up that shortfall over there. So, what would be the quantum on that side? Sorry, there is a board approved glide path which is in line with the RBA directions and we are strictly following that and we will try and see that that gets that gets completed in the current financial year.

Sir, any quantum, basically, what's the kind of spot for that you have?

I will not have that number, but I think the number is available in the balance sheet. But we can share with you. We can share you offline.

Sure, sir. So, secondly, on the OPEX front, so our OPEX certainly has been lower whereas most other banks have been reporting very high OPEX for during this quarter. So, one benefit that we have is the staff cost which is largely stable. How about the other OPEX, whether we will have a meaningful branch addition over next nine months and that will lead to a higher OPEX during the nine months going forward?

See, when it comes to our OPEX, See, employee cost etc. is given. There is not much which can be done. But yes, of course, we are trying to shore up our income. So, that's our cost-income ratio that's addressed. And in that direction only, we have come out to the, we have been given approval to set up the new subsidiary which is operating support subsidiary. And the intention is that this subsidiary will help us in reaching out or rather supporting our rural branches to garner quality awareness and also to ensure that the renewal etc. also happens on time. So, this is something which it will put to use and which will help us in reducing the MP in the agriculture and also will help us in booking the quality awareness which is available in the rural economy.

So, this is what the plan of action is which will eventually address the cost to income issue. Thank you.

And I request you to come back in the question queue for a follow-up question. The next question is from the line of Jignesh from Empire Capital. Please go ahead.

Yeah, hi. Am I audible? Yeah, please go ahead. Yeah, okay. So, I have the question one on, you know, your margins basically which has come out. on a sequential basis. So, I agree that YY business, it has been pretty high. I mean, it has improved. What trajectory, basically, you are seeing it up for the full year, though you have already indicated that you will see an improvement happening. But if you can give some guidance and the roadmap, how you are seeing it up, the improvement will be coming. That is one. And second, obviously, on the growth plan, which, you know, the rate hike already being there and inflation remaining high, Now, do you remain confident that the growth will be, you will be able to benchmark it, but what exact would be the momentum and which areas do you think will be a better one that the growth will be coming up, be it in corporate or international books, that you are seeing it for the next three quarters, do you think there is some clarity on it that would be really useful? Thank you.

The trajectory as far as the name is concerned, I would say the kind of trend which we have seen in the past. We expect to be a repeat of a similar trend going forward also. Though we are starting at a little higher base as compared to where we were last year in the first quarter of financial year 2021. Nathanael, your second question relating to which are the areas of focus. I think irrespective of the interest rate high architecture which is being talked about, our retail engine continues to adhere to its promise and we hope that we will have a decent growth in the retail going forward as well. Rather, when it comes to the corporate growth, we are quite hopeful this year we will have a better traction as far as the corporate book is concerned. And even SME also is one of the special focus for the bank. You will have observed that we have moved up in SME from about 2.20 trillion to about 3 trillion plus. It has already moved. And this is all we are getting into supply chain finance and some kind of balance sheet lending also. But we are very mindful of the risks which are inherent in the SME. We are ensuring that we should underwrite the best for the quality of SME also. So, I would say that retail, corporate, SME all will grow. That's as Agri is concerned. Our focus is going to be high value agriculture. Our focus is going to be SIG financing. So, this will be our focus so that the aggregate book should also improve in terms of quality. That is what our endeavor will be.

Okay. All right. Thank you, sir, and all the best.

Thank you. Next question is from the line of Rathar Sharma from Jefferies, India. Please go ahead.

Thank you sir for taking my question. Just two bits. First sir, on the SMA 1 and 2 loans, the balances have gone up from 3500 to about almost 7000 crores. Could you just help us understand what is the reason for this?

SMA 1 and SMA 2. Sequentially. Oh okay, sequentially you are saying. out of the 7000 also if you will really look at it we would have pulled back a significant component just one second Yeah, SMM essentially invariably we have seen that in the first quarter there are always some peculiar behavior which we see and that is one of the reasons why sequentially it looks on the higher side but almost 2000 odd code has been pulled back out of this so if at all we look at that 2800 odd code so then actually it comes almost in the same range as it was as on December 21 so That's how the, I mean, that partly explains the behavior. Sir, second question is on the interest on tax refund for the March quarter.

Could you please clarify what was the amount in the previous quarter?

600 crore was the amount interest on tax refund. Yes, for the March quarter. Yes, for the March quarter. Thank you, sir. Thank you.

Thank you very much. Ladies and gentlemen, due to time constraint, that will be the last question for today. I now hand the conference over to Chairman Sir for closing comments.

Thank you very much to all the analysts who are taking out time on a weekend, on a Saturday evening. I wish all of you the very best. As we have explained, our endeavour is to keep on delivering better outcomes. Hopefully, it will be the scenario going forward. But for the situations which are actually beyond our control in terms of GCEC etc., they have to be, we have to play in the broader macro and our effort will be to navigate through the turbulent times in the most professional way. Thank you very much. All the very best.

Thank you very much. On behalf of State Bank of India, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.