Ladies and gentlemen, good day and welcome to Axis Bank Conference Call to discuss the Q1 FY23 Financial Results. Participation in this 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. Unauthorized dissemination of the contents or the proceeding of the call is strictly prohibited, and prior explicit permission and written approval of Axis Bank is imperative. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions at the end of the briefing session. 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.
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. Puneet Sharma, CFO. I now hand the conference over to Mr. Amitabh Chaudhry, MD and CEO. Thank you and over to you, sir.
Thank you so much. Good evening and welcome everyone. Apart from me and Puneet Sharma, we also have on the call Rajiv, deputy MD, Amit Talgeri, chief risk officer, and members of the bank's leadership team, Subrat Mohanty, Ravi Narayanan, Sumit Bali and Munish Sharda. We continue to move forward with clarity and intent in a quarter where the external signals are mixed. The system credit growth picked up with double-digit credit growth for last four months. Consumption has continued up, working capital demand is strong, and together with refinance requirements are driving credit growth. However, higher than expected inflation rate and the global headwinds will mean further rate hikes and tightening of liquidity. There could be some moderation in the short term. However, we do believe that the medium-term opportunity for Axis Bank is significant.
We continue to grow faster and gain market share in our identified segments that provide better risk-adjusted returns. We remain focused on three core areas of execution to move forward on our GPS strategy. First is deepening a performance-driven culture. We have lifted the growth trajectory and consistently gained market share across various business segments and now have strong market position in multiple businesses. On deposits, we have gained over 100 basis points market share in last five years to reach 4.7% as of June 2022. On advances, our incremental market share has been closer to 9%-10% over the last five years and closing market share stood at 5.7% as of June 2022.
In credit cards, we continue to be ranked fourth largest with over 17% incremental market share in the last 6 months and 12% market share on period end basis. In merchant acquiring business, we are now the second-largest up from rank 4 in March 2021. Our Burgundy AUM has grown three times in the last five years, and we are the fourth largest player in wealth management business now. On the payment side, we continue to have strong positioning with 16% market share in UPI and 15% in mobile banking. As discussed above, it is evident that our digital footprint is three to four times our market share in our traditional businesses. Similarly, on the wholesale side, we are now transaction bank of choice with market share gains in transaction-oriented flow businesses.
We have doubled our foreign LC market share from 5% to over 10% in last 3 years. Our G-Sec and RTGS market share continues to be strong at 9% in Q1 FY23. We have been the leading player in the DCM space over the last decade. On deposits, if you refer to slide 17-21, our customer acquisition remains strong. In Q1, we added 2.2 million new customer accounts, a growth of 22% year-on-year. The strong growth in our granular deposits continues with average CASA balances up 16% year-on-year. Our liability strategy driven through premiumization, granularization and deepening remains on track, reflected in average savings account balance growth of 16% year-on-year and 4% quarter-on-quarter.
We continue to see improvement in the quality of our deposit franchise, leveraging our wide suite of product portfolio to offer customized solutions for specific markets. We have started seeing traction in our corporate salary acquisition, led by One Axis approach and productivity lift across the channels. 100% plus year-on-year growth in new salary labels acquired in quarter one. Our Ultima Salary Program has seen significant adoption in our customer base. On current accounts, we remain focused on driving value and relationship-led core current account growth. Our strong positioning in the transaction flow businesses and our wide suite of transaction banking APIs has helped to drive acquisition and balances growth. On a QoQ basis, we grew current account balances by 15% year-on-year. In term deposits, our growth has been higher than industry and our cost of deposit remains extremely competitive.
Our term deposits grew at 13% year-on-year on QoQ basis. The growth in our non-retail term deposits was led by non-callable high-value deposits that are LCR accretive. Digital remains an important acquisition engine across deposit cards. We source 26% of non-salary SA accounts and 55% of individual CA accounts through digital means. Further 68% of individual retail term deposits by volume and 46% by value were acquired through fully digital channels. Our credit cards acquisition in the quarter were up 4 times year-on-year at about 1 million cards. We are today the fastest growing card acquisition franchise. In quarter one, we witnessed strong momentum across our focus retail and SME business segments that grew 25% year-on-year and 27% year-on-year respectively. Overall loan book grew 14% year-on-year.
We have built a very diversified and high quality SME book in the past two years. We have replicated the learnings from SME segment to similar businesses like small banking business on the retail side and mid-corporate book on the corporate side. Mid-corporate book grew 54% year-on-year and 5% quarter-on-quarter. The SBB segment delivered strong growth of 74% year-on-year, led by our innovative product offerings like digital business loans, merchant cash advance, small ticket Suvidha loans, new account aggregator product variants, along with our end-to-end digital fulfillment capabilities. The combined portfolio of these three segments, small business banking, SME, and mid-corporate, grew 41% year-on-year and now constitutes 19% of the loan book, up 500 basis points in the last two years.
Formalization of MSME lending and high contribution of MSME segment in India's GDP offer tremendous opportunity. We continue to invest in this MSME space, extending our distribution and service footprint across India. Within corporate segment, we brought down the lower yielding offshore trade book during the quarter and chose not to pursue low yielding deals in line with our focus on driving profitable growth. Our government business performance remains strong as we continue to add new mandates and gain market share. The government business has transitioned from being deposit-centric to being more solution-centric. We deliver and deploy holistic customer-specific solutions for payments, collections, and liquidity management across single and central nodal agencies. Over the last 18 months, we have deepened our relationships across various government businesses and signed MOUs with Indian Army, Indian Navy, Police, and Forest Department, among others.
Within the private sector banking landscape, we have been a pioneer in government business offering competitive products and solutions to the institutional and retail customer. On the second point on our deepening of performance-driven culture, we continue to focus on improving profitability matrix. While Puneet will provide granular details, let me highlight the key metrics. Net interest margins improved 11 basis points quarter-on-quarter and 14 basis points year-on-year to 3.6% in quarter one financial 2023. NII grew 21% year-on-year and 6% quarter-on-quarter. Fee income was up 34% year-on-year, with retail fee up 43% year-on-year. Our core operating profit grew by 17% year-on-year. PAT was up 91% year-on-year.
The combined Q1 FY23 and large PAT of our domestic subsidiaries stood at INR 1,082 crores, up 10% year-on-year. The bank's standalone ROE at 15.07% was up 596 basis points year-on-year. Our third was around fostering our winning mindset. Our winning mindset is reflected in our strong business performance and multiple external recognitions we received during the quarter. As highlighted earlier, customer acquisitions remain strong. We opened 1.1 million new SA accounts in Q1 FY23, up 50% year-on-year. The number of new accounts, current accounts opened were also up 68% year-on-year. Led by innovative product offerings across all asset classes and our One Axis approach, the bank won Best Private Bank for Client Acquisition Asia at the 5th Annual PWM Wealth Tech Awards.
We continue to see traction in our card segment, with 33% year-on-year growth in number of outstanding cards. 31% of credit cards were acquired through non-bank partnerships across Flipkart, Google Pay, Freecharge, Airtel and others. The bank won the Retail Banker International Asia Trailblazer Award for trailblazing use of AI and machine learning in financial services space. We also won the Economic Times DataCon Awards for modern and agile data architecture and infrastructure. Maximus, our digital lending product, grew over 50% year-on-year, driven by introduction of new programs and new products, with end-to-end digital PL and BL contributing over 50% overall outsourcing. The bank's initiative on digital lending project, Maximus, was recognized at the Finovate Awards 2022. Our second pillar was around strengthening the core. Our strong balance sheet lends support to our aspirations.
Our asset quality is now among the best in class, with net NPL of 0.64%, high provision coverage of 77%, and standard asset coverage of 1.7%. We continue to work towards building our next generation technology architecture, strengthening the organizational core and technological capabilities along with the focus on execution. The impact of significant investments in digital banking, adopting a cloud first technology and analytics-driven decision-making has helped us deliver a strong core operating performance. Our in-house engineering team has now delivered over 20 digital products, including credit card servicing, BNPL, MCA, Bharat BillPay, and several other products. These products are all built in a cloud-native, microservices-based, modular architecture and in an API-oriented manner. Our DevSecOps framework, including our CI/CD pipelines, are now tested in multiple situations and have significantly enhanced our go-to-market speed and our ability to be agile and customer centric.
We are seeing strong traction in Project Neo that is aimed at building a world-class digital corporate bank. We have built a best-in-class suite with 70+ corporate APIs live and many more in development that are capable of addressing complex use cases across trade, payments, collections, treasury, and account information. We've witnessed strong corporate interest with significant increase in digital payment transactions done by newly onboarded customers onto our corporate APIs in quarter one. Our third pillar, building for the future. Digital continues to see strong progress. The impact of this is now visible across the business segments. In quarter one, we completed the rollout of our new internet banking, and we launched our new mobile banking app in pilot mode. Our app continues to see strong growth with MAUs of 9.7 million this quarter.
We launched account aggregator-based lending programs late last year, and this quarter, disbursements through this program have grown by 250% compared to last quarter. The digital merchant cash advance, our unique proposition wherein we were the first private sector bank to offer an integrated digital current account and unsecured term loan proposition, along with QR, continues to see strong traction. The product, which was launched in December 2021 in partnership with Freecharge, helps small businesses to grow their businesses by providing loans up to INR 5 lakhs with a unique daily installment repayment methodology. During the quarter, MCA delivered 2.7 times and 2.2 times quarter-on-quarter growth in number of loans and number of CA accounts opened respectively. We continue to have bank-wide programs to build disciplined. We are making strong progress through our focus initiatives around Bharat Banking and customer obsession.
Bharat Banking continues to scale up strongly. The formalization of the economy by GST, evolution of the technology stack, efficient delivery of various government schemes in retail and MSME space, and growing internet penetration have provided strong tailwinds to the Bharat markets. We have enhanced our distribution network significantly in rural regions, led by our strong partnership with CSC and India Post Payments Bank. During the quarter, we added 12,000 VLEs to take our overall CSC VLE network to 52,450 that would act as extended arms for our 2,065 Bharat branches. In quarter one, we also entered into partnership with Airtel Payments Bank to offer greater convenience and faster solutions to our vast customer base in the rural regions of the country.
We are also focused on developing strategic partnership with Agri corporates and OEMs to scale up rural business enterprises segment and capture entire rural value chain. The strategy is to embed banking in the digital ecosystem of clients, pursue co-lending opportunities for PSL, and leverage the tech stacks and alternative data to better underwrite customers. As a result of our focused approach, we achieved strong year-over-year growth in disbursements across all the major product segments and delivered 42% year-on-year growth in rural loan book. We are progressing well on Sparsh, which is our customer experience transformation initiative. Several ground level interventions have been set in motion to drive distinctive customer delight for bank customers. Our subsidiaries continue to create significant value. The One Axis approach is now embodied across the Axis Group and is reflected in robust performance of our subsidiaries.
As I mentioned earlier, the total annualized PAT of our domestic subsidiaries in quarter one financial 2023 was up 10% year-on-year. Axis Finance continues to perform extremely well, with its PAT up 59% year-on-year. Axis AMC reported 18% growth in overall quarterly average assets under management, with 20% growth in its PAT. Axis Capital and Axis Securities reported PAT of INR 34 crore and 39 crore respectively. Our Citibank consumer business integration continues. We are awaiting CCI approvals, and we expect to close the transaction by fourth quarter of fiscal 2023. The integration management office with the steering committee is in place with nominees from both sides. Within the constraints of applicable regulations, we are working on key work streams around people, technology, and business operations.
In closing, this was another quarter of a strong and steady performance across multiple identified areas of focus. I have mentioned about the positive cultural change in the bank and are coming together as a winning team. We remain optimistic on the growth opportunities, Indian economy, while keeping an eye out on the global headwinds. We believe that the strong franchise we are building is well-placed to deliver sustainable and profitable growth. I'll now request Puneet to take over.
Thank you, Amitabh. Good evening, and thank you for joining us this evening. We continue to make meaningful progress on strengthening our core business performance and ensuring that our balance sheet is resilient across cycles. I will discuss the salient features of the financial performance of the bank for Q1 FY 2023, focusing on our operating performance, capital and liquidity position, growth across our deposit franchise and loan book, asset quality restructuring and provisioning. Our core operating performance in the current quarter is strong, with meaningful improvement in NIMs, growth in NII, core operating profit, benign credit costs, and significant improvement in our ROA and ROE. NII for Q1 FY 2023 stood at INR 9,384 crore, growing 21% YOY, 6% QOQ. NIMs for Q1 FY 2023 stood at 3.60%, growing 14 basis points YOY and 11 basis points QOQ.
We have clearly articulated the drivers of our NIM improvement journey over the next 8-10 quarters. The progress against the key drivers in the quarter are as follows. The improvement in balance sheet mix to loans and investments from other assets. Loans and investments now comprise 87% of total assets at June 2022 as compared to 84% at March 2022. Within advances, INR denominated loans comprise 93% of total advances at June 2022 compared to 91% at March 2022 and 89% as at June 2021. Within advances, the retail and CBG segment comprise 69% of advances as at June 2022 compared to 67% at March 2022 and 63% at June 2021. Low yielding RIDF bonds declined by INR 5,816 crores on a YOY basis and INR 402 crores sequentially.
The bank continues to improve the risk profile of its loan book. Our NII as a percentage of average risk-weighted interest earning assets stands at 7.26%, improving 30 basis points YOY and 15 basis points sequentially. Our fees stood at INR 3,576 crore, growing 34% YOY. 93% of our fee is granular. Total retail fee grew 43% YOY. Digital and mobile banking fee grew 121% YOY and 3% sequentially. Fees from retail cards and payments grew 62% YOY and 13% sequentially. Fees from third party distribution grew 27% YOY. Transaction banking, Forex and trade related fees grew 22% YOY.
Trading loss for the quarter stood at INR 667 crore. Compared to a profit of INR 231 crore in the previous quarter and a profit of INR 556 crore in the same quarter last year. The MTM is largely in our corporate bond book, 79% of which is AA+ and above rated, and 98% is rated A- and above. We do not expect an economic loss on this book. MTM on the book had an adverse impact on the standalone ROA and ROE for the quarter of 16 basis points and 172 basis points respectively. Operating expenses for the quarter stood at INR 6,496 crore, growing 32% YOY and declining sequentially by 1%.
The YOY increase in INR crore expenses can be attributed to 40% for volume linked increases, 14% for growth investments, 11% for digital and technology, 6% towards collection expenses, 5% for statutory costs, 5% for one-time expenses, and the balance 20% for BLG. Expenses sequentially declined by INR 80 crore or 1%. This is attributable to the reduction in INR 103 crore of one-time expenses reported in the previous quarter, INR 372 crore due to lower collection expenses, lower volume and operating efficiency in the quarter, offset by INR 395 crore of incremental expenses on growth, technology, statutory costs, manpower expenses and annual increments and ESOP costs. Technology and digital expense grew 42% YOY and constitute 9% of our total operating expenses. Costs increased by 16% sequentially.
We've added 6,150 people from the same period last year, mainly in our growth businesses and technology teams. We have continued to maintain the Social Security cost provisions. The cumulative Social Security cost provision in the books of the bank now stand at INR 227 crore. Operating expenses to average assets stood at 2.24% for Q1 FY 2023, higher by 19 basis points YOY and 7 basis points sequentially. Given the strong momentum across our businesses, we remain committed to consciously invest in our focus business segments. The lower credit cost over the past few quarters has provided us some headroom to run operating expenses at slightly elevated levels. This has not affected our ROE delivery trajectory.
We have demonstrated our ability to improve the cost ratios, having brought them down to below 2% in the past and continue to demonstrate the same through a sequential decline in expenses. We remain committed to achieving around 2% cost to assets in the medium term. Operating profit for the quarter was INR 5,887 crore, declining 5% YOY, largely due to the MTM loss. Core operating profit for Q1 FY 2023 is INR 6,554 crore, growing 17% YOY and 5% sequentially. Provisions and contingencies for the quarter were INR 359 crore, declining 89% YOY, 64% sequentially. The bank has not utilized any of its COVID-19 provisions in the current quarter. This is entirely prudent and in no way a reflection on the credit risk on the books of the bank.
Annualized credit costs for Q1 FY23 is 0.41%, declining 129 basis points YOY. Profit after tax grew sequentially to INR 4,125 crores, growing 91% on a YOY basis. Consolidated ROE for the first quarter stood at 1.48%, improving 60% or 55 basis points on a YOY basis. Subsidies now contribute four basis points to the consolidated ROE. Consolidated ROE for Q1 FY23 stood at 15.66%, improving 587 basis points YOY. Subsidies contribute 59 basis points to the consolidated ROE. The cumulative non-NPA provisions stand at INR 11,830 crores, comprising COVID, INR 5,012 crores, restructuring provisions, INR 1,259 crores. Unsecured retail within the restructured book is 100% provided for.
Standard asset provision at higher than regulatory rates of INR 4,141 crores. Weak assets and other asset provision of INR 1,480 crores. Our provision coverage, all provisions NPA plus non-NPA by GNPA stands at 133.51%, improving 1,587 basis points YOY and 182 basis points QoQ. Our standard asset provisions stand at 1.17%. The bank is well capitalized and carries adequate liquidity buffers. Our total capital adequacy ratio, including profit for the quarter ended thirtieth June 2022, is 17.83%. Our CET1 ratio is 15.16%. Prudent COVID provisions translate to a capital cushion of 58 basis points over and above the reported capital adequacy. Our average LCR ratio for the quarter is 116%.
Exit LCR is 0.23%. Our excess SLR is INR 75,636 crores. The risk-weighted assets for the bank as of 30th June stands at 65%. Growth across our liabilities and loan franchise. Amitabh has discussed the progress in customer acquisitions, growth and liability and loan franchise in his opening remarks. Please refer to slides 17-21 for details around the quality of the liability franchise growth and slides on our loan franchise and quality. In line with our articulated strategy, our loan book continues to get more granular and balanced, with retail advances constituting 59% of overall advances. Corporate loans at 31% and our commercial banking loans at 10%. 69% of our loans are floating rate, which positions us well in a rising interest rate environment.
Breakup of the floating rate loan book by benchmark type and similar repricing frequencies set out in slide ten of the investor presentation. Moving to our retail business. Q1 FY 2023 retail disbursements were up 77% YOY. Small business banking, rural and TL disbursements were up 111%, 177% and 42% YOY. SVB cards and rural loan portfolios grew 74%, 42% and 42% respectively. Retail loans represent healthy characteristics with 79% being secured. Disbursements to unsecured products continue to grow. Proportion of unsecured disbursements to total disbursements being 22% this quarter as compared to 18% in the previous quarter. Credit card spend for Q1 FY 2023 grew 96% YOY. Industry spends growth is being driven by pickup in commercial card spends. We are consciously focused on growing on the profitable retail card spend.
We are progressing well on our endeavor to build a profitable and sustainable corporate bank. Rating details, composition, incremental sanction quality is set out on slide 36 of our investor presentation. The offshore wholesale advances are largely trade finance related and primarily driven by our GIFT City branch. 96% of the overseas standard corporate loan book in GIFT City branch is India-linked, and 95% is rated A and above. The quality of our commercial banking franchise is reflected through the strong relationship approach that we are rolling out. 4% of the CBG book got migrated to the wholesale banking coverage team during the quarter, reflecting the scale-up of our customers and hence the quality. CBG current account deposits on a quarterly average balance basis grew 26%. Our CBG fees increased by 30% year-over-year. Coming to the performance of our subsidiaries.
Detailed performance of our subsidiaries set out on slide 61-67 of the investor presentation. Domestic subsidiaries reported a total net profit for Q1 FY 2023 of INR 271 crore, up 11% YOY. This translates into a return on investment of 45%, and subsidiaries now contribute 4 basis points to consolidated ROA and 59 basis points to consolidated ROE. Axis Finance delivered strong growth as a full service customer focused franchise offering retail as well as wholesale lending solutions. In Q1 FY 2023, overall book grew 59% YOY and 11% sequentially. Retail book grew 3 times and now constitutes 36% of the total loans, up 4% in the last 2 years. Within wholesale, focus remains on well distributed and granular book.
97% of the corporate book disbursements within Axis Finance were to corporate rated A- and above and cash flow backed businesses. AACL's book quality continues to be strong. Net NPA at 0.46%, negligible restructuring and Stage three assets at 0.36%. Axis Finance Q1 PAT grew 59% to INR 95 crore at an ROE of 15.4% and a CAR of 19%. Axis AMC's average AUM grew 18% YOY in Q1 FY 2023, and the equity average AUM was up 29% YOY. Its investor portfolios grew 50% YOY during the quarter to take its total investor base to 13.2 million. In Q1 FY 2023, PAT grew 20% YOY to INR 88 crore. Axis Capital completed 10 investment banking transactions, including five equity market transactions in Q1 FY 2023.
Its PAT stood at INR 34 crore. Axis Securities continues to see strong traction in new client additions that stood at 0.18 million, up 148% YOY. The broking revenues for Axis Securities grew 7% in Q1 FY23, and Q1 FY23 PAT stood at INR 39 crore. Asset quality provisioning and restructuring. The GNPA and NPA and TCR ratios of the bank and segmentally for retail SME and corporate are provided on slide 53. We have nil net exposure to IL&FS entities, three future entities, three entities that are being reviewed by RBI. GNPA was 2.76%, improved 109 basis points YOY and 6 basis points QOQ. Net NPA 0.64%, improving 56 basis points YOY, 9 basis points QOQ.
TCR at 77%, improving 751 basis points YOY and 253 basis points QOQ. We have not sold any non-performing loans in the quarter. The bank has a time-driven, rule-based write-off policy for retail and CBG portfolios. The net slippages in the quarter, adjusted for recoveries from written-off pool was -INR 17 crore. Net slippages for retail, CBG and wholesale were INR 475 crore, INR 14 crore, and -INR 506 crore respectively. Recoveries from written-off accounts for the quarter were INR 744 crore, improving YOY and Q over Q by INR 456 crore and INR 25 crore respectively. Reported net NPA slippage for the quarter was INR 727 crore, declining 82% YOY. Net slippage ratio for the quarter on an annualized basis is 0.41%, improving 219 basis points YOY.
On a segmental basis, reported net slippages in retail were INR 859 crores, CBG INR 38 crores, and WDCG was a negative INR 180 crores. Gross slippages for the quarter were INR 3,684 crores, lower by 43% YOY and 7% sequentially. Gross loan slippage ratio for the quarter stood at 2.05%, improving 210 basis points YOY and 33 basis points sequentially. For the quarter, 45% of the gross slippages are attributed to linked accounts of borrowers which were standard in classified or have been upgraded in the same quarter. Standard COVID restructuring restructured loans stand at INR 3,402 crores, or 0.45% of our GCA, with a provision cover of 24%. We collected 5% from the opening standard restructuring book during Q1 FY 2023.
Double B and below pool of the bank declined 38% YOY and 13% sequentially. Upgrades and recoveries during the quarter aggregated INR 652 crore, constituting 7% of the opening book. New downgrades in the quarter were INR 113 crore, down 91% YOY. More details on the BB and below and restructuring have been provided on slide 54 of our investor presentation. To summarize, our balance sheet resilience is visible through strong capital adequacy, net NPA 0.64%, overall coverage at 133.51% of GNPA and limited COVID restructuring of 0.45. Early improvements in the quality of the granular liability franchise is visible through reduction in outflow rates. As we have indicated previously, this will take 6-10 quarters to fully play out with some inter-quarter fluctuations.
The average CASA balance stood at 43%. Focus growth segments like retail, SME, mid-corporate with better ROIC continue to grow faster at 25%, 27% and 54% respectively. The reported consolidated Q1 FY 2023 annualized ROE at 15.66% is in striking range of our commentary of visible ROE of 16% to 16.5% over the medium term. We continue to closely monitor our geopolitical outlook, inflation and liquidity risks and resulting government policy action on our businesses. We would be glad to take your questions now.
Thank you very much. We'll now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Mahrukh Adajania from Edelweiss Financial Services. Please go ahead.
Yeah, hello. Congratulations. My first question is on loan growth outlook. Of course, you've done very well on your focus segment. However, if you look at overall loan growth, I mean, what would be the outlook for the next nine to 10 months? I mean, will we be able to do double digits YOY growth? Is that a fair assumption? Because that is key to constructing an earnings model, right? Obviously, your margins are improving and that should help, but.
Hi, thanks a lot for the question. We have delivered double-digit growth, and we have always stated that we will continue to grow faster than the market. We have given a range of how much we'll grow faster than the market, and we continue to maintain that particular guidance. In this particular quarter, in the last couple of quarters, we've been saying repeatedly that the pricing in sub-segments of the wholesale side don't make so much sense for us. We do expect with all the rate hikes that have happened and that might happen in the future, and with what we have seen in terms of behavior by other banks, that hopefully more discipline will return on pricing, both for the working capital side and the term loan side.
Hopefully that should feed into our loan growth going forward. Just to show a growth in our advances and have a considerable impact on our NIMs, it did not make sense to us. We have a very clearly outlined strategy on delivering a certain ROE. As part of that, we have said that we need to deliver a certain NIM, certain cost ratio, certain credit costs, and that's what we are focused on. We do believe that as we continue on this journey, the loan growth will come and the prices return to normalcy. Because we have an extensive corporate franchise, we are one of the key banks to corporate India. Frankly, when you want to look for that data, you see our growth on the fee income side.
You see our foreign LC market share, our GST market share. We're getting a positive view. We are not too worried about getting that loan growth back at the right time. We're just waiting for the right pricing to resume, which we believe should happen in the next couple of quarters, if not earlier. I hope that answers the question.
Yes. Thanks a lot. My next question is on deposits. Basically last quarter you had talked about reclassification of some deposits from retail to wholesale. All that is done or is something pending there?
A small amount is still pending, but most of that work is almost done. Small amount of deposits are still pending, and that's why you would see that you are seeing a growth in the deposits coming from the NR TD thousand RD side. If you look at the number of NR TDs which have been opened and compared year-over-year, there is clear growth which is visible from our perspective. Again, as we said, we are quite confident that the granularity of the franchise is there for people to see. We continue to work on our Project Triumph, and we expect to continue to see the granularity coming through in the future quarters also.
Sure. My last question is just on OpEx. Obviously, the OpEx improvement has been good this quarter. You did explain the delta as well. But that's all. Any near-term target? I know longer term is 2%, but your OpEx tends to be very volatile. Like in the fourth quarter, we had guided to some uptick in OpEx. What is the stable ratio in the near term that we could look at? And any comments why employee expenses have risen so sharply QoQ? That has happened even for ICICI, so asking.
Mahrukh, thank you for the question. I think, let me break my response into three parts. To the point that we had said last quarter expenses will go up, our cost to assets was 2.17 when we closed quarter four, which was our reported number. Our cost to assets has gone up in line with our commentary to 2.24%, which is principally led by the investments that we continue to make in our growth business. The cost trajectory is reflective of the commentary that we provided as of Q4. To the second part of your question, which is do we have confidence in our ability to manage our cost base adequately to deliver on the medium-term guidance of around 2% cost to assets? The answer is absolutely yes.
We have delivered below 2% in the past. We have been able to deliver a sequential decline in cost, which is effectively against trends that are visible today. We remain confident. Mahrukh, we ceased to offer short-term cost to assets guidance. We don't intend to bring that back currently. The only comment that we have to offer is over the medium term, we will get to around 2% cost to assets, and we feel confident about that.
Thanks. Employee expenses?
Mahrukh, on employee expenses, on a year-on-year basis, we've added 6,150 people to our growth businesses as well as our technology and digital teams. Second impact is the RBI instructions on accounting for ESOPs came through in quarter two of last year, so there was no ESOP cost in quarter one. That is reflected currently. There's a full year effect of last year hiring, plus ESOP cost, plus annual increments that have paid out in the current quarter that are showing you the cost growth on the staff cost side.
Okay. Thanks a lot. Thank you.
Thank you. A request to all the participants. Please restrict to two questions per participant. If time permit, please come back in the question queue for a follow-up question. The next question is from the line of Abhishek Murarka from HSBC. Please go ahead.
Hi, good evening, and congratulations for the quarter. I have two questions. One is on NIM. A couple of quarters back, you know, you've given a medium-term guidance of 20-30 bits improvement in NIM driven by several factors. We've almost got back 20 bits in 2 quarters or 3 quarters. What is the outlook of NIM from here?
Abhishek, I'm very sorry. Abhishek, I'm sorry, I can't hear you too clearly. Would you please repeat what you're saying? I'm sorry. Not audible at all. Please.
Sure. Am I audible now? Hello?
Yes, Abhishek, better now.
Okay, thanks. My question was on NIM. A couple of quarters back, you had given a sort of medium-term outlook of 20-30 bps improvement in NIMs driven by several factors. And you know we've in the last 2-3 quarters. What is the outlook from here? And also if you know you start growing again in corporate and you know maybe international loans does that that would be a drag as well. How do you counter that?
Abhishek, what I had commented two quarters ago is when we were at NIMs of 3.4%, we had said that we have a NIM improvement journey of 30-40 basis points that we want to cover.
Right.
that we get to a NIM range of 3.7%-3.8%. That helps us deliver the aspirational ROE. That commentary and that trend or execution against that commentary continues. We are 2 quarters from when we made that statement. From the 3.4 levels, we are up to the 3.6 levels. We haven't built the NIM accretion by drawing down on our LCR, so our LCR remains consistent over the quarters. This is business-led NIM improvement. We stay committed to getting to the 3.7%-3.8% over the next 8 to 10 quarters, which is the residual period of the comment we made earlier. The direction to deliver that, in addition to the four variables I spoke of, was improving the quality and the composition of our liabilities franchise, which is work in progress.
As we stand today, we stick to what we said, 3.7%-3.8% over the next 8-10 quarters in terms of improvement is what we should be able to get.
Sure. The other one is on OpEx again. Basically, you know, in the medium term, you do expect it to come down from current levels. Given your growing retail and maybe CBG more, what would drive the OpEx down? Because these would incrementally be a higher OpEx to asset business compared to, let's say, large corporate.
A couple of things, Abhishek. One is we've said that we are making investments. The productivity gains from that investment need to play through the P&L because investments are not made for the sake of making investments. That's one. Second is while we grow the granular business, we're also building on how the sourcing composition of that business can be, which is also a meaningful cost driver. If you change the sourcing mix, you do get cost optimization even as you build granularity. The cost journey will be a function of productivity gains from investments made, plus tactical actions on our businesses. We do think it is achievable and therefore we are just sticking to what we have said previously, medium term around 2%.
Sure. That is also, let's say medium term would be 8-10 quarters, just like me.
We do a three-year medium-term plan. Abhishek, I think around 2% would be an FY 25 number.
Understood. Thanks so much, Puneet. Thanks, and all the best.
Thank you.
Thank you. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead.
Yeah. Congratulations for great set of numbers. Firstly, in terms of the retail TD, if you can just highlight in terms of on a like-to-like basis, how would have been the overall growth? The context is when we look at in terms of the hikes that we would have taken, over past 3 to 6 odd months compared to the other players, we are relatively on the lower side. Should we see catch up on the rate side to further gather pace on the retail TD?
Yeah. Hi, Kunal. Thanks for that question. So as we mentioned, the entire focus is on getting the LCR accretive business moving, and this is the institution-wide approach that we are doing. If I were to look at it on a like-for-like basis, I think the RTD figures would be somewhere around the 13% growth YOY. That is where it would be.
Yeah. In terms of,
Sorry, come again.
In terms of the retail TD rates, the way we have seen the increase is relatively lower compared to that of the other players. Do we plan to catch up and get the retail TD growth relatively at a faster pace?
Kunal, this is something that we are watching very keenly in the market, and we would like to analyze and study as to where the market is moving. At this point in time, we feel that where we are for the particular tenors that we are offering our rates, I think, we will continue to hold on to those and watch and wait and see how we play our game.
Sure. Secondly, in terms of wholesale or corporate advances, maybe at least on the advance side it is declining, but heavy position in the investment portfolio or the credit substitute because there is significant rise in the investment book. If we have to look at corporate plus credit substitute, how would have been the overall growth?
There was no, Kunal, this quarter there has been no, material addition to, the corporate substitute book. What you're seeing on the decline that you're seeing on the corporate loan book is what it is. As Amitabh spoke about in his opening comments, our focus sector segments are growing very, very strongly. I think incrementally in other parts of the wholesale bank, as and when we see profitable growth, we will certainly chase after that. I think the quality of the franchise is unquestionable. We are gaining market share, across various parts of the corporate bank.
We are actually serving the customer across the capital structure, which means that there are loans that we do, there are bonds with which we do domestic bonds, offshore bonds. Much of that we originate and distribute, and earn a fee. We are serving corporate India from Axis Capital. Almost 40% of all IPOs last year were left led by Axis Capital. Therefore, the use of the balance sheet is only one part of the relationship strategy that we have with the corporate bank.
Sure. Lastly, on Citi acquisition integration, you highlighted steering committee and integration on, say, people, processes and technology. Otherwise, when we look at it, how has it been compared to what the expectations were, any positive, negative surprise and any, maybe any read-through in terms of, how credit cost or any incremental expense that would be incurred towards the integration when we are expecting it to complete by Q4?
Kunal, absent the CCI approval, we do not have full and complete access to Citi information, for all the right reasons. This is what we are able to track publicly, because some data points are published publicly. The Citi performance is trending in line with the assumptions we made at the time of the investment. That is all that I can say at the moment. Our best case estimate is CCI approval should come through in 4-8 weeks from today, at which point in time we will have better clarity on data, and we could offer incremental comments, assuming it's come through pre our quarter two reporting.
Sure. Thanks, and all the best. Yeah.
Thank you. Next question is from the line of Adarsh from CLSA. Please go ahead.
Yeah. Hi, Ravi, Puneet. Question on the liability side, retail TD, you indicated that large part of the reclassification is done. Now, just wanted to understand, you know, over the next couple of years, getting retail TD momentum back will be key to sustainable growth for the bank. Can you just highlight what steps are we taking? You can have a pricing play. You indicated about customer additions. Can you talk about the account deepening? What's happening to your corporate salary build-up?
Thanks, Adarsh. The overall piece in which we are looking at it is in terms of sweating the franchise to start with. The way we are going about it is if you would have seen our slide 17, you would see that we are moving in multiple vectors. One of them clearly states that how we are facilitating our staff, the frontline staff, in terms of enabling them to free them up from routine operation work. If you see, 65% of our branch service transactions have moved digital and 94% of them are straight through, which gives us the lever to increase you know engagement with customers.
Similarly, we have ensured that we are emphasizing our KRA changes for our staff, where the entire focus is on ensuring that there is, as Amitabh mentioned in his opening comments, you know, the focus towards delivering an engine which is focused on growth. The productivity, whether you look at it in unit terms or value terms, is also moving quite strongly, and over the last couple of years, it has moved by nearly 30%, at a resource by resource level. Similarly, the product penetration that we are focusing on comes through the fact that, and that is why salary as a focus segment comes into play.
You would have seen that our engine on the efforts of salary, we have doubled the number of corporates that we have signed up, as well as, rejiggered our corporate program, the Ultima Salary Program. At the same time, again, coming back to the ability to onboard the customer better, we have the digital elements of saying that whether it is non-salary, we have moved 26%, individual current sourcing, we have moved 55%. Similarly, RTD, coming back to your earlier question, we are seeing 68-70% of the RTD onboarding going on to the digital.
A combination of you know freeing up service to sales capacity ensuring that there are enablers which are in place KRAs which are changed to reflect this aspiration of ours to create the growth engine and then delivering the quality of growth that we are looking for whether it be in terms of premiumization whether it be in terms of granular deposits whether it be in terms of LCR accretive. All of that are coming into play and helping us move in that direction. As Puneet mentioned this is a you know a long-term play that we are at and the effort is to ensure that we are moving in this direction.
The RTD book per se, I think, the question on rates and how we are looking at it, as I mentioned earlier, too, this is a market dynamic element. I do believe that we will wait and watch and see how competition. This is an interest rate upcycle, but we do not want to be the leader as of now. We will wait and watch and see how competition moves. The idea is to be in front of customers and to see that we are able to get their better and better wallet share.
Just to add to Adarsh, everything that Ravi just mentioned in terms of what we're trying to do in the physical space.
68% of our TD comes digitally. Therefore, to that extent, we have improved the journeys digitally to ensure that if you're seeing drop-offs, how can we ensure that drop-offs reduce, and so on and so forth. We really run literally hundreds of campaigns, you know, to our base for retail term deposits. You know, each of these campaigns is run digitally based on data analytics that we have. Many of them are very, very successful. Some of them don't work, but I think it's a...
Really what we're looking to do is increase these hundreds of journeys into literally thousands of campaigns, and we are building out capabilities to be able to do that. We are also trying to optimize the funnel, meaning 68% of individual TDs come digitally. We also need to ensure that as the customer is looking to redeem on maturity date or looking for prepayment, is it possible for us to hold them back in some manner by making them an offer for a personal loan, for example, or a OD against FD product, are some of the journeys that have already got constructed.
Therefore, the digital team is looking at through data analytics, not just at increasing the top of the funnel, but ensuring that leakages don't happen as well.
Got it. No, this, Thanks. This is useful. My only observation and just a follow-up on this is, for some of the large brand banks, you know, there is a certain retail TD accretion that normally happens when you build on it, either through rates or through efforts, and then, there is an extra momentum that gets built in. What I'm just trying to understand is underlying there was a reclassification. So except reclassification, how large that number was, how's the momentum? Because it looks like somewhere the underlying momentum has been quite weak, right? Then we have to do a lot more on, you know, run on the treadmill to kind of get an organic accretion, which is there for some of the larger, brands in terms of, banks out there.
I wouldn't disagree with you at all. I mean, this is a market where everybody has to be on the treadmill, given that it's an interest rate uptick cycle that is coming through. You know, as I mentioned earlier, excluding the reclassification, et cetera, we would be somewhere ballpark around the 13%-14% mark.
Okay. Got it. Thanks. Yeah, all the best.
Thank you.
The next question is on the line of Rahul Jain from Goldman Sachs. Please go ahead.
Yeah. Thanks. This is Rahul here. Just taking the previous conversation forward on deposits and bringing in the element of branches. On one hand, we see the CD ratios are elevated at 87%-88%. You know, capital is fair enough, 13%-14%. Branch expansion is just 1 in this quarter, if I saw the numbers correctly. How are you all thinking about it? You know, on one hand, you know, we've got HDFC Bank, which is talking about massive expansion of branches. On the other hand, we are, you know, looking at, you know, higher LDRs and then rates are rising. What is the strategy around that particular element?
Thanks. As I mentioned, you know, the number of branches opening in quarter one, we should take with a pinch of salt because, you know we're kind of looking at places, identifying. Let me come back to what the bank is, you know, weighing in. As I mentioned, the focus is on sweating the franchise. At the same time, we are also cognizant of white spaces in different states across the country. Combination of both these will come to bear on the way we are looking or the direction we take. The whole idea is to see that how I can get each of my existing branches own more and more of the catchment, and take a better wallet share.
To that extent, we track it at a district-by-district level and see how we are moving across the 670 districts that we are present in across the country. Both in terms of the existing branches sweating as well as any white spaces available across these districts is where we are focusing on. I think that will determine the way we look at it over the next 2 to 3 years of how our distribution footprint should be.
Okay. Thank you.
I think just to put that in context as well, our mobile app today has 9.7 million customers who come to the mobile app on a monthly basis and transact somewhere in the vicinity between 10-12 times, which means that there are 100 million visits to the mobile app on a monthly basis. Therefore, as we think about our physical strategy, I think the strength of our mobile app is something that we would superimpose upon that and think through in terms of the number of branches that we require over the next 2-3 years, as Ravi mentioned, to be able to fill white spaces, some of it physically and some of it digitally as well.
Okay. Thanks. Just another question is on the growth sequentially. You know, of course, the headline numbers are sort of indicating a sort of marginal decline led by corporate. When I look at the retail book also, the secured portfolios have seen a lower quarter-over-quarter accretion, maybe some seasonal factor, you know, could have been there. Just trying to understand, did we see any pricing pressure there too? Or how's the repayment rates, you know, trended in those portfolios? Or it's a calibration or sort of conscious decision to sort of calibrate more towards unsecured and go a little slow on secured. How do you think about the mix changing going forward and what has happened in this quarter?
Overall, as we've guided that we would be directionally moving towards bit more of unsecured than what we've done. Our disbursement this quarter was about 32% unsecured versus, say, 19% of last year. That journey continues. This quarter has been all about rate transmission, increasing fee, and also therefore keeping at the same time ensuring that the volumes do come in. Been a bit of a timing difference in terms of rate hike. We've been acutely aware that we would like to transmit the rate increase to the customer. That's why you see numbers which are there. Overall, the year-on-year growth of about 25% is a pretty healthy growth. This momentum is gonna continue in the remaining of the year.
Would you say that the repayment rates, or the prepayment balance terms et cetera would have been normal, that you've witnessed otherwise?
Yeah. It's been a normal year in terms of repayment, so there's nothing extraordinary.
Just wanted to squeeze in one last question in terms of credit cards, very strong momentum there. You know, can you just throw some light around what would be your revolver rate? What would be the EMI portion out of the spend that you all have?
Hi, Sandeep here. See, revolver rates have reduced for us and for the entire industry, right? That has gone down, which essentially means that a lot of revolvers went out with the credit cycle, which we saw a couple of years back. Apart from that, we are seeing behavior where customers were revolving couple of years back and are now displaying more of transactor behavior. We believe this always happens after a credit cycle. Last time it happened in India in 2007/08, it took almost four years for the industry to recover to the normal revolver rate. Our sense is this time it's gonna be faster because the growth rate is much faster, right? Having said that, our strategy is pretty clear. The book is clean. We see opportunity in the market organically.
We see opportunity in the form of partnerships. We will grow our franchise. The rates will organically recover over time. We are not unduly worried by the fact that revolver rates are low right now. The balance sheet and the business can earn monies which are reasonable in, even in the context of lower revolvers. We'll stay with the strategy we are playing out right now. Your ROE would be below industry levels or would be at par with industry?
There is no published metric on this, so very difficult to say what the industry is at. We believe everybody is lower than where they were by a certain level. There is no published metric on this, so very difficult to comment there.
All right. Thank you.
Thank you. The next question is from the line of M B Mahesh from Kotak Securities. Please go ahead.
Good evening, sir. Just a couple of questions. First is on the slide number 10. With respect to the spread improvement that you reported this quarter, how much do you think would you attribute to the loan mix that is sitting out there? Either loan mix or the balance sheet changes.
Mahesh, thank you for the question. We haven't split the 13 basis points, but the 13 basis points will be a mix of repricing effect on our floating rate book, plus the mix effect. We haven't called out which driver has constituted what amount.
No. The question is more in the sense that is it fair to say that the decline in wholesale book would have contributed to the margin expansion, or you think that's an incorrect assessment there?
The decline in wholesale book would have contributed to the bank margin expansion because we ran down the trade book, so that is a correct assertion. However, to take that assertion to the conclusion that that is the only driver of margin expansion in the current quarter would not be correct.
Okay.
There are drivers like our CBG book and retail book delivering superior growth and superior pricing. The fact that we have had a reprice that has taken place in the last quarter, that is to fully play out. The mix shift between INR loans and FCY loans. The 4 drivers that I keep talking about, the reduction in the RIDF book, all have contributed in part to make sure that the spread has expanded by 13 basis points. I would not like you to leave with the conclusion that, or if I were to frame or paraphrase your question, I don't think I will lose this spread once I start growing my wholesale book.
Okay.
That's the other way to answer your question.
Perfect. That's useful. Secondly, if I were just to look at the same slide and just kind of look at how do you see the pricing of the loan book changing over the next couple of quarters given the yield movement for your portfolio?
Mahesh, about 70% of my entire loan book, to be precise, 69 odd change, is floating rate link. Of which, roughly about 30% is repo. We've had one repo, one cycle of repo rate hikes happening in the current quarter. Assuming that another rate cycle happens, we should see that repricing take place. MCLR, if you look at how we've actually put out data for you to make an independent assessment. We have a pretty broad spectrum reprice on the MCLR. Of the 23%, about half of it reprices over a 12-month period. The MCLR reprice is going to be more out in time. The repo reprices will be faster. There is going to be a component of the 30% fixed rate book that pays itself through the next 12 months, which will also reprice.
That's how I am looking at the reprice effect on the book, over the next 12 months.
Okay. Sure. I'll just take this offline. Just if I would ask one last question. Slide number 14. You've seen an improvement in the LCR on a QOQ basis. You say that the exit LCR is 123. There has been no material change in the balance sheet on the asset side. If anything, there's been a reduction in cash balances. Just trying to understand what would explain an improvement here.
Mahesh, I've articulated previously that we had two levers to improve our NIM. The composition of our liabilities and the quality of our liabilities. The relative quality of our liabilities has improved on a quarter-by-quarter basis. If you look at the LCR disclosure, the outflow rates would have come down, which therefore is also an improvement in LCR.
Oh.
123. You see, exit number.
Sure, sure. Useful.
It is the journey that we set out that we will get to.
Perfect. This is useful. Thanks.
Thank you. Ladies and gentlemen, we'll take the last question from the line of Saurabh Kumar from JP Morgan. Please go ahead.
Sir, just two questions. One is, you know, the mark-to-market, so I'm assuming this is mostly coming from your corporate bond book. Could you just highlight what is the duration here? That's the first one. Second is on your fee to assets. How should we think about it? Because if I look at from pre-pandemic level, it's growing about 10.5% odd. As the unsecured mix rises, should one reasonably assume fee to asset is going to be your optimization? Thank you, sir.
Thank you for the question. We've called out the color of the rating profile of our corporate bond book. We said that 98% of the book is A- and above, and 79% of the book is AA and above. We haven't called out the duration of the book, but it is not a short duration book per se.
Okay.
If your question is the pull-to-par duration, the pull-to-par duration is a multi-year duration versus a one-year duration or a shorter period that one may assume.
Okay. In this quarter you were not exposed to the short end of the curve? That was the question.
That is correct. All of it is. In fact, if I were to make a assessment, nearly all of this is corporate bond book. When I mean nearly, I mean it's tending towards 100% is the corporate bond book. We've explained to you there's no economic loss and it'll be a multi-year pull to par.
Okay, got it. The second one, fee to asset?
Look, I think, we don't offer guidance on fee to assets. I think historically performance would be the best reference that I will let you draw to. We really don't have a specific guidance on fee to assets currently.
Okay. All right, sir. Thank you.
Thank you. I now hand the conference over to Puneet Sharma for closing comments.
Thank you, Neeraj. Thank you everyone for taking the time to speak with us today. If we've left any questions unanswered, we'd be very happy to speak with you offline in the course of the evening today. Please do reach out to Abhijeet for any further questions or clarifications. Thank you very much for spending your evening with us.
Thank you very much. On behalf of Axis Bank Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.