ICICI Bank Limited

Ladies and gentlemen, good day and welcome to ICICI Bank Limited Q3 F524 earnings conference call. As a reminder, all participant lines will be 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 call, please signal an operator by pressing star then zero on your touched on 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 Q3 of financial year 24. Joining us today on this call are Sandeep Batra, Rakesh, Ajay, Anandia, and Abhinav. The Indian economy continues to remain resilient with upward revision in the GDP growth estimate, so financially at 24 by RBI, reflecting the consistent actions and initiatives of the policymakers. As the liquidity and interest rate environment evolves, we would continue to monitor the developments globally. At ICICI 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 opportunities across ecosystems and micromarkets. We continue to operate within a strategic framework to strengthen our franchise and expand our technology and digital offerings. Maintaining high standards of governance, deepening coverage, and enhancing delivery capabilities are our focus areas for risk-calibrated profitable growth. The profit before tax, excluding treasury, grew by 23.4% year-on-year to 135.51 billion rupees in this quarter. The core operating profit increased by 10.3% year-on-year to 146.01 billion rupees in this quarter. The profit after tax grew by 23.6% year-on-year to 102.72 billion rupees in this quarter. Total deposits grew by 18.7% year-on-year and 2.9% sequentially at December 31, 2023. Term deposits increased by 31.2% year-on-year and 4.9% sequentially at December 31, 2023. During the quarter, the average current and savings account deposit grew by 5.3% year-on-year and 0.2% sequentially. The bank's average liquidity coverage ratio for the quarter was about 121%. The domestic loan portfolio grew by 18.8% year on year and 3.8% sequentially at December 31, 2023. The retail loan portfolio grew by 21.4% year on year and 4.5% sequentially. Including non-fund based outstanding, the retail portfolio was 46.4% of the total portfolio. The business banking portfolio grew by 31.9% year-on-year and 6.5% sequentially. The SME portfolio grew by 27.5% year-on-year and 6.7% sequentially. The rural portfolio grew by 18.2% year-on-year and 4.6% sequentially. The domestic corporate portfolio grew by 13.3% year-on-year and 2.9% sequentially, driven by growth across well-rated financial, and non-financial corporates. The overall loan portfolio, including the international branches portfolio, grew by 18.5% year-on-year and 3.9% sequentially at December 31, 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-sell. We have shared some details on the technology and digital offerings in slides 15 to 26 of the investor presentation. The net NPR ratio was 0.44% at December 31, 2023, compared to 0.43% at September 30, 2023, and 0.55% at December 31, 2022. During the quarter, there were net additions of 3.63 billion rupees to gross NPAs, excluding write-off and sales. The total provisions during the quarter were 10.5 billion rupees, or 7.2% of core operating profit, and 0.36% of average advances. The provisioning coverage ratio on NPAs was 80.7% at December 31, 2023. In addition, the bank continues to hold contingency provision of Rs. 131 billion or about 1.1% of total loans at December 31, 2023. The capital position of the bank continued to be strong with a CET1 ratio of 16.03%, AR1 ratio of 16.03%, and total capital adequacy of 16.70% at December 31, 2023, including profits for the nine months ended December 31, 2023. This includes the impact of recent regulatory guidelines on increasing the risk base on consumer loans and credit to NBFCs. Looking ahead, we see many opportunities to drive this calibrated profitable growth. We believe our focus on Customer 360, extensive franchise and collaborations 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'll continue to make investments in technology, people, distribution, and building a brand. We'll 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 Anand here.

Thank you, Sandeep. I will talk about loan growth, credit quality, P&L details, growth in digital offering, portfolio trends, and performance of subsidiaries. Starting with loan growth, Sandeep covered the loan growth across various segments. Coming to the growth across retail products, the mortgage portfolio grew by 15.9% year on year and 3.7% sequentially. Auto loans grew by 22.5% year on year and 4.5% sequentially. The commercial vehicles and equipment portfolio grew by 14.8% year on year and 3.3% sequentially. Personal loans grew by 37.3% year on year and 6.4% sequentially compared to 40.4% year-on-year and 10.2% sequentially at September 30, 2023. The bank worked on increasing pricing, further refining credit parameters and optimizing sourcing costs, resulting in lower disbursements of personal loans during the quarter as compared to the previous quarter. The credit card portfolio grew by 39.5% year-on-year and 11.5% sequentially The personal loans and credit card portfolio were 9.4% and 4.1% of the overall loan book, respectively, at December 31, 2023. The overseas loan portfolio in U.S. dollar terms increased by 9.8% year-on-year at December 31, 2023. The overseas loan portfolio was about 3.4% of the overall loan book. The non-India linked corporate portfolio declined by 30.4% or about $116 million on a year-on-year basis. Of the overseas corporate portfolio, about 92% comprises Indian corporates, 4% is overseas corporates with Indian 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 3.63 billion to gross NPAs in the current quarter compared to 1.16 billion rupees in the previous quarter. The net additions to gross NPAs were 23.02 billion rupees in the retail, rural and business banking portfolios and there were net deletions of gross NPAs of 19.39 billion rupees in the corporate and SME portfolio. The gross NPA additions were 57.14 billion rupees in the current quarter compared to 46.87 billion rupees in the previous quarter. The coveries and upgrades from gross NPAs, excluding write-offs and sales, were 53.51 billion rupees in the current quarter compared to 45.71 billion rupees in the previous quarter. The gross NPA additions from the retail, rural, and business banking portfolio were 4.82 billion rupees in the current quarter compared to 43.64 billion rupees in the previous quarter. There were gross NPA additions of about 6.17 billion rupees from the Kisan credit card portfolio in the current quarter. We typically see higher NPA additions from the Kisan credit card portfolio in the first and third quarter of a fiscal year. Recoveries and upgrades from the retail, rural and business banking portfolio were 31.8 billion rupees compared to 30.19 billion rupees in the previous quarter. The gross NPA additions from the corporate and SME portfolio were 2.32 billion rupees compared to 3.23 billion rupees in the previous quarter. Recoveries and upgrades from the corporate and SME portfolio were 21.71 billion rupees compared to 15.52 billion rupees in the previous quarter. The gross NPAs written off during the quarter was 13.89 billion rupees. There was sale of NPAs worth 0.36 billion rupees in the current quarter compared to 1.79 billion rupees in the previous quarter. The sale of NPAs includes 0.29 billion rupees in cash and 0.07 billion rupees 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 36.94 billion rupees as of December 31, 2023, compared to 38.86 billion rupees as of September 30, 2023. The bank holds provisions amounting to 20.61 billion rupees against this non-fund-based outstanding. The total fund-based outstanding to all standard borrowers under resolution as per various guidelines declined to 33.18 billion rupees or about 0.3% of the total loan portfolio at December 31, 2023 from 35.36 billion rupees at September 30, 2023. Of the total fund-based outstanding under resolution at December 31, 2023, 27.82 billion rupees was from the retail, rural and business banking portfolio and 5.36 billion rupees was from the corporate and SME portfolio. The bank holds provisions of 10.32 billion rupees 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 13.4% year-on-year to 186.78 billion rupees. The net interest margin was 4.43% in this quarter compared to 4.53% in the previous quarter and 4.65% in Q3 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. The impact of interest on income tax refund on net interest margin was four basis points in Q3 of this year compared to nil in the previous quarter and in Q3 of last year. The domestic name was at 4.52% this quarter compared to 4.61% in the previous quarter and 4.79% in Q3 of last year. The cost of deposits was 4.72% in this quarter compared to 4.53% in the previous quarter. Of the total domestic loans, interest rates on 49% are linked to the repo rate, 2% to other external benchmarks, and 18% to NCLR and other older benchmarks. The balance 31% of loans have fixed interest rates. Non-interest income excluding treasury grew by 19.8% year on year to 59.75 billion rupees in Q3 of 2024. Fee income increased by 19.4% year-on-year to 53.13 billion rupees in this quarter. Fees from retail, rural, business banking and SME customers constituted about 79% of the total fees in this quarter. Dividend income from subsidiaries and associates was 6.5 billion rupees in this quarter compared to 5.16 billion rupees in Q3 of last year. The year-on-year increase in dividend income was primarily due to higher interim dividends from ICICI Securities, ICICI Prudential Asset Management, and ICICI Securities Primary Dealership. On costs, the bank's operating expenses increased by 22.3% year-on-year in this quarter. Employee expenses increased by 30.5% year-on-year in this quarter. Respecting mainly the increase in the employee base from the second half of fiscal 2023 onwards, the bank had about 141,000 employees at December 31st, 2023. The number of employees has increased by about 23,600 in the last 12 months and about 1,700 in the current quarter. Non-employee expenses increased by 17.8% year on year in this quarter, primarily due to retail business related and technology expenses. Our branch count has increased by 123 in Q3 of 2024, and we had 6,371 branches as of December 31, 2023. The technology expenses were about 9% of our operating expenses in the nine months ended December 31, 2023. The core operating profit increased by 10.3% year on year to 146.01 billion rupees in this quarter, excluding dividend income from subsidiaries and associates. The core operating profit grew by 9.7% year on year. The total provisions during the quarter were 10.5 billion rupees or 7.2% of core operating profit and 0.36% of average advances compared to 5.83 billion rupees in the previous quarter. The provision during the quarter included the impact of 6.27 billion rupees pursuant to the recent RBI circular on investments in alternative investment funds. The provisioning coverage on NPAs was 80.7% as of December 31, 2023. In addition, we hold 10.32 billion rupees of provisions on borrowers under resolution. Further, the bank continues to hold contingency provision of 131 billion rupees as of December 31st, 2023. At the end of December, the total provisions other than specific provisions on fund-based outstanding to borrowers classified as non-performing were 230.25 billion rupees or 2% of loan. The profit before tax excluding treasury grew by 23.4% year-on-year to 135.51 billion rupees in Q3 of this year. There was a treasury gain of 1.23 billion rupees in Q3 compared to 0.36 billion rupees in Q3 of the previous year. The tax expense was 34.02 billion rupees in this quarter compared to 27.02 billion rupees in the corresponding quarter last year. The profit after tax grew by 23.6% year-on-year to 102.72 billion rupees in this quarter. Growth in digital offerings, 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 platforms by our customers. There have been more than 10 million activations of iMobile Pay by non-ICICI bank account holders at the end of December 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, interest 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 ecosystem. 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 import transaction lifecycle with solutions providing frictionless experience to the client and simplify customer journeys. About 72% of trade transactions were done digitally in Q3 of 2024. The volume of transactions through the trade online platform in Q3 of 2024 grew by 26.2% year-on-year. We have further simplified cross-border remittance journeys with new enhancements. Smart IRM is a multi-party cross-border inward remittance solution with virtual account architecture, enhanced security features, and remittances reconciliation with peer identification. Smart ORM enables pre-vetting of output remittance transactions to ensure error-free submission before booking foreign exchange deals. iLend, the retail lending platform currently enabled for mortgages, is being upgraded on an ongoing basis with new features such as integration with account aggregator, opening of instant paperless savings bank account for newly onboarded mortgage customers, and instant property valuation reports for select developers to provide enhanced customer experience and serve the customer's 360 degree needs digitally. 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 BB and below was 58.53 billion rupees at December 31, 2023, compared to 47.89 billion rupees at September 30, 2023 and 55.81 billion rupees at December 31, 2022. This portfolio is about 0.5% of our advances at December 31, 2023. Other than two accounts, the maximum single borrower outstanding in the WD and below portfolio was less than 5 billion rupees at December 31, 2023. At December 31, 2023, we held provisions of 9.25 billion rupees on the WB and below portfolio compared to 8.17 billion rupees at September 30, 2023. This includes provisions held against borrowers under resolution included in this portfolio. The total outstanding to NBFCs and HFCs was 784.84 billion rupees at December 31, 2023, compared to 837.49 billion rupees at September 30th, 2023. The total outstanding loans to NDFCs and HFCs were about 6.8% of our advances at December 31, 2023. The builder portfolio, including construction finance, lease rental discounting, term loans, and working capital was 456.85 billion rupees at December 31, 2023, compared to 430.58 billion rupees at September 30th, 2023. The builder portfolio is about 4% of our total loan portfolio. Our portfolio largely comprises well-established builders, and this is also reflected in the sequential increase in the portfolio. About 3% of the builder portfolio at December 31, 2023 was either rated WB and below internally or was classified as non-performing. compared to 3.5% at September 30th, 2023. Moving on to the consolidated results, the consolidated profit after tax grew by 25.7% year-on-year to 110.53 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 annualized premium equivalent of ICICI life was 54.3 billion rupees in nine months ended December 31, 2023 compared to 53.41 billion rupees in nine months of last year. The value of new business margin was 26.7% in nine months ended December 31, 2023 compared to 32% in nine months of last year and 32% in fiscal 2023. The value of new business was 14.51 billion rupees in the nine months ended December 31, 2023 compared to 17.1 billion rupees in the nine months of last year. The profit after tax of ICICI life was 6.79 billion rupees in nine months ended December 31, 2023 compared to 5.76 billion rupees in nine months of last year and 2.27 billion rupees in Q3 of 2024 compared to 2.21 billion rupees in Q3 of 2023. The growth direct premium income of ICICI General was 62.3 billion rupees in this quarter compared to 54.93 billion rupees in the same quarter last year. The combined ratio stood at 103.6% in Q3 of 2024 compared to 104.4% in Q3 of 2023. Excluding the impact of CAT losses, the combined ratio was 102.3% in this quarter. The profit after tax was 4.31 billion rupees in this quarter compared to 3.53 billion rupees in Q3 last year. The profit after tax of ICICI AMC as per INDS was 5.46 billion rupees in this quarter compared to 4.20 billion rupees in Q3 of last year. The profit after tax of ICICI securities as per NDIS on a consolidated basis was 4.66 billion rupees in this quarter compared to 2.81 billion rupees in Q3 of last year. ICICI Bank Canada had a profit after tax of 15.9 million Canadian dollars in this quarter compared to 11.5 million Canadian dollars in Q3 last year. ICICI Bank UK had a profit after tax of 6.7 million US dollars this quarter compared to 3.1 million US dollars in Q3 of last year. As per NDIS, ICICI Home Finance had a profit after tax of 1.86 billion rupees in the current quarter compared to 1.05 billion rupees in Q3 of last year. With this, we conclude our opening remarks and we'll be happy to take your questions.