Hello. Good evening, everyone, and welcome to the Analysts Meet for Bank of Baroda's results for the quarter ended June 30, 2024. Thank you all for joining us. We have with us today our MD and CEO, Mr. Debadatta Chand, and he's joined by the bank's executive directors and our CFO. We have a brief presentation that we will take you through, followed by opening remarks by Chand Sir, and we'll then move to the Q&A session. Chand Sir, over to you for a brief introduction, and then we'll move to the PPT.
Sure. Thank you, Phiroza. And good evening to all of you who have joined on call. So let me introduce the management team. I'm D. Chand, MD and CEO of the bank. I've been interacting with you for quite a while now. So with us, Mr. Lalit Tyagi, he's the Executive Director. He looks after corporate credit, international banking, and treasury, apart from a couple of other functions. Then we have with us Mr. Sanjay Mudaliar. He looks after the IT part of it and the retail asset and retail liability and a couple of other platform functions. Then we have with us Mr. Lal Singh. He's the Executive Director looking after the HR, the agri MSME, and also, more importantly, the recovery part of it. And with us also, the new COO, Mr. Manoj Chayani. This is his first call as far as all of you are concerned.
With this introduction, over to you, Chandji, then you can, I will come back with the comments after the presentation.
Thank you, sir. Good evening, everyone. It, in fact, gives me immense pleasure in welcoming you to this analyst call of Bank of Baroda. Let me take you through the highlights of the bank's performance as of 30 June 2024. Coming to the asset side, if you can see that the asset has been grown, your advances portfolio has been grown by 8.1%, with domestic advances grown by 8.5%. This growth is a little bit on a muted side as against our guidance. However, as you all know, the first quarter is practically a sluggish quarter, and there is also a consistent focus on the bank to increase the RAM portfolio. Further, there are certain low-yielding assets consistently we have cited. So that's the reason why the growth is 8.1%. Segment-wise, if we say, we are going strong with the retail growth of 21%.
Agriculture is around 9.1%, MSME 9.8%, corporate is at 2.5%. In the retail portfolio itself, the secured portion, that is mortgage as well as home loan, we have grown 11% and 14.7%. Education, we have grown by 18.8%, auto loan by 25%. And as we said earlier also, we have moderated our growth as far as the personal loan is concerned, and personal loan growth is 39% as of June 2024. Next slide, please. Coming to the liability side, as you all know, the liability is a challenge for all the banking industries. And besides that, there are certain external factors also. Further, there is a conscious effort on the part of the bank to reduce the dependency on the bulk deposit, as a result of which, despite all those things, the deposit has grown by 8.9%.
Here, the point to be noted is that the deposit has been grown by 8.9%, and our advances are grown by 8.1%, which is lesser than the deposit growth. However, if we look at our CASA, our CASA has grown by 6%, which is better than the peer banks also. We are continuing our CASA ratio more than 40%, and it is 40.62% as of 30 June. If I look at our credit deposit CD ratio, it is 82%, which is being maintained at that level. Next slide, please. Coming to the profitability metrics, the operating profit has grown by 8.5% to INR 7,161. However, here, I would like to mention that this operating profit has been down only because there is a dip in the treasury income due to the newer valuation norms given by the RBI.
Coming to the profit after tax, there is a growth of around 9.5%, and the profit after tax has improved from INR 4,070 crores to INR 4,450 crores. One of the strongest profitability metrics is return on assets. For the last eight quarters, we are posting return on assets more than 1%. As of June, return on assets is 1.13%, which is two basis points over the Q1 FY 2024. Return on equity is almost around 18%. That is 17.45% as of June 2024. Coming to some of the key ratios, yield on advances has improved from 8.40% to 8.55%, a 15 basis points higher. We are having a tight lid as far as the cost of deposit is concerned. If you can see the cost of deposit sequentially, we could manage to maintain at the same level of 5.06%.
Coming to the net interest margin, our margin is posted at a very comfortable 3.18. If I compare that with the Q4, it is a dip from 3.27 to 3.18. However, if I normalize last quarter NIM with the higher year-end recoveries, it becomes 3.14. As compared to that, we have posted a NIM of 4 basis points high at 3.18. We are having a stronger and robust asset quality, and our gross NPA has improved by 63 basis points from 3.51 to 2.88. Similarly, as against our guidance of net NPA of less than 1%, we continue to be at 0.69, improved from 0.78. Provision coverage ratio is comfortable at 93.32%. Slippage ratio, our guidance was 1 to 1.25, and we are at 1.05, maintained at the same level as of Q1 2024.
The robustness of our quality of the asset is depicted in our credit cost, which has improved from 0.70% to 0.47%. Next slide, please. As far as our portfolio is concerned, we are not facing any incipient sickness in our portfolio, with SMA book is only 0.18% of our total standard asset and collection efficiency. As compared to March, it has improved to 98%. 99%, sorry. Similarly, the bank is enjoying a robust capital position with CET1 improving from 12.54 to 13.02, and overall CRAR has been improved from 16.31 to 16.82. The bank is also having a healthy LCR of around 138%. That comes to the end of my presentation. Over to you, Chand Sir.
Sure. Thank you, Chayani. Let me make some qualitative comments on the financial of the current quarter, Q1. So in terms of the guidance with regard to the loan growth and the deposit growth, slightly it is below the guidance. The outcome is more of a strategic outcome that we wanted and that the CFO highlighted with regard to our liability management. So it is the Q1 of the financial year that allowed us to manage the liability in a manner that protects the margin, more importantly, and improves the bank's capital position. So if you look at this quarter, I mean, if you have the number, the bulk deposit outstanding as on March 2024 was INR 224,000 crore. The bulk deposit outstanding as on June 2024 end is INR 200,000 crore. So there is a dip of INR 24,000 crore.
Out of that, there was a reclassification benefit available as per the RBI guidelines between INR 2-3 crore. So there's something around INR 16,000 crore. The balance is the dip again in the bulk deposit outstanding. And earlier also, since December, I have been outlining this point that as a prudent profile, we want to reduce dependency on the bulk deposit. At that time also, we almost reduced bulk by INR 20-25,000 crore. I just also give another data point. If you compare the FY 2023 bulk as a percentage of total deposit over FY 2022, the increase was almost 600 basis points. And if you look at the bulk as a percentage of bulk, including CD as a percentage of total deposit as on June vis-à-vis March 2023, it is almost the same level, almost only 50 basis points increase. So clearly, we are focusing CASA more.
Precisely, the bulk has two components. It impacts the margin because that's obviously a high-cost deposit. At the same time, the durability of liquidity also wants to improve the quality of liquidity in the bank. So this worked well for the bank for this quarter. The LCR is almost at 138% now. The margin, we had the full year margin of 3.18, and we could maintain the Q1 also the same margin at 3.18, although our guidance has been at 3.15 ± 5 basis points, which we continue to hold on this. Secondly, on the profitability, as you know, we have a 9.5% growth vis-à-vis the Q1 of last year, and the profit metrics are working well. Another data point which would be important for you to also understand that on the cost of deposit, it's flat vis-à-vis the March 2024.
On the June 2024, cost of deposit is the same like March 2024, whereas March over December was almost an increase of 11 basis points. So we wanted to manage liability so that on the cost side, we have complete control. And so as to the margin is protected. And as I said, in terms of the bank's objective in terms of building block, we look at asset quality as the first piece, the profitability as the second, and the top line is the third. The growth is the third. So in that way, this has worked well for this quarter. This profit has been almost now this is the sixth quarter we are posting in excess of INR 4,000 crore net profit. On the ROA is the eighth quarter we are posting ROA in excess of one.
The financial metrics and all the profitability metrics are working well for the bank. At the same time, looking for the next quarter and going forward, because this quarter is a strategic outcome of what we wanted to happen, but the bank has a strong pipeline cases, we again hold the same guidance of deposit growth 10%-12% and advance growth at 12%-14%. So I think that's something we wanted to reiterate the bank's growth metrics at the same time, the profitability metrics. In terms of asset quality, it's fairly stable now. The GNPA sequentially has improved by 4 basis points, although net NPA has gone up by 1 basis point. In terms of the guidances that we had given to the market earlier, in terms of the slippage ratio between 1-1.25, the current quarter has been 1.05.
The credit cost, which is again, earlier we said it would be less than 1, and now we are improving that to less than 0.75. The credit cost has gone below 0.5. I mean, earlier also, multiple time, people asked about the recovery target. We are targeting INR 10,000 crore recovery this financial year. In terms of GNPA and net NPA, we are not giving guidance, but the trending is clearly towards because we have already achieved sub-3 level of GNPA, the trending would be towards 2.5. As I said, margin is almost like there is something I think very positive as far as this quarter is concerned. A strong profitability with containing margin is the strong point for this quarter. The bank would continue to have in this journey.
But clearly, outlining the factor like we need to do a trade-off in terms of the margin requirement and also the growth at the same time. With this, over to you, Phiroza, for the question answer.
Thank you, sir. We will now start the question and answer session. I request all the participants, whoever want to ask questions, to raise their hands. I request all the participants to restrict to two questions at a time so that all your colleagues can get a chance to ask their questions. If you have more questions, you can always come back in the queue. With that, I start with Rikin Shah. Please unmute yourself and ask the question.
Hi. Thank you for the opportunity, sir. So I had a bunch of questions, but probably I'll restrict myself to two in the beginning, and I'll come back in the queue. So firstly, you did mention that the slower growth in this quarter was a function of the strategic initiatives. The corporate loans decreased 6%. So in terms of you articulating loan growth guidance of 12%-14%, would you be able to share how the mix would be moving in terms of the growth? And just to clarify on this, if your deposit is 10%-12% and loan growth is 12%-14%, are we saying that the LDR can move up even slightly higher than 80%, and would the regulator be broadly okay? So that's the first question. The second one is on the yields on global investments.
It has increased almost 135 basis points sequentially to 5.37%. Was it because of the new investment norms only? If you could elaborate what drove this increase sequentially? Those would be my two questions. I have a few questions on asset quality, but perhaps I'll have to come back.
Thank you, Rikin. Actually, looking at the guidance and the current, if you look at the corporate growth, as you said, when I reduced the dependency on the bulk at the same time, almost INR 25,000 crore of assets on the fine price asset, obviously high quality. But then we allowed that to mature. So the idea is clearly, as you understand, that the liability management leading to the margin protection, actually, that's the strategy. So if you exclude the institution piece out of the corporate book, the core corporate has grown by 12%. So I mean, the corporate growth metrics are intact. The pipeline cases are strong. So I think what we intend to do in September quarter is to grow almost at the level of 10%-12%. And retail has been growing faster, 20% for many quarters now.
Slightly, we'll keep focusing on the Agri and MSME, which is slightly below 10%, need to go above 10%. So broadly, in case we do that, I think we'll be in a position to achieve that 12%-14% growth we are talking on the advances side. We normally do not disclose the pipeline, but as of today, I have a very strong pipeline cases for us to give a growth of 10%-12% on the corporate book. And the moment we get into that market of fine price, anytime the book can increase, right? So that's something already inherently there with the bank. The second aspect we talked about deposit growth, yes, the deposit has been while slightly reducing the dependency. As I said, the bulk has gone down. The focus was on the CASA.
If you look at my CASA growth, 6%, even better than the industry peers, right? We'll be working very strongly on that. Recently, we come out with a scheme on the retail term deposit. So the focus clearly would be on the retail side more. And I think, I mean, bulk as a percentage substantially we have content, but still there is a moment why there is a lower dependency in the bulk because of the elevated cost. And the moment there is a bit of moderation happening, we'll again get into that market slightly so as to protect the margin at the same time. So I think fairly, when I look at the current flow of both on deposit and advances, I think we'll be in a position to achieve this guidance of 10%-12% for the deposit side and 12%-14% on the advances side.
On the LDR front, you are right, actually, why we wanted slightly a lower growth. The bank had a peak LDR of almost 84%, right? That was something actually, in terms of peers, we had the highest LDR. As of today, with all this, we are at an LDR of 82%. We intend to operate between a band of 80-82%, and slightly the bias would be towards 80%. In that way, we are comfortable maintaining that kind of because we do have a strong borrowing pipeline also. That is also not that we raised last year almost INR 20,000-25,000 crore through infra and the capital bond. We have overseas channel open to us. Actually, we are one bank having a huge international presence.
So I think these are all achievable in terms of managing the growth guidance both on deposit advances at the same time operating in the LDR of around 80%-82%. Your second question was, I believe that was on, can you just repeat that also?
Yeah. So it was on yield on global investments, which is there in your PPT. So that has increased almost 135 QOQ to 5.4%. So is it only led by the new investment norms or something more to read into it?
Global does include the domestic, including international, right?
Only the international, yeah. Sorry.
International is more of a pricing. Actually, some of the time we'll not be surprised. Some of the return you get out of the international investment is as good as a domestic because of the scenario over in overseas market. But Mr. Tyagi, would you like to comment on this?
So in fact, the international investment yield has largely impacted because of the yield movement there. And probably it is in line with the expectations as we were holding those investments. And if you analyze our investment portfolio in overseas, it has largely remained the same or flat, barring some churning within that. In domestic also, you rightly picked up, slightly it has been aided by the new investment valuation norms or classification norms, I would say, with the RBI. So some margins we have got there also.
Got it, sir. Thank you. I'll come back in the questions for the rest of my questions.
The next question is from Ashok Ajmera. Please unmute yourself and ask the question, sir.
Good evening, sir.
Good evening.
Yes, Jan sir. ED and, of course, Mr. Chayani. Sir, I would, in my opening observation, say, sir, we are a little bit disappointed, sir, in the overall profitability, you know, in the overall results of the bank. Now, we need to understand the reasons. So like you know, this other income has gone down substantially from INR 4,191 crore to INR 2,487 crore. Mr. Chayani said that basically it is because of the RBI change in the framework of the investment valuation, but it's not so. I mean, almost INR 1,700 crore has gone from the other income, in which that part is very small. So on every front in the other income, including other income of INR 313 crore, if you look at every head, you know, like recovery from the return of account. Now, this we used to consider is going to be robust.
You got a very big large book of those accounts from where the recovery return of accounts. It has gone down to INR 554 crores as compared to INR 1,202 crores. So on every front in the other income, which has, I think, made a major dent on the overall profitability. The other is, we are not very clear that because you are probably the only bank or whatever I have seen, which says in the note number five that the impact of the revised framework on the profit and loss account is not as certain as the same are not comparable. But others have given whatever is the impact. So with the huge downside, like operating profit margins have also gone down 13.88% as compared to 14.47%. And in spite of the provisions also being lower, our overall profit has gone down. Even the tax is also lower.
So these are the two major factors, I believe. One is the norms changing for the investment valuation, the profitability on AFS book. But you have a good trading profit, which has come in the other income. So net net, where have we lost? As against the profit increase, which we were expecting at least about INR 500-700 crore more than the last quarter, we are rather losing. We have lost here. So this is my first question, major question on the profitability.
I'll take your second question later because this is a lot of coverage on the first question. Can I reply to this, Ajmera sir?
Yes, sir. So that I can come back with other one or two observations.
Yeah, fair.
Because you actually switch me off otherwise. Yeah.
You actually, it is not where you have lost. Actually, the issue is where you have gained. Even if there is a lower other income and non-interest income, how the profit has been so strong? And that is the point, actually. Let me again clarify on a couple of things. Like on the non-interest income, which is considering fee income and treasury income for the matter, right? First, let me come to the treasury income. On the treasury income, we are seeing a change of almost like INR 850 crore. Why? Because the trading profit, which was almost like INR 400 crore in the Q1 of last year, has gone down to INR 164 crore, precisely for the accounting norms. I'll come to that.
The second aspect is that there was a write-back of depreciation to the extent of INR 625 crore, which is an additional depreciation to the extent of some INR 76 crore. Why this change? That is what's important here. As for the new valuation, which came in, although the shifting of security was not allowed, but there was a, I mean, you had to reclassify the entire book, right? If you look at the reclassification, vis-à-vis other banks and us, actually, the trading book, which was earlier the HFT, which is an FVTPL, we have taken a lower book there. And the in-money position of the AFS entirely, we took it to the normal AFS, right? If you compare me, and that's why the trading profit on the FVTPL, which was purely a trading position, has been lower as compared to maybe many of the other banks.
At the same time, if you look at the reserve that we have created in the CET1, because of this stance of putting income in the AFS, that is in excess of INR 3,200 crore, that has contributed to the CRAR on the CET1 to the extent of 30 basis points. So clearly, the family silver, Ajmera sir, we kept it with the book, not otherwise, leading to a position wherein I have strengthened the structural balance sheet of the book bank, rather than again a short-term objective of booking profit. This is point one with regard to the treasury. If we net it off both sides, we are better off as compared to many others. That is point one. The second is something on the fee-based income. Yes, you are right. There actually, that's a core area that we earlier also articulated we need to focus.
Slight growth has been slightly lower on two counts. The corporate book has gone, I mean, the growth is only 2.6%. A lot of processing fee linked with the first sanction. And we deliberately wanted this, because of the liability management, this book has to have a lower growth. So the processing fee has gone down. At the same time, on the wealth side of the business, actually, on the wealth distribution, we implemented many controls mechanism therein. And the wealth income has also seen a significant dip, almost like to the extent of 30%, leading to a fee-based income. So the only point that I can assure you that the management or we be concentrating on the fee-based income this quarter clearly, that's something we wanted to perform better that we didn't do.
The treasury income is clearly a strategic output wherein the strengthening of balance sheet was a more important factor as compared to booking trading profit because that doesn't serve me the objective as I have a high, what you can say, net profit on the matter. Recovery out of return of account, actually, last quarter was a one-off. My normalized round rate is almost like INR 700 crore-INR 750 crore. So in line of that, if you look at first, last eight quarters, the trend has been the same. I mean, the normalized around INR 750-INR 700 crore that we have done this quarter. So in spite of all this. But it is INR 550 crore.
It is higher because I'll come to that. The provision is at lower. Actually, what has happened, the provision last quarter, this quarter out of a 100% provided account, there was a government guarantee component. And we got almost INR 300 crore the guarantee money out of it. So the provision has to be reversed. That can't be comparable because the provision has to be released there. So leading to a lower provision, it looks like. But the lower provision is because of a higher, I mean, better credit cost, better asset quality, not otherwise, right? So in that way, I think the bank is on a very strong fundamental part of it. There's not one time you have a YoY increase in net profit to the extent of 9.5%, right? So we are last six quarters posting more than INR 4,000 crore of net profit.
The profitability matrix is structural, sustainable, and that is what possibly can answer to your question on that. Can you go to the second one?
Yeah.
No, sir. On this, so does it mean that if it is one time, in the coming quarter, we can expect the back that INR 8,100 crore operating plus some INR 3,400 crore more kind of a profitability? If all the events were one-off events, can we actually in the coming quarters, we'll come back to that 8,000+ operating profit, INR 8,200 crore plus operating profit?
No, no. Actually, the treasury income is not going to be because of the reclassification. It has gone to the reserve. Actually, you would have seen the CET1 of maybe comparing with banks, then look at the CET1 level for other banks and me. I have increased the CRAR. Normally, the June quarter CRAR is lower than the March. We have increased the CRAR by 54 basis points. The impact of the investment norms on the CRAR is 30 basis points. If you compare those CRAR, CET1, you can get a fair picture with regard to the investment strategy that we are talking about, right? So on the operating profit scale, normally we don't give a guidance on the operating profit, but clearly what is important to me on the net profit and the ROA guidance. So we continue to hold that ROA.
This time also it is 1.13, and we said last time that we need to maintain 1.10. So that is what actually I can guide you at this point of time.
The next question is from Kunal Shah. Please unmute yourself and ask the question.
Yeah, hi. So with respect to the slippages, when we look at it in terms of the SME slippage, it's still continuing to be slightly at the higher end over past a few quarters, running at almost like, say, 4% kind of run rate. So anything much to read into that? And when we look at it, even on the PL side, there has been the inch up in the GNPAs to almost like 2.5%. Maybe there is still some kind of a seasoning which is expected, but do we further see like the inch up in the GNPAs of the PL, and that's the reason we have moderated the growth?
No, no. Moderate growth is more of a strategic outcome in terms of the liability management and consultative holding on the margin side. Actually, that's clearly.
No, I was just talking in terms of PL, PL moderation, growth moderation. Yeah, not the overall. Yeah, not the overall. Yeah.
Actually, personal loan, the growth has been almost YoY 39%, and quarter to quarter is much lower. I think it is something around 3% sequential growth, which was almost 80% earlier and sequential 12%. So clearly, the moderation has happened. In terms of the quality of the book, as I said earlier, these are again existing customer and backed by the cash flow. Thirdly, in terms of any incipient part, we are not looking at the component of GNPA on the PL is almost fairly stable for last many quarters. So there is no per se any concern on the PL side. So Mr. Lal Singh, anything you want to supplement on this? Particularly more on the PL side that he's asking.
PL side, in fact, is not increased. In fact, our PL is mostly to the service class individuals. So there is no challenge on the slippage side in the PL.
In fact, Kunal, if I add the PL model itself, we changed around six months back, slightly capturing because a lot of what you can say guidances in the market in terms of the PL, the outcome, building stress in the book. But then now the model is also robust. It does cover many other parameters apart from the cash flow therein because a lot of market data now will take input at part of the model while deciding on the PL side. But clearly, we have moderated to a large extent and continue to, I think, because our base is very small as compared to many of the other banks, right, on the PL. So we'll continue to grow at a normalized rate of around 30%-35% year-over-year. That's what I can say.
Okay. And on MSME?
MSME, we want to focus. Actually, the budget has a lot of takeaway from the MSME. That is what actually, if you look at the overall corporate growth, I mean, overall advances growth at 8.1, the retail is growing good at more than 20% for many quarters. Corporate was an outcome that we decided at the beginning of the quarter because of the liability management that we talked about. Agree on MSME, we want to grow higher, obviously. MSME, after the budget, I think there is a huge scope to upsize that growth with a strong cash flow matrix. Actually, maybe knowing that we had a cash management product for the large corporate. Now we rolled out the cash management to the MSME customers. That means the cash flows are there with us.
We're able to now read into the cash flow more than as compared to what it was earlier. I think the MSME growth should normally get into that 14%-15% growth model. That is what will be the budget and.
On asset quality, more on asset quality side of MSME?
No, MSME actually, asset quality for last four quarters has fairly stabilized. And if you look at my asset quality on MSME, it is, I mean, one of the good levels as compared to many of the peers in the market. So we think a very stable outlook on the MSME for last many quarters. Yes, there are, if you talk about FY22 and FY23 to some part of 2024 also, there has been elevated NPA level in MSME because obviously COVID impacted them more than any other sector. But now these levels are fairly stabilized now and we're much comfortable to increase the growth at this point of time.
Okay. And last question on growth. So again, you highlighted in terms of the priority, it's going to be asset quality, then profitability, and then growth. But again, when we look at it, we have just reached the stabilization way in terms of getting the bulk deposits down. Now we'll try to grow retail as well. But doesn't that mean like maybe even in terms of reaching the guided levels of growth, there could be some challenge out there if we don't see the stabilization and the improvement in the liability profile? And if there is any further risk which can happen on the margins or on the ROA front?
No, on the ROA, we are fairly confident. As I said, that we wanted to have some outcome this quarter. And on the growth, we are fairly also consistent of the fact that we need to achieve those guidances on growth, both in terms of deposit and advances. So this quarter, we'll try to catch up whatever shortfall of the last quarter. We'll try to catch up in this quarter. So your point is on the consequent impact on the margin. That's a very fair take. Currently, if you look at the cost of deposit, it's flat for June over March. When I was in the month of March, I mean, in the month of April, looking at the March number, the March over December was almost 11 basis points. So now we have a fair control on the cost of deposit.
So at this point of time, I think we have the right bandwidth to increase a bit of bulk because the bulk level has been all-time low now after many years. So I think we can grow on that segment. And not necessarily high bulk, actually, this quarter we slightly didn't focus because of the elevated cost. It's not necessary for this quarter the same to continue, because there is a although the rate stance has been the same, but the liquidity profile in the market is improving. So rate can go down even if in case there is a without a rate change because of the liquidity availability in the market. So we are very certain of slightly managing asset liability in a manner where we give the growth as per the guidance, that means 10-12 and 12-14.
At the same time, fairly getting into our margin guidance. Margin guidance is 3.15 plus minus 5 basis points, right? So that is what something, and we'll work on the growth side definitely this quarter.
The next question is from Mahrukh Adajania. Please unmute yourself and ask the question.
Yeah, hi. So my first question was again on asset quality, that the slippage in retail has gone up substantially. The growth in retail slippage is much higher than growth in retail loans. So anything you would like to call out specifically? And even within that, your gold, non-agri gold has grown. It was always growing very well, but it's grown even much stronger. So what are your strengths vis-à-vis other banks in this portfolio? Is it some new geography that you explored? If you could explain, and then I have one follow-up question.
Okay. So Mahrukh, the first thing you talked about on the slippage side, right, on the retail. So if you look at the slippage, the slippage has been all-time low in corporate and many other books, and retail has gone up a bit. In the sense that sometimes there is a seasonal factor on a couple of cash flow happening on the retail side. If I look into the composition of this retail book, there is one group asset which has a dependency on the subsidy, and that has gone bad, actually. I hope that will pull back that as early as possible. So in terms of the incipient, because we also track the SMA position in the retail and also the collection efficiency, both look very strong and good at this point of time.
So that actually is not a concern or not significant at this point of time for me to raise anything with regard to the retail slippage. See, the guidance on the slippage risk you are giving 1-1.25, and we're at 1.05 in spite of what you said about the retail bit of more slippage. I think this is one of seasonal. Going forward, we'll be in a content much better in the retail book. The second, I just forgot it. What do you ask for?
Gold loans. Strong growth in gold.
Actually, if you look at the Gold Loan base of me and many of the peer banks, our base is low. That is point one. Secondly, I have two Gold Loans. One is a retail Gold Loan, and another is an agri Gold Loan. Am I right?
Retail, sir. Retail.
Yeah, I know that. So when I look at these two growth, we balance it out at different point of time depending upon the margin and the potential available. Yes, definitely, retail gold gives a slightly higher margin as compared to the agri gold. So we want to again slightly focus more on that. We have gold supply like branches that do have a separate wing for the gold loan. So that's working well now. But the base is very, very small as compared to many of the peer banks we would look on the retail gold side, right?
Got it, sir. Sir, and just one more question in terms of your credit cost, right? So your annualized credit cost is around 40 basis points. Now, if ECL were to be implemented effective FY2025, is this kind of a credit cost through the rest of the year good enough to meet the new norms? I mean, the draft norms? I know that it's not finalized, but you would already have a rough idea.
Yeah. So actually, there are two scenarios. This time, credit cost is 0.47, and anything below 0.5 is a good number. You have annualized at 0.4. So the fact which is important, we are giving is credit cost guidance of below 0.75, right? Earlier, it was 1. So why this guidance higher than the current level is precisely to factor in any ECL impact there. There are two factors on the ECL. ECL also talks about there is a loss of provision impact on the standard asset. If you look at my SMA book as on today on the asset quality, these are all fairly stable. And there is a standard provision also inbuilt to it. So I don't think there is a substantial impact because of the ECL. Anyway, the ECL impact used to be spread over in many years.
That is what the guidance in case it comes as a framework to be implemented. So fairly provision that the ECL impact, and I don't think any as on today, accounting that impact, we have to change any guidance in terms of ROA or anything for the matter.
Thank you, sir. Thank you.
Thank you.
The next question is from Jai Prakash Mundhra. Please unmute yourself and ask the question.
Yeah, hi. Good evening, sir. And thanks for so much clarification that you have already given. I have a question, sir, on LCR. So this quarter, we have seen LCR rising to 138. Last quarter, it was around 121 something. What has changed? I mean, if I look at your investment book, that has not changed materially. It's only 1% plus minus. Loan deposit both have declined more or less similar. What has changed that has driven so much uptake in the LCR? And also, a request, if you can also publish your LCR disclosure on a quarterly basis. What we see is only in the annual report, and four quarters comes together. But a request, if you can also publish on a quarterly basis.
See, on the LCR front, again, we had 122 in the last March, and we wanted to optimize that. So there are many components. I'll not come to the specific component therein. But typically, if you look at the new draft guidelines and the impact thereof, right, so then you have to make provision and account for it. In that way, the LCR is currently comfortable to take impact of draft guidelines in case it comes as a final guidelines. But a component increase, anything we can add, Mr. Tyagi, at this point of time?
So in fact, sir, we have brought down our borrowings against the excess SLR. That is one point. The second point is that in terms of raising the fresh liabilities, which has the lower runoffs, that has also one contributing factor to the increase in LCR quarter on quarter.
Yeah. Thank you.
The next question is from Pritesh Mashru. Please unmute yourself and ask the question.
Yeah, good evening, and thank you for the opportunity. I am a retail investor and have been tracking Bank of Baroda for quite some time, almost right as early as the merger happened, which was the first PSU merger. I have a couple of questions, not on the specific quarter numbers, but on a long range. That I understand that before general elections, all the PSU banks were asked to provide their five-year roadmap to the Prime Minister's office. And certainly, there are good plans. And I think the overall objective of the PM was to look at how the banks can support the economic growth, which they are forcing that all the pieces of economic growth are there in place and how the banks can play their role.
So taking some clues from there, my question is that how the bank is going to grow in terms of balance its size over, say, next 3-5 years. And related to that, how the quality of the assets, how the profitability of the bank overall is going to look like. And if you can throw some broad guidelines around it, that would be really helpful. That's the first question. And the second question is that, again, in terms of profitability parameters, while return on asset is great to know. And I believe Bank of Baroda is well capitalized for that matter in terms of capital adequacy. So not sure how the plans of fundraising would be there. But the point is how the return on equity is going to look like for this year and over, say, maybe 3-5 years from on an average going forward.
Okay. So your first point is very pertinent, actually, irrespective of the conversation between us and the government. Let me share that earlier we announced to the market also that is something earlier is already in the domain of public information, that we want to grow at a CAGR of almost 13.5% for next five years. And that's a rolling plan, actually, because earlier years also, you would have seen FY 2023, the growth has been almost 16%. This year, because of the liquidity issue, as a systemic liquidity issue, it's not one bank, but many of the banks have lowered the growth guidance because obviously, liquidity gives you the deposit and then you lend money. But the intention of the banks to grow at a CAGR of 13.5% for next five years.
On a normal math, if you compute, it almost comes to a doubling the number vis-à-vis the March 2024. So that is something I can outline at this point of time. We are mindful, like when you said that earlier also, I said on a business plan, the underwriting standard and the quality of asset is something paramount as far as the strategy is concerned. And actually, one way to look into the RWA density that we do have for multiple product lines, and that's fairly stable. And going to, I mean, these are improving also on a basis point scale. So I think when we plan out a growth, we will be mindful of the quality of asset. ROA, we have been giving guidance. And currently, actually, why the ROE has gone down vis-à-vis the last quarter?
Because, as I said, because of a strategic call on the investment side where we wanted in-money AFS, more on the AFS, which goes into reserve, the CET1 expanded almost by 54 basis points. The CRAR has also gone up by around 50 basis points. And normally, if you see a June quarter, because the profit is not added back to capital, you see a dip vis-à-vis the March. But in our case, it has gone up 54 basis points, which is not also, if you compare the Peer CRAR, that not happen. Because of the elevated capital level, because of one investment reserve getting into because of the accounting norms, the ROE has gone down to 16 or 16.5 or something. But on a guidance scale, normally we give a ROA, but at the same time, intend to maintain ROE in excess of 15, 16%.
I think that's a fair return on the equity that we can think of. There is no plan to raise capital because of a comfortable CRAR. But as a substitution of AT1 and Tier 2, we have announced to the market that roughly around INR 7,500 crore capital will be raising in this year. With a growth of roughly, let's say, on the advanced side, although we are giving 12%-14%, taking also a growth of 14% at the current level of CRAR, I think, and the kind of internal accrual we are generating out of the net profit, then I think equity raise may not be an immediate visibility at this point of time. So no plan as on today to raise equity.
I think I've answered your three, but clearly, the bank is focused for a five-year business plan, and internally, we're working on a lot of other levers of the metrics on the five-year business plan.
The last question from the evening is coming from Rakesh Kumar. Please unmute yourself and ask the question.
Yeah, hi. Thanks a lot, sir. So sir, firstly, the question was related to credit yield number, which has fallen quite sharply this quarter. So if you can tell us what is the reason for that?
Yeah, that is who? Yeah. Can I go ahead?
Yes, sir. Yes, sir.
Okay. So we said earlier, actually, this quarter being the first quarter of the year, we wanted to be realign on the growth numbers. The idea was to protect margin, actually. And if you look at the liability side, we announced that we reduced the dependency on the bulk deposit again in this quarter. We have announced that earlier also. We have reduced almost by INR 6,000-INR 7,000 crore after excluding the reclassification benefit of INR 2-INR 3 crore. So that's something important. So now we are at a fairly stable level. The idea of dependency on the bulk is more from the cost impact because the rates continue to be elevated in the market as on today. But going forward, I think there may be a bit of moderation possible, and then we can raise bulk to the extent we need to fund our advances for the matter.
The advances growth is typically linked with the deposit growth, right? One bank where the deposit growth this quarter has been higher than the advances growth. But at the advances segment, also, retail continues to be strong at more than 20%. The growth has been. MSME, agri almost slightly below 10%. That we think that will improve this quarter. And particularly after the budget, again, there is a possibility to increase MSME significantly. The asset quality on the MSME now is fairly stable for last four quarters, and that gives us confidence to increase the MSME. Corporate, again, as I said, the growth of 2.6%. If I exclude my institutional book, the growth has been more than 12% on the core corporate. So that pipeline continues to be strong.
As far as the institutional side, they are high-quality fine price book, which again, this quarter, we decided almost more than INR 25,000 crore. We wanted them to mature so that we get the benefit on the repricing at a later quarter. And that's something we have done it in this quarter. Going forward, we'll optimize on that also so that we get a decent growth of corporate in excess of 10%.
Sorry, sir, I was just referring to the credit yield number, sir. The credit yield, domestic credit yield has fallen by around 25 bps sequentially. So when did the credit yield number change? I couldn't understand, sir.
Credit? What do you come back? What is it? Credit?
Credit yield. Fall in the credit yield.
Oh, credit yield. Okay, okay. Sorry. So actually, if you look at the cost and the advances, these are both flat, right? Cost of deposit is flat June over March. Advances, there are two on the repo linked, which is almost 50% of the book. These are already priced in, actually. The repo rate has been flat for many quarters now. So the yield on that count is still flat. MCLR and other segment, there is a bit of churn happening in those markets also because the market is competitive. So in that way, the yield has taken slightly a cut. So Mr. Tyagi, can you address on this issue?
So precisely, it is related to our strategy of shedding the fine priced assets as when they came up for the repricing or at the time of maturity, we did not went further to onboard them. And to contain that or to protect the margins, precisely that was the reason that we thought of at one point of time, this is enough. And now we do not want to take beyond that. So you are right that to some extent, we accepted that. And beyond that, we said that's enough to take a call. And as MD said, that in core corporate, we saw the growth of nearly 11%-12%, which is at the price point where we wanted to onboard them.
To supplement what he said, absolutely, that is right. I just give you one data point. My average advance growth is higher than the terminal growth. So that can address the issue that we are talking about here.
Got it. So just one last question, the second question. Sir, the investment depreciation provision is like there is a so there is a INR 136 crore, which is credited to P&L. So that number and write back on the standard asset provision. So why these two things have happened and where this investment depreciation write back is coming from?
No, there is no write back on the latter; we have provided additional depreciation as compared to the write back that we did in Q1 of last financial year. But on the standard asset provision, I think there are a couple of milestones on those assets and those got fulfilled. So we have to write it back. Anything CFO want to add on this?
Sir, basically, Rakesh, you are referring to the RBI in case of the investment. There was a specific account in which we got revaluation again and a specific account, NPA account. That's the reason.
Why this has been NPA account? That's the reason.
NPA account, okay. The top above the line, it was a depreciation provision on the standard investment. On the NPA investment, there is a write back because of increase in market value.
Right, sir. In a specific account.
Yeah. Okay. Okay. Got it. Thank you. Thank you.
Okay, everyone, that's the last question for today. uncertain, if you can please give a vote of thanks. Thank you.
Yeah. Thank you all for sparing your valuable time and joining us for this analyst meet. The bank has posted a good quarter. If any further query or clarification which we could not take during this call, please feel free to contact me or my team. I am always available. Let us have close interaction with each other to get more clarification. Thank you and have a wonderful evening. Thank you very much. Thank you. Thank you all of you.
Thank you. Thank you, everyone.