Ladies and gentlemen, good day, and welcome to the Q4 FY22 earnings conference call of Kotak Mahindra Bank. 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 the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Uday Kotak. Thank you, and over to you, sir.
Good evening, colleagues. Welcome to the Kotak Mahindra Bank earnings conference call on this hot fourth of May here in Mumbai. I would first like to share with you what has already been publicly announced by us today with reference to the various appointments and changes with reference to the management. I'm happy to share that my colleague, Shanti Ekambaram, who has been with the Kotak Group for more than 30 years, has been appointed on the board of Kotak Mahindra Bank, subject to regulatory and shareholder approvals with effect from November 1. I'm also happy to announce the reappointment of Manian for another term as Whole-Time Director with effect from November 1, subject to shareholder and regulatory approvals.
I would also like to share that my colleague, Gaurang, has voluntarily decided not to seek renewal of his term on his completion as whole-time director on 31st October 2022. However, I am happy to also share that Gaurang will continue to be on the board of all our major group companies, which includes Kotak Life Insurance, Kotak General Insurance, Kotak Asset Management Company, international subsidiaries, as also Kotak Investment Advisors. I'm also happy to share that Gaurang has been appointed today as the chairman of Kotak General Insurance. We are wanting to share that Gaurang continues his active association with the Kotak Group and will continue to add significant value to our key businesses on a consolidated basis.
I'm happy to share that my colleague, Dipak Gupta, who has been on the board of our alternate assets business, which is a growing business and which we propose to grow even faster, Kotak Investment Advisors. Dipak has been appointed as the chairman of that company. Finally, my colleague, Kannan, who has built our commercial banking business over the last many years, particularly the penetration we've made in the microfinance business. Kannan has been appointed today as chairman of BSS Microfinance, a company which we acquired a few years ago. Kannan will continue to see how we can grow in various segments, particularly in the microfinance business as we go forward. Moving...
I would just like to share with all of you an important message that Kotak Mahindra Bank is taking appropriate steps for transition and the strength and the depth of Kotak Mahindra Bank and the group management is something I'm extremely proud of, and we see that as a very strong, stable, sustained base on which Kotak Mahindra Bank and the group can continue to grow over long periods of time. Coming specifically to the financial numbers for the period ended 31st March. The earnings numbers are with you and my colleague, Jaimin, will take you through them shortly. I just wanted to make a few important points, actually more on the balance sheet side. Specifically, very happy to share that we are now seeing a very sharp drop in the slippage ratio in terms of the new bad loans.
For the fourth quarter, the slippage ratio on an annualized basis is down to 1.08%, which is in absolute numbers, only INR 736 crore of gross slippage. Our COVID restructuring portfolio is barely 15 basis points, and then the MSME restructuring portfolio is another 29 odd basis points. I think Jaimin will give you the exact numbers, but those put together are around the 0.5% mark. It again reflects on the very strong quality of the book as we come out of the pandemic. The second important point I would like to highlight is we have been able to make significant reduction in cost of funds and our cost of funds are now at a historic low. We understand as rates move up that they will change.
With the CASA ratio in excess of 60%, we feel that we are well-positioned for growth as we go forward. Third, as an extension of that, it also is demonstrating that our risk-adjusted pricing is giving us significant benefits on our NIMs. Here, I would also like to highlight the fact that despite our loan book growing in the bank at over 21%, our capital adequacy ratio has continued to be equal or higher than what it was one year ago. Which means despite the addition of risk assets at this pace, the generation of earnings across different arms of Kotak is more than sufficient to actually keep the capital at similar levels despite a 20+% growth. This, in a way, reflects on the mix and the quality of the earnings which we have.
I'm also happy to highlight the fact that out of our consolidated profits, 30% of the profits come from the subsidiaries approximately, and 70% of the profits are the standalone bank. Therefore, our true approach to a consolidated Kotak across financial services is something which is playing out well. The fact that we own 100% of our subsidiaries is contributing significantly to the 30% number out of the consolidated earnings. We are also happy at the bank to have been cautious in building our fixed rate loan book, and it is actually somewhere between 15%-18% of our total loan book, which is fixed rate loan book, more than a year's duration. The rest of the book is either duration below one year or is a floating rate book.
As interest rate scenario changes, we have got a significant ability to reprice our book. We are again at a stage where we have put on the accelerator for speeding up our loan growth, as is evident in our Q4 numbers. We feel with the quality of our balance sheet, our cost of funds positioning, our historical ability to manage and grow a low cost and sustained liability franchise, which is a core of a banking franchise. We feel pretty confident to be able to grow our loan book, both secured and unsecured, despite interest rates moving up with an ability to price appropriately as things change. I would also like to share that on our fixed income bond book, we run a very low duration.
A little over one year is the duration of our treasury book, and which actually positions us very well as the interest rate scenario changes. With that, I will now ask Jaimin to take you through the financials and then open up, and also my other colleagues to take you through different parts of our performance in the last quarter and the year behind. Thank you very much.
Thank you, Uday Kotak. Let me take the consolidated numbers first. We end this quarter with post-tax profit of INR 3892 crore, which is 50% higher than what we did in Q4 last year. For the full year, we closed at INR 12,089 crore, 21% higher than what we did in FY 2021. Our overall customer assets at the group level grew 22% to close at INR 3,27,000 crore. At the group level, ROA for the quarter annualized at 2.94%, and if I take the full year, we are at 2.36%. Capital adequacy at the group level, again at the consolidated level, 23.7%, with Tier 1 itself at 22.8, both of them marginally higher than what they were one year ago.
Our book value per share now at INR 487 per share. Return on equity, again, if I take the quarter, 16.6%. Year at 13.4%. The year being lower, thanks to some of the negatives which we had in quarter one of this year. For this quarter, as Uday Kotak mentioned, the bank contributed about 70%, INR 2,767 crores, which is about 64% higher than a year ago and 23% higher than the previous quarter. Kotak Prime showed almost a 70% PAT growth on a YOY basis, closing this quarter at INR 313 crores. Similarly, Kotak Investments brought in INR 101 crores, up 30% on a YOY.
If I look at the two NBFCs put together, they showed a 60% growth FY 2022 over 2021. The big growth also came in the capital market subsidiaries. That's Kotak Securities and Kotak Mahindra Capital. The two of them contributed close to INR 1,250 crores to the post-tax profits as against INR 875. It's about 42% YOY. The life insurance entity this quarter had a 38% higher than previous year's same quarter with INR 267 crores. For the full year, of course, the life insurance segment had a negative first quarter, and therefore the full year numbers are lower than what they did last year. The domestic mutual fund entities, the AMC and the trustee put together contributed INR 454 crores, which is 28% higher than last year.
The alternate assets, Kotak Investment Advisors ended this year with a profit of INR 58 crore. BSS, which is, as Uday mentioned, a business correspondent in the microfinance area, which we acquired in 2017, closed with a post-tax profit of INR 82 crore this year as against INR 23 crore last year. INR 32 crore of this INR 82 crore came in quarter four of this year. At the overall group level, the non-bank entities continuing to give about 30% of the profits. Advances at the group level now crossing INR 3 lakh crore. The overall net worth getting close to INR 100,000 crore, with the bank getting INR 72,000 crore there. All of our entities are pretty adequately capitalized. The two NBFCs, for example, have a capital adequacy each of over 30%, with together having INR 10,000 crore of capital.
The life insurance company has a solvency of 2.7 with a net worth of INR 4.4, and international subsidiaries now have roughly about $200 million of net worth. Very little of that went as investment from India. I come to the bank standalone, where, as I said, for the quarter we show a 64% growth on a YOY basis and 23% if I look at the full year, INR 8,573 crore, 23% higher than last year. This quarter saw NII growth of 18% YOY. The NIM improved to 4.78% for the quarter and 4.62% if I take the full year. The fee-based services again showed a healthy growth of 23% versus Q4 2021, and this came both from higher distribution and syndication fees as well as the general banking fees.
The others under the other income thing for the full year is lower largely because of the NPM hit which we took. A lot of it came in quarter three. Our employee cost for this quarter comes in lower than the previous quarter, thanks to some reversals of retirement provisions which were linked to largely coming from the interest rate cycle. As we continue to push for growth, the non-employee expenses have grown, with cost coming in promotions towards client acquisitions, both on the asset side and the liability side, technology and communication expense. During the quarter, we added 2 million customers as against 1.1 million, which we had done in the same quarter last year.
Our operating profit for Q4 at INR 3,340 crores, which is 13% higher than what we did in Q4 FY 2021 and 23% higher than Q3 of this year. We have done a reversal of COVID provisioning on the same lines and principles as we followed for Q3 and we this quarter reversed a total of INR 453 crores and we continue to retain INR 547 crores as COVID provisioning. What we have also done in this quarter is on our standard restructured book coming either from COVID or MSME, we have taken an additional 10% provision than what is required regulatorily, which amounts to a P&L cost of INR 120 crores this quarter. Our GNPA at March 31 stands at 2.34, which is up against 3.25, which was a year ago.
In absolute numbers, we had a GNPA of INR 7,400 crores in March 2021, which has now dropped to INR 6,470 crores. The net NPA at 0.64% is against 1.21%, which has a PCR of 73.2%. As Uday mentioned, slippages this quarter at INR 736 crores, which is about 0.27% of advances, annualized at about 1.08%. Against this, we had recoveries and upgrades in this quarter, which were INR 897 crores, which is therefore the third quarter in a row where we've got recoveries and upgrades higher than slippages coming in. Our credit cost for this quarter without factoring any COVID reversals come to 27 basis points, and if I take the full year, it's at about 55 basis points compared to what we had, 84 basis points in FY 2021.
Our fund-based restructure under COVID resolutions at INR 417 crore is about 0.15% of our advances. Similarly under MSME resolution frameworks at INR 788 crore, which is 0.29% of our advances. Our SMA-2, which is funded exposures for borrowers at INR 5 crore + exposure, at INR 186 crore. Our standalone balance sheet now at INR 4.3 crore approximately. CASA continuing to be healthy at 60% + and capital adequacy at the bank again 22.7 overall and 21.7. As Uday mentioned, this has actually been a small tick up in the capital adequacy despite a pretty healthy advances growth. Advances grew 21% on a YOY basis, with this quarter itself clocking 7.3%.
I'd request K.V.S. Manian to take the corporate book and then.
Thanks, Jaimin. Good evening, everyone. As we usually do, let me take you through the corporate loan growth in its parts. There are two parts to that. One is the SME portion, which you can see has grown at a healthy 25%. We continue to remain optimistic about this segment, and we have seen strong NTB new customer acquisition as well as marginally higher utilization compared to the past. This segment, we are quite optimistic about growth. The other part of corporate which is, I would draw your attention to the corporate banking book shown here in the presentation as well as the trading substitutes. The combination of the two has grown at about 12.5%, actually 12.7%.
We see of course somewhat muted growth on the corporate side overall in the industry. We are beginning to see some green shoots and some capacity additions and CapEx related demand. As of now, we are not seeing that strong enough, the beginning of some green shoots there. Within the corporate segment, the CRE segment has grown faster at close to 23%. Here we have moved focus to the residential segment from the commercial segment, and that seems to be doing quite well. In fact, on a consolidated basis between the bank and the subsidiaries, the growth in the corporate advances is relatively better.
In fact, in the corporate core corporate segment, we have had to, as you can see the QOQ growth is very muted. We have seen some unsustainable levels of pricing here. In fact, towards the end of the year, we dropped some assets, especially in the PSU segment, because of unsustainable pricing. Also in our advances, we saw good focus on PSL advances and within the corporate book we have built a fair amount of PSL loans. In fact, managing PSL loans, costs and pricing is critical part of profitability for a corporate bank. Having said that, across all segments, whether it is MNC business, the new age companies, large corporates or conglomerates, we have seen very robust addition of NTB clients.
In addition to assets, of course, our focus is always on fees and other earnings from corporates, from the relationship. Our trade, Forex, current account and debt capital markets businesses, all these fee lines grew significantly faster than the asset growth. In fact, DCM had a record year. On the current account, the core current account, domestic current account also grew very strongly. Custody business also continued to be robust and we continued to add new clients. Overall, the current account growth was extremely good because also of our transaction banking focus. The quality of assets of course remained quite good throughout the year, and in fact we are seeing record low levels of credit costs in the portfolio.
Overall, therefore, the profitability of the franchise remained extremely robust and in fact our ROE rose during this year. We think our business model is best in class in terms of high focus on risk management, ROE and growth as a balance. We manage our risk-adjusted return on capital very carefully at the business level, product level and customer level. Our segmental focus adds to the balance in the portfolio. We have also good progress on the digital and analytics front and customer experience front. I think more about this, Shanti will talk about in the digital slides. Analytics is also an area where we have made significant progress, especially in areas of pricing, optimizing pricing, cross-sell and RM productivity.
We see the franchise in good shape and, with revival in the economy, we feel optimistic. We remain optimistic on this business. Thank you so much. Can I hand this over to Kannan to take you through the commercial bank?
Thank you, Manian. I'll start with the commercial vehicle finance business. The commercial vehicle industry saw good growth in quarter four as compared to the previous quarter. The industry grew about 26% during the year, and the fourth quarter was even better. Demand for new vehicles is being driven by better capacity utilization as well as replacement demand. Diesel price increases are to some extent being compensated by increased trade demand and good freight rates. Utilization of passenger vehicles has improved considerably during the quarter and it's expected to get better in the coming quarters. Our disbursements during the quarter has been much better and stronger than the previous quarters. Collection efficiency on current demand is back to normal times. Construction equipment demand continued to be good during the quarter, mainly driven by road mining and real estate sector.
Manufacturer data points to better utilization of existing equipment and better utilization is leading to better cash flows in the hands of our customers. Our disbursement numbers are better than the previous quarter, and collection efficiency on current demand is back to normal times. This trend seems to be continuing in the month of April too. There's a marginal degrowth in the sales of tractors in FY 2022 as compared to FY 2021. However, demand in April is again showing an improved trend. Farmer cash flows continue to be good, driven by better yields and prices. Utilization of tractors in farming was always good, and with the increase in rural infrastructure spending, utilization of tractors for commercial applications has also shown good improvement. Collection efficiency on demand is good and is back to normal times.
Outlook for our tractor financing business is quite positive, and we continue to maintain our leadership positions. Demand for credit and utilization of existing lines has been strong in our agri SME segment and the agri value chain. Higher demand for commodities has also increased the price of commodities, which is leading to a permanent increase in credit. Customer cash flows are strong and collections are back to normal times. Our microfinance disbursements in the quarter shows a significant improvement over earlier quarters. Again, here demand is mainly driven by agri and allied activities as also small businesses. Customer cash flows have been good and this is helping us in restoring normalcy in our collections. I'll now hand it over to Shanti to take.
Thank you, Kannan. In continuation, I'll start with advances. On the retail assets, our strategy was to go for growth, which we executed. All our retail lending products showed robust growth in Q4, helping us gain market share in many products. At the consumer asset aggregate level, we grew 35% YOY and 11% QoQ. This is after 11% QoQ increase. Mortgages. We continue to see strong demand for home loans in this quarter. Our home loan DIY journey went live, where new-to-bank customers can get a sanction letter in 10 minutes entirely end-to-end digitally. We continue to acquire quality customers and strengthen our market share across all customer segments. This will continue to be a focus area for us. As business momentum picks up, we saw good volumes in LAPs and had one of our best quarters.
We saw a pickup in commercial and industrial property for sale deals. We continue to consolidate market share in LAPs. Mortgages grew at 39% YOY and 10% QoQ. Unsecured retail. We had one of our best quarters in credit cards with acquisition at over 5 lakh cards and on spend, one of the best quarters with a YOY growth of 62%. Bulk of the sourcing has been from existing customers. We rolled out attractive offers to our customers in marketing alliance across e-com and physical partners. Our brand tie-ups with Apple, IndiGo, and PVR helped us deepen our engagement with the customers. We signed a co-brand agreement with Indian Oil for credit cards in this quarter. Credit card advances was at 40% YOY and 13% QoQ. Personal loans. We had our best ever quarter in terms of volume.
Over 40% of the personal loans were sourced digitally and internally. We saw increased demand in consumption from segments like travel, wedding, home renovation. We have scaled up our customer acquisition in both the traditional and the data-led digital space. Consumer finance, a very good quarter once again across physical and digital distribution, and we continue to scale in this space through widening distribution relationships and key partners with a strong data-led digital base. Overall unsecured business saw a YOY growth of 42% with a strong quarterly growth of 16%. In the working capital and business banking segment, we continue to witness sustainable growth in the customer segment, both secured and unsecured. We aligned Intact's strategy with our current account and linked services to current accounts, which helped us show a strong growth in current accounts.
We've invested in technology enabling ease of onboarding trade and cash transactions like FYN B usiness App, which I'll talk about shortly. Q4 growth was one of the highest in the previous 10 quarters, accelerated by incremental focus in select industries, higher imports and export realization. Our growth focus continues to be on granular, high-quality, profitable, and sustainable businesses. 85% of this business qualifies for priority sector. Collections. Our bounce rates and resolutions continue to be better than pre-COVID levels. Our digital collections platforms saw significant adoption, increasing efficiency of our collections. We have invested significantly in the consumer asset business across digital, tech and digital, data and analytics, which has helped us grow our franchise and aggressive customer offerings proposition. We will continue to invest in this space. Now to deposits.
Average savings deposits grew YTD YOY 11%, and current accounts 26% and sweep term deposits 16%. The focus continues on granular retail customer growth across digital and physical channels, and 811 continues to contribute successfully to our digital customer acquisition. The bank had 32.7 million customers as at March 2022 versus 26 million last year, a growth of 26% YOY. Our CASA ratio was at 60.7% at December 2021. CASA and CD below INR 5 crore comprised 89% of the deposits. CD sweep deposits were at 7% of the total deposits. Cost of savings was at 3.56% this quarter versus 3.7% in Q4 last year. Our asset quality in Q4 was strong across all retail assets in the consumer and commercial space.
This was driven by deep analytics helping us deepen our customer base. Fee incomes showed strong growth across insurance, investments and brokerage. First, receiving in-principle from Government of India for agency business. We've received mandate to set up TDPP, GST, Customs and Railway Pension. We've launched our payments for Customs, and the transactions were INR 250 crore in one month, in the first month of launch, which was in March. We will continue to build each and every part of the individual proposition. In Q4, we acquired 600,000+ customer, maintaining our position as the fourth highest issuer. Customer acquisition, deepening, and CASA is at the core of our consumer bank strategy and will continue. Now to digital. We continue to invest in technology-led capability and are focused on resiliency and scalability, modernization and cloud-first applications, DI journey for all our financial products.
All digital channels continue to show robust growth across adoption, financial transactions and sales. Our mobile-first strategy continues and our flagship mobile banking led the way. We introduced new features to enrich customer experience through credit score, home search, investment research, among several others. Our customer experience, functionality and velocity consistently among the top-rated financial apps across both iOS and Android. Our pay to contact features continue to see steady growth in in-app UPI transactions. We are among the top 10 UPI apps across banks and non-banks. We saw an 8.5x growth in pay to contact transactions over the last three quarters, 2.3 YOY on UPI overall. Our retail assets focus on customer journey and automation continues. We went live with home loan and home buying digital journey. We revamped our credit card and loan section in the mobile app, providing our customers a superior experience.
We expanded our partners ecosystem play by enabling Account Aggregator and open framework. This will help us connect seamlessly as customers increase adoption on these partners platforms. Corporate business banking. In our endeavor to delivering the best customer experience, we continued with our journey of launching and upgrading tech platforms for corporate and business banking segments. Within transaction banking, we introduced our future-ready one-stop best-in-class digital portal, Kotak FYN, Exclusive for business banking and corporate, providing our customers a paperless, seamless, end-to-end digital experience and one unified view across trade, collection, payment and account services through a single interface. We launched many other products for our customers like UPI, ASBA, instant CMS and upgrading our corporate mobility app. Our corporate mobility app saw nearly 25 lakh YTD transactions, 37% up YOY, while DBTs saw a 15x growth in number of transactions.
We will continue to invest in the corporate tech stack to have a superior experience for business banking customers. Digital transactions through Nex mobile continued to grow across deposits, lending, service, payments and in-app shopping. 97.8% of savings transaction volumes were in digital or non-branch mode. Now request Gaurang Shah to take you through the insurance business side.
Thank you, Shanti, and good evening, friends. The life insurance business started on a lot of challenges in Q1 2022, but I think it ended quite well. Our embedded value during the year grew by 8.2% to INR 10,679 crore. The growth in IEV was impacted by lower mark-to-market surplus due to increase in yields and extra mortality costs due to COVID wave two. Our VNB margin grew by 29.5% to INR 895 crore for 2021-2022. Our VNB margin was at industry-leading 31.1%. VNB margin is mainly driven by a balanced product mix with good balance between par, non-par and ULIP. Share of protection business was 32.9%, an all-time high for us in group and individual businesses combined.
We have always maintained a very good balance of channel mix of bank assurance and agency. Persistency continued to be good except for the 13th month, which we need to improve. Individual conservation ratio was still at a very good level of 89.4%. We had excessive claim paid during the year. In spite of such a load of 2x to 3x in certain verticals, our claim settlement ratio for individuals was at 98.82%, and for group claims it was 99.5%. Coming to our premiums, our gross written premium grew 17.3% YOY during FY 2022. Individual AP new business growth for Q4 2022 was 11.8% against private industry growth of 8.5%. Individual renewal premium continued to be strong.
We grew by 16.6% and AUM for the year grew by 20.3% to INR 51,800 crore. Our OpEx ratio improved to 12.8% in FY 2022 from 13.6% in the previous year. The 32.9% protection share reflects in a number of active lives covered, which grew by 11% to 3.7 crore. Our profit for the quarter was up by 38.3% to INR 267 crore against INR 193 crore in the same quarter in the previous year, and our solvency ratio continued to be at a strong level of 2.73. Now I hand over to Jaideep to take the presentation forward.
Thank you, Gaurang. Good evening. Total income for Kotak Securities in Q4 or FY 2022 was INR 661 crore. This is compared to INR 570 crore for same period last year and INR 656 crore for the last quarter with Q3 FY 2022. The profit before tax is INR 335 crore for Q4 of this year or of FY 2022, which was against INR 321 crore for Q4 FY 2021 and INR 359 crore for Q3 of FY 2022. The PAT numbers are INR 262 crore for Q4 of FY 2022, which was INR 241 crore same period last year. This number was INR 270 crore for Q3 of FY 2022. The full year PAT for Kotak Securities was INR 1,001 crore versus INR 793 crore for last year.
The cash market share for this quarter was 11.5% against 9.7% for the same period last year. We witnessed a very large growth in trading in average daily volume for both mobile as well as the web. The market average daily volumes for this quarter was INR 47.82 lakh crore against INR 22.47 lakh crore same period. A real serious jump. The increase which happened was predominantly in the options market. The cash market has remained more or less the same. The total overall market volume on a daily basis was INR 1.74 lakh crore against INR 49,000 crore in the same quarter last year. A few of the activities which were taken up by Kotak Securities on the digital side. On...
In March of 2022, we launched our cloud-based trading platform, which would be best in class on all the technology stacks. We upgraded the customer experience across login, trade, payment, and portfolio views. There were significant mobile and web enhancements, where we introduced new features like order slicing, stock fundamentals and screeners, and we extended the net banking facility for additional 31 banks. The DIY service journeys like the do it yourself service journeys will be available to update details on nominee, bank address, mobile, email ID, and trading segment activations. We executed our first API deal with a company called TradeSmart. We initiated partnerships with fintech like StockEdge and Trendlyne to empower clients to take informed trading decisions.
In March of 2022, we launched our no brokerage plan for the youth under 30 years of age, which would encourage youth to experience markets early without worrying about brokerage. I will now hand it back to Manian for our investment bank. Thanks, Kavi. Kotak Mahindra Capital Company, our investment banking arm, had a record year, all-time best year. Both in the equity and advisory, it had extremely robust performance. Even within the equity ECM business, I think it's the performance across IPOs, QIPs and blocks was quite exceptional. Even with a relatively slower Q4 compared to Q3, the overall, the firm ended with INR 245 crores of profit after tax compared to INR 82 crores of last year.
We continue to have extremely good pipeline growth on the IPO side as well as on the advisory side. While such a record year is difficult to replicate, we still continue to be optimistic about the coming year in this business. Coming to Kotak Mahindra Investments Limited, it is the NBFC arm primarily into CRE and corporate structured lending. In fact, in this entity we also have the loan against share book, which, as per RBI directive, we have run down almost close to nil, as at the end of the current year. The corporate loan book showed extremely robust growth. CRE also grew well. The exceptional thing about this company this year was the quality of its loan book, which had almost close to zero kind of loss.
Very low loss, and the quality of book is maintained very well. This is an area where we think both in CRE as well as in the corporate structured book, we can continue to maintain the growth momentum. Obviously, the margins improved as an NBFC because the cost of funds were well managed through the last year. The PBT grew by 34% on a YOY basis. I'll now hand over to Kannan to take you through Kotak Mahindra Prime. Thank you.
Thank you, Manian. Kotak Mahindra Prime has had a very good year. AP had a profit after tax of INR 886 crores this year as compared to INR 535 crores last year. Disbursements in quarter four has been higher than the previous quarters. Demand for car finance continues to be good, but deliveries are impacted due to supply constraints faced by manufacturers. Collections against current demand as well as
continue to be good and looks to be back to normal times. I'll now hand it over to Nilesh to take this presentation forward. Thanks, Kannan. Good evening. Thanks. Let me take you through our asset management business. Our total average AUM grew 22% year-on-year to reach INR 2.86 trillion. Our equity average AUM, supported by market bounce, grew 53% year-on-year to reach INR 1.44 trillion. Our total average AUM market share increased to 7.4%. Our equity AUM market share increased to 5.4%. Our SIP inflows for March 2022 grew 34% year-on-year to INR 7.2 billion.
Our SIP book growth average AUM growth continues to outpace industry by a healthy margin. Our retail AUM stands at about 49%. We continue to serve investor requirements by launching active as well as passive funds focused on local as well as offshore markets across debt, equity and commodities. We also remain focused on ESG investing as India's first signatory to UNPRI. We also made our maiden foray into AIF space by launching fund this quarter. Consequently, our profit after tax has grown 31% year-on-year to INR 450 crore for full year FY 2022. Our total AUM across mutual fund, PMS, offshore, insurance and alternate assets grew 18% year-on-year to INR 3.83 trillion. Our relationship value across wealth, priority and investment advisory grew 68% to reach INR 6.41 trillion. Over to Jaimin Bhatt.
Thanks, Nilesh. Steven, can we throw it open for Q&A, please?
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mahrukh Adajania from Edelweiss. Please go ahead.
Good evening and congratulations. My first question really about your sector out-
Mahrukh Adajania? Ma'am, request you to speak closer to the device, please. Your voice is not audible.
Yeah. Hi, can you hear me now?
Better.
Yes. I just wanted to know that, just your view on the sector outlook. Basically, inflation concerns have risen, rate outlook has changed since your last result, but your guidance or your optimism on your own growth has not changed. I'd just like to know if that's because you think you'll acquire market share or you expect sector growth also to pick up despite all these concerns.
See, Mahrukh, if you look at a higher inflationary period and rising interest rates, in the early stages of the cycle, normally, banks who have got reasonable focus on risk management actually have a good upside because you have your liability franchise, particularly the low cost liability franchise, which normally the cost of funds does not increase at the same speed at which the interest rates in the economy increase. On the credit cycle, in the early stages of the interest rate hikes, most borrowers are able to absorb that increase, especially if it is from record low rates, which is what we have seen. The question which then arises is what is inflation going to do to producers and consumers?
On the producer side, to the extent to which the inflationary increase producers are not able to pass on to their end consumers, you then have a squeeze on margins, and therefore you have to watch how that cycle plays out on the producer side. On the consumer side, it starts impacting the lower end consumer first, where for an X amount of money which that consumer has, more and more money is needed for the non-discretionary spend, and therefore less and less surplus available for the rest. That puts the squeeze on that consumer in terms of the spend, as also in terms of being able to pay installments. You have to watch how this inflationary cycle goes and to what extent it traverses. Further, one of the interesting aspects about inflation is particularly when a very large part of your book is secured.
Inflation is a great protector for the value of the underlying security. Therefore, whether it's a home, whether it's a car, inflation gives a natural hedge to the rupee value of the underlying asset for a lender. To that extent, the secured book gets some natural protection, because even as ability to pay gets a little impacted, the value of the asset is a good security for the lender. Because one has to, in the later stages of this cycle, watch out for the lower end consumer who gets squeezed in because of less discretionary surplus available and which part of the producer chain gets impacted because of not being able to pass on the input cost. It goes back to Mahrukh, a first principles view that good risk management is at the core of financial services.
There is no such thing as blind growth across different cycles. You have to look at each cycle. You've got to look at where you sit and where you stand, look at different segments of your book. Find out where you really want to be very aggressive, where you think you need to temper based on the external environment matrix, and it's a very dynamic part. Yes, you run the risk some, of some part on the historical book. In that context, if you look at our current historical book, the relative stock of unsecured is low. The relative stock of the secured is pretty high. The slippage ratios for us are at record lows. The very large part of the book is essentially floating rate. Our CASA ratio is well above 60%.
We genuinely believe that as we turn on the engine for increasing the liability growth, we do believe we have the ability of stepping onto that accelerator at speed, which is what we think is something which we will have to move into as interest rates move up. All in all, two parts, overall sector, significant focus on different segments, risk management, secured, unsecured, mix, producer, consumer, relative position. From Kotak point of view, some inherent advantages of where we are, and obviously, we have to. We cannot be complacent, but we see an opportunity because it is like in good times, all boats are lifted. It's only in tough times that boats which can swim better will swim better. Therefore, that is where we are. We actually believe that, within one is we have to really watch how this whole inflation dynamics plays.
We have been well prepared for it ourselves. Question is, does it really lead to a growth slowdown? At this stage, early days, we cannot take a call that growth will slow down, but we have to watch the tea leaves carefully.
Thank you, sir. My second question is, what is the proportion of overdraft loans in your personal loans, and how would you assess risk on that product given that there's no EMI schedule?
No, we have-
Okay.
Very insignificant part of our total book is overdraft loans. It's not a major part of our book at all.
Not a strategic.
If you look at our overall unsecured lending, we are still overall in single-digit % out of our total loan book.
Got it.
Overdraft is a very small portion. It's insignificant.
Insignificant. Got it.
Not even material.
Okay. Got it. Sir, if you could share your outlook on growth in savings deposits because that's been a little slower this quarter.
Yeah. I will ask Shanti Ekambaram, who runs that business, to give you feedback on how she's seeing what has happened and how she sees it from here.
Yeah. Thank you, Uday. If you look at savings deposits, the growth has been a little slower, as we came off, you know, our 6% and moved into, you know, competitive rates in the market. Towards increasing customer engagement, which we were not that focused when we had 6%, we have moved in integrating assets into our customers, whether it's credit cards, home loans. We have increased the offers that we have rolled out for our various debit card and other products to the customer. That has sort of created that slowdown, which we are seeing the turn, and our whole focus this year is going to be deepen the hooks into our customer to be able to get the savings growth back again. That is on the individual customer.
The second is on the government business. Our base is very small as compared to most banks, and a lot of banks have grown very aggressively last year. With the receipt of approval, as I spoke in my, the thing, of the agency bank and some of the taxes which we have gone live and we will go live in the next, one or two quarters, we hope to build our savings on that as well. I think these two are the strategies that we are adopting for getting the savings growth high. Thanks a lot. Thank you.
Thank you. The next question is from the line of Rahul Jain from Goldman Sachs. Please go ahead.
Yeah. Thank you. Good evening, Uday and team, and congratulations for good number and congrats to Shanti Ekambaram as well. Just a couple of questions. Number one, strategy. Of course, in the backdrop of what RBI has done today, how do you think about the NIM trajectory, particularly given the fact that, you know, there is a competitive pressure on certain products? How would you choose to sort of, you know, respond, you know, to the market forces?
Rahul, back to good old basics. First of all, I'm very happy that savers will get a little more money on that savings deposits versus negative real returns. I'm saying savings deposits means I'm just looking at overall savings, not the savings deposits rate at Kotak in particular. I'm talking about overall return on savings, including term deposits, where the rates will certainly move up as we go forward. The good news for us is we are sitting on a reasonably decent CASA ratio, and we do believe that we will continue to focus, of course, on current account, but we will ratchet up our engine in terms of really getting our act together much stronger on the savings deposit as we go forward.
We believe that is something low cost and stable liability, something which is at the core of a good banking franchise. In terms of NIMS, we've always priced on a risk return basis and, actually our NIMS are what they are keeping in mind three things. That there's a reasonably large retail portion in what we have. There is a higher capital which is helping NIMS. And third is despite such high NIMS, our retail unsecured is still a very small part of the total. Therefore, the third part, third point of course, if that mix gets a little higher, that actually supports NIMS. A high CASA ratio, in a rising interest rate environment supports NIMS. And the third point is capital. We would hope to make more use of it, organic or inorganic.
The fact of the matter is with the more than 20% loan growth, our core equity capital ratio is actually marginally higher than what it was one year ago. That actually shows the way our earnings models are built, which effectively says for a certain base growth, which in this one year has been around 20%, is still not eating capital. Our ability to price aggressively is always there, but we also value the discipline of risk-adjusted returns as the core to our philosophy. Therefore, we will certainly look at this as an opportunity to look at growing our market share on the asset side, even as we ramp up further our liability franchise. We look at the opportunity of gaining market share, but we are also conscious and will remain so on risk-adjusted returns.
Fair enough. So the implied message here is that, you know, the growth of course is paramount, even though, you know, while the margin trajectory could be upwards, we may sort of, you know, use that to grow faster. Is that a fair assumption?
Yeah. I think the advantage is that, with a solid cost of funds and a liability franchise, which we will continue to nurture aggressively, we have the ability for the risks we like to go aggressive on the lending side. Fortunately for us, our fixed rate book is relatively a small part of our total.
Fair. The second question is on the branch expansion. You know, last two quarters, you're gradually ramping up. We know, you know, one large bank is, you know, talking quite aggressive on the expansion side. How do you see, you know, branch expansion, you know, playing out, or the distribution footprint playing out over the next few years or so?
Rahul, I think as we go forward, our firm view is if you divide the customer base into broadly two categories, which is the consumer and the business customer. Okay? Divide the customer base into these two categories. Our firm view is while the consumer wants the comfort of a brand and some physical presence to be seen, the consumer is moving towards digital at a much faster pace and in terms of transacting. We see that as a continuing trend. Therefore, we are of the firm view that we will certainly add branches in a measured manner, but the primary focus of our network will be more towards the business customer, primarily again because cash continues to be a very large part of the Indian economy.
Therefore, the direction of the branch network, which of course undoubtedly will deal with the consumer as well, but the direction of the network will be much more towards the business customer as the need for the branch network. Digital on the consumer side is here to stay, and as Shanti mentioned, if I looked at in volume terms, more than 97% of the savings account customer transactions are now non-branch in volume terms. May not be in value, but in volume terms. The traffic at branches from the savings and the consumer has significantly changed more towards transacting off branch.
Got it. Those are our questions. Thank you so much.
Thank you. The next question is from the line of Adarsh Parasrampuria from CLSA. Please go ahead.
Yeah. Uday, one question is on liability, that.
Can you be louder? Adarsh, can you speak louder, please?
Yes. On the liability, Uday, you did mention that we've got good CASA. The fact is, if you go through the last three to four years because of slow growth, let's say a term deposit growth's been quite low, right? When you go significantly higher on overall growth of the balance sheet, deposit mobilization will need to expand manyfold. That has a consequential impact on how CASA will work for the bank, right? It's a completely different ballgame for the bank over the next two to three years, and that has a meaningful impact on cost of funds.
Yeah.
So-
Adarsh, your question is how are we looking at the liability side strategy and execution? Is that what it is?
I'll just give you some, you know, because when you look at your term deposit book, right, it's, you know, we've accreted like $1 billion a year of term deposits in the last three, four, five years.
While incrementally you'll need $4 billion-$6 billion annually, right? It's a material shift in the way the branches will mobilize term deposits, and it has an impact on CASA.
Look, Adarsh, we've been through this debate with you before, if you recall, along with a lot of investors which you had. This is probably again coming back from the report which you had mentioned. The answer to that is very simple. It is not just a one-way street. While some of what you mentioned does happen on the liability side, remember, we still are at a very high CASA. Some of this will get balanced by the incremental delta, which we hope we will get out of a better mix on the asset side. Net-net, maybe we are talking about a NIM contraction of 10-15 basis points, but that is running off a high 4.5 odd NIM really. I think in the overall context, that should not really be too much of a worry really.
No, Dipak. No, this is helpful because, if you'll go through the numbers and feel that, NIM can be contained at 10-15 basis points with the kind of balance sheet expansion that we see, it'll be a phenomenally strong outcome for the bank.
Yes. Like I said, some of this will also happen because of, you know, gradual modification in the mix of assets really, yeah.
See, one of the items building on what Dipak said, one of the areas which we can do a better job as we go into the future is significant ability to generate liability out of our asset strategy. Our historical focus has been cross-sell of assets, especially including in the last 12-18 months on the liability base. We're now getting our engine and the hooks in place to see that the asset strategy also starts adding to the liability strategy. We've seen some of the banks do a very good job at it.
Got it. Thanks, Uday and Dipak, and all the best.
Thank you. The next question is from the line of Saurabh Kumar from JP Morgan. Please go ahead.
Yes, sir. Three questions. One is what is the LCR ratio for the quarter? The second is also if you can quantify the technology spend to, you know, revenue or operating cost and what is your overall G&A operating cost from here on. The third is basically on the savings rate. Now that you know, would a savings rate increase be also on the cards if you have to increase our growth? Thank you.
Okay. I'll answer the third, and I'll ask Jaimin to answer the first two. At this point of time, there is no plan to increase savings rate. Okay.
Some of the LCR which we have, this is at, for the average for the quarter, is at about 130%, 129 something. That's part of our bank book disclosures which happened. If I look at the tech cost, tech cost is operating tech cost as part of the tech cost. I'm not including the CapEx cost there. Operating tech cost as part of the overall tech cost is about 7.5% thereabouts, and that's been consistent through this year, both for the quarter and the year. Of course, if I add the CapEx, it would be another 1/3 of that adding to that. Roughly about that.
Okay. Thank you, Jaimin. Just one follow-up. Is this so the LCR drawdown that perhaps can continue for another quarter or so, right?
That's right. Again, our number which we put for the previous quarter was about 143 thereabouts, which is now about 129.
Okay. Thank you. Thanks a lot.
Thank you. The next question is from the line of Prakhar Sharma from Jefferies. Please go ahead.
Yes, thank you. Uday, just two questions from my side. One, you know, this recent Citibank consumer portfolio, you know, that was announced by Axis Bank. You know, there were expectations that Kotak Bank would also be, you know, eyeing at it, and frankly, everybody else was also looking at it. Is it possible to share some insight on what made the bank choose not to go ahead with this? That's question one. Second is, from the management transition perspective, is there any, you know, further step that we should kind of expect or what you plan to do, over the course of next one and a half years as we go through the transition? Thank you.
Okay. First, I mean, I would like to congratulate Axis Bank for its acquisition of the Citibank business and really wish them the very best on that. You know, I have something which I've said publicly, and I just feel that I may want to repeat it for the benefit of all the analysts and investors. One of the important aspects of a merger or an acquisition is also the methodology of the same. When we acquired ING Vysya Bank, it was a merger of ING Vysya Bank into Kotak Mahindra Bank. The day the merger was completed and consummated, all the customers of ING Vysya Bank became customers of Kotak Mahindra Bank.
This is different from an acquisition, where you have to buy customers with positive consent of customers for some of the products like credit card and other products. We believe fundamentally the difference was, I mean, when I compare our acquisition of ING Vysya Bank versus the facts of the case as are in the public domain on the Citi situation, and therefore I'm not discussing anything which is non-public, is very fundamentally different. Obviously that creates different set of challenges, and we have to keep that in mind when we are looking at potential opportunity. I would like to say that that is something which did weigh on our mind as we thought about various opportunities in the market. We always weighs on our mind when we think about opportunities, the nature and the structure of the transaction.
Coming to your point, as I mentioned, we have just announced appointment of Shanti Ekambaram as the full-time director, subject to approval. Reappointment of Mr. Manian, again, subject to approvals. Continuation of Gaurang Shah's involvement with all our major subsidiaries, even as he steps down as full-time director in the bank. We are very conscious of this fact that we have huge strength in our leadership within Kotak Mahindra Bank, and it is at various different levels within the firm. We've built a very strong professional entrepreneurial leadership class within Kotak over the years. We believe that as we go forward, any further announcements on transition, we will share at the appropriate time with the stakeholders.
We do believe that Kotak as an institution believes that sustainability and the power of a one Kotak strong leadership is something we are very proud of. We will share with you the transition progress as we go forward.
Perfect. Thanks a lot, Sudhir. Thank you.
Thank you. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead.
Yeah, congratulations for good set of numbers. Again, getting right onto the liability franchise and deposits. Today when we look at it in terms of the term deposits, again, they have been more or less flat. You said, like, maybe, now we will be showing up the engine. How critical would be pricing in this? Because it's not moving up and would pricing be a key element to drive both, maybe the term and your highlighted savings might not go up, but eventually, and that could also drive the savings deposits.
No. As I said, we have already given you clarity on the savings. There's no plan at this point of time of increasing savings deposit rates. Shanti has also highlighted to you the steps we are taking to really get our savings engine, really move, revving up, including the fact that, you know, we are not a, we were not a government agency bank. There were a lot of technology initiatives post opening up by government, which have taken time to be put in place, which are now put in place or getting into place. The whole government agency business is now going to be a very significant part of increasing our government savings, including individual customers transacting for taxation and other things. We think that is one of the very important engines.
There are some various other plans through which, including the digital side, where we are getting very high savings growth. We will continue to sort of build on that further. We believe that our fundamental engine is very much intact. Like I still remember, Kunal, if you and I had spoken about a year ago or even later, the biggest focus would have been how will we rev up our asset side. We have demonstrated that on the liability side in the past. We have now feeling very confident on the asset side, as you can see in the numbers which are in front of you, and we are continuing to guide on decent asset growth as we go forward.
We think that, I mean, we once we make up our mind, we will get our liability engine also firing even faster because at the core of it is something which has been deeply in our DNA, which is low cost and sustainable liability. We don't start in a bad place with 60.7% CASA ratio and 130% LCR.
Yeah. No, the question was when you look at the incremental growth, okay, of INR 19,000 crore, which is coming on the advances side, largely that's been funded through utilization of the liquidity, but no increase in savings. Is it by choice or we need to fix this and pick that up? Pricing would again play a key role. When I look at it just on a quarter-on-quarter basis.
Kunal, if you-
Yeah.
If you look at it and if you do a mathematics, it is no rocket science to show you that our cost of funds is below our savings deposit rate.
Yeah.
I mean, this is, you are in a two-year period where there has been a significant drop in the cost of carrying surplus liquidity. I mean, there has been a significant drop in absolute returns which are available for surplus liquidity. We are tuned to the fact that if cost of that liquidity goes up, we will be able to manage it. Our cost of funds is at a remarkable low point and we have to take the choices and we will take the choices keeping in mind risk-adjusted returns and the fact that we like to get our risk-adjusted returns at very good price.
Sure. Lastly, in terms of the investment, so last time we had taken a hit, but this time, was there any kind of an MTM hit? You highlighted in terms of the duration how we are positioning. Even in terms of the non-HTM portfolio and overall duration with the rise in yields which might be there, given the rising interest rate scenario, how are we positioned now?
Whatever is in front of you, as I said, our duration of our fixed income book is a little over one year. Whatever it is. This includes both HTM and HFT, and AFS all put together a little more than a year. You can figure out what the impact would be with a very large portion in HTM out of that, with a decent portion of that even back in HTM. We are very, very comfortable on ALM matching and, actually feel very, in many ways, we were positioning ourselves for what has happened for quite some time.
Okay. One last bookkeeping question in terms of the breakup of the loan book between repo-linked, other, CBR, floating, maybe the fixed rate loan book, if you can just share that, yeah.
Okay, if you take it this way, Kunal, the overall fixed rate would be about 30%. However, if you look at those which are less than one year, which the payments are due in less than one year and which are over one year, it's about half and half. About which goes over one year is just about 16-17%. That's the fixed rate book. If you take the non-fixed rate book, which is roughly about 67-68%, about 48% or 48%-50% would be EBLR linked or rather EBLR linked and the others would be MCLR linked.
Kunal, in some simple language, on a total of 100, around 15%-17%.
Yeah.
Is fixed rate more than one year.
I think that you alluded to the fact.
About 15-odd% fixed rate less than one year.
Okay. Fair to assume within EBLR, 70%-80% would be repo-linked?
Yeah. Our EBLR is entirely repo-linked.
Okay.
EBLR is 48%, which is all repo linked. MCLR is 18%.
Got it. Thank you. Thanks a lot.
Thank you. The next question is from the line of Manish Shukla from Axis Capital. Please go ahead.
Good evening and thank you for the opportunity. Mr. Kotak, just a question here. This is the first time that we have a large portion of balance sheet for the banking system linked to repo rate, which, depending upon which economist you talk to, is expected to go up by 100-150 basis points over the next 12 to 18 months. How do you see the customer behavior changing for this set of customers, primarily home loans and MSME, when we see such a large rate hike in such a short duration of time?
You know, you have to ask yourself that there was no repo rate link and it was MCLR link. Instead of having a 40 basis points increase one shot, you would have 5-10 basis points increase over three or four months. The end outcome would have been the same.
It's more like a cumulative rate hike because in the past cycle, while repo rate did change by 100-150 basis points, we didn't see the benchmark rate change by the same order of magnitude, right? Whereas this time the benchmark is changing.
It happens more gradually on a monthly basis. Therefore, it does not look that high at every stage of MCLR increase, whether it's five, 10, 15, 20 basis point increase. Repo rate, this was a shock, which I mean, you've got to give, look at it differently. The Reserve Bank of India decided to have a meeting not only between policies but during market hours. You have to read the signal of what RBI wants to convey. Obviously, the intent seems to be to create an impact. If they want to create an impact, they're creating an impact.
I mean, could you please quantify the MTM hit for the fourth quarter?
For whom?
For you, sorry. For MTM book-
We've told you that our duration of our book is a little more than a year with very large part of it in HTM.
Last quarter, about 60% of the book was in AFS as of December. Has that meaningfully changed during the quarter?
That includes our corporate bond book and everything put together. Even if you look at that, total book is a little over a year, including both HTM, AFS, HFT.
Okay, got it. Thank you. Those are my questions.
Thank you. The next question is from the line of Nilanjan Karfa from Nomura. Please go ahead.
Hi. Thanks for taking my question. Go back to the deposit question once again. I think Dipak has explained substantially talking about, you know, potential of maximum 15 basis point cut on margin. Would an HDFC Limited merger and ensuing competition also builds into your expectation how the rate market will move on that side?
All that I know is that we have reasonable confidence that for the size of our growth of our balance sheet and what that rate of growth is, we are not giving forward guidance, but you have our evidence for the last two quarters on a quarter-on-quarter basis, what is our loan growth. You can estimate how we will build our business as we go forward. All that I can say is out of the large ocean which you are talking about of various banks, large banks, small banks, NBFCs, everything, we believe for the size of our loan growth and our aspiration, which has been more aggressive on the loan side than in the past, we believe we will be able to generate liability at reasonable cost and with good NIMs as we go forward.
Right. See, it is very, you know, easy for all of us to talk about future, but so I'll just concentrate on, let's say, the fourth quarter. I mean, given the, you know, INR 19,000-odd or 20,000 crore of loans that we added, looking at the way we funded it, if you look at the average CAR and the average between Q3 and Q4, it's actually declined. Whereas on a period end basis, the CAR has actually increased, Tier 1 is flat, CASA is broadly there. We have basically borrowings have gone down with possibly, you know, we have a lot of unwind that has happened on the corporate, you know, essentially the LCR book. So the question is, have we sort of squeezed out whatever was there in our balance sheet right now?
No, I think that divide into two or three parts. First of all, Jaimin mentioned we have a 130% LCR. So if it squeezed out everything, we would have been at 110%. So there is LCR, which is with us. Number two, our NIMs for the fourth quarter are at record. Dipak talked about the average for the year. NIMs for the fourth quarter are?
478.
4.78%. Average for the year are 4.62%. We're still well above the 4-4.5 mark. Okay? Even as Dipak indicated, even if there is some reduction in NIMs in the 4s, 4.30%, 4.40%, 4.50%, 4.60% would be very healthy NIMs for a bank growing at the pace at which we are. Therefore we are very far away from being squeezed out in terms of getting NIMs. Yes, 4.78% is an exceptional feat with huge cost of funds advantage, but we're still running 130% LCR. It's not about squeezing out. It's about the fact that we want to ensure that we make the best returns and optimum returns for our shareholders on a consistent basis. Obviously, our job is to maximize that.
Sure. Absolutely. I mean, the management of the balance sheet has been quite fantastic. This is one thing I maintain. It's been very smoothly managed. Fair enough. Moving on to a different part, which is on the asset quality side. Now, this is obviously, you know, we look up to Kotak Bank as almost a gold standard there. Across the banking system, it does look like there is, you know, very strong recovery that has happened. Uday, would you want to, you know, sort of give some color as to, is it that banks in general because of their past learnings have been very prudent in terms of charge-offs or taking recognition? Secondly, also, is the underlying growth also coming to be a little better?
If you could qualify which segments are actually the ones where you're seeing recoveries?
You know, we have to first, when you're looking at numbers, be very careful of base effect. Okay? A lot of hits were taken in the first year, particularly in the December and the March quarter last year. I would request you to look at two important metrics as we go forward. First is the slippage ratio. I'm not commenting on other banks. All that I can say is our slippage ratio on gross basis before recoveries, okay, was 1.08% for the fourth quarter. We think that is a pretty low ratio, but we are getting back to what I would call as pre-COVID period. Jaimin also mentioned our credit cost for the fourth quarter was 27 basis points, and average for the year is 55 basis points. First quarter was COVID 2.0.
Now, where do we think our credit cost will be? Higher than 27? Probably. 40, 45, 50. I don't want to give a guidance.
Mm-hmm.
That's the kind of feel we believe at this point of time, okay, which is still very much within a controllable range for the nature and the mix of our book. Therefore, slippage ratio is a very important lead indicator of what it is looking like. The second important point is restructuring. Our COVID restructuring cost, our COVID restructuring book is 15 basis points, and MSME restructuring book is 29 basis points. Again, it is at a very low level. Therefore, I remember a year and a half ago, there was concern about the size of our ECLGS book.
Mm-hmm. Yep.
The fact of the matter is our total restructured book, our slippage ratio, both MSME, COVID, overall is there for you to see. SMA-2, again, you look at our numbers, we are probably among the few banks which does it. We are at INR 186 crore SMA-2 total on a INR 2,71,000 crore lending book on the five plus SMA-2. There the numbers and the data is in front of us. Basis that we are making some projections. However, it's a new normal world. Tomorrow, if Mr. Putin does something which is outside what you and I think, we have to respond to that. We cannot then say, "Oh, we should plan for it today," in its fullest sense.
Sure. Let us do the third question. Given the rate hike cycle and potentially another, you know, 75 or whatever number, you know, additional hikes, on our strategy, I mean, last two quarters we have been talking about organically growing the unsecured parts from a very low base. Does that continue? Or you want to-
We are clear. I think we have spelled out. I would like to once again reiterate our growth strategy continues. We believe that unsecured retail as a percentage of our balance sheet is extremely low. We are in a good place to be. For the right risk management on our customer base, we will continue to grow it at a good pace. We are not getting into a slowdown merely because interest rates have gone up.
Great. Perfect. Thank you. Thank you so much.
Thank you. The next question is from the line of Sumeet Kariwala from Morgan Stanley. Please go ahead.
Hello, everyone. Congratulations on a very good set of numbers. I had a question on operating leverage. The last three or four quarters, OpEx growth has been higher than revenues and obviously because we were rapidly ramping up the loan book, there were COVID issues and so on. At the same time you were investing. I just wanted to understand. Two questions will be back to back. One, when do we see positive jaws? When do we expect revenue growth to accelerate OpEx or over the near term will see continued investments? Second is, we are in a very benign credit cycle. As you said, credit cost is gonna be like 30, 40 basis points. Does that mean that the bank can look to accelerate investments further? Those two questions. Thank you.
Sumeet, you are not very clear. You got a little muffled. I got this point on operating costs and technology. The second was on the, what is the 30, 40 basis points you said?
Okay, first question is very quick on operating leverage. When does that play out? How do I think about cost? Second question is credit cost is gonna remain very benign, 30-40 basis points. Does that mean that you would look to accelerate the pace of investments further? There's no compromise that I see at Kotak, but because the credit cost is gonna run very low, does that mean that you could look to invest even faster?
Yeah. On the first, I mean, Sumeet, as you know, I don't know what Mr. Putin does tomorrow morning, therefore all this is subject to that. I do believe that, we've got a reasonable risk-adjusted return model, and as long as we get that, we are happy to grow, okay, on a very clear basis. For the mix of assets we think which get our risk-adjusted returns. Okay? Absolute categorical position from where we are. Second, with reference to costs and technology costs, I will ask Jaimin to answer that question to take you through your specific queries.
Sumit, if you look at it, yes, as we mentioned last time also, yeah, there has been a go for growth approach. There is spends for acquisition and acquisition spends are both on the liability side and the asset side. There is also the whole issue about promotional spends, a lot happening in the technology and the communication areas. All of that is going to continue. We are not saying we are gonna slow down at this period. In fact, if I do a very quick math and take away some of those promotion costs and the going for growth costs, the cost growth over the period has been pretty modest. Yes, we are going to continue this cost as we go for growth.
At least, this year you'll see some of that continuing. We're not going to stop. That would help us get to a better number. This is our investment as we go into the future.
Sumeet, what we are really focused is on unit economics, not what is the front-end acquisition cost. Finally, each of our decision-making is on the operating metrics that is the underlying unit economics working. Therefore, if it means the front-end operating cost increase for underlying unit economics, we will go ahead and do it. That is the core of how we look at building this. The second is we are also clear that the strategy of asset growth leading to some increase in liability growth by putting the hooks, including some of the spends related cost, we are ready to do it because we want both the engines now to fire significantly as we go forward.
Got it. That's helpful. Jaimin, thank you very much.
Thank you. Ladies and gentlemen, we take that as the last question for today. I now hand the conference over to Mr. Uday Kotak for closing comments. Over to you, sir.
Thank you very much. It's been 1.5 hours, so a long call and a long meeting on a very eventful day in the Indian financial sector. Look forward to continuing engagement. My entire team here, with me, we are really excited to be building this institution into the future. Thank you very much.
Thank you. Ladies and gentlemen, on behalf of Kotak Mahindra Bank, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.