Speaker #1: It as on 30 September 2026. Participation in the conference call is by invitation only. Axis Bank reserves the right to block access to any person to whom an invitation has not been sent.
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Speaker #1: On behalf of Axis Bank, I once again welcome all the participants to the conference call. On the call, we have Mr. Amitabh Chaudhry, MD and CEO, and Mr. Rajiv Mantri, Group Head and CFO.
Speaker #1: I now hand the conference over to Mr. Amitabh Chaudhry, MD and CEO. Thank you, and over to you, sir.
Speaker #2: Thank you so much, Sagar. Good evening, and welcome to Axis Bank's earnings call to discuss the bank's financial results for the quarter ended September 2026.
Speaker #2: Before we begin, I would like to warmly welcome Rajiv Mantri to the Axis Bank family. Also, joining us on the call today are our ED, Subrat Mohanty, Munish Sharda, and Neeraj Gambhir, along with other members of the leadership team.
Speaker #2: The global macroeconomic environment continues to face headwinds, from geopolitical tensions and trade-related disruptions. The new tensions in West Asia have continued to disrupt global supply chains and fuel volatility in energy markets, while rising energy and food prices are adding to inflationary pressures across economies.
Speaker #2: Despite the overhang from elevated commodity prices, tariff-related disruptions, and weather-related risks, the Indian economy has continued to demonstrate resilience, with growth supported by broad-based economic momentum.
Speaker #2: Economic activity was underpinned by robust investment activity, and healthy private consumption aided by sustained discretionary spending. Supported by proactive regulatory measures, system liquidity improved significantly during the quarter, providing a flip-to-credit growth and deposit accretion across the banking system.
Speaker #2: In an environment characterized by resilient domestic growth and persistent global uncertainties, Axis Bank continued to build a differentiated and agile franchise through investments in digital trust, payments innovation, AI-led capabilities, network expansion, and talent development.
Speaker #2: We sustained the momentum in our businesses, while delivering sustainable and quality growth, further strengthening balance sheet resilience and enhancing productivity, and deepening customer relationships across segments.
Speaker #2: Now, let me talk briefly about the progress we have made on each pillar of our GPS strategy, starting with growth. Our momentum on gaining market share across deposits and advances continued during the quarter, driven by broad-based growth and supported by encouraging mobilization on FCNRB front.
Speaker #2: Our total advances grew 23% year-on-year and 9% quarter-on-quarter, and excluding the loans extended by our international branches for FCNRB deposits, the advances grew 19% year-on-year and 5% quarter-on-quarter.
Speaker #2: The growth in advances has been supported by continued healthy traction and tail disbursements, across segments for the 4th straight quarter, translating into retail book growth of 16% year-on-year and 10% quarter-on-quarter.
Speaker #2: Even post-excluding the leverage facility extended for FCNRB deposits, retail book grew 10% year-on-year. Our SME franchise continues to deliver broad-based growth of 25% year-on-year and 9% quarter-on-quarter, driven by differentiated offerings, best-in-class tech, and digital capabilities, and a customer-centric approach tailored to the evolving needs of India's MSME ecosystem.
Speaker #2: Our wholesale banking franchise delivered another strong quarter with growth of 34% year-on-year, driven by a robust client activity, across sectors, supported by resilient economic momentum.
Speaker #2: Our relationship-centric approach characterized by greater engagement intensity, disciplined follow-through, and an omnipresent client coverage model, alongside deeper-one-axis collaboration continued to strengthen client relationships and franchise performance.
Speaker #2: Our growth has been through deepening the wallet share, across our customers, while maintaining our rare-off thresholds. These relationships also provide us access to corporate salary accounts, as well as potential for liability relationship and additional fee income going forward.
Speaker #2: Moving on to the deposits, through our strong NRI franchise and proactive outreach, we garnered a meaningfully better market share of 8% on FCNRB deposits in this quarter, raising an aggregate amount of $1,018 billion of FCNRB deposits, year-on-year on QAB and MEV basis, MEV basis our total deposits grew 23% in 21%, term deposits grew 28% in 27%, CA grew 15% in 7%, SA grew 13% in 12%, and total caster deposits grew 14% in 11% respectively.
Speaker #2: Quarter-on-quarter on QAB and MEV basis, our total deposits grew 7% in 6%, term deposits grew 10% in 8%, CA grew 3%, and SA grew 2% in 2%.
Speaker #2: And total caster deposits grew 3% in 2% respectively. Excluding the portion of FCNRB deposits backed by loans, given by our international branches, our total deposits grew 17% year-on-year and 3% QOQ, and term deposits grew 21% year-on-year and 3% QOQ on MEV basis, post-accounting for the 8.6% QOQ decline in the non-retail term deposits, as we utilized part of the FCNRB deposits to optimize our balance sheet.
Speaker #2: Please refer to slide 6 for more details on the impact of FCNRB on various reporting metrics. Our new-to-the-bank franchise scaled further with an increasing mix of premium and relationship-led acquisition, resulting in 20% year-on-year growth in NDB average balances, and reinforcing the quality of franchise growth.
Speaker #2: The corporate salary business continued to deliver robust performance, supported by deeper engagement from wholesale coverage teams and a sustained focus on relationship deepening. Average NDB salary balances grew by 40% year-on-year, while the existing-to-bank salary portfolio expanded by 16% year-on-year, reflecting strong customer primacy and improved engagement and continued franchise deepening.
Speaker #2: Burgundy continues to anchor our optimization journey with assets under management up 27% year-on-year and 9% quarter-on-quarter, including AUM for Burgundy Private, which grew 12% year-on-year and 3% quarter-on-quarter.
Speaker #2: On profitability, our focus has been on building a more sustainable earnings profile, driven by disciplined execution, operating leverage, and improved efficiency. Our net interest income for the quarter grew 12% year-on-year and 5% QOQ, NIM for Q2 financial 2027 was $3.36%, including accounting for the impact of FCNRB deposits, excluding the impact of FCNRB NIM for Q2 financial 2027 stood at $3.47%.
Speaker #2: Our cost-to-assets declined further to $2.14%, down 24 basis points year-on-year and 6 basis points QOQ, for the quarter PAT grew 38% year-on-year, and our consolidated ROA was 1.49 and ROEs were 13.96%.
Speaker #2: On sustainability, we stayed focused on driving quality growth, strengthening balance sheet resilience, building future-ready technology platforms, advancing industry-first innovations, and investing in people and capabilities to deliver sustainable outcomes at scale.
Speaker #2: Our GNPA was at 1.16%, declining 30 basis points year-on-year, and 12 basis points QOQ. NNPA at 0.35%, declining 9 basis points year-on-year, and 4 basis points QOQ, while the net credit cost was at 0.45%, down 28 basis points year-on-year and 18 basis points QOQ.
Speaker #2: For the quarterly progress on our AI transformation journey, please refer to slides 14 and 15 for details. We continue to make progress in our AI journey through Exeom, our enterprise-wide AI operating model focused on embedding AI across customer journeys, operations, and decision-making.
Speaker #2: AI-driven solutions such as Doc AI, Voss AI, and Gen AI-powered collections continue to enhance customer experience, improve operational efficiency, and deliver better business outcomes.
Speaker #2: With a strong focus on governance, talent, and innovation, we are accelerating our transition toward becoming an AI-native institution. We continue to strengthen our leadership in digital payments and secure banking through industry-first innovations, during the quarter Axis Bank became the first and only Indian bank to enable Apple Pay for its credit card customers, marking a significant milestone in the evolution of digital payments.
Speaker #2: Building on our commitment to safe and intuitive banking, we introduced industry-first UPI limit management feature in our mobile banking app that enables customers to set and manage transaction limits across different UPI payment categories.
Speaker #2: Beyond technology and innovation, customer engagement and talent development remained key priorities. We strengthened our customer connect through the launch of Sparse Week 2026 last month, our flagship customer engagement initiative, while continuing to invest in building a future-ready and customer-centric workforce.
Speaker #2: Our continued focus on innovation, customer experience, talent development, and execution excellence was recognized through several procedures industry accolades, including India's best digital bank at the Euromoney Awards for excellence 2026, honors at the Brand New Hall Awards, ICC Emerging Asia Awards, APF Retail and Wholesale Banking Awards in the cyber South Asia Awards.
Speaker #2: As we enter the second half of the year, we continue to remain watchful and are closely monitoring the evolving external environment. We remain confident in our agility, execution capabilities, and ability to navigate the evolving challenges while capitalizing on emerging opportunities.
Speaker #2: Backed by a strong capital position, a prudent risk culture, and diversified growth drivers, we are well-positioned to deliver sustainable and profitable growth while continuing to outperform the industry.
Speaker #2: With that, I'll now hand over to Rajiv to discuss the financial performance for the quarter.
Speaker #3: Thank you, Amitabh. Good evening, everyone, and thank you for joining us. The salient features of the financial performance of the bank for H1, FY2027, and Q2, FY2027 across operating performance, capital and liquidity position, and asset quality restructuring and provisioning are as follows.
Speaker #3: For H1, FY2027, we delivered healthy operating performance, supported by strong NII growth and operational efficiency. Net interest income was at $30,018 crore, which grew by 10% year-on-year, fees at $1,2536 crore, grew 6% year-on-year, operating expenses as $20,541 crores, grew 7% year-on-year, delivering a positive jaw on core operating revenue.
Speaker #3: Core operating profit was at $22,120 crores, grew 11% year-on-year, and profit after tax at $14,117 crore, increased by 30% on a year-on-year basis. Moving to the quarter, the key metrics for Q2, FY2027 are net interest income at $15,371 crore, grew 12% year-on-year and 5% quarter-on-quarter, fee at $6,381 crores, grew 6% year-on-year and 4% quarter-on-quarter, granular fee was at 90% of the total fees.
Speaker #3: Expenses at $10,819 crores, grew 9% year-on-year and increased by 11% quarter-on-quarter, cost to assets stood at $2.14%, improving by 24 basis points year-on-year and 6 basis points sequentially.
Speaker #3: Operating profit was at $11,083 crores, up by 6% year-on-year, core operating profit at $10,998 crores, 11% year-on-year, net credit cost of $1,564 crores at $0.45%, which was lower by 28 basis points year-on-year and lower by 18 basis points quarter-on-quarter.
Speaker #3: Profit after tax was at $7,003 crores, up by 38% year-on-year perspective. GNPA at 1.16%, declined 30 basis points year-on-year and 12 basis points quarter-on-quarter, NNPA was at $0.35%, declined 9 basis points year-on-year and 4 basis points sequentially, PCR was healthy at 70%, standard asset coverage of 1.16% improved 3 basis points year-on-year, all provisions by GNPA ratio is 164%, which improved by 17% year-on-year.
Speaker #3: Annualized consolidated return on assets was at 1.49%, annualized consolidated return on equity was at 13.96%, subsidiaries contributed 11 basis points to the consolidated annualized ROA, and 66 basis points to the consolidated annualized ROE this quarter.
Speaker #3: Bank CET1, including H1, FY2027 profit, stands at 14.61%. We net added $23 basis points of CET1 in the half-year. The bank has provisions, aggregating to $8,006 crores, including the standard asset provisions created in Q2, FY2026, pursuant to regulatory guidance.
Speaker #3: These have not been recurrent for regulatory capital computation, and as a result, they represent an additional buffer over and above the reported capital ratios, translating into an incremental capital cushion of roughly $49 basis points.
Speaker #3: This reinforces the bank's balance sheet strength and enhances our ability to navigate uncertainty while continuing to support growth and shareholder value. We reiterate that we do not need equity capital for either the growth or protection pillars.
Speaker #3: As mentioned during the previous quarter earnings call, we raised $81 aggregating to USD 600 million within first half FY2027, which has been used to call back the earlier $81 as per its contracted call date in September 2026.
Speaker #3: Additionally, in Q2, we raised USD 600 million in senior notes. NIM, moving to net interest income and margins. NIM for Q2, FY2027 was 3.36%, declined by 37 basis points year-on-year and 10 basis points quarter-on-quarter.
Speaker #3: Excluding the SCNRB impact, the NIM for the quarter was 3.47%, which shows an increase of 1% sequentially, 1 basis point sequentially. The quarter-on-quarter NIM decline of 10 basis points can be attributed to 11 basis points due to grossing up for self-leverage SCNR deposits, and also due to the liquidity carry associated with SCNRB deposits, with surplus funds being parked in low-yielding securities prior to deployment, in the appropriate avenues.
Speaker #3: Slightly offset by 1 basis point's benefit from lower interest reversals, during the quarter. On a year-on-year basis, the NIM decline of 37 basis points can be attributed to 11 basis points due to the SCNR impact as we just explained for quarter-on-quarter, 16 basis points due to the change in balance sheet mix, and 10 basis points due to full impact of the 125 basis points of repo rate cut in the current quarter, versus 100 basis points rate cut in the same quarter last year, net of benefit in cost of funds due to liabilities repricing.
Speaker #3: Cost of funds declined by 8 basis points year-on-year and increased 3 basis points quarter-on-quarter. Moving to other income and operating expenses. Our fee-to-assets ratio stood at 1.26%, wholesale fee grew by 10% year-on-year, and total retail fee grew by 4% year-on-year.
Speaker #3: Trading profit and other income was at $150 crores, declined by 74% quarter-on-quarter, mainly account of MTM and some realized losses on investments. Operating expenses for the quarter stood at $10,819 crores, growing by 9% year-on-year and 11% sequentially.
Speaker #3: The year-on-year increase in operating expenses is $862 crores, this increase can be attributed to the following reasons: 48% of the increase is linked to volumes, 23% for investments in technology and digital, and the remaining due to staff cost and other operating expenses.
Speaker #3: For quarter-on-quarter increase in expenses, it needs to be noted that the bank had $271 crores of one-time reversals in staff cost in the last quarter, further there are some one-time expenses of $254 crores in the current quarter, mainly relating to new labor code-related items, and also certain expenses attributable to the SCNRB mobilization.
Speaker #3: Adjusted for these one-timers, the quarter-on-quarter increase in operating expenses was $572 crores, which is about 6%, attributed to the following reasons: about 60% of this is due to volume, 13% is due to investment in technology and digital, and the remaining are other BAU costs.
Speaker #3: Overall technology and digital expenses constituted 10% of total operating expenses for Q2, FY2027. We opened net $119 new branches in the quarter, and 139 new branches for the entire half-year.
Speaker #3: Our H1 period and headcount declined by 375 compared to 31 March 2026. Moving to the growth for liabilities and the loan franchise. Amitabh has already discussed the growth in loans and deposits, along with the impact of SCNRB on both.
Speaker #3: We continue to gain market share on deposits and advances. We gained approximately 10 basis points on market share on the loan franchise, and approximately 10 basis points market share on our year-on-year basis on the deposits franchise.
Speaker #3: Our loan book is granular and well-balanced with retail advances constituting 54% of overall advances, corporate loans at 34%, and SME at 12%. Please refer slides 20 and 21 for details around the quality of our liability franchise and slides on our loan franchise.
Speaker #3: 72% of our loans are floating rate, of which 60% are linked to repo, 12% are linked to MCLR and other benchmarks, 44% of our fixed rate book matures in 12 months.
Speaker #3: Breakup of the floating rate book by benchmark type and MCLR repricing frequency is set out on slide 10 of our investor presentation. In Q2, FY2027, retail disbursements grew 22% year-on-year, disbursement growth in home loans was 24%, vehicle loans was up 25%, and SBB was up 33% year-on-year, retail agri was higher by 19%, and consumer loans was up by 20% on a year-on-year basis.
Speaker #3: Moving to asset quality and provisioning. Slippages GNP and NP and PCR ratios for the bank and segmentally for retail CBG and corporate are provided on slide 45 of our investor deck.
Speaker #3: Gross slippages in the quarter were $4,762 crores, of which retail was $4,286 crores, CBG was $287 crores, and WBCG was $189 crores. Our gross slippage ratio for the quarter declined 63 basis points year-on-year and 31 basis points quarter-on-quarter.
Speaker #3: For the quarter, 33% of the gross slippages are attributed to linked accounts of borrowers, which was standard, when classified or have been upgraded in the same quarter.
Speaker #3: Net slippages for the quarter were $2,383 crores, net slippages segmentally were $2,042 crores for retail, $210 crores for CBG, and $131 crores in WBCG.
Speaker #3: Net slippage ratio for the quarter declined 30 basis points year-on-year and 37 basis points sequentially. Recoveries from written-off accounts for the quarter was $971 crores, up by 51% year-on-year, net slippage in the quarter adjusted for recoveries from written-off pool were $1,412 crores, segmentally retail was $1,313 crores, CBG was $98 crores, and WBCG was $1 crore.
Speaker #3: As of 30 September 2026, the gross NPs of the bank stood at $16,778 crores, net NPs stood at $5,054 crores, and provision for NPs stood at $11,724 crores.
Speaker #3: The cumulative non-NPA provisions, as at September 30, 2026, stands at $15,860 crores, comprising prudent provisions for standard assets of $6,775 crores, restructuring provisions of $173 crores, standard asset provision at higher than regulatory rates of $1,914 crores, additional one-time standard asset provision of $1,231 crores, and weak assets and other provisions of $5,767 crores.
Speaker #3: Moving to the performance of our subsidiaries. The detailed performance of the subsidiaries set out in slides 52 to 59 of the investor deck. In H1, FY2027, the domestic subsidiaries reported a net profit of $1,210 crores, growing 29% year-on-year, the return on investments in domestic subsidiaries was 45%.
Speaker #3: Axis Finance, the assets under management crossed 54,590 crores, growing 23% year-on-year, retail plus MSME book constitutes 71% of total loans. H1, FY2027 PAT grew 42% year-on-year to $546 crores, capital adequacy ratio at 22.15%, and strong asset quality with net NP of 0.35%.
Speaker #3: Moving to Axis AMC, overall quarterly average AUM grew 9% year-on-year to $3,82,966 crores, H1 PAT adjusted for the impact of PMS business transfer was at $370 crores, growing by 36% year-on-year.
Speaker #3: Axis Capital profit after tax stood at $149 crores, up by 61% year-on-year, and the team executed about 20 ECM and 5 non-ECM deals during the first half.
Speaker #3: Axis Securities revenues for first half were at $842 crores, and the H1 PAT adjusted for impact of the PMS business transfer stood at $191 crores, higher by 9% year-on-year.
Speaker #3: In summary, we continue to make progress towards building a stronger and more sustainable franchise. We remain vigilant in monitoring the macroeconomic and geopolitical environment, inflation, liquidity, and our cost of funds, along with their impact on our business.
Speaker #3: This concludes our opening remarks, and we would be happy to take questions.
Speaker #1: Thank you very much. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone.
Speaker #1: An operator will announce your name. In the question queue. Participants are requested to use only handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
Speaker #1: Your first question comes from the line of Chintan with autonomous. Please go ahead.
Speaker #2: Hey, thank you for taking my questions and congrats and welcome, Rajiv. Can I start with the retail versus corporate debate? I think a couple of quarters ago we had a fairly robust conversation on the call.
Speaker #2: And at that stage, the indication was that retail will probably cap out, you know, at 55%. But it seems like the corporate opportunities continue to remain, and they remain strong because the AA spreads are still quite wide.
Speaker #2: So is this a trend that we can still expect that, you know, as long as these corporate opportunities are there, the percentage of retail in the loan mix could continue to fall?
Speaker #2: That was question one. And the second question was on understanding how NIMS might evolve in the next quarter. First, I mean, I should thank you for giving us very clear disclosures on the FCNR adjusted NIMS.
Speaker #2: Your peers have not done that, so appreciate that slide. But just on next quarter, you know, if you go through light on what kind of movement we should expect there, that would be helpful.
Speaker #2: Thank you.
Speaker #3: So I think on the question on the corporate opportunity, I'll request Vijay to talk about that. And then I'll take the question on the NIM outlook.
Speaker #4: Yeah, hi, this is Subrat. Sorry, I'll take the since you asked the question on the overall mix, Chintan, maybe not we didn't guide for any particular topping out of or bottoming out of the retail share of the total mix.
Speaker #4: If you look at our retail disbursement growth on a quarter-on-quarter basis, that's quite strong across all the categories. So we continue to push the pedal on retail growth in terms of disbursement.
Speaker #4: The book growth also has gone up even ex FCNR, it's now above 10%. So it's been going up from 6 to 8 to 10 over the last few quarters.
Speaker #4: On the corporate side, see, there is good opportunity good pipeline, very good companies. With whom we are actually gaining wallet share. And these are long-term relationships.
Speaker #4: And like we have mentioned, the downstream benefits of these relationships where we are actually substituting other banks. Cannot be in any sense, you know, undervalued.
Speaker #4: So we are continuing to make sure that the retail book growth starts to catch up once the disbursement growth continues to remain as robust over the next couple of quarters.
Speaker #4: And it is doing that. It is growing. It is the book growth is starting to grow at a faster clip. And, you know, going forward, we are not putting a particular number, but we are very cognizant of our medium-term structural NIM guidance.
Speaker #4: And we know that we have to do this balancing act at a faster clip in terms of making sure that we do not further move away from the mix that we are right now.
Speaker #4: And we get back to the above 55% retail mix. So that effort is on at this point in time. On the second point, which was NIM, that I think, yeah.
Speaker #3: Yeah, on the second point on NIM, as we have depicted in the investor deck, we have about 11 basis points of impact, which has come during the quarter due to the FCNRB deployment.
Speaker #3: Or due to the FCNRB mobilization. If we net out for that, the NIM for the quarter was at 3.47%, which was one basis points higher than the last quarter.
Speaker #3: As the funds have come through, we are now looking at further deployment and optimization to be done using these funds. In the last quarter, we have utilized some portion of these funds to retire the more expensive NRTDs.
Speaker #3: That was done towards the end of the quarter. So we should be able to see some benefit of that come through in the next quarter in terms of NIM uplift.
Speaker #3: At the same time, like Subrat mentioned, we are working towards improving the loan mix. Liability mix as well as various aspects of product-level mix that we can actually work on in terms of improving the NIM trajectory.
Speaker #3: The FCNR-related deployment will take us the next couple of quarters in terms of fully seeing the benefit of the optimization. And then we'll also see how exactly we are able to uplift the NIM.
Speaker #3: So overall structurally, the guidance that we had given on NIM remains unchanged. However, as you can see, these are various factors which are playing out.
Speaker #3: And therefore, you know, from a timelines perspective, we won't be able to specifically guide on how much timeframe this will take in terms of moving forward on that trajectory.
Speaker #3: Though structurally, we are working towards through the cycle guidance of 3.8% that we have mentioned earlier.
Speaker #1: Rajiv, just to clarify, the 11 basis point FCNR impact on the NIMS optical impact on the NIMS, does that increase or decrease in the next quarter?
Speaker #3: So 11 basis points had broadly two components. One was the impact due to the grossing up of the balance sheet. And the second was the fact that it took some time for these funds to be deployed let's say for retiring of the NRTDs a portion of that.
Speaker #3: Initially, these have been sort of parked in low yielding investments. So as we look at the deployment of this into the advances growth as well as further optimization of the balance sheet, I think we should be able to see an uplift.
Speaker #3: So this impact was for this particular quarter. I think in Q3 and Q4, you should be able to see some sort of a benefit coming through due to the optimization exercise that we'll be doing.
Speaker #1: Thank you. That helps. Thank you.
Speaker #2: Thank you. Your next question comes from the line of Mahrukh Adajania, with Tara Capital. Please go ahead.
Speaker #5: Yeah, hi, good evening. I had a couple of questions just again on the corporate retail mix. So a lot of banks that have raised FCNR, private banks, they are growing corporates quite rapid corporate loans quite rapidly.
Speaker #5: Is it a shift in demand? I mean, do you see the industry shifting to a higher corporate loan growth, given inflation, possibly the war?
Speaker #5: And I mean, is that is that the correct way of looking at it? Because even for you, your retail has grown quite impressively. The growth has picked up.
Speaker #5: But the corporate loan growth has also increased. So that's really my first question. And my second question is on credit costs. So you would have had made standard provisions on FCNR loans.
Speaker #5: And you would have also I mean, you've drawn down some provisions you had already discussed that when you had made those provisions. So you've drawn those down.
Speaker #5: So where does credit costs settle? Are there any benefits to be seen on any segment or the normalize back to Q1 levels? How do we view credit costs?
Speaker #5: So these are my questions.
Speaker #3: Vijay, I'll talk about corporate growth. See, over the last few quarters, we now have a boringly consistent and repeatable playbook. See, as we have said in the past, we are not chasing assets.
Speaker #3: We originate selectively. We apply our internal filters on transfer pricing, RAROC, and RWA. And we are letting go of several assets. In spite of that, we are able to see growth because the growth is pretty broad-based.
Speaker #3: Across several sectors. And across segments. And we're also seeing growth across capex, project finance, refinancing, as well as working capital. So we don't have any dependence on any single sector or as client segment or financing category.
Speaker #3: So the growth is sustainable as we have shown over the last few quarters. I also want to add that taking the balance sheet to the market, obviously wherever we are taking balance sheet, we take the full franchise we have spoken about one axis in the past.
Speaker #3: And that's not no longer a pilot. It's actually embedded in how we operate. We take our NEO platform, which is best-in-class digital stack for both flow business, for fee business.
Speaker #3: We're also taking our one axis approach to get cross-sell across corporate salary as well as burgundy. So corporate growth is sustainable because it's well diversified across sector segments and financing categories.
Speaker #3: And we don't want to lose the opportunity because we are seeing as Subrat had said earlier, there are several downstream benefits that we're re realizing.
Speaker #3: Thank you.
Speaker #4: I think on your second part of the question, Mahrukh, on the credit cost, we have definitely seen an improvement trajectory. On a quarter-on-quarter as well as on a year-on-year perspective, we have seen the improvement come through.
Speaker #4: We don't give a specific guidance on what exactly is a credit cost going to be. But directionally, what I can confirm is that we are on the trajectory towards improvement.
Speaker #4: I think there is some further improvement that also we can expect. Though some portion of this improvement that has come through is also because of the mix.
Speaker #4: But in individual portfolios as well, we are seeing definite improvement coming through. As reflected by the overall slippage ratios as well as the recoveries improvements.
Speaker #4: So I think the trajectory of improvement continues. And we can expect some further improvement as well. But we won't be able to give a specific guidance.
Speaker #5: Okay. And just one last question on ECLGS disbursements. How much of ECL loans have ECLGS loans have you disbursed?
Speaker #3: Yeah,
Speaker #6: We have sanctioned around 12,000 and 12,500 loans worth around ₹10,700 crores, and 80% of those approximately have already been disbursed.
Speaker #7: Sorry.
Speaker #6: We sanctioned around 12,500 loans. Uh, worth around ₹10,700 crores, and around 80% of these have been disbursed till now.
Speaker #8: Okay, thanks a lot. Thank you. Thank you. Thank you.
Speaker #6: Your next question comes from the line of Rikin Shah with IIFL Capital. Please go ahead.
Speaker #9: Sir, a few questions. The first one on clarification on the Labour Code impact of— in that one-off item of ₹254 crore, would the large part of that ₹250 crore be associated with the Labour Code, or would that also include FCNR?
Speaker #9: I mean, any split, if at all, you could provide. And this Labour Code impact was already recognized last year, so curious to understand why did it come up again and how do we think of it incrementally.
Speaker #9: Should we expect more of this in the coming quarters? That's my first question. Yeah, hi, Rikin, Rajiv here. So broadly, if we were to look at the one-offs during this particular quarter of ₹254 crores, I think slightly more than half of this was really relating to the Labour Code-related impact.
Speaker #9: Broadly, I think certain clarification that we have recently received as regards a couple of components pertaining to some of the outsourced employees. And the provisioning that we have taken around that, as well as some clarifications relating to the ESIC.
Speaker #9: So those are— those have been the key items on which we have actually taken you know, some one-time expenses, and the slightly less than half is pertaining to the FCNR-related mobilization, as we have called out.
Speaker #9: And we shouldn't expect any further Labour Code-related OPEX in the coming quarters, right? So this is an evolving area. We are continuously looking at the various guidelines and the circulars coming our way, and as and when if anything comes through, we immediately highlight.
Speaker #9: across. So, so far, based on what we have been aware of, we have already taken those account. But this is an area where, you know, some new guidelines, etc., whenever they come, we will have to deal with that.
Speaker #9: So As of now, based on what we are aware, we've already factored that in. Got it. The second question is on fee income related.
Speaker #9: So the fee income growth overall has been a bit weakish in the last 2-3 quarters, largely led by cards and payments. Some of your peers have seen some benefit on fee income due to FCNR.
Speaker #9: Did you not receive that? How should we think of it going ahead, excluding Banka? And if you could also offer some comment on Bank Assurance.
Speaker #9: What could be the potential impact following the draft IRDA guidelines? And I have one more question after this. Thanks.
Speaker #10: So on fee income, Rikin, this is Subrat. Uh, you know, there is the growth in corporate book means that some of the asset links fee doesn't, uh, I mean, it's on a ratio basis is lower.
Speaker #10: Also, some of the non-asset-linked fees come a bit later, so that trend continues. So that's a bit of a challenge. The other one is on credit cards.
Speaker #10: The fee income has been a bit weak. The spend numbers have not been strong. And also last year, September was when the festive month had started.
Speaker #10: This year that has shifted to October, so there is a bit of a temporal difference on account of that. So we, I mean, we continue to work on it.
Speaker #10: If you see quarter on quarter, the growth was, uh, was quite okay, but on a year-on-year basis, the growth is not as strong as we used to see fee income growth in the past.
Speaker #10: So we are continuing to work on it. On the insurance part, uh, I mean, the consultation paper is out. I still think it's early days.
Speaker #10: Uh, there are various points of views being expressed by various industry players. They have been sent to the regulator. They're also in a listening mode at this point in time.
Speaker #10: We've done some assessment of how things are based on the consultation paper. We believe there will be some time before they actually come through.
Speaker #10: We also possibly believe there might be a few areas where there might be, uh, you know, specific amount of time given or a glide path given for us to— or for the insurance players to actually, uh, you know, manage the change.
Speaker #10: So some of those things will happen. I don't think there is anything right now that we can give with more specificity in terms of, uh, how they will play out.
Speaker #10: We've done some of the work on our, you know, from our side in terms of what potential impact could be and how we could mitigate, uh, you know, through a combination of volume product mix, etc.
Speaker #10: We'll try and manage it, and the remaining we'll try and see if there are other sources of fee income that we could crank up in the meantime.
Speaker #10: So I think we might get about 6 to 9 months before that comes through, uh, so we'll try and mitigate the impact during that point, during that period of time.
Speaker #9: Got it. And my last question is a clarification on margins. So, you know, of course, Rajeev, you did offer some comments on how to think about it, but just to get it make it completely unambiguous.
Speaker #9: While there could be some drag on FCNR full quarter for the next quarter, can we say that this quarter including the FCNR hit, is this the bottom and directionally it can stabilize to move up in the 3Q and onwards?
Speaker #11: Yeah, so I think on the NIM trajectory, as I'd explained in the previous question that came through, you know, we have, we have seen this significant impact of FCNR come through in this quarter.
Speaker #11: But net of that, we have seen a 1 basis point improvement. We had said that Q1 is where we are seeing sort of the bottom of that, and then we will see an improvement.
Speaker #11: We've clearly shown net of the FCNR impact, that improvement come through going forward as well, based on the various levers that the bank is working on, especially around the advances, assets, as well as liability mix.
Speaker #11: We are trying to work through that improvement. Some of that will also be aided through the rate hikes that will come through, but there are also certain headwinds that we need to work on.
Speaker #11: So across the various factors, our endeavor is to make sure that the NIM trajectory continues to move up. So I think that is what we had mentioned earlier and would like to reiterate the same.
Speaker #11: But as I mentioned, I think we are just working through the various levers. The timeframe of this is difficult to sort of ascertain, but sequentially we should be able to show an improvement.
Speaker #11: Going forward, that's what we are working on.
Speaker #10: You had a— you had that additional point on whether we have collected FCNR fees as we have mobilized these deposits. And does the 6% year-on-year growth include that fees also?
Speaker #10: No, it doesn't include that. No, we didn't collect the fees. We didn't specifically charge fees for the— for raising deposit. Okay, that's clear. Thank you, Subrat.
Speaker #10: Thank you.
Speaker #12: Your next question comes from the line of Abhishek Murarka with HSBC. Please go ahead.
Speaker #9: Yeah, hi, good evening, and, uh, thanks for taking my question. Uh, so back to foreign, I think you said, you know, qualitatively you've made some assessment of, you know, the impact and the offsets available.
Speaker #9: I would actually be interested to know if you can expand a little bit on what you could change to offset the impact. Obviously numbers will come through later on, but just a broad qualitative, you know, understanding would help.
Speaker #9: And in your, you know, sales, overall insurance sales, what comes— what percentage comes from credit life versus the rest? Can you sort of split that up in broad terms again?
Speaker #9: So that would also help. in our overall understanding. That's my first question. I'll just come back for a second after this.
Speaker #10: Yeah, thank you for the, for the question. See, we don't give the breakup of fee income, and within that, some, uh, you know, breakup in terms of how much comes from various product categories.
Speaker #10: Uh, so that's not something, uh, we offer. On your first point, see, there are multiple levers. I think it's still premature to go into some of those levers even on a qualitative basis.
Speaker #10: If you look at how the industry has navigated previous changes in, you know, regulations. As late as last year when we had a GST rate cut change, there was an expectation that the volumes would go up and the volumes went up.
Speaker #10: And, uh, in that sense, on a net basis, the industry managed to have higher volumes of, uh, you know, the product that actually had the maximum GST impact in terms of price reductions.
Speaker #10: And on an overall basis, the industry still came out positive. I think some of those levers we'll try and work on, uh, but like I said, till we get a final picture of how various products look like— look in terms of the change in their commission structures.
Speaker #10: It would be a bit premature to talk about more qualitatively the subcategories through which we'll be able to mitigate.
Speaker #9: Got it. Um, okay, and on the other hand, due to this MDR on UPI, would you have some broader, uh, numbers about how much revenues you hope to gain?
Speaker #9: Because that could be an offset also available for whatever you lose out on the insurance side. So in an order of magnitude there also would would help.
Speaker #8: So on UPI, this is Anika on UPI MDR. As you are aware, we play across all the 3 spectrum as an issuing bank, PSP bank, as well as Um, the acquiring bank.
Speaker #8: Um, you know, at this stage we can't give any specific guidance because the MDR implementation has been postponed. Um, you know, and as and when it comes, I think the bank is committed to ensure that we also use some of the revenue we have to actually grow the ecosystem, you know, by increasing our merchant footprint as well as, you know, the infra cost that we incur.
Speaker #8: on maintaining the UPI. So yeah, no specific breakup there.
Speaker #6: Do you think most of the gains that you would actually go in developing the channel Investment.
Speaker #9: Reinvest. Yeah, you know, end of the day, end of the day, a lot of people will be jostling for this, for the share of this pie.
Speaker #9: And as Radhika said, we have a decent share across various parts of this value chain. Finally, where we end up will all depend on obviously what leverage we have over each other to say that, oh, we'll have to spend money to, you know, Right now it was not profitable.
Speaker #9: Now suddenly there's a revenue pool available. What ends where is difficult to predict at this stage. Anyways, implementation has been delayed. Uh, our endeavor obviously would be to
Speaker #10: Uh, you know, get some revenue out. But given the fact there are so many variables, and one of them you added one more to the equation, it's very difficult to predict at this stage as to where, you know, the penny will drop.
Speaker #10: But
Speaker #6: We do believe we are much better placed than all the others. Yeah, exactly, which is why I was asking you the question. But anyway, thanks for the response and all the best for future quarters.
Speaker #6: Thank you.
Speaker #12: Your next question comes from the line of Kunal Shah with Citi. Please go ahead. Yeah, uh, hi. Uh, so the first question on, uh, the operating jaws overall, uh, so even adjusting for this labor code as well as, uh,
Speaker #8: one-time impact which is there in the overhead cost. Still, in terms of cost to assets, it seems to have inched up on a quarter-on-quarter basis, and you indicated adjusting for all of this, like 60% is volume-linked.
Speaker #8: So as we still keep on growing the retail portfolio and the disbursements out, out there, would we see limited OPEX to asset benefit now kicking in from 2.1-odd percent where we are currently, but there are still some jaws available.
Speaker #11: Yeah, Kunal Rajiv here. So I think we definitely have seen, uh, the jaws being positive on a core operating revenue perspective. Um, you know, with, with sort of some noise in one-timers, etc.
Speaker #11: If you remove that, then I think clearly we see that story come out. Um, the cost to assets ratio has been coming down steadily quarter on quarter over the last 1.5 years or so, and I think we do expect that journey to continue.
Speaker #11: Uh, the bank is actually taking a lot of steps in terms of the efficiency agenda and the productivity improvement as well. We have, I think, as had been mentioned earlier, we are looking at deploying AI and various sort of efficiencies that could come on the basis of that.
Speaker #11: At the same time, looking at how do we actually create efficiencies across the entire spectrum. So I think that journey is continuously on and we see the benefits of that come through.
Speaker #11: Essential investments are being done in cost, but the trajectory that we see in OpEx to assets has been very encouraging, and I think that momentum will be kept on, um, you know, going forward.
Speaker #11: Sorry, uh, Kunal, this is Subrat. You mentioned that cost to assets has gone up.
Speaker #10: Uh, I, I mean, if you just look at slide 13, the quarter-on-quarter drop on cost to assets is from 220 to 214. That's a 6/6 rate.
Speaker #10: No, that's because we take that 12 years average.
Speaker #8: If I purely look at on a quarterly basis, it's moving up. Yeah. So we take, uh, 12 months, uh, uh, in, in this cost-to-asset formula.
Speaker #8: We— I, I think we take like, uh, uh, 12 months, uh, period. Yeah.
Speaker #11: We are comparing like to like in any case when we compare with the previous quarter, but I, I appreciate your point. I think this is primarily due to the one-timers that we've seen in the cost for this quarter.
Speaker #11: That's why I think adjusted for that, you will see the ratio coming down even further.
Speaker #8: Okay, and, uh, lastly, in terms of credit cost, if I hear you right, maybe this 50 basis points doesn't have any unusual recoveries out there, and still maybe there is scope to further optimize and improve it given the kind of slippage run rate which we are seeing.
Speaker #11: Yeah, so there is no unusual recovery which is there in the, in the recovery numbers, uh, and, uh, I think we have definitely seen the improvement come through.
Speaker #11: on the net slippage ratio. What we can say is that there was a recovery from the written-off accounts also during the quarter, which I had mentioned as part of my opening commentary around ₹971 crores.
Speaker #11: which was about 50% higher year-on-year. But that's been the recovery trend that we have seen as well.
Speaker #8: Okay, got it. Yeah, thanks, thanks, and all the best. Yeah.
Speaker #11: Thank you. Thank you.
Speaker #12: Your next question comes from the line of Piran Engineer with CITIC Securities International. Please go ahead.
Speaker #6: Yeah, hi team, uh, congratulations on the quarter. Uh, I'm just sorry to belabor this point on NIM, but somehow it matters to investors. Now just to be very clear Your month of September NIM or exit NIM for the quarter would be meaningfully lower than your quarterly average NIM of 3.36, correct?
Speaker #11: Uh, Piran, hi, Rajiv here. I think we don't give advice names, but I think broadly, as, as I've explained, I think the way the NIMs came about due to the FCNR impact and how exactly we are seeing the improvement come through, or we will see the improvement come through as we optimize it further.
Speaker #11: I think that will give you some color. But yeah, we won't have a specific number for the month of September.
Speaker #6: Okay, fine. So, uh, then you're off my argument and tell me if I'm wrong here. Uh, you raised about ₹1 trillion of deposits and net-net your deposits have grown maybe ₹1,000 crores.
Speaker #11: So that you, you probably would have paid down some TDs, whatever, uh, versus ₹80,000 crores of deposit growth, your loan growth ex of the self-leverage portion is ₹68,000 crores.
Speaker #6: So mota moti, you have deployed all the money that you've raised, right? And that also reflects in your LCR not increasing. Uh, which brings me back to my question that there isn't a lot left to redeploy from excess liquidity into loans.
Speaker #6: Is my argument correct?
Speaker #10: Or wrong?
Speaker #13: Yeah, if you just look at— sorry, this is Neeraj here. If you just look at from a balance sheet competition perspective, you're right, the money has to find its way into some, some place, and it has found it.
Speaker #13: There are different places where we've deployed it. Deployed could mean we've repaid some high-cost liabilities. Deployed could mean we also created assets out of it, but Now if, if you think it from a growth perspective, we have not used the full FCNRB liquidity to grow our assets.
Speaker #13: Right? So to that extent, there is runway for the balance sheet to grow given the fact that this is an incremental liability that we have raised.
Speaker #13: So, you know, whichever way you want to look at it, it's up to you, but reality is that this has given us an ability to grow as well as optimize the balance sheet.
Speaker #6: No, but sorry, Neeraj, the ability to grow depends on your, uh, LCR, right? If your LCR had gone up to 130, I would have said, yeah, there's enough room to
Speaker #13: redeploy excess liquidity, but it remains flat at 1.9. So what am I missing? LCR is not an automatic increase. LCR needs to be managed, and we manage our LCR very actively.
Speaker #13: So if my LCR is going beyond a certain threshold because I have excess liquidity because of higher deposit growth, we will do something with it.
Speaker #13: We'll basically bring down some other lines of liability. To make sure that our LCR stays within the band that we have been talking about, which is 115 to 120%.
Speaker #13: Understood.
Speaker #6: Is it fair to say that with improved asset quality, you all will, you know, uh, be able to earn lower bounce charges, late payment charges?
Speaker #6: Etc., and that's also impacting your fee income growth, or is that too minuscule to matter?
Speaker #10: No, no, I think that— I mean, there are larger areas that we need to work on that might contribute a bit but not really making a big dent on that number.
Speaker #13: Understood, understood. Okay, yeah, that's it from my end. Uh, thanks and wish you all the best. Thank you.
Speaker #12: The next question comes from the line of Jai Prakash Mundhra with ICICI Securities. Please go ahead.
Speaker #9: Yeah, hi, good evening, and thanks for the opportunity. Uh, so are you just— sorry, on NIM again, but my question is a little bit different.
Speaker #9: Um, so I heard that there are some moving parts and you know, basis your efforts or your endeavor would be to increase the NIM incrementally.
Speaker #9: The question is, have you changed the transmission? Because if I remember correctly, earlier we were passing on only at the last day of the quarter.
Speaker #9: If that, if that is unchanged, then most of the, the majority of the NIM delta would come from liability and maybe the mix change.
Speaker #9: Is that understanding correct, or that has changed?
Speaker #11: Yeah, yeah, hi Jay. So yes, I think we continue to have the same date. It's the last week of the quarter where the repricing happens.
Speaker #11: So the latest repo rate increase from a book stock perspective, uh, the benefit we'll actually see in Q4 as opposed to in Q3. Of course, any new loans which get written will obviously apply the new rate.
Speaker #11: if it's repo-linked.
Speaker #9: Right, sure. Secondly, related to personal loan, so I see, and we have been maintaining very useful information on PL. That all actually 100% of the PL is salaried, right?
Speaker #9: And at industry level, we see banks' PL growth has been, you know, at industry level has been only 10-12%. 13%, whereas some of the other non-banks lenders, they have been having a very strong PL growth.
Speaker #9: I suspect that would be because they are lending maybe to non-salaried segment. Basis your experience on asset quality so far and maybe the, the interest rate favoring, would there be any change in the PL strategy to offer it to non-salaried also, or You know, you would sort of continue with the same construct.
Speaker #11: Hi, this is Munish Sharda. I, you know, our PL strategy, uh, has been centered around building a healthy, uh, unsecured portfolio, uh,
Speaker #13: focused on giving loans to salaried customers only. In our case, we— PL is only for salaried customers, or the non-salaried customers, self-employed customer loans are covered under the business loan segment, which is a separate segment.
Speaker #11: We are focused on building that book, as we have been telling you in the past few quarters. We have done a lot of work in improving the health of the portfolio, invested in collections.
Speaker #13: technology, etc., also sharpened our underwriting standards and filters. We are seeing the disbursals grow quite sharply in that business as we mentioned in the notes, and Amitabh also mentioned, and Rajiv also mentioned, we've started seeing the book grow on the back of the increasing growth in disbursals.
Speaker #13: And the portfolio quality remains quite healthy.
Speaker #9: Right, that is clear. Secondly, on quality of liability, right, so this quarter we raised FCNRB, which I believe is purely retail. And would have much runoff rates, and we replaced some of the bulk deposits, possibly 100% runoff rates, but still the blended runoff rate that we show has actually gone up a little bit.
Speaker #9: Um, any more detail here possible?
Speaker #13: So there is a bit of technicality here, uh, Neeraj. Again, there's a bit of technicality here. Um, the LCR deposits that we have— sorry, the FCNRB deposit that we have raised have a lock-in period of 1 year.
Speaker #13: So they are basically treated similar to non-callable deposits, which basically means that they will not show up in the LCR calculation. There is no— there is no sort of HQLA required to be maintained on these deposits.
Speaker #13: Within, um, you know, within non-retail term deposits, we have seen some swing between, uh, callable to non-callable deposits, which is partially led to a slight increase in the rest of the book's outflow rate, but it doesn't have the full impact of FCNR in that sense.
Speaker #9: Understood. And last, last question, sir, Rajiv, on credit cost, right? So we appreciate that the portfolio, individual portfolio, have been behaving well, and hopefully they will continue.
Speaker #9: But from FY28 perspective, including ECL and some bump-up in the standard assets provisioning, would you believe that credit cost would still have a ROA improvement lever, including the standard assets provisioning?
Speaker #9: Going into FY28?
Speaker #11: Yeah, so Jay, I think on the, on the ECL transition and the impact, uh, look, as we have maintained in the past, uh, we don't expect any material impact to come through, uh, on the transition itself.
Speaker #11: This is also supported because we have existing contingent provisions almost close to ₹8,000 crores that continue, which will help us in terms of moving towards the transition.
Speaker #11: Uh, in a smooth manner. Um, you know, from a, from a flow perspective, uh, how exactly that will play out, uh, based on the flow rates that are there for Stage 1, Stage 2, etc.
Speaker #11: I think that's what we will work through, but overall for both the transition and the flow, I don't think we expect any material implications on the portfolio that we have, but we are working through this and of course as we come closer to the date, we'll have greater clarity on that.
Speaker #9: Understood. Sure. Thank you, Rajiv. Thank you and all the very best. Thank you. Thank you.
Speaker #12: Your next question comes from the line of Shishu and Gao with Sean Penn. Please go ahead.
Speaker #6: Hello, my audio is off. Yes, sir, you're audible. Please go ahead.
Speaker #14: Yeah, thanks for the opportunity. Given NIM is more optical this and next quarter, I just want to ask about NII momentum. So we have seen NII sequentially grow, improve to 5% from low single digit last couple of quarters.
Speaker #14: Should we expect that momentum to improve going forward, given that there's rate hike and also deployment of FDRI? Is that a good assumption to make?
Speaker #11: So, hi, I think, look, NII is ultimately a function of how the book is growing as well as what we expect on the NIM trajectory.
Speaker #11: I think our book growth trajectory is on. We have you know, guided for 300 basis points higher than the industry average over the medium term.
Speaker #11: Even the current year, we're seeing good trajectory on the asset flow. So I think that is one key factor. And second, the narrative that you've heard from us on the NIM, where we expect sequential improvement to come through, you know, based on the FCNR sort of optimization.
Speaker #11: At the same time, the mix improvements that we'll have to work through. So these are the levers that we'll be working upon. There's no specific guidance we can give on the NII uplift sequentially or on a year-on-year perspective.
Speaker #11: But those are the broad factors that will play out to make sure that we continue working on improving this trajectory. Enjoyed it. Thank you.
Speaker #11: Thank you.
Speaker #12: Ladies and gentlemen, as there are no further questions, this concludes our question and answer session. I now hand the conference over to Mr. Rajiv Mantri for closing comments.
Speaker #12: Over to you, sir.
Speaker #11: Yeah, I would like to thank everyone for dialing into the call and for placing the trust with the bank, and would also like to wish everyone a happy Dussehra and festive greetings.
Speaker #11: Thank you. Thank you.
