Ladies and gentlemen, good day and welcome to the Axis Bank conference call to discuss the Q3 FY23 financial results for the quarter ending as on 31st December 2022. 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 proceedings of the call is strictly prohibited. Prior explicit permission and written approval of Axis Bank is imperative. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions at the end of the briefing session. Should you need assistance during this 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. Over to you, sir.
Happy New Year to all of you. We have on the call, apart from Puneet, Rajiv Anand, Deepti, MD, and other members of the bank's leadership team. This quarter, we continue to build the momentum on our GPS strategy. We are gaining market share in our focus segments. We continue to have a disproportionate share in digital channels and products and are now among the best-in-class on operating and earnings metrics. We delivered strong and balanced growth in domestic advances, led by market share gains in Bharat and SME segments. We got better on granular and premium deposits. Our credit card business has delivered industry-leading performance for four quarters now. NEO, our cutting-edge digital product for corporate banking, is seeing strong traction among clients, and Axis Mobile app continues to be the number-one rated banking app in the world.
Delivery across the key initiatives undertaken by the bank is visible, and we continue to invest in 19 specific bank-wide transformation initiatives whose results are yet to fully play out. We are monitoring the external environment closely. We are well-positioned to take advantage of the trends that are emerging in India, the China plus one opportunity, the next-gen public digital infrastructure like Account Aggregator, OCEN, and ONDC, and Bharat being an engine of growth for India. We remain alert to the global macros and its impact on the economy. We will ensure that this customer-focused, consistent, and industry-leading performance will sustain through cycles. On balance, we are feeling good and confident. Our financial performance reflects the balance sheet strength with meaningful shift in trajectory in the last five quarters.
There has been fundamental improvement in ROE driven by higher NIM as we stay on course on three core areas of execution of our GPS strategy, namely embedding a performance-driven culture, centering the core, and building for the future. Let me now discuss each one of them in further detail. On the performance-driven culture side, our profitability metrics continue to improve. Our consolidated analyzed ROE for quarter three financial year 2023 stood at 19.81%. While Puneet will provide granular details, let me highlight the key trends. Net interest margins improved 70 basis points year-on-year and 30 basis points quarter-on-quarter to 4.26% in quarter 3 financial year 2023, which is a lifetime high. Operating profit grew by 20% quarter-on-quarter and 51% year-on-year, highest in the last 13 quarters.
OpEx growth of 8% in quarter three further moderated from 14% in quarter two on a year-to-year basis. PAT at INR 5,853 crores was up 62% year-on-year and 10% quarter-on-quarter. We lifted the growth trajectory and consistently gained market share. We have strengthened market position across key segments. On advances, we grew faster than the industry with domestic loan book gross of IBPC, which we have sold, up by 18% year-on-year and 5% quarter-on-quarter, higher than the system credit growth. In credit cards, we issued over 3 million cards in the nine months financial year 2023, nearly twice that issued in the first nine months of last year. We had a 16% growth in incremental shift market share in quarter three.
During the quarter, we crossed the milestone of 3 million cards in force for Flipkart Axis Bank Credit Card, making it one of the fastest-growing co-branded credit cards in the country. The bank's Burgundy Private offering that we launched three years back continues to scale greater heights with AUM of nearly INR 1 trillion, up 22% year-on-year. Burgundy Private proposition now includes 30 of the Forbes 100 richest Indians as its clients and manages wealth for over 4,400 families across 27 cities pan-country. Our customer acquisition engine remains strong. In quarter three, we added 2.9 new customer accounts, a growth of 34% year-on-year and 3% quarter-on-quarter. Our district-level segment strategy to build high-quality deposits is progressing well. This is reflected in 140 basis points year-on-year improvement in share of premium savings segment to overall retail savings deposits.
The quality of deposits too saw improvement. The lendable term deposits from retail and small business customers were up 15%, while deposits that attract higher outflow rates were down 20%. The AC deposits on a QAB basis grew 10% quarter-on-quarter, led by broad-based growth across segments, including branch banking, large corporates, and MSMEs. Assets, focus segments delivered strong growth and corporate banking activity increased meaningfully. In quarter three, we continued to witness strong momentum across our focus MSME segment, which continues to remain a key growth driver for the bank. The mid-corporate book grew 42% year-on-year and 11% quarter-on-quarter. The SME book grew 24% year-on-year and 5% quarter-on-quarter. The SBB segment, the small business banking segment, delivered strong growth of 60% year-on-year and 8% quarter-on-quarter.
The combined portfolio of these three segments grew 35% year-on-year and now constitutes 20% of the loan book, up 510 basis points in last eight quarters. We remain a banker of choice for corporate India with our ability to serve across the capital structure. The domestic corporate franchise grew 12% year-on-year and 11% quarter-on-quarter, while simultaneously improving its margins. We are seeing a broad-based growth in corporate loan demand. There are strong activity in segments like renewables, roads, chemicals, urban energy distribution, commercial real estate, and healthcare. Capacity expansion projects are picking up, especially in consumption-driven sectors. Pricing has seen improvement compared to what we were seeing two- three quarters back. We continue to choose opportunities that meet our return threshold. Retail loans grew 17% year-on-year and 1% quarter-on-quarter.
Unsecured personal loans and credit card advances grew faster at 21% and 39% year-on-year respectively. We saw market share gains in NEFT payments of 180 basis points year-on-year to 12%. We are also the largest clearing member in the listed derivative space with a market share of around 18%, while maintaining our leadership in equity capital markets and debt capital markets. Around fostering a winning mindset, it is reflected in multiple external recognitions we received this quarter. Like I mentioned earlier, Axis Mobile app is the world's highest-rated mobile banking app on the Play Store with a rating of 4.8. It has over 16 lakh reviews, which is the highest across 59 global banks, 8 global neo banks, and 50 Indian FinTech apps. The app now handles over 65% of all service requests by volumes.
The bank also won that Red Hat APAC Innovation Award for India for digital transformation and cloud-native development during the quarter. We also retained our leadership position in rupee-denominated corporate bond issuances for the sixteenth consecutive year based on Bloomberg league table for India bond. For strengthening the core is concerned, the strong balance sheet with self-sustaining capital structure has been one of the areas we've been focused on. Our balance sheet remains resilient. Our asset quality is now among the best-in-class with net NPL of 0.47%, high provision coverage of 81%, and standard asset coverage of 1.53%. Our internal accruals is now largely sufficient to fund the business growth with CET1 capital accretion of 195 basis points in last 9 months as compared to 164 basis points of growth-related consumption during the same period.
We are building the next-generation technology architecture for wholesale digital banking. With client-centric design at its heart, NEO for Corporates is enabling multi-product, multi-channel, end-to-end digital experience for our corporate clients. About 100-plus open banking APIs are now operational across the product suite. NEO for Corporates allows us to integrate various API product suite via an ERP-agnostic single utility. We have partnered with leading FinTechs to offer connected banking experience. Within a short span, we have 1,000-plus corporates on our Axis API Developer Portal. I am bullish on what NEO for Corporates is doing and what it can do to transform our transaction banking expertise. We continue to build for the future too. Our digital banking unit is now operating at scale. While our current digital banking platform has delivered strong outcomes, Axis Two, our next-gen mobile banking platform, is beginning to fire at minimum viable product stage.
Axis 2.0 is a significant leap both on technology and business model. It will focus on truly 2 digitally-generated businesses with zero paper, zero touch, and zero intervention. Axis 2.0 will operate as a digital bank within the bank. CASA balance through Axis 2.0 source accounts has grown nearly 2-3 times on a year-over-year basis. FD flows have grown by 61%. Similarly, the overall loan book of Axis 2.0 has grown 52% in the same period. On digital lending, we introduced several new capabilities on Account Aggregator-based underwriting, eKYC and eSign-based approvals. The bank today is underwriting a loan or a credit card to any citizen of India digitally without any physical documents or any human intervention. We have built very successfully digital partnerships that we spoke about during the analyst day. We are setting up and scaling a few more strategic partnerships.
We continue to work on bank-wide programs to build distinctiveness. Bharat Banking continues to grow from strength to strength. As a result of our focused approach, we delivered 37% year-on-year growth in rural loan book, while the deposits growth in Bharat markets stood at 16% year-on-year. During the quarter, we added 6,000 village-level entrepreneurs to take our overall CFC really network to 60,200+. They would act as extended arms for our 2,065 Bharat branches. The disbursements through CFC network were up over 5x year-on-year in quarter three financial 2023. Our subsidiaries continue to create significant value. The One Axis approach now is reflected in lowest performance of our subsidiaries. The total analyzed PAT of our domestic subsidiaries for 9 months of financial 2023 stood at INR 1,252 crore.
During the quarter, we further strengthened our presence in the retirement solution segment with the launch of Axis Pension Fund. Capitalizing on One Axis approach, the company has become the fastest private pension fund to cross 1,000 crores of AUM. On Citibank consumer business integration, Citibank acquisition and integration process is progressing well. Customer base and business performance remain steady and on expected lines. We are extremely happy with the response received from Citibank customers and employees alike. We already have 96%+ acceptance rate from the employees of Citibank who will be joining us shortly. We look forward to adding this high-quality customer base and workforce to the Axis family. The opportunity to build on this base is tremendous on the back of our fast-growing wealth and cards franchise.
In closing, the domestic demand and economic activities continue to remain resilient, and global economic growth is staying at a slowdown. Our leading indicators suggest that economic momentum remains strong with minor moderation, despite the rapid transmission of the repo rate hikes and liquidity tightening on a broad spectrum of interest rates. The economic resilience, particularly for the micro and small businesses, is presently surprising. We at Axis Bank remain optimistic on the growth opportunities in the Indian economy and our ability to support and take advantage of them. I will request Puneet to now take over.
Thank you, Amitabh. Good evening, thank you for joining us. We continue to make progress on our endeavor to be a stronger, consistent and sustainable franchise. I will discuss the salient features of the financial performance of the bank for Q3 FY23, focusing on our operating performance, capital and liquidity position, growth across our deposit franchise and loan book, asset quality restructuring and provisioning. Our operating performance remains strong. We have now shown consistent NIM improvement delivered through robust growth in NII. Growth in granular fees controlled our operating expenses. The resultant core operating profit growth, coupled with relatively benign credit costs, resulted in a strong YOY improvement in our ROA and ROEs. The net interest income for Q3 FY23 stood at INR 11,459 crores, growing 32% YOY and 11% sequentially.
NIMs for Q3 FY 2023 stood at 4.26%, growing 73 basis points YOY and 33 basis points Q1Q. Domestic NIMs stood at 4.41% growth for the quarter. Reported net interest income and NIMs for the quarter include a one-time interest recovery on restructuring of an existing NPA account aggregating to INR 149 crores. This contributed 5 basis points to the current quarter NIMs. We have clearly articulated the drivers of our NIM improvement journey. The progress against the key drivers in this quarter is as follows. Improvement in balance sheet mix. Loan and investments comprise 87% of total assets at December 2022, as compared to 84% at December 2021, improving 300 basis points YOY.
INR-denominated loans comprise 93.3% of total advances at December 2022, as compared to 90.4% at December 2021, improving 290 basis points YOY. Retail and CPG advances comprise 67% of total advances at December 2022, compared to 65% at December 2021, improving 195 basis points YOY. Low-yielding RIDF loans declined by INR 8,425 crores YOY and INR 3,246 crores sequentially. RIDFs comprises 2.7% of our total assets at December 2022 compared to 3.8% at December 2021. We currently estimate to be PSL compliant across all subsegments at the headline level in FY 2023. Composition of our liability is measured through average CASA percentage improved by 18 basis points YOY. Quality of liability is measured by outflow rates improved 400 basis points YOY.
The bank continues to improve risk-return profile of its loan book. Our NII, as a percentage of average risk-weighted into earning assets, stands at 8.14%, improving 89 basis points year-over-year and 39 basis points quarter-on-quarter. Our fee income stood at INR 4,101 crores, growing 23% year-over-year and 6% sequentially. 93% of our fee is granular. Total retail fee grew 30% year-over-year, 8% quarter-on-quarter. Fee on cards grew 44% year-over-year. Conventional transaction banking fee grew 25% year-over-year. Trading profit for the quarter stood at INR 428 crores compared to a loss of INR 86 crores in the previous quarter and a profit of INR 367 crores for the same quarter last year.
46% of the profit for the current quarter is attributable to reversal of MTM losses previously recognized on our corporate bond portfolio due to rate movements. This is in line with our previous commentary that we did not expect an economic loss on our corporate bond book. 85% of the corporate bond book is rated double A+ and above, and 99% is rated A- and above. Operating expenses for the quarter stood at INR 6,847 crore, growing 8% YOY and 4% sequentially. The YOY increase in INR crore expenses can be attributed to the following reasons. 12% is linked to volume growth, 40% is technology and growth-related expenditure, 30% is wage increase, and the balance 18% is BAU. Technology and digital spends grew 11% YOY and constituted approximately 8% of our total operating expenses.
Staff costs increased by 18% YOY and 5% sequentially. We added 1,309 people from the same period last year, mainly in our growth businesses and our technology team. We continue to maintain the Social Security Code provisions. The cumulative Social Security Code provision in the books of the bank stand at INR 227 crores. The cost-income ratio for Q3 FY23 stood at 42%, improved 822 basis points YOY and 358 basis points Q1Q. Operating expenses to average assets stood at 2.24%, higher 9 basis points YOY and declining 1 basis point sequentially. Given the strong momentum across our businesses, we remain committed to consciously invest in our focus business segments. Lower credit costs over the past few quarters have provided some headroom to run operating expenses at slightly elevated levels.
We remain committed to achieving around 2% cost to assets in the medium term. Operating profit for Q3 FY23 at INR 9,277 crores, increased 51% YOY, 20% Q-on-Q. Core operating profit for Q3 FY23 was INR 8,850 crores, growing 53% YOY, 13% Q-on-Q. Provisions and contingencies for the quarter were INR 1,438 crores, up 8% YOY. In the current quarter, the bank made non-recurring one-time/prudent provisions aggregating to INR 340 crores or equal to 24% of the provisions and contingencies for the quarter. Excluding such prudent one-time non-recurring provisions, provision contingencies would be down 18% YOY. The bank has not utilized any of its COVID provisions. This provision is entirely prudent in our assessment. Annualized credit costs for Q3 FY23 is 65 basis points.
Adjusted for non-recurring prudent provisions, it would be 54 basis points. Profit after tax stood at INR 5,583 crores, growing 62% YOY, 10% sequentially. Consolidated ROA for Q3 FY22-23 stood at 2%, improving 57% YOY and 13% Q-on-Q. Subsidiaries contributed 8 basis points this quarter. Consolidated ROE for Q3 stood at 19.81%, improving 465 basis points YOY and 91 basis points Q-on-Q. Subsidiaries contributed 47 basis points to the consolidated ROE. The cumulative non-NPA provisions as at 31st December 2022 stood at INR 11,633 crores, comprising COVID provisions of INR 5,012 crores, restructuring provisions of INR 928 crores. Unsecured retail restructuring is provided at 100%, and the rest is at first bucket NPA rates.
Standard asset provision at higher than regulatory rates of INR 2,146 crores and weak asset provision of INR 3,547 crores. Our provision coverage represented as all NPA provisions plus all other provisions divided by GNPA stands at 139%, improving 952 basis points YOY. The bank is well capitalized and is carrying adequate liquidity buffers. Our journey to be self-sufficient on capital is progressing well. We accreted CET1 net of consumption of equivalent to 41 basis points for this quarter and have net accreted 31 basis points over the nine-month FY23 period. Based on the current capital position and RWA intensity of our existing business, CET1 consumption on the Citibank acquisition is estimated at 180 basis points.
We raised INR 12,000 crores of Tier two capital in the form of bonds in the current quarter. This improved our overall capital adequacy by 150 basis points at December 2022. Our capital adequacy ratio, including profits for the nine months ended 31st December 2022, is 19.51%. Our CET1 ratio is 15.55%. The prudent COVID provision translates to a capital cushion of 55 basis points over and above the reported capital adequacy. Our average LCR ratio for the quarter was 116%. Our excess SLR was INR 60,568 crores. The RWA percentage of the bank as at 31st December stands at 65%, improving 61 basis points Q-on-Q. Growth across our liabilities and loan franchise.
Amitabh has discussed the progress on customer acquisitions, growth and liability and loan franchise in his opening remarks. Please refer slides 20 and 21 for details around the quality of our liability franchise and our loan franchise in the investor presentation. Our CASA ratio on a QAB basis was 44.1%, improving 18 basis points YOY and 48 basis points Q-on-Q. We continue to improve the quality of our core loan franchise. Our loan book continues to get more granular and balanced, with retail advances contributing 56% of overall advances, corporate at 33, and our commercial banking business at 11. 68% of our loans are floating, 45% of our fixed rate book matures in the next 12 months. Breakup of the floating rate loan book by benchmark type and MCLR repricing frequency is set out on slide 11 of our investor presentation. Retail book.
Retail advances grew 17% YOY, 1% sequentially. Unsecured disbursements constituted 22% of the total disbursements for the quarter. Cards and PL portfolio grew 39% and 21% YOY respectively. The retail loan book represents healthy characteristics with 79% being secured. The credit card spends for Q3 FY23 grew 42% YOY. We are progressing well on an endeavor to build a profitable and sustainable corporate bank. Details of rating composition, incremental sanction quality is set out on slide 37 of our presentation. Corporate loan book gross of IBPC sold grew 12% YOY and 9% quarter-on-quarter. We found profitable opportunities to lend within the risk framework that we have chosen to operate in. Our mid corporate business grew 42% YOY.
The offshore wholesale advances are largely trade finance-related and primarily driven by our Gift City branch. 97% of the overseas standard corporate loan book in Gift City Branch is India linked and 95% is rated A-minus and above. The commercial banking book grew 24% YOY and 5% sequentially. The quality of the CBG franchise we are building and the strong relationship-led approach is reflected through CBG CASA deposits on a quarterly average balance basis growing 22% YOY. Overall, CBG fees increased 16% YOY. 87% of our CBG book is PSL compliant. Detailed performance of our subsidiaries is set out on slide 65 to 71 of the investor presentation. The domestic subsidiaries reported a total annualized net profit for the 9 months of INR 1 to 5, 2 crores. This translates into a return on investment of 50%.
Axis Finance delivered strong growth as full service customer franchise offering retail as well as wholesale lending solutions. In Q3 FY23, overall AUM grew 38% YOY. Retail book grew two times and now constitutes 44% of the total loans, up from 13% two years ago. AFL's asset quality continues to be strong with a net NPA of 0.37% and negligible restructuring. AFL's nine-month PAT grew 35% to INR 340 crores with an ROE of 17.7% and a healthy capital adequacy ratio of 22.2%. Axis AMC investor folios grew 17% YOY to take the total investor base to 13.1 million. Its nine-month PAT grew 16% YOY to INR 292 crores. Axis Capital's PAT for nine months stood at INR 110 crores.
Axis Securities nine-month new client acquisitions were up 71% YOY. Broking revenues were up 10% YOY and PAT stood at INR 151 crores. The slippage GNPA, NNPA and PCR ratios for the bank and segmentally for retail SME and corporate are provided on slide 56. Reported GNPA was 2.38%, improved 79 basis points YOY, 12 basis points quarter-on-quarter. Reported net NPA was 0.47%, improving 44 basis points YOY and 4% quarter-on-quarter. PCR at 81%, improved 876 basis points YOY and 89 basis points quarter-on-quarter. We have not sold any non-performing loans this quarter. Recoveries from written off accounts for the quarter was INR 608 crores. Reported gross slippages for the quarter were INR 3,807 crores, lower 8% YOY.
This includes slippages attributable to non-recurring and/or prudent items aggregating to INR 410 crores. Adjusted for the aforesaid, gross slippages by value was INR 3,397 crores, down 18% YOY. For the quarter, 36% of reported gross slippages are attributed to linked accounts of borrowers which were standard when classified or have been upgraded in the same quarter. Reported net slippages for the quarter were INR 1,719 crores. This includes slippages attributable to non-recurring and/or prudent items aggregating to INR 402 crores. Adjusted for the aforesaid, net slippage by value was INR 1,317 crores. Reported net slippages in the quarter adjusted for recoveries from written off pool was INR 1,111 crores.
On a segment basis, net slippages for retail was 1,040, CBG was INR 26 crores, and wholesale was INR 45 crores. In summary, the non-recurring and/or prudent items adversely impacted gross slippages by 22 basis points, reported net slippages by 22 basis points and reported cost, credit costs by 11 basis points. This is more clearly reflected on slide 56 and slide 59 of our investor presentation. Details of double-beam below pool and restructuring have been provided on slide 57 of our investor presentation. To summarize, Axis Bank is progressing well to be a stronger, consistent and sustainable franchise. Our balance sheet is strong and resilient, visible through strong capital adequacy ratio of 19.51%, COVID buffer of 55 basis points, overall coverage of 139% on GNPA and limited and better than regulatory provided COVID restructuring of 30 basis points of our gross customer advances.
Consistent delivery across our key initiatives and disciplined execution in our focus segments has resulted in the consolidated ROE for the quarter standing at 19.81%, improving 465 basis points YOY and 91 basis points Q1Q. The franchise is getting more sustainable as visible through net CET1 accretion over a 9-month period of 31 basis points. Our quarterly average CASA ratio stood at 44.1% as of December 2022. Early improvements in the quality of the granular liability growth is visible through reduction in outflow rates. This gives us comfort that we've laid a good foundation for our liability journey. Our assessment is that improvements planned that we have planned over the next 8 to 9 quarters should deliver results with some inter-quarter fluctuations, which is normal for a business of our scale and size.
While we are well-placed in the current macroeconomic environment, we continue to closely monitor the geopolitical environment, inflation, both domestic and international, liquidity risk and its impact on cost of funds, resultant policy action and its impact on our businesses and our clients' businesses. We would be glad to take your questions now. Thank you.
Thank you very much. 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. An operator will take your name and announce your turn in the question queue. If you wish to remove yourself from the question queue, you may press star and two. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask the question. First question is from the line of Mahrukh Adajania from Nuvama Wealth. Please go ahead.
Yeah. Hi, congratulations. My first question is on loan growth. Do you get any sense, say maybe from the disbursements in November, December or even in January, if at all there is a slowdown in secured retail in response to rising rates?
Hi, this is Sumit here. We have started seeing that customers are taking a longer time from inquiry to closure of the loan. That's what's been observed in the previous quarter.
Mm-hmm.
A similar quarter. Early trends are similar in this month also. We'll have to wait and watch how this progresses further.
Got it. The overall loan growth has been very good, but home loan growth is 2%. That's why I was just checking.
Yeah. That's how. That's the reason I mentioned that.
Right. Right.
That's what we observe on the ground. Thank you.
Got it. Got it. Got it. The other question I had is that the credit card thing is because of the festive season, right? As in that, you've mentioned why, you mentioned a note in your presentation, the reason why credit card outstandings were flat, was because of the festive season being across 2 quarters or?
Yeah, yeah, you're right. The Big Billion Day sale of Flipkart was in September end. That's when we saw a bump up. During the quarter, we saw festive season. In December, it's reverted to normal. It's still up about 40% year-on-year.
Got it. Got it. My next question is on the Citi deal. When we had made the initial presentation, we had talked about INR 15 billion additional OpEx over 2 years. Would that cause any lumpiness in co-cost in the fourth quarter? Will a large part of that OpEx come into the numbers in the fourth quarter? I mean, you've not mentioned any quarter, so I'm just asking.
Thanks, Mahrukh, for the question. The INR 1,500 crore number is post-tax. A large part of that is a time-linked payment for services that we will receive post Day one, so it should be gradual.
Mm-hmm.
We will be incurring some expenses as we ride up to the actual transaction closing, which will get up fronted, but I don't think there will be material lumpiness on the cost as we move forward.
My last question is again on outlook on deposit and loan growth. Of course, near term, maybe the next two, three months, but also longer term in FY 2024, now that the system has also hit a very high base.
Thanks, Mahrukh. We don't offer short-term guidance. I think, we stick by what we've said previously. We feel confident that the franchise will grow at 500-600 basis points faster than industry credit growth on advances. We've also said previously that for the current financial year, we expect to grow at or about the industry credit growth. That's the only comment I would offer there. We don't have guidance for the next quarter or multiple quarters thereafter.
Thank you. Mahrukh, sorry to interrupt you. I'll request you to come back in the question queue for a follow-up question. A request to all the participants, please restrict to two questions per participant. If time permit, please come back in the question queue. The next question is from the line of Adarsh from CLSA. Please go ahead.
Hi, Amitav and team. Congrats on good numbers. Question is again on the mortgage growth. It's not been just a quarter where our mortgage growth has been slow. It's been about two, three quarters, since four Q. This 9-month YTD mortgage growth is quite slow. I don't see this kind of trend in most other banks. Just wanted to understand, have you seen a lot of balance transfers out? Are disbursement trends are weaker? What is happening? If you can just highlight.
There's no nothing abnormally high in terms of balance transfer. This quarter particularly, as I said, we have seen customers taking a longer time to convert an inquiry into the loan. Hopefully that trend should stabilize and things should improve this quarter, but we'll have to wait and watch.
Yeah. Again, I'm just re-emphasizing that the mortgage growth in nine months was like 4%, 5%. It's a little bit surprising to see this lower growth.
The first quarter was okay, second quarter was slightly slower, third quarter is when it's slowed down to about 1% growth. Q4 historically has been good, let's wait and watch how Q4 pans out.
Got it. Your sense on market share in mortgages, you know, disbursements, y'all are doing fine, is it?
Disbursements also have been affected. That's how the book has not grown the way we expected it to. It has got impacted.
Got it. Second question was on OpEx, you know, the team was, you know, sequentially for three quarters now, we've had a more stable OpEx after the investments we've done in the last two years. understand that you'll have guided to 2%. When you guide 2% now, does that include the merger or that's just the bank alone and hence we would see a bump up if you look at post-merger basis?
Adarsh, thanks for the question. What we've said is around 2% and not an absolute 2%.
Okay.
The around 2% is for Axis Bank excluding the Citi acquisition.
Mm-hmm.
We did put out pro forma disclosure on what the cost to assets of that business is. Yes, there will be an impact on cost to assets on the integration. If you look at the flow through to the bottom line, we've also called out in the same breath that the transaction is only accretive. Yes, on the cost to assets variable, there will be an adverse impact when we add the Citi franchise. We also need to incur the implementation expenses, which is the one-time cost that we've talked about over an 18-month period, but that's temporary. Those two variables will play through the P&L post-integration.
Got it. I'll just squeeze in one more question is on the corporate growth. When you've seen this kind of growth after, you know, kind of remaining low on that business, have the incremental spreads improved quite materially for you to take the call that, we will do this business a little bit more, proactively now?
I think the margins in this business, I think spreads in this business have certainly improved over the last couple of quarters. I think the way to think about that, perhaps, Adarsh, is also that, despite the fact that the corporate book has grown, our NIMs have improved as well.
Got it. Okay, thanks. That's it, and all the very best.
Thank you. The next question is from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead.
Yeah, hi. Thanks for the opportunity. I have one question around the treasury performance this quarter. This seems particularly strong, Sunny. Anything which has driven this performance?
My apologies. We were not able to catch the question. Would you be kind enough to repeat it, please?
Yeah. Hi, Puneet. I was asking about the treasury performance. We have reported a healthy treasury gains, so how do we see this and what is-?
Okay, thank you.
Oh, hi. Am I audible now?
Yes, you are. Please.
Yeah, Puneet. The question is around the treasury performance this quarter and the outlook, if you can talk about this.
Like I said, like I called out specifically, 46% of the trading profit performance is a write-back of MTM losses that we had recorded as, in the earlier part of the year when rates had moved adversely on our corporate bond book. At that point in time also we had specifically said that we would not incur any economic loss on the portfolio and the corporate bond book, 85% of it is rated AA+ and 99% is rated A- and above. We don't think we will incur an economic loss even for the residual MTM, which is the difference of what we took in quarter one versus what we have gotten back because of rates this quarter. Obviously, further MTM write-backs will be a function of how rates play out, so difficult to call at the moment.
What I can tell you with certainty is we maintain that we will not incur an economic loss on that portfolio.
Okay.
Also to give you better clarity, the duration of the book we had previously said was four to five years. Assuming that there is no further movement, that would be the timeframe by which the residual MTM should come back into the P&L.
Right. Okay. Secondly, just one small clarification around the standard plus additional provisions that we have. In the press release on page 3, we mentioned additional provision standard plus additional, other than NPA of INR 5,000 odd crores. This seems to be like a misplaced number. If you can just verify this.
The INR 5,012 crores that I called out was our COVID provision, which we have neither utilized nor topped up in the current quarter. We believe that provision is entirely prudent.
Right. The total number is?
INR 11,633 crores, which is also set out on, if you look at the investor presentation, slide one or slide two of the investor presentation.
Yeah.
Slide two.
Actually, this confusion just arose because of like a number that is mentioned for the additional plus standard on page three of the press release, which seems a bit odd.
Sorry, just give me one second. Sorry. That's, please treat that as a typographical error, please. We have a correction issued. The amount is, like I called out, INR 11,633 crores. That INR 5,012 crore number that you're reading on page 3 of the press release should be read as INR 11,633 crores. We will issue a revised press release to that effect. Thank you for bringing that to our attention.
No worries. Thanks so much. Thanks a lot.
Thank you. The next question is from the line of Rohan Mandora from Equirus Securities. Please go ahead.
Good evening, sir. Thanks for the opportunity. Sir, if I look at the Citi financials, for the business that Axis is acquiring for FY22, the PAT there is around INR 420 crores. In the presentation that we had issued at the time of announcement of merger, the normalized PAT that we were looking at was INR 840 crores. Just wanted to understand how should we look at this difference? Is it the cleanup that is happening? Does the bank remain confident on its position for the Citi Business post-merger? That's first. Second was on the retail term deposits. If you look at the last four to five quarters, the absolute value has not changed much. What's happening there? Are there any challenges in raising retail term deposits? Because of non-retail term deposit size rising.
Those are the two questions.
On the Citi financial numbers, unfortunately, I do not have the INR 400 crore number that you're referencing. Just for clarity, we are buying the Citi Consumer business, which is part of Citibank, N.A. India branches.
Right. Sir, the number that INR 420 that I'm taking is from the Citi India financials, where they are giving a separate disclosure of discontinued financials. There they are giving that number of INR 420 under discontinued business, which is likely to sold off. That's why they are giving this. I'm assuming it could be the entire business that Axis purchasing. That's I think on the second last page of the Citi India financials.
Understood. The only clarification I can offer there at the moment is on the discontinued business, we need to see whether the discontinued business profitability is on a transfer price basis, on an actual profitability basis. I will have a look at the disclosure and come back to you.
Sure.
The way our pro forma was prepared was it was Citibank India Branches Consumer Business plus CitiCorp Finance (India) Limited, which is the NBFC entity. We are buying both businesses. When we looked at the pro forma therein, ex certain costs. If you look at the footnote, we had clearly called out that we expect certain costs to disappear. On top of that, we had called out synergy benefits. That is an INR 840 crore number that we had called out. We'd be very happy to look at this disclosure. Once we've consummated the acquisition, we can build a bridge for you. At the moment, I can't comment on how Citi has quantified its discontinued business's profitability. We stand behind our pro forma disclosure. We think it was well-articulated and thought through, please.
Sure. On the retail term deposit?
Thanks for that question on retail term deposits. As Puneet had mentioned in his opening comments, retail term deposits also determine the kind of outflow improvement that we have seen. Puneet had talked about 400 basis points improvement there. We continue to stay focused on ensuring that we use the retail term deposits to improve the quality of franchise as we go ahead. Even in the individual term deposits over the nine-month period, we have seen a growth of 13%. It also indicates that we are moving in the right direction. Having said that, we continue to work hard to ensure that we look at this retail term deposits as a focus area for us.
The indicators in terms of the way we are moving and the quality of franchise that Amitabh also alluded to in his opening statement, these are the ones where we continue to focus. Thanks.
Thanks a lot.
Thanks. Thanks for your question. Just to supplement your answer, while Ravi was on the... answering your question, I've had a chance to look at the disclosure. I would guide you to look at the segmental disclosure that's referenced in the note. There is treasury profitability which sits there. That's on a funds transfer price basis, not an actual profitability basis. That may be the principal reason for the differential. Like we said, we stand behind our disclosure.
So sorry, sir, if you would repeat the last part, the treasury part.
Yeah. If you look at the geographic segment disclosure that Citi has put out, which is page 80, page 70 of the document you were referencing.
Right.
At the head of the document, you will see that the segment is treasury, corporate banking, retail banking, other banking business.
Right.
Effectively, when you look at all bank segmental disclosures, the businesses are disclosed on a funds transfer price basis, not actual cost of fund basis. That's the principal cause of difference. You will need to read that disclosure holistically with our disclosure, please. Thank you.
Sure, sure.
We will reconcile this for you once we integrate.
Sure. Okay. Thanks a lot.
Thank you. Next question is from the line of Pankaj Agarwal from Ambit Capital. Please go ahead.
Yeah. Good evening, sir. You mentioned that you are PSL compliant on marginal basis. Does it mean that on fresh disbursement you are doing 40% in PSL as well?
Thank you for the question. What we said is we expect to be PSL compliant for FY23. PSL compliance is a combination of organic business plus PSLCs.
Okay. There's still a shortfall on PSLC, right?
There is no shortfall anticipated at a subsegment or headline level for FY 2023. The compliance will be organic PSL aided by PSLC purchase. There is no shortfall that we have indicated as of now.
My question was more related to your RIDF fund. If you continue to meet your PSL requirements, this number will come to zero in couple of years?
We have previously stated that the door-to-door maturity of our RIDF portfolio is four-five years, and therefore, you would have to look at that tenures for the number to get to net zero. Obviously, in the same breath, what I would say is, no large franchise runs at net zero. We will need to wait and watch, but our endeavor is to get the number to the lowest possible value.
Okay. You said that quality of your liabilities have improved, but if I see on a QoQ basis, your bulk deposits have gone up. What I'm missing here?
I think what Ravi was indicating is the way we measure quality of liability is outflow rate for LCR purposes. What you're seeing is a change in composition of liabilities. For composition of liabilities, we look at proportion of CAR, SAR and TDs in the total book. Ravi's point was the quality of the stock liability has improved. We do take your feedback that NRTDs have grown faster than the core liabilities, but that's a composition effect, not a quality impact.
Puneet, that outflow should be a function of your, you know, retail and bulk deposits, right? More bulk deposits, more outflows, right? This is how the calculation is done.
That is correct. In bulk deposits you also have to factor non-callable bulk deposits. Again, if you look at the quality parameter, we have improved on the non-callable bulk deposit side also. Therefore, you will see a cumulative quality improvement.
Okay. Okay. Thank you. Thank you.
Thank you. Next question is from the line of Saurabh from JP Morgan. Please go ahead.
Just two questions. One is on your recovery. Was there any chunky recovery this quarter?
Thank you, Saurabh, for your question. No, no chunky recovery this quarter.
Okay. Sir, just on this, third-party fees, how should we think about the momentum going ahead? I mean, quarter-on-quarter is pretty good. How would you think about the growth here?
I think, while it would be difficult to give a future-looking guidance on that, but in terms of the fact that as you have seen, we have maintained a robust growth on the third party fee line. It's a combination of multiple products. So there will be always one or the other at play at all times. Therefore, we continue to believe that what we have demonstrated in terms of the growth indicates the strength of the franchise. Thank you.
Thank you.
Thank you. Next question is from the line of Prakhar Agarwal from Elara Capital. Please go ahead.
Yeah. Hi, sir. Thanks for this opportunity. Just two bits from my side. One in terms of your slippage that you'd probably talk about, one-off a prudential in nature. In that context, you have made around INR 10 and 15 odd crores of provisions as well. Which segment does it essentially belongs to? What I do essentially mean is when I look at your overall retail segment GNPAs that has gone up, in that context, when I look at your LAP portfolio that has also from a growth perspective gone down. Is there something write-off that we have taken in that segment? If you could just highlight this.
Thank you Prakhar for your question. The prudent one-time non-recurring items are large accounts, so they don't affect the retail segment at all.
Okay, got it. The second is when I look at your retail growth, which is around 1% on sequential basis, and when I look at your fee growth, which probably even adjusting for this third party, which is around 11%. What is driving and what is our outlook on that particular line item?
I think, Prakhar, the way you should think about retail fees is the product mix that we are delivering. While the headline growth has been 1% sequential quarter and 17% year-on-year, the mix has seen a positive shift that continues to yield better fees for us. That's why you're seeing a divergent performance between fee growth and asset growth. Like Sumit said, in our assessment, it is a function of timing of disbursement. Sumit earlier alluded on the call saying that let's monitor how this progresses through Q4.
Thank you. Just one last bit, if I could squeeze in. On the margin, if we don't expect any further rate hikes from RBI, when do you see your margin is probably peaking out? Probably other way of saying is when you see your cost of funds taking over probably incrementally negating the benefits of relief?
Prakhar, we don't offer short-term, NIM guidance, but broadly speaking, if you look at the contributors to our NIM improvement, there are three big contributors. One is the structural drivers for NIM improvement, which I discussed earlier in the call. The second is the pricing discipline that we have brought through across all of our businesses. Third is the cyclical rate hikes, where asset repricing has led liability repricing in this cycle. We fully appreciate, and we ourselves have indicated that we expect deposits to reprice, quarter four of the current financial year and further in quarter one of the next financial year. The outlook that we are offering is we've built a cushion over our structural NIM.
Two of the three drivers of our NIM journey still have an ability for us to control, and that should serve as some offset to the rate pressure that we see on the deposit side coming forward. That's how I would request you to think about our NIM journey. We do not have specific guidance for a point in time NIM as we speak.
Sure. Thanks a lot. Thanks a lot.
Thank you. Next question is from the line of Rakesh Kumar from Systematix Group. Please go ahead.
Yeah. Hi. Thanks a lot for the opportunity. Just two questions. Firstly, like, how do we read this, you know, that our total investment portfolio, you know, having gone up the percentage to end here, broadly, on a sequential basis on the last five quarters and on the non-retail deposit has gone up by 21%? What is happening there basically on the asset and liability side? Why so much of frictional liability, frictional liquidity that we are keeping on the book?
Hi, this is Neeraj Gambhir here. Our investment portfolio largely comprises government securities, and there is some bit of corporate bonds as well. It's basically high quality liquid assets that we need to maintain for our LCR. If you look at our average LCR over the last four quarters, it has been between 114 to 120%, 121% average. Essentially, the size of the book is moving in line with the LCR requirement of the balance sheet, which is a function of how the deposit book grows.
Secondly, the similar kind of, you know, thing. If you look at the excess SLR number that has gone up actually in this quarter on a sequential basis to INR 60,000 crore from INR 55,000 crore. Are we, like, you know, is there any plan to reduce the LDR and increase, like CD ratio is already on the higher side. What is the plan? How are we planning to reduce this LDR?
Okay. main distribute, main, you know, decision point on the liquidity is basically the LCR. Excess SLR is basically a disclosure that we give. Now the major driver of liquidity management is LCR ratio, and therefore I would guide you towards looking at the LCR ratios to look at what is the liquidity on the balance sheet. As I mentioned, over the last four quarters, we have been ranging between 114%-121%. It's a very well, sort of, within a range kind of a LCR that we maintained.
Would it be right to understand that, you know, this kind of excess SLR we will have to continue considering the previous quarter NSFR number and LCR number of this quarter?
The LCR dynamic is different from SLR. SLR is a fixed percentage, 18%, whereas the LCR requirements are dependent upon the deposit composition. Depending upon how the deposit composition changes, the LCR requirement moves up and down. Suffice it to say that for most banks, including us, the LCR requirements are higher than what is, you know, the kind of government securities that are required to be held for SLR.
Okay. Thank you. Thanks a lot, sir.
Thank you. Ladies and gentlemen, we'll take the last question from the line of Jay Mundra from B&K Securities. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. First, if you can elaborate this, one-off or non-recurring prudent item which has impacted slippages and provisioning. I remember we had already boxed all the, you know, risky assets, and we had provided adequately there.
Thank you for your question, Jay. This is not an ad hoc provision. The one-off item is illustratively, and let me explain one of the items for you so you get full color. It's, it's an account which is not 90 days past due. This is our risk assessment. We have prudently downgraded that account, and we have applied our rule-based provisions to that downgrade. Therefore, the only prudent decision was to downgrade an account that was not 90 days past due. Other than that, our rule engine kicks in and makes provisions. There is no discretion beyond that. This is nothing to do with legacy assets. Our legacy assets are fully provided for as we have called out. This is an action that has happened in the current quarter.
Right. This is funded exposure, right? Nothing to do with guarantee, et cetera.
This is funded exposure. There is linked non-fund-based exposure also. Like I said, our rules apply to both fund plus non-fund, and therefore provisions would have got triggered for both.
Sure. Second question, Puneet, on the sustainability of the ROA, right? Our GPS strategy also emphasizes a lot on sustainability. Over the last, let's say, four quarters, we have seen ROA now coming to 1.9% versus 1.3%, 1.4%. The same delta has come or even higher delta has come from margins, which are now, let's say, historic high. We go forward over the next four quarters, probably these margins will decline. How do you address the sustainability of the headline ROAs?
Samitabh, you know, whatever we've been trying to do since we launched the GPS strategy is to build a sustainable business. What we are very conscious of is that while we had broadly talked about the ranges on NIM, we had never given a guidance on ROA, but we had given, definitely given a guidance on NIMs and ROE. Our intention is once we get to a certain zone, to work very hard to stay there. This is not something which you're trying to do in the short term and hope that, you know, when the numbers come down, we do nothing about it. We are obviously continuing to work on all our levers possible, looking at what might happen in the market in the future and ensure that we can sustain the overall performance.
I'm not guiding ROA, I'm not guiding anything else. I'm just saying that the idea is, was to hit 18% ROE, and we will work very hard to stay there. We fully well know that there are factors which are working against it also in terms of rising cost of deposits. We are going to use every possible lever to ensure that we sustain the performance. Again, this is not a guidance on next quarter or next year. Just saying what, how we are looking at the business and how we are sustaining it.
All right. Thanks. Puneet, just to understand the, this one-off, this is the entire exposure you have already, you know, put out and have provided 100%. If you can also mention the sector because this is like, you know, on a large scale, this is coming for the first time in the last 1-2 quarters across banks. If you, if possible, if you can share the sector of that exposure.
Thank you. We don't, we don't comment on sector or name specific exposures. To your first question on whether it's fully provided, I will go back to a comment I made earlier. It's been provided as per our rule engine, and our rule engines are reasonably conservative. That's where I'll leave that response.
All right. Thank you so much, sir. Thank you.
Thank you very much. I now hand the conference over to Mr. Puneet Sharma for closing comments.
Thank you, Nirav. Thank you everyone for taking time this evening to speak with us. It's been a pleasure. If there are any questions that remain unanswered, our teams will be available to assist you with those. Good evening, and have a nice day.
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.