ICICI Bank Limited

Good day and welcome to ICICI Bank Limited Q4 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 this 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 Q4 of financial year 2024. Joining us today on this call are Sandeep Batra, Rakesh, Ajay, Anandiya, and Abhinay. The Indian economy continues to remain resilient amidst international geopolitical tensions with upward revision in the GDP growth estimate for the first half of financial year 2025 by RBI, reflecting the consistent actions and initiatives of the policymakers. At ICSA 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 our strategic frameworks 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 this calibrated profitable growth. The profit before tax excluding treasury grew by 19.2% year-on-year to 146.02 billion rupees in this quarter and by 28.3% year-on-year to 544.79 billion rupees in financial year 2024. The core operating profit increased by 10.5% year-on-year to Rs. 153.20 billion in this quarter, and by 18.3% year-on-year to Rs. 581.22 billion in financial year 2024. The profit after tax grew by 17.4% year-on-year to Rs. 107.08 billion in this quarter. For the fiscal year 2024, the profit after tax grew by 28.2% year-on-year to Rs. 408 .88 billion rupees. The Board has recommended a dividend of 10 rupees per share for financial year 2024 subject to requisite approvals. Total deposits grew by 19.6% year-on-year and 6% sequentially at March 31, 2024. Term deposits increased by 27.7% year-on-year and 1.6% sequentially at March 31, 2024. During the quarter, the average current and savings account deposits grew by 7% year-on-year and 2.9% sequentially. The bank's average liquidity coverage ratio for the quarter was about 123%. The domestic loan portfolio grew by 16.8% year-on-year and 3.2% sequentially at March 31, 2024. The retail loan portfolio grew by 19.4% year-on-year and 3.7% sequentially. Including non-fund-based outstanding, the retail portfolio was 46.8% of the total portfolio. The business banking portfolio grew by 29.3% year-on-year and 5.7% sequentially. The SME portfolio grew by 24.6% year-on-year and 3.8% sequentially. The rural portfolio grew by 17.2% year-on-year and 4.5% sequentially. The domestic corporate portfolio grew by 10% year-on-year and was flat sequentially. The overall loan portfolio, including the international branches portfolio, grew by 16.2% year-on-year and 2.7% sequentially at March 31, 2024. The net NPA ratio was 0.42% at March 31, 2024 compared to 0.44% at December 31, 2023 and and 0.48% at March 31, 2023. During the quarter, there were net additions of Rs. 12.21 billion to gross NPAs, excluding write-offs and sales. The total provisions during the quarter were Rs. 7.18 billion, or 4.7% of core operating profit and 0.24% of average advances. The provisioning coverage ratio on NPAs was 80.3% at March 31, 2024. In addition, the bank continues to hold contingency provisions of 131 billion rupees or about 1.1% of total loans at March 31, 2024. The capital position of the bank continued to be strong with a CET1 ratio of 15.6% and total capital adequacy ratio of 16.33% at March 31, 2024 after reckoning the impact of proposed dividend. Looking ahead, We see many opportunities to drive risk-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 continue to make investments in technology, people, distribution, and building our brand. Operational resilience is a key area of focus for us, and we continue to work towards enhancing the same. 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 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 Anandiyan.

Thank you, Sunil. I will talk about loan growth, credit quality, P&L details, growth in digital offerings, portfolio trends, and performance of subsidiaries. Starting with loan growth, Sunil covered the loan growth across various segments. Coming to the growth across retail products, the mortgage portfolio grew by 14.9% year-on-year and 3.1% sequentially. Auto loans grew by 19.2% year-on-year and 2.3% sequentially. The commercial vehicles and equipment portfolio grew by 14.1% year-on-year and 3.2% sequentially. Personal loans grew by 32.5% year-on-year and 5% sequentially compared to 37.3% year-on-year and 6.4% sequentially at December 31, 2023. The bank continued to work 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 35.6% year-on-year and 6.5% sequentially. The personal loans and credit card portfolio were 9.9% and 4.3% of the overall loan book, respectively, at March 31, 2024. The overseas loan portfolio in US dollar term declined by 3.4% year-on-year at March 31, 2024. The overseas loan portfolio was about 2.8% of the overall loan book at March 31, 2024. The non-India linked corporate portfolio declined by 10.1% or about US$31 million on a year-on-year basis. Of the overseas corporate portfolio, about 91% comprises Indian corporates. 6% is overseas corporates with Indian linkage, 2% comprises companies owned by NRIs or PIOs and the balance 1% is non-India corporates. Moving to credit quality, there were net additions of 12.21 billion rupees to gross NPAs in the current quarter compared to 3.63 billion rupees in the previous quarter. The sequential increase is primarily due to higher recoveries and upgrades from the corporate and SME portfolio during the previous quarter. The net additions to gross NPAs were 17.11 billion rupees in the retail, rural and business banking portfolios and there were net deletions of gross NPAs of 4.90 billion rupees in the corporate and SME portfolio. The gross NPA additions were 51.39 billion rupees in the current quarter compared to 57.14 billion rupees in the previous quarter. Recoveries and upgrades from gross NPAs, excluding write-offs and sales, were 39.18 billion rupees in the current quarter, compared to 53.51 billion rupees in the previous quarter. The gross additions from the retail, rural, and business banking portfolios were 49.28 billion rupees in the current quarter compared to 54.82 billion rupees in the previous quarter. Recoveries and upgrades from the retail, rural and business banking portfolio were 32.17 billion rupees compared to 31.8 billion rupees in the previous quarter. The gross NPA additions from the corporate and SME portfolio were 2.11 billion rupees compared to 2.32 billion rupees in the previous quarter. Recoveries and upgrades from the corporate and SME portfolio was 7.01 billion rupees compared to 21.71 billion rupees in the previous quarter. The gross NPAs written off during the quarter was 17.07 billion rupees. There was sale of gross NPAs of 3.27 billion rupees in the current quarter compared to 0.36 billion rupees in the previous quarter. The sale of NPAs includes about 0.21 billion rupees in cash and about 0.64 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 36.71 billion rupees at March 31, 2024, compared to 36.94 billion rupees as of December 31, 2023. The bank holds provisions amounting to 20.9 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 30.59 billion rupees or about 0.3% of the total loan portfolio at March 31, 2024. from 33.18 billion rupees at December 31, 2023. Of the total fund-based outstanding under resolution at March 31, 2024, 25.45 billion rupees was from the retail, rural and business banking portfolio and 5.14 billion rupees was from the corporate and SME portfolio. The bank holds provisions of 9.75 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 8.1% year-on-year to 190.93 billion rupees in this quarter. The net interest margin was 4.40% in this quarter compared to 4.43% in the previous quarter and 4.90% in Q4 of last year. The net interest margin was 4.53% in FY2024. The impact of interest on income tax refund on net interest margin was nil in Q4 of this year compared to four basis points in the previous quarter and nil in Q4 of last year. The domestic NIM was 4.49% this quarter compared compared to 4.52% in the previous quarter and 5.02% in Q4 of last year. The cost of deposits was 4.82% in this quarter compared to 4.72% in the previous quarter. Of the total domestic loans, interest rates on 49% of the loans are linked to the repo rate, 2% to other external benchmarks, and 17% to MCLR and other older benchmarks, the balance 32% of loans have fixed interest rates. Non-interest income excluding treasury grew by 15.7% year-on-year to 59.3 billion rupees in Q4 of 2024. Fee income increased by 12.6% year-on-year to 54.36 billion rupees in this quarter. Fees from retail, rural, business banking and SME customers constituted about 77% of the total fees in this quarter. Dividend income from subsidiaries and associates was 4.84 billion rupees in this quarter compared to 2.73 billion rupees in Q4 of last year. The year-on-year increase in dividend income was primarily due to higher dividend from ICICI Bank Canada ICICI Prudential Asset Management Company, and ICICI Securities Primary Dealership. On costs, the bank's operating expenses increased by 8.7% year-on-year in this quarter and 19% year-on-year in FY 2024, excluding the one-off expense of Rs. 3.35 billion in Q4 of last year. on account of change in certain assumptions for provisions for the time and benefit obligations, the bank's operating expenses would have increased by 12.9% year-on-year in this quarter and 20.3% year-on-year in FY 2024. Employee expenses increased by 9.4% year-on-year in this quarter, reflecting mainly the increase in the employee base from fiscal 2023 onwards, and the impact of annual increments and promotions in FY 2024. Excluding the one-off expense in Q4 of 2023, the bank's employee expense would have increased by 21.3% year-on-year in this quarter. The bank had about 141,000 employees at March 31, 2024. The number of employees has increased by about 12,000 in the last 12 months, and by about 180 in the current quarter. Non-employee expenses increased by 8.3% year-on-year in this quarter, primarily due to retail, business-related and other technology expenses. Our branch count has increased by 623 in the last 12 months and by 152 in the current quarter. We had 6,523 branches as of March 31, 2024. The technology expenses were about 9.4% of our operating expenses in the year ended March 31, 2024. As happens every year, the operating expenses would increase in the first quarter on account of annual increments and promotions. The core operating profit increased by 10.5% year-on-year to 153.20 billion rupees in this quarter. The core operating profit increased by 18.3% year-on-year to 581.22 billion rupees in FY2024. The total provisions during the quarter was 7.18 billion rupees or 4.7% of core operating profit and 0.24% of average advances compared to 10.50 billion rupees in the previous quarter. The total provisions during FY2024 decreased by 45.3% year-on-year to 36.43 billion rupees. The provisioning coverage on NPAs was 80.3% as of March 31st, 2024. In addition, we hold 9.75 billion rupees of provisions on borrowers under resolution. Further, the bank continues to hold contingency provision of 131 billion rupees as of March 31st, 2024. At the end of March, the total provisions other than specific provisions on fund-based outstanding to borrowers classified as non-performing were 234.59 billion rupees or 2% of loans. The profit before tax excluding treasury grew by 19.2% year-on-year to 146.02 billion rupees in Q4 of this year and by 28.3% year-on-year to 544.79 billion rupees in FY2024. There was a treasury loss of 2.81 billion rupees in Q4 compared to a loss of 0.4 billion rupees in Q4 of the previous year due to the transfer of negative balance of 3.40 billion rupees in the foreign currency translation reserve related to the bank's offshore banking unit in Mumbai to the profit and loss account in view of the proposed closure of the unit. The tax expense was 36.13 billion rupees in this quarter compared to 30.85 billion rupees in the corresponding quarter last year. The profit after tax grew by 17.4% year on year to 107.08 billion rupees in this quarter. The profit after tax grew by 28.2% year on year to 408.88 billion rupees in FY 2024. We continue to enhance the use of technology in our operations and to provide solutions to customers. iLens, the retail lending platform, is being upgraded on an ongoing basis with personal loans and education loans now integrated in the platform along with mortgages. About 71% of trade transactions were done digitally in FY 2024 and the volume of transactions through the trade online platform grew by 29.2% year on year in FY2024. We have further simplified bank guarantee journeys with new enhancements. Smart BG Assist is a solution to enable digital execution of bank guarantees for creating and validating text, stamping, and digital signature, among others. We have provided details on our retail, business banking, and SME portfolio in slides 24 to 31 of the investor presentation. The loan and non-fund-based outstanding to performing corporate and SME borrowers rated BB and below was 55.28 billion rupees at March 31, 2024 compared to 58.53 billion rupees at March 31, 2023. This portfolio is about 0.47% of our advances at March 31, 2024. Other than two accounts, the maximum single borrower outstanding in this portfolio was less than 5 billion rupees At March 31, 2024, we held provisions of 9.03 billion rupees on this portfolio, compared to 9.25 billion rupees as of December. This includes provisions held against borrowers under resolution included in this portfolio. The total outstanding to NBFCs and HFCs was 770.68 billion rupees at March 31, 2024, compared to 784.84 billion rupees at December 31, 2023. The total outstanding loans to NBFCs and HFCs were about 6.5% of our advances at March 31, 2024. The builder portfolio, including construction finance, lease rental discounting, term loans, and working capital was 482.92 billion rupees at March 31, 2024. compared to 456.85 billion rupees at December 31, 2023. The builder portfolio is about 4.1% 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 2.7% of the builder portfolio at March 31, 2024 was either rated BB and below internally or was classified as non-performing. compared to 3.1% at December 31, 2023. Moving on to the consolidated results, the consolidated profit after tax grew by 18.5% year on year to 116.72 billion rupees in this quarter. The consolidated profit after tax grew by 30% year on year to 442.56 billion rupees in FY 2024. The details of the financial performance of subsidiaries and key associates are covered in slides 39 to 41 and 60 to 65 in the investor presentation. The annualized premium equivalent of ICI Share Life was 90.46 billion rupees in FY2024 compared to 86.4 billion rupees in FY2023. The value of new business was 22.27 billion rupees in FY2024 compared to 27.65 billion rupees in FY2023. And the VNV margin was 24.6% in FY2024 compared to 32% in FY2023. The profit after tax of ICICI Life was 8.52 billion rupees in FY2024 compared to 8.11 billion rupees in FY2023. The profit after tax was 1.74 billion rupees in this quarter compared to 2.35 billion rupees in Q4 of last year. During the quarter, the bank purchased equity shares of ICICI Lombard General Insurance Company through secondary market transactions. Consequently, the company is now a subsidiary of the bank. Gross direct premium income of ICICI General was 247.76 billion rupees in FY2024 compared to 210.25 billion rupees in FY2023. The combined ratios stood at 103.3% in FY2024 compared to 104.5% in FY2023. The profit after tax grew by 11% to 19.19 billion rupees in FY2024 from 17.29 billion rupees in FY2023. Excluding the impact of reversal of tax provision in Q2 of FY2023, the PAT grew by 19.8% in FY2024. The profit after tax was 5.2 billion rupees in this quarter compared to 4.37 billion rupees in Q4 of last year. The profit after tax of ICFA AMC, as per INDES, was 5.29 billion rupees in this quarter compared to 3.85 billion rupees in Q4 of last year. The profit after tax of ICICI securities as per NDIS on a consolidated basis was 5.37 billion rupees in this quarter compared to 2.63 billion rupees in Q4 of last year. ICICI Bank Canada had a profit after tax of 19.9 million Canadian dollars in this quarter compared to 15.6 million Canadian dollars in Q4 of last year. ICICI Bank UK had a profit after tax of 9.5 million US dollars this quarter compared to 5 million US dollars in Q4 of last year. As for India, ICICI Home Finance had a profit after tax of 1.69 billion rupees in the current quarter compared to 0.96 billion rupees in Q4 of last year. With this, we conclude our opening remarks and we will now be happy to take your questions.