ICICI Bank Limited

Ladies and gentlemen, good day and welcome to the ICICI Bank Q2 FY24 earnings conference call. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, 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. Sandeep Bakshi, Managing Director and CEO of ICICI Bank. Thank you, and over to you, sir.

Thank you. Good evening to all of you, and welcome to the ICICI Bank Earnings Call to discuss the results for Q2 of FY2024. Joining us today on this call are Sandeep Batra, Rakesh, Anandya, and Abhinay. The Indian economy continues to be resilient amidst the uncertainties in the global environment, reflecting the actions and initiatives of the policymakers. The underlying growth momentum is visible with expansion in manufacturing and services PMI, real estate buoyancy, increasing steel and cement output, higher tax collections, and demand for travel. The government-led CAPEX cycle is continuing. Though there has been a pause in the policy rate hike cycle in India, global and domestic inflation and the liquidity and rate environment continue to evolve. At ITSA Bank, our strategic focus continues to be on growing our core operating profit-less provisions, i.e., profit before tax, excluding treasury, through the 360-degree customer-centric approach, and by serving opportunity across ecosystems and micro-markets. We continue to operate within a strategic framework and strengthen our franchise, enhance our delivery and servicing capabilities, and expand our technology and digital offerings. The profit before tax, excluding treasury, grew by 35.7% year-on-year to Rs. 137.31 billion in this quarter. The core operating profit increased by 21.7% year-on-year, to 143.14 billion rupees in this quarter. The profit after tax grew by 35.8% year on year to 102.61 billion rupees in this quarter. Total deposits grew by 18.8% year on year and 4.5% sequentially at September 30, 2023. Term deposits increased by 31.8% year on year and 9.2% sequentially at September 30, 2023. During the quarter, the average current and savings accounts deposits grew by 7.1% year-on-year and 1.1% sequentially. The bank's average liquidity coverage ratio for the quarter was about 122%. The domestic loan portfolio grew by 19.3% year-on-year and 4.8% sequentially at September 30, 2023. The retail loan portfolio grew by 21.4% year-on-year and 5.5% sequentially. Including non-fund-based outstanding, the retail portfolio was 46% of the total portfolio. The business banking portfolio grew by 30.3% year-on-year and 10.6% sequentially. The SME portfolio grew by 29.4% year-on-year and 7.2% sequentially. The rural portfolio grew by 17.3% year-on-year and 3.5% sequentially. The domestic corporate portfolio grew by 15.3% year-on-year and 3.1% sequentially. The overall loan portfolio, including the international branches portfolio, grew by 18.3% year-on-year and 5% sequentially at September 30, 2023. We continue to enhance our digital offerings and platforms to onboard new customers in a seamless manner, provide them end-to-end journeys and solutions, and enable more effective data-driven cross-sell and up-sells. We have shared some details on our technology and digital offerings in slide 15 to 26 of the investor presentation. The net NPA ratio declined to 0.43% at September 30, 2023 from 0.48% at June 23 and 0.6% at September 30, 2022. During the quarter, there were net additions of 1.16 billion rupees to gross NPAs, excluding write-offs and sales. The total provisions during the quarter were 5.83 billion rupees or 4.1% of core operating profit and 0.2% of average advances. The provisioning coverage ratio on NPAs was 82.6% at September 30, 2023. In addition, the bank continues to hold contingency provisions of 131 billion rupees or about 1.2% of the total loans as of September 30, 2023. The capital position of the bank continued to be strong with a CET1 ratio of 16.77%, TR1 ratio of 16.86%, and total capital adequacy ratio of 17.59% at September 2023, including profits for H124. Looking ahead, we see many opportunities to drive this calibrated profitable growth. We believe our focus on Customer 360, extensive franchise and collaboration within the organization, Backed by our digital offerings, process improvements, and service delivery initiatives will enable us to deliver holistic solutions to customers in a seamless manner and grow market share across key segments. We will continue to make investments in technology, people, distribution, and building our brand. We will remain focused on maintaining a strong balance sheet with prudent provisioning and healthy levels of capital. The principles of return of capital, fair to customer, fair to bank, and one bank, one team, one ROE will continue to guide our operations. We remain focused on delivering consistent and predictable returns to our shareholders. I now hand the call over to Anandya.

Thank you, Sandeep. I will talk about loan growth, credit quality, P&L details, growth in digital offerings, portfolio trends, and the performance of subsidiaries. On loan growth, Sandeep covered the loan growth across various segments. Coming to the growth across retail products, the mortgage portfolio grew by 16.2% year-on-year and 4.1% sequentially. Auto loans grew by 24.1% year-on-year and 5.5% sequentially. The commercial vehicles and equipment portfolio grew by 12.3% year-on-year and 4.5% sequentially. Personal loans grew by 40.4% year-on-year and 10.2% sequentially, and the credit card portfolio grew by 29.5% year-on-year and 6.2% sequentially. The personal loans and credit card portfolio were 9.4% and 3.9% of the overall loan book, respectively, at September 30, 2023. The overseas loan portfolio in US dollar term declined by 6.3% year-on-year at September 30, 2023. The overseas loan portfolio was about 3.3% of the overall loan book at September 30, 2023. The non-India-linked corporate portfolio declined by 26.9% or about US$115 million on a year-on-year basis. Of the overseas corporate portfolio, about 90% comprises Indian corporates, 6% is overseas corporates with India linkage, 2% comprises companies owned by NRIs or PIOs, and the balance 2% is non-India corporates. Moving on to credit quality, there were net additions of 1.16 billion rupees to gross NPAs in the current quarter, compared to 18.07 billion rupees in the previous quarter. The net additions to gross NPAs were 13.45 billion rupees in the retail, rural and business banking portfolios and there were net deletions of gross NPAs of 12.29 billion rupees in the corporate and SME portfolios. The gross NPA additions were 46.87 billion rupees in the current quarter compared to 53.18 billion rupees in the previous quarter. Recoveries and upgrades from gross NPAs, excluding write-offs and sales, were 45.71 billion rupees in the current quarter compared to 35.11 billion rupees in the previous quarter. The gross NPA additions from the retail, rural and business banking portfolio were 43.64 billion rupees in the current quarter compared to 50.72 billion rupees in the previous quarter. We typically see higher additions from the Kisan credit card portfolio in the first and third quarter of a fiscal year. Recoveries and upgrades from the retail, rural and business banking portfolio were 30.19 billion rupees compared to 31.4 billion rupees in the previous quarter. The gross NP additions from the corporate and SME portfolio were 3.23 billion rupees compared to 2.46 billion rupees in the previous quarter. Recoveries and upgrades from the corporate and SME portfolio were 15.52 billion rupees compared to 3.71 billion rupees in the previous quarter. The gross NPAs written off during the quarter were 19.22 billion rupees. There was sale of NPAs worth 1.79 billion rupees in the current quarter compared to no sale in the previous quarter. The sale of NPAs included Rs. 0.14 billion in cash and Rs. 0.53 billion of security receipts. As these NPAs were fully provided, we continue to hold provisions against the security receipts. The non-fund-based outstanding to borrowers classified as non-performing was Rs. 38.86 billion as of September 30, 2023. Compared to Rs. 37.04 billion as of June 30, 2023, the bank holds provisions amounting to Rs. 20.64 billion against this non-fund outstanding. The total fund-based outstanding to all standard borrowers under resolution as per various guidelines declined to Rs. 35.36 billion or about 0.3% of the total loan portfolio at September 30, 2023, from Rs. 39.46 billion at June 30, 2023. Of the total fund-based outstanding under resolution at September 30, 2023, Rs. 30 billion was from the retail, rural and business banking portfolio and Rs. 5.36 billion was from the corporate and SME portfolio. The bank holds provisions of Rs. 11.07 billion against these borrowers, which is higher than the requirement as per RBI guidelines. Moving on to the P&L details, net interest income increased by 23.8% year-on-year to Rs. 183.08 billion. The net interest margin was 4.53% in this quarter compared to 4.78% in the previous quarter and 4.31% in Q2 of last year. The sequential movement in NIM reflects the lagged impact of increase in term deposit rates over the last year on the cost of deposits. Impact of interest on income tax refund on net interest margin was nil in Q2 of this year compared to three basis points in the previous quarter and no impact in Q2 of last year. The domestic NIM was at 4.61% this quarter compared to 4.88% in the previous quarter and 4.45% in Q2 of last year. The cost of deposits was 4.53% in this quarter compared to 4.31% in the previous quarter. reflecting primarily the increase in term deposit rates over the last year, though rates on incremental retail term deposits have largely stabilized. Of the total domestic loans, interest rates on 48% are linked to the repo rate, 3% to other external benchmarks, and 18% to MCLR and other older benchmarks. The balanced 31% of loans have fixed interest rates. Non-interest income, excluding Treasury, grew by 14% year-on-year to Rs. 58.61 billion in Q2 of 2024. Free income increased by 16.2% year-on-year to Rs. 52.04 billion in this quarter. Fees from retail, rural, business banking and SME customers constituted about 78% of the total fees in this quarter. Dividend income from subsidiaries and associates was 6.48 billion rupees in this quarter, the same as due to of last year. On costs, the bank's operating expenses increased by 20.8% year-on-year in this quarter. Employee expenses increased by 29% year-on-year in this quarter. The bank had about 139,000 employees at September 30, 2023. The number of employees has increased by about 29,000 in the last 12 months. Non-employee expenses increased by 16.3% year-on-year in this quarter, primarily due to retail business-related and technology expenses. Our branch count has increased by 174 in Q2 of 2024, and we had 6,248 branches as of September 30, 2023. The technology expenses were about 9.2% of our operating expenses in H1 of this year. The core operating profit increased by 21.7% year-on-year to 143.14 billion rupees in this quarter. Excluding dividend income from subsidiaries and associates, the core operating profit grew by 22.9% year-on-year. The total provisions during the quarter were 5.83 billion rupees or 4.1% of core operating profit and 0.2% of average advances. compared to Rs. 12.92 billion in the previous quarter. The sequential decline in provisions reflects higher NPA additions from the Kisan Credit Card portfolio in Q1 of this year, and corporate recoveries and upgrades, as well as recoveries from return of accounts. The provisioning coverage on NPAs was 82.6% as of September 30, 2023. In addition, we hold Rs. 11.07 billion of provisions on borrowers under resolution. Further, the bank continues to hold contingency provision of Rs. 131 billion as of September 30, 2023. At the end of September, the total provisions, other than specific provisions on fund-based outstanding to borrowers classified as non-performing, were Rs. 229.1 billion or 2.1% of loss. The profit before tax excluding Treasury grew by 35.7% year-on-year to Rs. 137.31 billion in Q2 of this year. There was a Treasury loss of Rs. 0.85 billion in Q2 similar to Q2 of the previous year. The tax expense was Rs. 33.85 billion in this quarter compared to Rs. 24.78 billion in the corresponding quarter last year. The profit after tax grew by 35.8% year on year to 102.61 billion rupees in this quarter. To talk about the growth in digital offering, leveraging digital and technology across businesses is a key element of our strategy of growing the risk-calibrated core operating profit. We continue to see increasing adoption and usage of our digital platform by our customers. There will be more than 10 million activations of iMobile Pay by non-ICHA bank account holders as of the end of September 2023. Our merchant stack offers an array of banking and value-added services to retailers, online businesses, and large e-commerce firms such as digital current account opening, instant overdraft facilities based on point-of-sale transactions, connected banking services, and digital store management, among others. We have created more than 20 industry-specific stacks which provide bespoke and purpose-based digital solutions to corporate clients and their ecosystems. Our trade online and trade emerge platforms allow customers to perform most of their trade finance and foreign exchange transactions digitally. Our digital solutions integrate the export transaction lifecycle with solutions providing frictionless experience to our clients and simplify customer journeys. About 71% of trade transactions were done digitally in Q2 of this year. The volume of transactions through the trade online and trade emerge platforms in Q2 2024 grew by 29.7% year on year. Moving on, we have provided details on our retail business banking and SME portfolio in slides 32 to 43 of the investor presentation. The loan and non-fund-based outstanding to performing corporate and SME borrowers rated BBN below was Rs. 47.89 billion at September 30, 2023 compared to Rs. 42.76 billion at June 30, 2023 and Rs. 76.38 billion at September 30, 2022. The increase during the quarter is due to the upgrade of one borrower from non-performing status which has been rated BB on its classification as a performing account. Other than this account, the maximum single borrower outstanding in the BB and below portfolio was less than 5 billion rupees at September 30th, 2023. At September 30th, 2023, we held provisions of 8.17 billion rupees on the BB and below portfolio. This includes provisions held against borrowers under resolution included in this portfolio. The total outstanding to NBFCs and HFCs was Rs. 837.49 billion at September 30, 2023, compared to Rs. 874.18 billion at June 30, 2023. The total outstanding loans to NBFCs and HFCs were about 8% of our advances at September 30, 2023. The builder portfolio including construction finance, lease rental, discounting, term loans and working capital was 430.58 billion rupees at September 30, 2023 compared to 427.12 billion rupees at June 30, 2023. The builder portfolio is about 3.9% of our total portfolio. Our portfolio largely comprises well-established builders and this is also reflected in the sequential increase in the portfolio. About 3.5% of the build-up portfolio at September 30th, 2023 was either rated WB and below internally or was classified as non-performing compared to 3.7% at June 30th, 2023. Moving on to the consolidated results, the consolidated profit after tax grew by 36.1% year-on-year to 108.96 billion rupees in this quarter. The details of the financial performance of subsidiaries and key associates are covered in slides 46 to 49 in the investor presentation. The value of new business margin of ICICI Life was 28.8% in H1 of this year compared to 32% in fiscal 2023 and 31% in H1 of last year. The value of new business of ICICI Life was 10.15 billion rupees in H1 of this year compared to 10.92 billion rupees in H1 of last year. The annualized premium equivalent was 35.23 billion rupees in H1 of this year, compared to 35.19 billion rupees in H1 of last year. The profit after tax was 4.51 billion rupees in H1 of this year, compared to 3.55 billion rupees in H1 of last year. and Rs 2.44 billion in Q2 of 2024 compared to Rs 1.99 billion in Q2 of 2023. The gross direct premium income of ICICI General was Rs 60.86 billion in Q2 2024 compared to Rs 51.85 billion in Q2 2023. The combined ratio stood at 103.9% in Q2 2024 compared to 105.1% in Q2 2023. Excluding the impact of cat losses, the combined ratio was 102.8% in Q2 2024 and 104.3% in Q2 2023. The profit after tax was 5.77 billion rupees in Q2 2024 compared to 5.91 billion rupees is Q2 2023. The profit after tax of Q2 2023 included reversal of tax provisions of 1.28 billion rupees. The profit after tax of ICICI AMC as per NDIS was 5.01 billion rupees in this quarter compared to 4.67 billion rupees in Q2 of last year. The profit after tax of ICICI securities as per NDIS on a consolidated basis was 4.24 billion rupees in this quarter compared to 3 billion rupees in Q2 of last year. ICICI Bank Canada had a profit after tax of 21.1 million Canadian dollars in this quarter compared to 12 million Canadian dollars in Q2 of last year. ICICI Bank UK had a profit of 3.3 million US dollars in this quarter compared to 1.5 million US dollars in Q2 of last year. As per INDS, ICICI Home Finance had a profit after tax of 1.12 million rupees in the current quarter compared to 0.6 billion rupees in Q2 of last year. With this, we conclude our opening remarks and we will now be happy to take your questions.

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 touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Mahroog Arjania from Nuwama. Please go ahead.

Yeah, hello. I just had a question on the sector and then even on margins. So there's a lot of talk going around on unsecured loans, on which segment of unsecured loans is safe and which is seeing higher delinquencies. So what is the sense you make of all this from the Bureau data and from your own customer data? That's the first question. And then in your experience, um, you know, as veteran bankers, do you think that the stress in one segment below 50,000 can easily spread to other segments? So that's my first question.

Uh, yeah. So, um, Maruk, I think, uh, of course, uh, you know, we track this portfolio quite closely and, uh, We have been doing so for the past several quarters. As far as our portfolio is concerned, we feel that the trends are quite stable and the credit, you know, the delinquencies and credit costs are well within what we would have sort of expected them to be. As far as the industry outlook is concerned, I think we have also seen some of the research which has come out which makes this distinction between the smaller ticket size loans and the larger ticket size loans. As far as our portfolio is concerned, we have a very minimal presence in the smaller ticket size segment. But I think you're right in the sense that you know, if we start seeing, you know, significant increase in delinquencies on personal loans that would have, you know, implications for, you know, other parts of the portfolio as well, potentially. But I think if we have kind of focused the portfolio as we believe we have on, you know, existing customers, on cross-sell and on customers with credit scores above a certain level, and also properly assessed and monitored their level of leverage and how many loans they are servicing at any point in time. We feel that the risks should not be something which would cause too much concern, but we will continue to monitor this as we go along. As things stand in our portfolio, the numbers are pretty comfortable and that is why you would have seen us growing the portfolio also at a similar pace this quarter as we have been growing for the past several quarters.

Okay, but as the portfolio seasons, even in your portfolio, would it be fair to say that there would be rising delinquencies over the last six months? I don't think so.

There's nothing really to call out. I mean, if you look at, you know, for example, we have been saying for the last several quarters that in absolute terms, as the retail portfolio grows and seasons and some of the, you know, higher recoveries coming out of the stock of NPLs that got created during COVID-19, As that comes through, you know, the net additions to Ross NPS in the retail portfolio will go up, but they are, you know, moving in quite a stable way. And in fact, in this quarter, you have seen it coming down actually sequentially, which is partly due to the absence of, or I would say largely due to the absence of KCC NPS. But even on the retail side, the performance has actually improved slightly.

Maureen, would it be possible to get the average ticket size? Can I request you to join back the queue, please?

Sure. No, we have not really given that up. But as I said, our presence in the smaller ticket size would be marginal.

Thank you. Ladies and gentlemen, in order to ensure that the management is able to answer queries from all participants, please restrict your questions to two at a time. You may join back the queue for follow-up questions. We'll take our next question from the line of Saurabh S. Kumar from J.P. Morgan. Please go ahead.

Hi, sir.

I have two questions.

One is, you know, your recovery and upgrade, so your retail slippages are running at 3% and your recovery upgrades are like 60% of that. Is that what you would consider like as a normal run rate in this business now? I guess so. I mean, as the portfolio grows in absolute terms, it may go up, but we expect these trends to be reasonably stable. There could be some little variation quarter to quarter. Okay. And the second, again, back to the SPL, the 40% growth that you will see, your approval rates on loans will be, where would this be versus, let's say, 2023 and versus 2019?

in terms of your internal credit filters?

We have not really talked about, you know, approval rates and so on. I think we've given our outlook on the portfolio and we will continue to monitor it as we go along.

Okay, but your credit filters internally have come down over the last one year, sir? I mean, if you can give some direction of color.

No, I don't think we would have, you know, we would have diluted our credit filters if in general, I think we have been focusing on progressively more on the upper end of the spectrum.

Thank you. We'll take our next question from the line of Chintan Joshi from Bernstein. Please go ahead. Mr. Chintan Joshi.

Hi. Thank you for the opportunity to ask the question. I have two areas. One is on kind of lending and deposit yields, and second is on your branch expansion strategy.

Lending yields have gone up five basis points this quarter, which felt a little low, and cost of deposit yields, you know, cost of deposit has gone up substantially.

How much repricing is left on the deposits and on the lending side? That's the first question. And the second question is, HDFC is growing branches quite aggressively now. It's leaving some of the other private sector banks behind on market share relative to the private sector. How does this impact kind of your branch expansion strategy on a three-year view? So as far as the first question is concerned, I think you're aware that the way margins for most banks have moved over the last year few quarters is that in fiscal 23 banks saw the benefit of the increase in the repo rate on the external benchmark linked loans primarily mortgages and others and the deposit rate started to also go up last year but because the deposits are a fixed rate fixed term that repricing impact is playing out you know through the quarters and is we are currently in the situation where the policy rates are on a pause and therefore the external benchmark linked loans are not seeing an increase in yields. But the deposit cost based on, say, the deposit rate increases that took place last year are continuing to reprice as they come up for maturity and so on and so forth. So that is why, in fact, we had articulated even in the call last time that the repricing of the loan book from here on would not be significant, and that is the way that it has played out. We would continue to expect to see some increase in the cost of deposits on the book, and therefore some moderation in margins over the next quarter or so as well, as we have articulated in the past. But on a full year basis, we continue to expect that the margins would be at a similar level as they were in fiscal 23. On your second question on branch strategy, so we have added about 350 branches in the first half of this year. We are really looking at what is our network across different micro markets and what is kind of our assessment of the opportunity in those micro markets and what is the branch capacity we need to add to kind of serve that. And that is the basis on which we are adding, not really looking at what any other particular bank may or may not be doing. That might leave you losing market share relative to the other players. Are you happy with that? As I said, we are looking at what is the, you know, our assessment of the market in each place, in each kind of geographical area and what is the kind of network expansion we need to do based on that. So it kind of is aligned to whatever are our sort of growth aspirations.

Thank you. We'll take our next question from the line of Hardik Shah from Goldman Sachs. Please go ahead.

Hi, this is Rahul here. Am I audible?

Yes.

Yeah, good evening, everyone. Actually, I've got two, three questions. Number one, can I just get your thoughts on the corporate dynamics, particularly in mortgages and deposits? Because clearly, the systemic growth has not been very strong in mortgages. And of course, you know, some pricing pressure here anecdotally has started coming through.

So what are your experience in that?

So on mortgages, yes, there is, I mean, it has always, Rahul, as you know, been a competitive segment and it continues to be so. So we do have players offering in particular segments that they are targeting pretty competitive rates. But we are sort of, you know, calibrating our response and, you know, trying to make sure that we optimize across the portfolio. But Overall, I think on loan pricing, there is a reasonable level of competitive intensity across the system.

Got it.

And the reason I was asking is, of course, credit card has been extremely benign. So do we choose to pass on some of that and strengthen the position in the secured portfolio because it's really unsecured?

portfolio is fine, but RBI has found it out. Everybody across the board has been saying that the portfolios are fine, but when we speak to some of the bureaus, they do tell us that there's been some downgrades in super prime, prime customers too. So just trying to get some head around as to how this likely will play out. So while it is looking pretty strong at this point of time, but what RBI is saying, what the bureaus are saying in the prime, super prime customers,

is there a need for you to increase your secured portfolio at some stage and therefore offer some of the pricing, you know, out there? Just trying to understand that, how it evolves. I don't think it is like that. So if you look at, you know, our secured retail portfolios, those are going pretty well. Mortgage is growing at 16, 17%. Auto is growing above 20%. Commercial vehicles, which was, you know, flat or growing just about in single digits for a long time, This quarter, the year-on-year growth is more like 14%. Our SME and business banking portfolios are growing at the 30% kind of level. So I think we have pretty broad-based growth and certainly we are not reliant on personal loans for growth. It's still less than 10% of our loan book. Credit cards, of course, we would want to continue to expand our franchise. Personal loans, we will... continue to monitor the portfolio and you know whatever comes through our credit filters in the customer segments that we are comfortable with we will take that in any case we are not particularly you know targeting you know a certain level of loan growth if credit conditions are not so favorable in our view and we need to prune it by a percentage point or two that's fine but there is no you know Currently, in that sense, softness in the secured loan categories, I know.

I request you to join back the queue for follow-up questions. We move on to our next question from the line of Kunal Shah from Citigroup. Please go ahead.

Yes, thanks for the question.

So, firstly, in terms of the international names, they have gone up by almost like 56-odd business points. Obviously, the portfolio is quite small now, but eventually when we look at it, is this a steady state in the overall or maybe we see further improvement in the names as well looking at the rates globally?

I think it is not particularly consequential, Kunal. That's a small portfolio. Incrementally, mainly what we are doing there is a short-term working capital, trade finance kind of portfolio. So we do that basis, you know, the funding that is available and, you know, the rates that are off, wherever we see that the lending rates give us, you know, appropriate some level of spread over that funding, particularly for some of the Indian corporates, etc. That market also, the Indian banks tend to be quite competitive. So, in any case, in the overall scheme of things, it doesn't really make much of a difference.

Yeah. And secondly, in terms of the unsecured, so if you look at the retail slippage run rate, which is there, any change in mix between the secured and unsecured incrementally, And is there a need to increase the rates in any segment of the personal loan portfolio, either maybe due to the industry delinquency levels or what we are seeing? And is there enough, or maybe if you talk about the competitive intensity, even within the PL, is that giving us any kind of leverage to increase the rates if need be, or it's extremely competitive from the other players?

I would want to increase rates for every loan category, every customer given, because as I said, the loan markets across all segments for, I think, you know, the quality of customers that most banks are prioritizing from corporate through SME to retail, the rate environment is, the pricing environment is competitive. As far as the personal loans are concerned, I mean, you are aware that loans rates in that segment have come off meaningfully across, you know, over the last few years, I guess, driven by the favorable credit experience and driven by the entry of, you know, new players who were not perhaps present in those segments earlier. So it continues to be a profitable portfolio. So we will see it as we go along, you know, and As long as we are able to get volumes in our chosen customer segments, we will keep looking at it. Otherwise, we can always prune it if required.

Thank you. We have our next question from the line of Manish Shukla from Axis Capital. Please go ahead.

Thank you for the opportunity.

My first question, Anand, is slide 54. There is a five basis points QOQ declining yield on loans when clipages have declined quarter on quarter.

What kind of explains that?

So largely, I think it's basis, you know, the computational conventions because the second quarter has one day more than the first quarter. So the interest computation conventions lead to some decline, but that's mathematical. It will be stable in Q2 and then reverse in Q4. Okay. As I said, it may not have made too much impact in this quarter in terms of from a yield on advances perspective, but there is significant pricing competition in the market as well. I appreciate that, Ananya, but the fact that we are still in an elevated interest rate environment, I would not have expected it to go down, especially when the prices are lower. So that's where the question came from. The 4-5 basis points can always happen either way.

Going back to your comment that full year margins should largely be similar to last year, Last year we were at 4.5.

First half this year is 4.65. That implies a 4.35 for second half.

Is that the way to look at it?

We can't give a specific number. As I said, we do expect margins to moderate further from the Q2 level and hopefully the extent of moderation could be somewhat lower and we would be at a you know, similar level of margins as we were last year. And that is what I think they've been consistently saying for the last couple of quarters. So we are just maintaining the same thing.

Thank you. We have our next question from the line of Samir Pisse from JM Financial. Please go ahead.

Yeah, hi. Thanks for the opportunity. Just a quick question on the mortgage portfolio. So if I see the presentation a few quarters back, say a year back, the average ticket size on the portfolio was roughly 25 lakhs. It's right now at 35 lakhs. Does the sizable increase look okay or is there something more to read into it? I don't recall the 25 lakh number. I think it was always 30-odd, but yeah, there would have been some increase. in the average ticket size, but looks okay. Okay, because say 1Q23 shows 2.5 million as average ticket size of the home loan, while it's 3.5 million right now. So just wanted to pick your brains on the same. Finally, I will follow up offline. Thank you.

Thank you. We have our next question from the line of Ashish Sharma from Enam AMC. Please go ahead.

Yeah, hi, thanks for the opportunity. This is something that in this margin thing is, would you be able to sort of differentiate in terms of impact, which is because of ICC, incremental cash reserve ratio. So, so the name compression, we've seen something which will not flow through in the next quarter. Any comment on that?

So ICC would have been a small impact. As I mentioned, you know, if you look at the sequential impact, there would have been some two, three basis point impact of the absence of interest on income tax refund. The ICRR would have had maybe one or a couple of basis points impact. But the larger impact would have, you know, the day count would have had some impact. But the larger impact would have been, you know, the repricing of deposits that we have spoken of earlier. Okay.

And second question would be on the personal loan thing. So, given that our growth rate which we are comfortable at this moment. So, in terms of what regulator is saying. So, I mean, I think they also have clarified the issue is on the growth part. So, I mean, from a delinquency perspective, we aren't seeing anything. I mean, I think you already sort of alluded a little bit on the first question. So, Just a sneak from confirming them.

I didn't tell you a little bit. I alluded considerably. As I said, we are comfortable with our portfolio. We believe we have underwritten it well. The delinquency levels on the portfolio are not disturbing us. But we will continue to monitor it as we go along. As I said, over the last few quarters, we have been... You know, in any case, not present at all. You know, our presence in the smaller ticket sizes overall of the portfolio is marginal. And over the last few quarters, we would have been migrating more towards the upper segment. So no concerns on this portfolio that we have. As we, you know, we will continue to monitor the growth, the credit quality and growth trends for our portfolio, as well as whatever system data we take and calibrate if we need to.

Thank you. We have our next question from the line of Param Subramanian from Nomura. Please go ahead.

Mr. Subramanian, please unmute your line.

Hello. Yeah.

Yes.

Yeah. Thanks for the opportunity. So first question again on the unsecured piece. So we're continuing to see the strong growth, at least for us. If you could highlight, you know, Explain the, you know, the disconnect that we are seeing perhaps between the broader trends in consumption in discretionary spends as well as, you know, at least for yourself, the strong growth that we are seeing in the unsecured piece, you know, personal loans, credit cards, etc. Some of the use cases, you know, that have increased over the, you know, the last few years. If you could highlight some of that which is driving this strong growth that we are seeing. That's the first question.

So, I wouldn't really want to talk more about the unsecured piece. I don't think that our For example, market share in credit card spends has increased dramatically, so there is enough growth happening across the system in these categories, and we are not particularly divergent. So no further comment that I have to make on that.

Okay, fair enough. And secondly, on this, you know, this recent fine by RBI on, you know, certain, basically on the cross-selling of non-financial products and, you know, one or two other reasons, you could, you know, speak a little bit about that because, you know, when it had happened for the peer banks, especially on this cross-sell of non-financial products, it had been taken pretty seriously. So any comments there would be, you know, useful. Yeah, that's it from me. Thanks.

I think, you know, as you're aware, the regulator conducts, you know, inspections and continuous examination of the activities of banks. It's a heavily regulated activity. And while we try and maintain as best levels of compliance we can from time to time, in any bank there are missiles for which, you know, action can be taken and and penalties can be imposed as is stated in the public release. These relate to 2020 and 2021. And we have taken the necessary corrective action as we have said in our release. So nothing more to add onto that.

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to management for closing comments. Over to you.

Thank you very much for taking time out on a Saturday evening and have a good weekend.

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