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.

Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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 question queue assembles. Participants, you may press star and 1 to ask a question. The first question is from the line of Maruka Jania from Nuama. Please go ahead.

Yeah, hi. I just wanted to know about operating expenses. They've not grown much this quarter. So going ahead, do we expect this kind of growth or any comments on the OPEX bit? That's my first question. And then I have two more.

Yeah, so as far as the operating expenses is concerned, I think if we look at the non-employee expenses, those are really growing in line with the business. And this quarter, of course, the advertising and sales promotion expenses on a year-on-year basis, the growth was on the higher side because of the festive season-related spend, while last year the festive season was, you know, split over Q2 and Q3. So those are really going in line with the business. On the employee side, I think is where we have seen in recent, over the last, I would say couple of years, last maybe six quarters, a pretty high growth because of the increase in the team size of the bank. But as you would have seen in this quarter, the net increase has slowed down. compared to about 10,000, I think 10 to 11,000 in the first half, we were at about 1,700 in Q3. So we would, I think, not be probably looking at adding the kind of headcount at the same pace. So that will play through into the operating expenses as we go ahead.

Okay, so the headcount additions now will be moderate only. This is not just a one-off.

they will not be at the pace that we have seen over the last, you know, over the previous four to five quarters, yeah.

Got it. And just in terms of LDR, there's a lot of discussion around it already. You are okay, but do you have any path on LDR? I mean, would you like to retain LDR at current levels or bring it down? Any views on that?

So the way we look at, you know, the balance sheet and the funding structure, Maruk, is that we look at, I would say, three ratios. Certainly the CD ratio or the LDR, the LCR, which is a measure of, you know, current liquidity, and the NSFR or the net stable funding ratio. So the LCR and the NSFR are a little more granular in the sense that they do take into account the nature of assets and liabilities. in terms of product, counterparty, and tenor. So we look at all three. If we look at the LCR and the NSFR, we are well above the regulatory minimum. We are at about 120%. On the credit to deposit ratio, I think a couple of things. One, typically a bank with a higher level of capital would tend to have also a higher, you know, CD ratio mathematically. When we look at our CD ratio, we also look at the overseas operations and the domestic balance sheets separately because they are managed separately and, you know, in the overseas operations, we have relatively limited deposit-taking capability. Of course, now the impact is much lower than it used to be, say, seven, eight years ago because that portfolio has come down to less than 5% of our overall portfolio, but it does have a percentage point or two of impact. As far as the bulk of the balance sheet, which is the domestic balance sheet, of course, deposits are our primary source of funding, along with capital. In addition to that, we always try to optimize between the wholesale deposit taking and the more stable, you know, wholesale sources like refinance and bonds. So in general, if you look at it over a longer period of time on the domestic balance sheet, our CD ratio has kind of hovered around the mid-80s, other than, you know, periods of very high liquidity and very low loan growth like the pandemic. So that is kind of the way in which we manage it, looking at all these three ratios on an ongoing basis.

Assuming that rates will remain stable, would you say that your margins have now bottomed out and this would be the level at or is deposit competition too strong to say that, assuming no change in policy rates?

So on the deposit side, I think the retail deposit rates have remained stable for a fair period of time now, at least the peak rate, although I think at various points of time, banks have moved up and down in certain other buckets. Of course, in Q3, I think given the overall liquidity environment, we did see some amount of hardening of the wholesale deposit rates. which is reflected in the CD rates and also the rates being quoted for high value kind of deposits. I think if you look at even currently systemic liquidity is running at a negative, so I guess that scenario will stay for some time until maybe a monetary policy starts to turn a little more accommodative. That's on the deposit rate side. From a margin perspective, I guess, we have said in the past that we expect the full year margin this year to be at a similar level than last year. And that implies some further margin compression in Q4, but it should be much lower than what we have seen. I mean, Q3 was already much lower than Q2. and it should be lower than what we have seen in Q3.

Okay, thanks so much. Thanks a lot.

Thank you. A request to all the participants, please restrict to two questions per participant. Next question is from the line of Abhishek Muraka from HSBC. Please go ahead.

Hi, thanks for taking my question. So two questions, one on asset quality. So if I see your slippages in retail, rural, business banking, that has gone up, even if I knock off the Kisan credit card slippages. So can you explain where that has come from? And similarly on the recoveries and upgrades in corporate and SME, is there any kind of one-off or what's happened there? That also improved, actually, so.

Yeah, so I think as far as the retail side is concerned, nothing specific to call out. I think it's really spread across products and if you look at the delta relative to the size of the portfolio, it is not very high, not particularly meaningful. So as we have been saying, we would expect, you know, the net additions and both the gross and net additions on the retail side to gradually normalize upwards, both as the portfolio grows and seasons. On the corporate side, we did have one or two larger sort of upgrades this quarter. But in a way, the benefit in provisioning terms of that was kind of offset by the provisioning on the AIF. So investments. So taking it all together, if we look at kind of the credit costs, if we look at the provisioning for the quarter and eliminate maybe a very chunky corporate upgrade, eliminate the AIF provisioning and really try and look at an adjusted number, it would be still below kind of maybe 50 bits of loans and about 10 bits of the PPOP. So that is the context in which we would look at the NPL formation and recoveries from our planning and risk appetite perspective.

Yeah, and sort of extending that, does it mean that even in the next few quarters we should continue to see trade costs in that range because you have enough PCR anyway and that can come down a little bit So, trade costs can remain low for let's say next three to four quarters. Is that a fair conclusion?

We don't really give forward looking thing, but I would say that I don't see anything imminently that would cause it to spike up. There will be some gradual normalization upwards.

Got it. And my second question is just on cost of deposits. maybe your incremental cost of TDs or incremental cost of deposits, anything that you may have handy, that would be helpful.

No, we don't publish those numbers, Abhishek.

Okay. Got it. Got it. Got it. Thank you and all the best.

Thank you. Next question is from from IIFL. Please go ahead.

Thank you for taking the question. I just have one question on cost of deposits. If you could just qualitatively comment as to the repricing on the existing book of TRE, would you say that by 4Q most of it would already be repriced into the P&L or it could flow into 1Q as well?

There could be some flow into 1Q as well, but I think, you know, Most of it should be done in Q4. There could be some flow into 1Q as well.

And this quarter increased 20-bit QOQ. So in terms of the quantum, should it be kind of slowing down from the current conduct?

I would guess so.

Okay, fine. Thank you, sir. That's all.

Thank you. Next question is from the line of Kunal Shah from SETI Group. Please go ahead.

Thanks for taking the question. So the question is on yield. When we look at it, in fact, the rise in some of the high yielding portfolio, sequential growth has been strong. And we would have increased the rates even suppose the tweaking of the risk rates by RBI, but still overall yield on advances are down. So just want to understand on that basis. And this entire NBFC rundown which has been there, is it like we tried to pass it on in terms of the rates and then there were repayments or we have been conservative post the risk withstands from RBI?

So on the first question, I think part of the impact on the advances yield is because of the addition to the KCC NPL. So basically what happens is that you kind of have to you do recognize a year's worth of interest income. So that does impact the yield on advances. In other parts, one, if you look at the share of the high-yielding portfolio, it is still not that high and we have seen decent growth in mortgages and auto and so on. and also on the corporate side, which continue to be pretty competitive. So I would say the yields have been broadly stable, and to some extent, any mixed benefit that could have come has been offset by the non-accrual on the KCC loan. The second question was on the NBFC exposure. I mean, I guess that We keep looking at the various exposures from a risk-reward basis. I mean, we did not have any credit concern on these exposures, but they were finely-priced exposures, and we have, therefore, a couple of borrowers prepaid, and we were quite okay with that.

And how much rate pass-on was there in MDFC?

It would really depend on the client. I don't think there is any rule of thumb in that sense. As you will see, the book itself, I mean, even adjusting for this prepayment, you know, has not really grown much during the quarter. So there would not have been any very large lending that would have happened afresh.

Okay. Okay. Yeah. Thank you.

Thank you. Next question is from Motila Loswal. Please go ahead.

Hi, thanks for the opportunity and congrats on the results.

So one question again around the ease and as to really how do you look at the competitive intensity in your products and even in the mortgage, are you seeing that lenders cutting down on space because the record rates have been unchanged but are the rates like seeing some moderation there and so basically and going forward, How do you see the unsecured loan mix also moving for the bank because until now it has been going very steady and some other private banks are indicating that they'll continue to drive that up. So what will be our approach on unsecured loan mix? So these two questions.

So I think as far as the competitive intensity in rates, that is kind of continuing. I mean, we'll have to see if things change in but certainly in Q3 across most of the products, mortgages and corporate lending, we continue to see a fair degree of competitive intensity. The way we look at it is to try and be disciplined in our pricing and to kind of look at the customer and see what is the total relationship value that we can have with the client and their ecosystem and then take a call on the loan pricing. I mean, we in general are not particularly focused on loan growth. So in that sense, we are able to calibrate our pricing decisions. I'm sorry, what was your second question?

So just related to this, has your aggregate mortgage portfolio E come down over the second quarter?

No, it could not have because the incremental business takes time to feed through. You had another question after the yield competitiveness, I'm sorry I missed it. That was like on the unsecured loan mix. On the unsecured loan mix, I think as far as personal loans is concerned, as we have mentioned, we have taken some steps in terms of refining the credit parameters. Basically, in any portfolio, you have certain cohorts which contribute more to the delinquencies and you try to figure out what are the origination markers of those cohorts and then cut origination in those particular segments, which is what we've done. And we've also, you know, rationalized, for example, sourcing payouts, as well as we moved up pricing on personal loans by maybe 25 basis points. So I would expect that, you know, growth in that portfolio may continue to moderate a little bit, even from a current level. But from an overall P&L impact, I would think that it should not have much of a P&L impact because in any product or business, it's not just about the yield and the margin. Hopefully, if we are managing the sourcing cost well, and that will contribute to profitability, and hopefully if we are reducing in the right cohorts, that will contribute to credit costs, you know, being better as well. Right.

And around credit costs, any comments on that?

No, I think I spoke earlier in relation to your question. I mean, I do agree that there is some noise in that line item this quarter because of the AIF and the large corporate recovery. But if one kind of tries to Moving that out, as I said, we are, would be at about maybe 50 bits of loans and, you know, 10% of the PPOP. So it is quite well contained and sort of within our risk appetite.

Okay, sure.

Thanks, Amit. Thank you so much, Amit, for all of this.

Thank you. Next question is from the line of MB Mahesh from Kotex Securities. Please go ahead.

Amit, yes. Yes. Anindya, just two questions. One is on flight 34. There has been a drop in the AA kind of rated portfolio and then increase in the BBB part of the portfolio. Would you stand to explain that?

Yeah, so actually, Mahesh, I think two things largely explain that. One is that, you know, the reduction in the NDSC portfolio, you know, most of our NDSC portfolio is well-rated, rated A and above. So as a result of the reduction in that portfolio, we would have seen some reduction in the outstanding in the higher rated category. And the second factor was that we had one of the larger upgrades of NPLs that we had, you know, got upgraded, got rated in the triple D family on upgrade. So it's one... One is a sort of, I would say, positive movement from a capital and profitability perspective. The other is a positive movement from a credit perspective. But, yeah, because of those two, the mix does look slightly different.

Okay. Second question, is there an interest versus an impact on account of the KCC platform, which is meaningful?

We're not really given a number. I mean, that's part of the sort of margin happens every first and third quarter. We've not called out that number separately.

I think it's the line of thought. On secured loans, are you saying that things have started to worsen or you say that it is at the margin remaining more or less the same?

So I think it is remaining more or less the same. I mean, we have been looking at that portfolio very closely. As I said, you know, in any portfolio at any point of time, there's always a bottom cohort which one could sort of do without. And given the overall commentary on unsecured and the increase in capital charge and so on, we have, you know, tried to sort of trim that part of the portfolio.

Thank you.

Thank you. Next question is from the line of Chintan Joshi from Autonomous. Please go ahead.

Thank you. Sorry, can I just follow up on that unsecured point you made? So you mentioned that some cohorts are seeing different delinquency trends on unsecured. If you were to do cohorts by time of origination, you know, is the recent kind of origination seeing different delinquency trends? So not breaking cohort by quality but by time. Are you seeing any difference? I think the markers we look at are more in terms of the characteristics of the customer and how try and find wherever if we are able to look at delinquency in terms of the characteristics of the customer and see what kind of loan borrowers are contributing more to delinquency, not to do with time as such. And if you do look at time, is it similar trends so far as say a loan given at the end of COVID versus kind of in the last six months? I don't think we have really commented on that. Okay. The other question I had was on cost of deposits. It increased 19 bps quarter on quarter. You know, you are indicating some more NIM pressure, but I doubt, you know, you're referring, like if I think about the exit run rate, if I keep NIMs flat on a F524 versus F523 basis, then it would be kind of 4.2. But I don't think that's what you're trying to imply. So if I break that down a little bit more, Could you give some color on how much more repricing is left on the deposit side that we can factor in? We've not given really how much more repricing on the deposit side. I think what we said is that there will be some more increase in the cost of deposits in Q4 and possibly a little bit into Q1 as well. It should be less than what we have seen and the NIM impact should also be less than what we have seen in this quarter. Okay, and a final quick one. Any indication on branch expansion number for FY23? No, not really. I think this quarter we added about 123 branches. So, as we have said in the past, we follow a pretty bottom-up approach. I mean, it's the people closest to the market who kind of recommend branch openings and then we do some assessment and open it. So we are not holding back on any branch opening, but we don't have a particular branch opening target either. Thank you.

Thank you. Next question is from Namora. Please go ahead.

Hi, thanks for taking my question. So on the average CASA ratio, so if you look at it quarter on quarter, we are not seeing any let up in the pace at which this is moderating. So any indication on where you see this say bottom out is starting to pick up or do we have to wait for a much more loser liquidity environment like you were alluding to earlier? Yeah.

So Param, I think this is something you're seeing to varying degrees across the system, across all banks. I think in our context, we are probably doing relatively better on the current account side. I think our payment products and payment platforms are contributing to that, to higher float balances. On the SAR side, I think it's much more a function of interest rates and consumption. So I guess, you know, I don't have an answer at the moment. I think we will have to wait for a couple of quarters and, you know, eventually see how things pan out next year as liquidity sort of normalizes in the system.

Got it. And then there's just one more question around this, but how are we geared towards, say, government spend coming back? How much is that, you know, if you can give some direction number as a percentage of our deposits, say, so when that comes back, how does that help you in terms of CASA as well as overall deposits?

We don't. I mean, our focus as far as the government is concerned is more from providing solutions which enable them to manage their cash flow and provide MIS, reconciliation, digital solutions. So yeah, the flow of that money through our system does create float. It is some part of our base, but one caveat is that the government is also becoming progressively more efficient in the way, in terms of the way in which it manages its finances. So, you know, I don't think one can rely too much on ID government money lying with you in CASA form.

Okay. Thanks a lot, Anandya. Thanks a lot.

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

Thank you very much for taking the time on a Saturday evening as always and happy to speak on any other clarification. Thank you.

Thank you very much. On behalf of ICICI Bank Limited, that concludes this conference. Thank you for joining us. You may now disconnect.