ICICI Bank Limited

Ladies and gentlemen, good day and welcome to ICICI Bank's Q1 FY25 earnings conference call. As a reminder, all participant lines will be in the listen-only mode and there will be an option 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 Q1 of financial year 2025. Joining us today on this call are Sandeep Batra, Rakesh, Ajay, Anandya, and Abhinik. The Indian economy continues to remain resilient as reflected by high-frequency indicators, showing growth momentum such as expansion in manufacturing and services PMI, higher tax collections, real estate buoyancy, and pickup in rural demand, supported by the consistent actions and initiatives of the policymakers. At ICICI Bank, our strategic focus continues to be on growing profit before tax, excluding treasury through the 360-degree customer-centric approach and by serving opportunities across ecosystems and micro-markets. We continue to operate within our strategic framework to strengthen our franchise. Maintaining high standards of governance, deepening coverage, and enhancing delivery capabilities are focus areas for our risk-calibrated profitable growth. The profit before tax, excluding treasury, grew by 11.8% year-on-year, to 140.80 billion rupees in this quarter. The core operating profit increased by 11% year on year to 154.12 billion rupees in this quarter. The profit after tax grew by 14.6% year on year to 110.59 billion rupees in this quarter. Total deposits grew by 15.1% year on year and 0.9% sequentially at June 30, 2024. Term deposits increased by 19.9% year-on-year and 3.1% sequentially at June 30, 2024. During the quarter, average deposits grew by 17.8% year-on-year and 3.3% sequentially, and average current and savings account deposits grew by 9.7% year-on-year and 5.1% sequentially. The bank's average liquidity coverage ratio for the quarter was about 123%. The domestic loan portfolio grew by 15.9% year on year and 3.3% sequentially at June 30, 2024. The retail loan portfolio grew by 17.1% year on year and 2.4% sequentially. Including non-fund-based outstanding, the retail portfolio was 46.3% of the total portfolio. The business banking portfolio grew by 35.6% year-on-year and 8.9% sequentially. The SME portfolio grew by 23.5% year-on-year and 4% sequentially. The rural portfolio grew by 16.9% year-on-year and 3.4% sequentially. The domestic corporate portfolio grew by 10.3% year on year and 3.1% sequentially. The overall loan portfolio, including the international branches portfolio, grew by 15.7% year on year and 3.3% sequentially at June 30, 2024. The net NPR ratio was 0.43% at June 30, 2024 compared to 0.42% at March 31, 2024, and 0.48% at June 30, 2023. During the quarter, there were net additions of 26.24 billion rupees to gross NPAs, including write-offs and sales, reflecting mainly the seasonal higher additions in the Kisan credit card portfolio and lower recoveries and upgrades compared to previous quarters. The total provisions during the quarter were 13.32 billion rupees or 8.6% of core operating profit and 0.43% of average advances. The provisioning coverage ratio on NPAs was 79.7% at June 30, 2024. In addition, the bank continues to hold contingency provisions of 131 billion rupees or about 1.1% of total loans at June 30, 2024. The capitalization of the bank continues to be strong with the CET1 ratio of 15.92% and total capital adequacy ratio of 16.63% at June 30, 2024, including profits for Q1 of 2025. 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 focus on enhancing delivery systems and simplifying processes, 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 are laying strong emphasis on strengthening our operational resilience for seamless delivery of services to customers. We remain focused on maintaining a strong balance sheet with good 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 Anandya.

Thank you, Kandeep. I will talk about loan growth, credit quality, P&L details, growth in digital offerings, portfolio trends, and performance of subsidiaries. So we've covered the loan growth across various segments. Coming to the growth across retail products, the mortgage portfolio grew by 14.2% year-on-year and 2.5% sequentially. Auto loans grew by 14.8% year-on-year and 1.7% sequentially. The commercial vehicles and equipment portfolio grew by 13.9% year on year and 2.2% sequentially. Personal loans grew by 24.9% year on year and 1.5% sequentially. The credit card portfolio grew by 31.3% year on year and 4.2% sequentially. The personal loan and credit card portfolio were 9.7% and 4.4% of the overall loan book respectively. at June 30, 2024. The overseas loan portfolio in US dollar terms grew by 5.4% year-on-year at June 30, 2024. The overseas loan portfolio was about 2.8% of the overall loan book at June 30, 2024. The non-India linked corporate portfolio declined by 9% or about 24.8 million US dollars on a year-on-year basis. Of the overseas corporate portfolio, about 92% comprises Indian corporates, 6% overseas corporates with Indian linkage, 1% comprises companies owned by NRIs or PIOs, and the balance 1% non-India corporates. Moving on to credit quality, the gross NPA additions were 59.16 billion rupees in the current quarter, compared to 51.39 billion rupees in the previous quarter. There were gross NPA additions of about 7.21 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 gross NPAs, excluding write-offs and sale, were 32.92 billion rupees in the current quarter. compared to 39.18 billion rupees in the previous quarter. The net additions to gross NPAs were thus 26.24 billion rupees in the current quarter compared to 12.21 billion rupees in the previous quarter. The gross NPA additions from the retail, rural and business banking portfolio were 57.32 billion rupees in the current quarter compared to 49.28 billion rupees in the previous quarter. The additions for the quarter include the KCC NPAs mentioned earlier. Recoveries and upgrades from the retail, rural and business banking portfolio were 29.33 billion rupees compared to 32.17 billion rupees in the previous quarter. The net additions to gross NPAs in the retail, rural and business banking portfolios were 27.99 billion rupees compared to 17.11 billion rupees in the previous quarter. The gross NP additions from the corporate and SME portfolio were 1.84 billion rupees compared to 2.11 billion rupees in the previous quarter. Recoveries and upgrades from the corporate and SME portfolio were 3.59 billion rupees compared to 7.01 billion rupees in the previous quarter. There were net deletions of gross NPAs of 1.75 billion rupees in the corporate and SME portfolio compared to 4.90 billion rupees in the previous quarter. The gross NPAs written off during the quarter was 17.53 billion rupees. There was sale of gross NPAs of 1.14 billion rupees in the current quarter compared to 3.27 billion rupees in the previous quarter. The sale of NPAs includes about 1.02 billion rupees in cash. The non-fund-based outstanding to borrowers classified as non-performing was 35.43 billion rupees as of June 30, 2024, compared to 36.71 billion rupees as of March 31, 2024. The bank holds provisions amounting to 19.64 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 27.35 billion rupees or about 0.2% of the total loan portfolio at June 30, 2024 from 30.59 billion rupees at March 31, 2024. Of the total fund-based outstanding under resolution at June 30, 2024, 23.25 billion rupees was from the retail, rural and business banking portfolio and 4.10 billion rupees was from the corporate and SME portfolio. The bank holds provisions of 8.63 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 7.3% year-on-year to 195.53 billion rupees in this quarter, the net interest margin was 4.36% in this quarter compared to 4.40% in the previous quarter and 4.78% in Q1 of last year. The impact of interest on income tax refund on net interest margin was nil in the current and previous quarter and was three basis points in Q1 of last year. The domestic net interest margin was 4.44% in this quarter compared to 4.49% in the previous quarter and 4.88% in Q1 of last year. The cost of deposits was 4.84% in this quarter compared to 4.82% in the previous quarter. Of the total domestic loan, interest rates on 50% of the loans are linked to the repo rate 2% to other external benchmarks and 17% to MCLR and other older benchmarks. The balance 31% of loans have fixed interest rates. Non-interest income excluding treasury grew by 23.3% year-on-year to 63.89 billion rupees in Q1 of 2025. The income increased by 13.4% year-on-year to 54.90 billion rupees 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 was 8.94 billion rupees in this quarter compared to 2.91 billion rupees in Q1 of last year. The year-on-year increase in dividend income was primarily due to a dividend from ICICI Securities, ICICI Lombard General Insurance, and ICICI Prudential Life Insurance in Q1 of this year compared to Q1 of last year. On costs, the bank's operating expenses increased by 10.6% year-on-year in this quarter compared to 19% in FY2024. In Q4 of last year, the year-on-year increase was 12.9%, adjusted for a one-off in the previous year's base, as we had stated on the earnings call. Employee expenses increased by 12.5% year-on-year in this quarter, reflecting mainly the impact of annual increments and promotions that takes place during the first quarter of every fiscal year. Non-employee expenses increased by 9.2% year-on-year in this quarter, primarily due to retail, business-related and technology expenses. The technology expenses were about 9.3% of our operating expenses in this quarter. Our branch count has increased by 64 in the first quarter. We had 6,587 branches as of June 30th, 2024. The total provisions during the quarter were 13.32 billion rupees, a year-on-year increase of 3.1% over the provisions of 12.92 billion rupees in Q1 of 2024. This includes the impact of release of AIF-related provisions of 3.89 billion rupees during the quarter, pursuant to clarity on the regulatory requirements. The provisions during the quarter were 8.6% of core operating profit and 0.43% of average advances, compared to 9.3% of core operating profit and 0.49% of average advances in Q1 of 2024. Adjusting for the AIF provision release and the seasonality of KCC provisioning, which comes in only in Q1 and Q3, the credit cost to advances would be about 50 basis points, which is the adjusted credit cost level we had spoken of in the earnings calls for the previous two quarters as well. The provisioning coverage on NPAs was 79.7% as of June 30, 2024. In addition, we hold 8.63 billion rupees of provisions on borrowers under resolution, as I mentioned earlier, and the bank continues to hold contingency provision of 131 billion rupees as of June 30th, 2024. At the end of June, the total provisions other than specific provisions on fund-based outstanding to borrowers classified as non-performing were 234.03 billion rupees or 1.9% of loans. The profit before tax excluding treasury grew by 11.8% year on year to 140.80 billion rupees in Q1 of this year. Treasury gains increased to 6.13 billion rupees in Q1 from 2.52 billion rupees in Q1 of the previous year, primarily reflecting and realized and mark to market gains on equities and on security receipts. As you are aware, from the first quarter of this year, the revised investment guidelines have become applicable under which the mark-to-market gain on investments classified as fair value through P&L flows through the P&L, which was not getting recognized prior to the introduction of these guidelines. And hence, the future course of treasury gains will depend on these market movements. The tax expense was 36.34 billion rupees in this quarter compared to 31.99 billion rupees in the corresponding quarter last year. The profit after tax grew by 14.6% year-on-year to 110.59 billion rupees in this quarter. Sandeep earlier talked about the capital adequacy position with a CET1 ratio including profits for Q1 of 2025 of 15.92%, tier one ratio 15.92%, and total capital adequacy ratio of 16.63% at June 30th, 2024. These ratios include the impact of increase in risk-weighted assets for operational risk, which is computed in the first quarter of every fiscal year, and also the impact of the revised investment guidelines that became applicable during the first quarter. Growth in our digital offering, we continue to enhance the use of technology in our operations to provide simplified solutions to customers. The bank has launched an industry-first initiative, Smart Lock, that empowers customers to instantly lock or unlock key banking services such as UPI debit cards and credit cards with just one click on iMobile Pay. About 71% of trade transactions were done digitally in Q1 of 2025. and the volume of transactions through our trade online platform grew by 21.5% year on year in Q1 of 2025. We have provided details on our retail, business banking and SME portfolio in slides 25 to 32 of the investor presentation. The loan and non-farm based outstanding to performing corporate and SME borrowers rated BB and below was 52.86 billion rupees at June 30, 2024, compared to 55.28 billion rupees at March 31, 2024. This portfolio was about 0.43% of our advances at June 30, 2024. Other than two accounts, the maximum single borrower outstanding in the BB and below portfolio was less than 5 billion rupees at June 30, 2024. At June 30, 2024, we held provisions of 8.49 billion rupees on the WB and below portfolio compared to 9.03 billion rupees at March 31, 2024. This includes provisions held against borrowers under resolution included in this portfolio. The total outstanding to NBFCs and HFCs was 854.12 billion rupees at June 30, 2024. compared to 770.68 billion rupees at March 31st, 2024. The total outstanding loans to NBFCs and HFCs were about 7% of our advances at June 30th, 2024. During the current quarter, the increase in the NBFC portfolio was primarily due to lending opportunities to higher rated borrowers, as well as opportunities for investment via the bond market. The builder portfolio, including construction finance, lease rental discounting, term loans, and working capital was 521.30 billion rupees at June 30th, 2024, compared to 482.92 billion rupees at March 31st, 2024. The builder portfolio was about 4.3% 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 2.2% of the build-up portfolio at June 30, 2024 was either rated BB and below internally or was classified as non-performing compared to 2.7% at March 31, 2024. Moving on to the consolidated results, the consolidated profit after tax grew by 10% year-on-year to Rs. 116.96 billion in this quarter. The details of the financial performance of subsidiaries and key associates are covered in slides 40 to 42 and 62 to 67 in the investor presentation. The annualized premium equivalent of ICICI life increased to 19.60 billion rupees in Q1 of 2025 from 14.61 billion rupees in Q1 of 2024. The value of new business increased to 4.72 billion rupees in Q1 of 2025 from 4.38 billion rupees in Q1 of 2024. The value of new business margin was 24% in Q1 of 2025 compared to 24.6% in fiscal 2024. The profit after tax of ICICI Life increased by 8.7% year-on-year to 2.25 billion rupees in Q1 of 2025 compared to 2.07 billion rupees in Q1 of 2024. The gross direct premium income of ICICI General was 76.88 billion rupees in Q1 of 2025 compared to 63.87 billion rupees in Q1 of 2024. The combined ratio stood at 102.3% in Q1 of 2025 compared to 103.8% in Q1 of 2024. The profit after tax was 5.8 billion rupees in Q1 of 2025 compared to 3.9 billion rupees in Q1 of 2024. The profit after tax of ICICI AMC as per NDIS was 6.33 billion rupees in this quarter compared to 4.74 billion rupees in Q1 of last year. The profit after tax of ICICI securities as per NDIS on a consolidated basis was 5.27 billion rupees in this quarter compared to 2.71 billion rupees in Q1 of last year. ICICI Bank Canada had a profit of 20.3 million Canadian dollars in this quarter compared to 16.4 million Canadian dollars in Q1 last year. Aishatia Bank UK had a profit after tax of 7.7 million US dollars in this quarter, compared to 9.4 million US dollars in Q1 of last year. As for India, Aishatia Home Finance had a profit after tax of 1.17 million rupees in the current quarter, compared to 1.05 billion rupees in Q1 of last year. With this, we conclude our opening remarks and we'll now be happy to take your questions.