Ladies and gentlemen, good day, and welcome to the Bajaj Finance Q3 FY 2020 earnings conference call hosted by JM Financial Institutional Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Singh from JM Financial. Thank you, and over to you, sir.
Thank you. Good evening, everybody, and welcome to Bajaj Finance's earnings call to discuss the third quarter FY 2020 results. To discuss the results we have on the call Mr. Rajeev Jain, who's the Managing Director, Mr. Sandeep Jain, who's Chief Financial Officer, Mr. Atul Jain, CEO of Bajaj Housing Finance, Mr. Anup Saha, Deputy Chief Executive Officer, Bajaj Finance, Mr. Deepak Bagati, President, risk and collections, and Mr. Ashish Panchal, President, rural business, insurance, and liabilities. May I request Mr. Rajeev Jain to take us through the financial highlights, subsequent to which we can open the floor for Q&A session. Over to you, sir.
Thank you, Karan. Good evening to all of you. I'll be referring to the investor presentation that we have uploaded on our website. I'll quickly jump to panel four which in a way summarizes the quarter that went by. Overall, I would say it is a good quarter despite a slowing demand environment, an episodic provision on a broker account, and overall higher credit cost. We continue to remain focused on portfolio granularity across products and locations in Q3 as well. Overall return on assets sustained its momentum due to continued momentum on operating efficiencies. OpEx to NIM came down further. On a year-on-year basis, it came down to 33.9% versus a year ago at 34.9%. Return on equity was higher, despite large capital raise that we've done, primarily on account of lower corporate tax rate, and also, of course, strong profit momentum. AUM came at INR 145,000 crore.
Now, OpEx to NIM, as I said earlier, down to below 34%. Loan loss to average assets is the only red flag. Fundamentally, from 45 basis points a year ago, it came in at 61 basis points. Even if you knock off the episodic provision on a broker account, it came in at 55 basis points, so that's technically 20% higher than a year ago. PAT came in strong. Core PBT growth was 33%. PAT growth on account of corporate tax cut is at 52% at INR 1,600 crores. ROE, despite the capital raise, came in steady at looking like 23.5% on an annualized basis. Very quickly on the next panel. It's a key question that's in general being asked, how are things looking on the ground? What's the demand environment looking like? I thought I'll just give you some texture on how we are seeing things virtually as of January 26th.
January 26th structurally is an important day for our consumption businesses. What we can see here, we've dropped thousands of AdWords as part of our digital marketing process on Google across lending and consumption categories, being electronics, mobile, furniture, and apparel. Clearly showed a significant demand slowdown in Q3. This is intent to purchase. This is not purchases, this is intent to purchase. Intent to purchase itself was down significantly on a year-over-year basis in Q2 to Q2 and in Q3 as well. However, since December, we're seeing some degree of uptick which has continued in January so far. Republic Day sale, which is a big day for most retailers, especially in electronics and mobile, was reasonably strong. It's a lot more structural. It's spread across metro, mini metro, urban, rural.
We're seeing a structural pattern at this point in time in consumption categories in the last 30, 40 days. If it was to persist, maybe the process of repair of consumer confidence and consumption pattern has started. I think we'll have a definitive view on that in the next 60-odd days. That's really on what our sense on demand is in the last 30 days since these numbers were published. Very quickly, I'll try and cover the next three panels, which essentially summarize most of how the quarter went by. Assets are talked about. There's regional granularity. The highlight in point number two on panel six was that sales finance business, through the conversational slowdown, grew only by 7%. Rest of the businesses grew quite well. LAP grew by 5%.
Loan against securities lending grew by 5%, mainly on account of us winding down most of our broker exposures as a result of the event that happened, which is in public domain. New customer acquisition. Despite the INR 40 million try and charge, company continued to acquire 2 million customers in a quarter. We added 2.5 million new customers in Q3 as well. Overall now we have 23.5 million 40.38 best overall franchise and 23.5 million customers who we want to give money to across various products. Existing customers contributed 68% of the loans. They've remained between 68% and 70% in the first nine months of the year. We continue to have a growth stance, added 182 new locations. We further accelerated the strategy given the capital raise and tax cut that we got. We're opening 200 new locations. I just want to just make one point.
The location is defined as it's a new city, it's not a location. If I'm opening another office in Bombay, it's not a location. Location is defined as addition of a city or a town in India. That's really how we count location as. Liquidity, pretty strong. ECB is now 4%. Sequentially, cost of funds are going down. It would have been further down if not for the overhang that sat on the balance sheet on account of the capital raise that we did. CP book is virtually down to now INR 2,000 crore, and it had impact on overall cost of funds for 45-50 days of Q3. Consolidated cash buffer on panel seven were close to INR 11,500 crore. Very well-placed on liquidity. Have excess liquidity and not enough to lend, I would say. We converted $575 million.
We've gone to RBI to raise $650 million of additional ECB approval, which we've received. Under automatic route, we can raise INR 750. We had INR 175 left, which we will raise, and we had raised a request for additional INR 650, which we have received. Fixed deposit books. The liability side of the book continue to get diversified. ECB has come in. Fixed deposit book has crossed the INR 20,000 crore mark, which is 76% growth. 67% of the book is retail, pure retail, with average deposit of INR 3 lakhs and average tenure of 34, 35 months. We continue to work towards growing this business. This part of our balance sheet. We launched SGP to further retailize our retail deposit program. Operating efficiencies, NIM was strong. Fees and commission continued to be strong. Operating expenses came down to 34% versus 35% a year ago. Credit cost, I talked about it.
Overall, we've taken a INR 85 crore exposure on the broker account. We've also taken another INR 15 crore on account of a coffee conglomerate. Overall, we have taken INR 100 crore accelerated exposure provision in Q3. Gross NPA, net NPA came in flat. Gross NPA came in flat. Sequentially, net NPA was up five basis points, mainly on account of the coffee conglomerate account. Otherwise, it would have been flat. Only business that turned red, it was yellow for the first two quarters, it turned red in Q3, was our auto finance business. We have taken corrective actions and we hope that in two quarters, we should start to see improvement in the portfolio metrics. Profitability and capital, we've talked about. Capital adequacy is well covered now for next two years. We virtually added to capital in Q3. [ECS provision is now at 101 basis points.
Bajaj Housing Finance continues to grow well. Delivered a profit of INR 131 crores in Q3. Bajaj Financial Securities has started business. We are well on course. What I will do quickly is to take you to the credit slides for a moment and then open it up for questions. I'm jumping straight to panel 36 which gives by lines of businesses our credit quality matrix. Gross NPA, Net NPA in auto finance business is up 26 basis points from a year ago and 12 basis points from a quarter ago. Sales finance is up six basis points from a year ago and has improved 16 basis points from a quarter ago. Consumer B2C businesses have improved from a year ago and improved from a quarter ago. Rural B2B businesses have remained flat from a year ago and improved from a quarter ago. Same for B2C.
SME have improved from a year ago and improved from a quarter ago. Commercial lending businesses a year ago were all standard. We are at 60 basis points at this point in time. Mortgages are flat from a year ago and have deteriorated by 16 basis points from a quarter ago, mainly contributed by the coffee conglomerate account. Next panel gives you some texture on NPA movements. The slippages were largely adjusted between Q2 and Q3, adjusted for the coffee conglomerate account. We were actually down from March to June and June to September and September to December. Write-offs were in line with the policy. We sold a portfolio on a cash basis and realized INR 18 crore as you can see in the panel. ECL is just an outcome from panel 37.
Very quickly on 39, digital products, we had flagged it as a yellow in two quarters ago. Its position has overall improved from two quarters ago. We should see the business get into green sometime by end of fourth quarter. Lifestyle has improved but not that much. As I've articulated earlier, and if you follow through the previous transcript, the portfolio is actually very small. It is what it is. Salaried customers in general, I would make a point, continues to be steady. Self-employed customers in general continues to be troubled. Whether it's a small exposure, a loan exposure, a consumption exposure, any kind of self-employed or a LAP exposure, self-employed customer continues to be highly stretched. Salaried customers, in general, continues to be reasonably steady so far. The next two panels are. Home loans pretty steady. Salaried personal loans, very steady.
Business and professional loans marginally worse off on a year-on-year basis, around 40, 45 basis points. Loan against property, mainly IL&FS and Tanglin. Otherwise, steady. That's the quarter in a quick summary. We're happy to take questions.
Sure. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask questions may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Dhaval Gada from DSP Mutual Fund. Please go ahead.
Yeah. Hi. Congrats on the good set of numbers. Four questions. I'll try to keep it short. The first one was on the consumer B2B sales finance business. That book has remained flattish over the last three quarters. Could you comment a little bit on the competitive pressure and if that's the key reason for the growth impact, and how are we tackling that? The second one was the zero bucket for the PL cross-sell that's been trending higher and is now highest since 2015. What's the threshold after which it turns into yellow or where we tighten credit filters? That is the second one. The third is on the auto finance business that has turned red this quarter and was yellow over the past couple of quarters. We've seen very strong growth and our share in Bajaj has only increased from that point.
Just the thought process and how we look at this business. Lastly, on panel 30, the growth rate in the cross-sell franchise has been moderating in both absolute and percentage terms. Is that in line with our expectation or that's like a one-off and should sort of catch up in the coming quarters? Thanks.
Yeah. look, on B2B, this entire competitive pressure, we tracked one fact for the last two and a half, three years. What is my share of manufacturer subvention? That number has remained absolutely steady. Okay. Take the noise out. Let's talk money. What is the share of manufacturer subvention pool? That has remained across electronics, mobile, very steady. That's point number one. Point number two, we offer this product in 2,000 cities in India. The nearest competitor offers it in, I mean, you can ask them. The penetration rates are pretty steady across. Whether you go to Vijay Sales in Bombay where 30% of the sales move through us, or you go to Khed and take the largest dealer, 30% of the sales move through us. For the 30%, what is that 30% is the key question.
When we look at the search data for electronics and mobile on a year-on-year basis, let me just give you texture on mobile. That mobile data is out, that last year the overall mobile phone sales grew by 3%. A year ago, in October, November, December 2018, the year-on-year growth for intents, searches was 19%, 8%, 4%. I'm talking 2018, okay? Which is October 2018, November 2018, December 2018. This year it was 9%, -6%, and 2%. If I take April to August, that number on an average is -8%. Okay? It's now the single largest category in terms of numbers. The searches are 130 million searches on an average, between 120 and 130 million searches. They are very representative of what is the consumer mood in terms of buying this product.
If I take consumer electronics, let's say a refrigerator and so on and so forth. Last year, this category in October, November, December, average was 51% growth in searches. This year, it is -6% in searches. On an average, there were between 12 million and 15 million searches in a month average in last year. This year it is 9.5 million and 10 million searches. Clearly our share is very steady. Our share of manufacturers, our share of retailer sales. The sales had to grow, and we remain very well positioned. If Republic Day was good, as I said earlier, we were there to seize it. That's point number one. Point number two on PLCS, clearly, look, across businesses, other than salaried PL, most businesses are up. They're up structurally between 25% and 30%. Break this into two parts.
That means it's structural in nature. If it is one portfolio, you act on it. Take even CD, which is very steady. It is a green, right? Let's take for a moment CD. It is green. Even CD has moved from 60-90. Significantly below our threshold of nowhere near where our product profitability models are, but it's still up. Still 99 has gone to 98.6. You get the drift, right? That's one part. Coming back to PLCS. Clearly, the margins are very strong. This is a cross-sell product. A 40 to 50 basis points is material and important, but doesn't change the trajectory of the business. Third order point, let me make a point. We have weaned away from this business between 15% and 17% of the business in the last five, six months.
This is a 36-month loan, takes 9 - 11 months to flow through to the P&L in this matrix. If we, let's say, acted between April and June, the impact of it will play between April and June. That's really the time that this takes to play out on this P&L. That's point number two.
Understood.
Point number three, if we have turned it red, I've said in the past, this is the only business that is captive. There is some consideration, a small, but some consideration of a captive play here. The business is a highly profitable business, sustainably generates equal ROEs to the company ROEs, and we are taking corrective action to bring it back. This business has gone to a 86%-87% levels in December 2016 as well. That was actually the worst time that it saw. In general, I've also made a point, Dhaval, to many people that what we are seeing is very close to the demonetization environment. Across most lines of businesses, if you knock off even the episodic account of the broker account, we will look like 178 to 180 basis points of credit cost in the current year. In that year, we were at 155 basis points.
If you adjust ECL to it, we would look like 167-168 basis points. It's much like a December 2016 kind of number. We should see improvement, but I do want to anchor that there is a small measure of captive orientation in it. Third is cross-sell franchise. There is a little bit of noise in the number, but let me first rule out, to make a different point. We remain committed to add between 7 million and 8 million new customers to the franchise every year. Even in an environment which is extremely slow, we still added 2.5. That's point number one. Point number two, if you have the panel in front of you, panel 30, we were running a golden record project in the company.
That meant that 780,000 customers who earlier based on our D2 methodology, were actually sitting all the way from 920,000 customers on top in 40.38 to 780,000 below, have actually been cleaned out in the current quarter. That's a mechanics point. 7 million-8 million customers a year, we will continue to add to the franchise for a foreseeable period. Does that answer all your questions?
Just one follow-up. That's related to the first question on B2B sales. If HDFC Bank is gaining and if we are maintaining, then is it like the market is getting consolidated and therefore it's not our share loss? Is that the summary of the entire last few months in the marketplace?
Look, to me, I don't know who's gaining, who's losing. I am looking at what is my share of the spending.
Understood.
I have to rely on data to know whether I'm winning or losing. I can track the data of 26 top manufacturers in India. I can't track the data of 50,000 merchants in India. If at all I can track, that'll be market intelligence. Whereas 26 manufacturers are B2B participants from whom I can exactly know, and we have very deep and strategic relationships with them. It's easier for me to manage that and be more credible about it, than what's the market intelligence.
Understood. Thanks and all the best. Thank you.
Thank you. The next question is from the line of Nagraj Chandrasekar from Laburnum Capital. . Please go ahead.
Hi. Thank you for taking my question. I had a follow-up on the previous participant asking questions on auto finance. You mentioned that you somewhat like a captive financier, there's some small consideration there. Where exactly do we play here, let's say for commercial three-wheeler loan? Would we only be financing larger, higher CIBIL score fleets, or would we also finance customers that other NBFCs turn away and would therefore come to us for financing?
We have a dominant share being a captive. Given that banks and non-banks continue to pull back and push forward, and we have seen that consistently over the last 13 years, especially in this part of our business, and a captive orientation, we have a dominant share of the sales that happen from this point of sale. Whether it is two-wheeler or it is three-wheeler or to some extent in commercial vehicle. What you see here is a consolidated picture, and that's really how we've represented it. Dominant share at the point of sale. We are the steady play. We play across all three, two-wheeler, three-wheeler and commercial vehicle. Does that?
Got it. What proportion of our book would be each of these products, and what would our average sort of [audio distortion] be for this product?
Two-wheeler would be around 5.5% and 3.5% would be three-wheeler. Commercial vehicle will be very, very small, + 20 basis points. It's very small. Don't do much at all.
Got it. What would our average yields be for this book?
Average yields are quite high. They are in line with what the industry numbers would be, anywhere between 23% and 24%.
Great. Thank you so much.
Thank you.
Thank you. The next question is from the line of Bhavin Shah from Sameeksha Capital. Please go ahead.
Yes. Thanks. I have a couple of questions. You mentioned you look to add another seven, 8 million customers every year. Could you give us some sense of what is the overall available market for you in terms of customers and can you benchmark it based on per capita income or exactly how? Second question I have is basically on Karvy, that it is pretty obvious to an average investor that money that Karvy had lent from you, I mean, the security was not there. I think it's pretty obvious. Given such a fantastic lending track record that you have, how did you make such a mistake? Thanks.
First question was on?
On the competition.
Yeah. Look, working with a retailer ecosystem, because as I said earlier, 30% of the sales is in lending. That means 70% of the sales are in cash. Working with retailer ecosystem over last few years, working with public data ecosystem, what is available, we've been aggregating data on customers, on prospects in India to reduce friction for them and to help them become our customers by pre-approving them. At this point in time, we are willing to lend to, in our assessment, between 55 million-60 million people we are willing to give money to. Over and above the 40 million customers that are given money to. Of them this year, and it's a metric that we track, this year, we will originate 2 million of these. Last year, from this base came 1.3 million. This year we get between 2 million and 2.1 million.
They are lower risk. They are happier because the friction is lesser. That has been a strategy for the last four, five years because it takes tremendous amount of effort to originate, organize, and stimulate this large a base. Headroom remains quite long. That's first part. Karvy, industry on broker financing is around INR 22,000 crore. If I am little measured in my response, please bear with me given that the matter is sub judice at this point in time. The only point I would make, every loan loss represents an opportunity to learn. The learning is following, if you ask me. Justification is INR 22,000 crore industry, the entire industry runs this way. Regulator allowed it. Mistake or learning for us, regulators started to say in June, debit credit is not allowed. Right thing to do. Let me make a point.
A practice which was going on for the last 20 years, given that these broking companies were dealing with hundreds of thousands of customers, should have been given more time. To be fair to regulators, they first said 30th June, then they said 31st August, then they said 30th September, then they said 31st October. In hindsight, on 31st October, we should have either squared off all our positions or invoked the shares. That's the single point learning if you ask me, because we are very focused in this business on operational risk, very focused on credit risk. We missed, if I may say so, at one level, the regulatory risk dimension. We thought we have no regulatory risk. That's the learning. We have, as you're aware, taken a placeholder, INR 85 crore provision.
We are working with the company, and we will draw a line under this, as said as part of our investor deck by March 2020 either way.
Thank you, sir. I think my question is slightly different. Bajaj Finance is at the forefront of a lot of things and areas where regulator probably hasn't even understood the business lines. This was a clear case of misrepresentation of client funds by Karvy. It was pretty obvious to anyone in this industry that Karvy doesn't have this kind of stock holding on their own book. I appreciate what you're saying. It seems like the issue here has been that the credit assessment was not correct.
As I said, and I'm not defending at all. That's why I said the learning to be taken is that regulatory risk we should have acted on. On the point on origination, as I said, the entire industry of INR 22,000 crore exposure to the banking system runs this way even today, so that I'm clear on my stance. The entire working capital exposure by various banks, even today run this way. As I said, I could talk through more, but just on this, I've been advised by our general counsel to be measured in my response, given that the matter is subjudice at this point in time.
Thank you, sir.
Thank you. Having said that, on a one-on-one basis, you would like to get in touch with us, we'll be happy to do a conversation with you.
Okay, thanks.
Thank you. The next question is from the line of Kuntal Shah from Oaklane Capital. Please go ahead.
Hey, good evening, Rajeev. Thanks for the opportunity. An excellent set of disclosure. I think nothing in the industry even comes close to it in terms of disclosure. My questions are as follows. On the PCR coverage, the same line of business, auto finance is seeing fluctuating PCR from 63%-55% range in last two years corridor. Can you explain that why? Secondly, what is the status on IL&FS and Tanglin? In Karvy's case, though the overnight regulatory requirement forced the conversion of secured lenders into unsecured and unsecured trade creditors into secured ones, you have access to SEBI. They were all regulated entities, what was regulator doing while this thing was happening is the question. Why this sudden change of stance is something perplexing. Thirdly, are payment banks allowed to issue credit cards?
If yes, do you see an opportunity where up to INR 100,000 you can issue credit cards and then seamlessly migrate the customer to EMI or wallet and be in that part of the business where currently, because of the silos, you are not allowed to do so?
One is AF, Kuntal. Third is payment bank. Second was?
IL&FS.
IL&FS and Tanglin.
What are you going to do about IL&FS, Tanglin and Karvy, all the three headline accounts which is giving rise to the worry. See, your disclosure standards are best. We don't have any complaints, Rajeev.
Yeah.
These are public names.
Yeah.
I'm just asking this as a question. I believe in IL&FS and Tanglin's case, it's over-collateralized, so you expect money to come through. It's just the mismatch of selling or disposals versus that.
Yeah.
In Karvy's case, this is a legal question specifically. They were regulated by exchanges. They were regulated by SEBI. What was happening in that and how suddenly the secured lenders became unsecured and unsecured investors become secure.
Yeah. Kuntal, just on AF and Sandeep just helped me. Fundamentally, in the AF business, when we repossess an asset, in general over the last 30 years, our experience is we realize between 35% to 40%.
40% to 45%
40%-45% of the value of the asset. Okay? Irrespective actually of whether it's an entry level bike or a premium bike. The numbers hover between, it's a function of what is the repossessed stock and what is the sale. That's why the numbers remain a little volatile in a corridor of 55%-60%. Second, payments bank, Kuntal, I'll take the second one and then I'll come to the second one, are not allowed to lend. The payments bank are virtually only debit banks. There's no credit. It's not allowed at all. Logically, I don't know then how did somebody take a payment bank and believe that they can build a business, but that's for those who opted to apply for a payment bank and become one. The second question, IL&FS, we are working closely with the management.
The RFP was issued to sell the buildings. We have received eight to 10 bids. We've given time till early February to open the bids, the process is on. We have an INR 60 crore provision on the account. We have INR 30 crores lying in the escrow as well. The account is significantly over-collateralized, even at the rate the bids are received. We should be money. Having said that, in the last 10 days, if you're tracking what on IL&FS. We filed a affidavit against the NCLT decision. Management is vital. There is some legal noise there. We're tracking that closely, is all I would say. Tanglin, from whatever we hear from in public domain and working with the company, we do believe strongly that the account where we are could get resolved in the next 30 days.
We have taken a place cut provision in the current quarter, just as a matter of prudence rather than anything else. Karvy, we will draw a line, I've said in the investor deck. We've taken INR 85 crore exposure. We will draw it. Either way, the company has demonstrated its intent to pay us back and has given us a security. The value of the security is the function of who the buyer is. They're looking to sell, we understand, the company. Either way, we think next 60 days are critical on the account. We would have drawn a line under it by March 31st. Does that answer the three questions?
Yeah. Thank you, Rajeev, and keep up this good disclosure, Rajeev. It's the best way to earn the investors' trust, and I think nothing else comes close.
Thank you.
None of your competitors. Thanks.
Thank you.
Thank you. The next question is from the line of Pranav Gupta from Birla Sun Life Insurance. Please go ahead.
Good evening, Kuntal. Congratulations on a good set of numbers. Most of my questions have been answered. Just one question if you could answer. We continuously keep on hearing and seeing some of the large competitors that get very aggressive in the consumer B2C space. If you could highlight how the competitive intensity has been and how we are seeing the space over the next nine to 12 months, that would be very helpful.
I don't want to be arrogant. I would summarize it as more noise than substance.
Okay. If you could just give some qualitative comments on how you see this going forward, that would be really helpful.
Fundamentally, if you can deliver to the customer frictionless purchase experience at the point of sale, is one part of the puzzle. Second is, can you manage a 25 million customers being banked in a given month, is the second part of the puzzle from a risk standpoint. Can you collect from 10% to bounce in a given month at INR 100 cost, is the third part of the puzzle. If you can get all the three puzzles together, you can deliver the business. It's a damn hard thing. I'm not saying it because we do this. One has to make very tough choices because at the end of the day, if the purpose of an enterprise is to generate profitability, this business is a multi-year game. Quite hard to crack. That is true for many of the financial services business.
If I take an example on the other hand, where we've taken as long to start to generate profitability and create scale is a whole loan part of the business. To me, three years ago, it seemed the easy business. I today appreciate and respect how hard it is. That doesn't mean we become a large competitor, but we will be at it and we've finally cracked it, and we are scaling the business. What I am to the whole loan business, I look at it as lots of competitors are to us in the point of sale business. Nothing wrong or right about it. It's just a matter of time, maturity, and commitment to building the business. Does that philosophical sound or sound.
No, that answers my question, sir. Thank you so much.
Thank you. The next question is from the line of Nirmal Bari from Sameeksha Capital. Please go ahead.
Thank you, sir, for taking my questions. My first question is on the provisions. If you look at the decks that you had provided, and we look at the 30+ day delinquency figure, that has increased across the buckets except for digital products.
Self PL and home loans.
Yeah.
Yeah. The second point is correct.
Do we expect the provisions to increase further because the probability of default that we would assign as the loan goes over + 30 days to + 60 days would increase in the coming quarter?
Are we seeing stability in flows? Yes. Have we seen a reduction in flows? No. Okay? Have they stabilized in the last two months? Yes. That's one part. Credit costs from here should not increase, is what our view is. We've probably most likely peaked and not taking into account the one-offs. Okay? This is adjusted for one-offs on a flow basis, let's say out of INR 145,000 crore, INR 140,000 crore balance sheet. On a flow basis, even these costs in my mind are elevated. They should not increase. Have they peaked? Have they peaked? Yes. Have we started to see improvement? No. I think one more quarter, we'll have greater clarity as to what is the horizon for next year. Whether we will remain at 180 basis points next year, or will we go back to 160 basis points next year?
I think one more quarter will most likely settle this in our heads. We will then provide that outlook to you as we come with fourth quarter data.
Okay, thanks. The second question was, would it be possible to give a breakup of the fees income that we are earning from, I think, between credit cards, our own loan products, and insurance, or something of that sort?
On a lighter vein, as I used to tell people, we give great performance to all portfolios. Now in a few days, I will start giving P&L of all portfolios. Nothing will be left. It's bilateral in nature. Both are public companies, and we have a good strategic, deep partnership with them.
Okay. Thank you, sir.
Thank you.
Thank you. The next question is from the line of Kunal Sharma from Perfect Research Value Funds. Please go ahead.
Good evening, sir.
Little louder. I'm not able to hear you.
Good evening, sir. I have a couple of questions. Listing them together.
Yeah.
Number one, is there any client stickiness we have? If the client getting a loan at a lower cost from another bank or NBFC, then we'll see. Next, what competition do you see from bank with lower cost of funds, either stepping up on digital and IT spending or tying up with fintech players to reach the urban consumers? The next, with banks like Kotak sounding alarm bells on economic condition and slowing down loan book growth to 7%, we continue to grow robustly. Can you please share a thought process behind it? Thank you.
I'll just repeat the question. One is on what is the growth outlook and what is the view. What is the growth view? You had a question on what is the client stickiness. That is the first question.
Yes.
What is the-
Banks tying up with the fintech.
Yeah. What is the banks-?
Tying up with fintech
tying up with fintech, what is the view?
Yes.
See, client stickiness, we have 20 million store card customers. In general, the process is really frictionless. Client will belong to those who reduce friction for them. One. Second is price. Lower the price of the product or lower the involvement of the buying decision and lower the friction. He will go after those who are reducing friction. Okay? Out of 20 million, we will do 24 million loans. 15 million will end up doing a transaction with us. We will end up doing in this year, 26, 27 million loans. Out of 27 million, 68% of the loans are existing customers. 18 million loans will come from this 20 million franchise. In a way, now it's not one-on-one relationship, but in general, it should tell you the heft of the franchise and the stickiness of the franchise. That 25 million loan [Foreign language]. That's one part.
I can give you data on how our NPS scores are high and so on and so forth. I keep telling people that the value of the true NPS is whether the customer is willing to do business with you. If he's willing to do business with you, that's the best NPS that you can get. On third question on growth view, look, we remain a very small part of the overall total credit in India. Total credit in India, we will be 140 basis points of total credit in India ending March 2020. Economy can go to 4.5, go to 5.5, as long as the business that I'm pushing through the door remains distinctly above my product profitability models. We are here for business, is really what our view is as a company.
Relatively low size, there is 98.6% of the banking system available or total credit available for us to grow. That's one part. Second, as long as the businesses are significantly above our product profitability models by each line of business, we remain growth oriented. I must make a third order point and given the questions on credit costs going up. Let's look at the scenario of first nine months. The balance sheet growth started from 41%, went to 38%, has come down to 35%. Okay? That means through the door, momentum has slowed. During this period, credit costs have gone up, overall ROA, we've continued to deliver on. The business model is getting stress tested for a slowing growth and higher credit costs, we're still delivering higher or better, or same return ratios.
I think that should give reasonable amount of confidence to investors that we can orchestrate between NIMs, OpEx, and credit costs and ensure end volume growth to deliver a balanced business. I think it's an extremely important point that I thought I should make. On the second point, banks tying up with fintech. Fintech [Non-English content ]. We've stopped. I keep getting the same SMSs that are floating around. What did internet companies deliver? Losses higher than turnover, I think it's a good business to be in. One day I would like to run a business like that. We have no view on that. Does that answer your question?
Yeah. Okay. Thank you.
Thank you. The next question is from the line of Ashish Sharma from ENAM Asset Management. Please go ahead.
Yeah. Hi. Thanks for the opportunity. First of all, congratulations on the good set of numbers, Rajeev. Two questions. One on the fee income you partly answered. We don't need the breakup, but is the traction in all the four segments, or is distribution income being the key driver? Just one comment on that. Second would be on Bajaj Housing Finance Limited. Just on the normalized ROA, Q3 was very strong from an ROA perspective. Even if you could guide based on the nine months number, can we sustain these kind of ROAs for BHFL? That would be the two questions. Sir.
Atul is here, but I'll just say that we're committed to deliver between 13.5% and 15% ROE on a fully scaled business as a company. That's all it'll do. I've said that in the past, Atul and his team are fully aligned to the fact that we're building a sum of parts model that the mortgage business role is to deliver lower risk, lower ROE, but a tremendous amount of solidity, stability, and steadiness to the overall business model. That means coming in at between 13.5% and 15%, we should be able to deliver that in the next fiscal as well. That's the second part. First part, fee income. Part of it, Ashish, if you look through the numbers closely, has a degree of linearity.
The slowing environment meant slowing balance sheet growth, meant fee and other income on a relative basis was slower. As the overall demand comes back, you will see on a percentage basis, we are pretty steady. On a focus basis, pretty steady. Volume linearity has a role to play.
Just clarifying on the BHFL part, you mentioned 13%-15% ROE. From an ROE perspective, are we already on a normalized profit stability?
No, it's a young business. We'll have to give it time. A little bit.
Okay.
I think next full year will be the third year of the business. We should see greater normalization on the business in next year.
Perfect. Thank you. That will be all, Rajeev. All the best for the next quarter. Thank you.
Thank you very much. We'll take that as the last question. I would now like to hand the conference back to Mr. Karan Singh for closing comments.
On behalf of JM Financial, I would like to thank Mr. Rajeev Jain and the senior management team of Bajaj Finance and all the participants for joining us on the call today. Thank you and goodbye.
Thank you, all. Thank you.
Thank you very much. On behalf of JM Financial, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.