Very good afternoon, ladies and gentlemen. On behalf of Team Bank of India, I extend a very warm welcome to all the esteemed analysts who have joined us today here in this auditorium, and also an extra special welcome to all those analysts who have joined virtually from different cities of India. We are pleased to announce the financial results of Bank of India for Q1 FY 2025. As you all can see, our top management has already taken the dais. Our respected Managing Director and CEO, Shri Rajnish Karnatak Ji, flanked by the Executive Directors, Shri M. Karthikeyan, Shri Subrat Kumar, and Shri Rajiv Mishra. Yes. Rajag opal, sir, our Executive Director, sir, is on the way, so he'll be soon joining us any moment. So we'll begin this analyst meet.
To start, I'll just brief. It'll be commenced with the address of our MD and CEO, sir, followed by question and answer session. It's my proud privilege to invite our MD and CEO, sir, Shri Rajnish Karnatak Ji, for his address. Thank you. The PR team has to confirm?
Okay. So we are audible, we are visible to them? Okay. So should I start? Yeah. So good afternoon, everyone. So at the present at the hall and also through VC. So good afternoon to all the members of the press, electronic media, and here presently, the analysts. Ladies and gentlemen, it is my pleasure to welcome you all for the today's interaction and share with you the financial results of the bank for Q1 for FY 25. On the Indian economy side, the Indian economy has shown remarkable resilience in FY 24 and achieved 8.2% GDP growth amidst geopolitical uncertainties. India has emerged as one of the only two major economies where GDP constant prices is 20% above the pre-pandemic level.
IMF has also revised the growth projections of India for FY 2024-25 at 7%, very close to RBI estimate of 7.2%. The economy is enjoying twin balance sheet advantage with sound and stable banking sector and strong corporate sector. In light of the prevailing optimism, the bank is focusing on inclusive and consistent growth to become the catalyst in the government's vision for Viksit Bharat 2047, and will formulate strategies to be the key drivers, such as financing MSME, agriculture, and expanding the net of education loans and PMAY, as outlined in the Union Budget 2024-25. The focus area will be strengthening liability franchise through augmentation of low-cost deposits and retail term deposits to fund credit growth. Maintenance of asset quality will be priority by improving the collection efficiency and NPA recovery, along with slippage containment.
Our endeavor will be enhancing customer experience by adopting more STP journeys of our various products with safety, security, and compliance. In these directions, we have taken a few initiatives, which I would like to highlight to you. Number one on the business side is the introduction of the innovative MSME product, namely the BOI Star MSME TUL .
Call is now being recorded.
THALA meaning that we are going into the hotel industry, tourism, and logistics sector under the MSME units. Number two is the co-lending tie-ups, which we are doing. Number three is the Bank of India, along with other 6 banks, have come together and invested in the CCIL IFSC Limited, for providing foreign currency settlement system called the FCSS in the GIFT City, Gujarat. The new STRO product, BOI Commercial Vehicle Loan, has also been launched during this quarter. On the IT and other initiatives that we have taken, 25 products have been made live on the e-platform under RAM segment, with 15 products more under development, which will be launched during the current financial year. In line with the PM Surya Ghar Muft Bijli Yojana, we have made solar rooftop products live on our e-platforms.
Under the MSME Mudra Loan, STP for seamless renewal cum enhancement up to INR 10 lakhs are made live. With this, customers can renew and enhance their loans through the website from anywhere and anytime. Portable UPI QR Sound Box has also been introduced to provide real-time audio confirmation for successful UPI payments. Bank has enabled its ATM acquiring switch for NFS UDIR, which is the Unified Dispute and Issue Resolution, to reduce the TAT in handling various disputes. E-commerce facility is made live through debit cards in all our three RRBs. CRMNext compliant management module and service management module have been made live for all our branches. UPI functionality has been integrated in the mobile app for instant payments, scan and pay, group payments, collect requests from peers for convenience and accessibility, secure transactions, and reducing the cash dependency.
We have published and shared the financial results of the bank for Q1 for FY 2024-25 on today in the afternoon. The main highlights are as under. On the business side, the global business has increased by 12%+ on a year-over-year basis from INR 1,214,000 crore in June 2023 to 13.64 lakh crore in June 2024, with incremental growth of INR 149,000 crore. Global advances have increased by 15.82% YOY basis from INR 518,000 crore in June 2023 to INR 600,000 crore in June 2024, with incremental growth of nearly 82,000 crore.
Global deposit has also increased by 9.74%, from INR 696,000 crore in June 2023 to INR 764,000 crore in June 2024, with incremental growth of INR 67,000 crore. CASA has increased by 5.5% on a YOY basis from INR 260,000 crore in June 2023 to INR 274,000 crore in June 2024, with incremental growth of around INR 14,000 crore and a CASA ratio of around 42.68% for this June quarter. Domestic advances have increased by 17.29% on a YOY basis from INR 433,000 crore in June 2023 to INR 508,000 crore in June 2024, with an incremental growth of around INR 74,000 crore.
RAM advances have increased by 18.78% on a YOY basis to INR 284,000 crore in Q1 FY25. Retail advances have also increased by 20% and agriculture advances by 22%. Finally, the MSME have also grown by 13%+ during this quarter. As regards the profitability and asset quality is concerned, net profit in Q1 FY25 stands at INR 1,703 crore, witnessing a YOY growth of 19.80%. Global NIM has improved by 4 basis points to 3.07% from, in Q1 FY25, as against 3.03% in Q1 FY24. The domestic NIM improved by 6 basis points to 3.43% in Q1 FY25, against 3.37% in Q1 FY24.
Return on Assets stood at 0.70% in Q1 FY25. Net interest income has increased by 6% on a YOY basis, and stood at INR 6,275 crore in Q1 FY25, as against INR 5,915 crore in Q1 FY24. There has been improvement in asset quality, with reduction in both gross and net NPA. Gross NPA ratio stood at 4.62%, improved by 205 basis points on a YOY basis for Q1 FY25, and net NPA ratio at 0.99%, improved by 66 basis points on a YOY basis. For the first time, we have been able to reduce the net NPA to the below one percent number.
As far as our guidance is concerned, in line with the growth of the economy, the domestic credit will be going, growing at around 13%-14%, and domestic, deposit growth, we will be showing at around 11%-12%, which is projected for FY 25. We will be concentrating on acquisition of new customers consistently to improve our CASA ratio and retail term deposits for funding sustainable credit growth. Going forward, the emphasis will be on strengthening the bottom line by improving the asset quality through better underwriting standards, with increased digitization initiatives and minimizing the fresh slippages and recovery in NPA accounts shall continue to be the thrust area for FY 25. I would like to thank you for all of you for showing your faith and coming here today, and also for your continued support all through this time.
The floor is now open for the discussion and question and answer. Thank you so much.
Thank you very much, sir, for the good set of numbers in the first quarter of FY 25. In fact, some of the concerns which were there in the last quarter, like especially there was an increase in the provision, you know, INR 1,800 crore. Now it has come to the reasonable level which you had promised in the last quarter. Sir, our only concern is that so many new norms are being announced every day and some guideline paper by RBI. There are 2, 3 such things. Going forward, number one, what would be the impact on us, including even, even this online, deposit mobilization on that, the increase in the provisions or rather doubling the provisions, as well as there is a pressure on the deposit side. On every bank we are, we are seeing it.
So how do we answer, as a Bank of India, to address that problem, a mismatch in the credit 13%-14% and the deposit 8%-9%, from the capital adequacy point of view and from underwriting point of view, the demand which is there in the market. So what are your views on that going forward? Would you like to revise some of the, guidance or targets given in the last quarter or towards retail on the higher side? And, something on the asset quality also, that yes, we have come down now, net NPA below 1%. Gross was already below 5% even in the last quarter. Also, there also is a reduction. One point was there on the recovery, on the return of, from the return of account.
I think we had about INR 40,000 crore, if I remember correctly, in the last quarter it was said that total return of account figure. So what are the recovery targets from that in percentage terms or in absolute we can convert it? So this is just a few,
Sir, request you to kindly introduce yourself and a small briefing for all those who are coming up with their questions, that first you have to introduce yourself, your organization, and kindly restrict for one or maximum two questions, and we'll be definitely coming back to you for more if time permits. Kindly introduce yourself.
Thank you. I am Ashok Ajmera. I am the chairman of Ajcon Global Services Limited, and I have, I have been tracking the bank, especially public sector bank, for the last 25 years.
Thanks.
Thank you.
Thank you, Ajmera ji. Thank you so much. As regards the recent guidelines which have come in the recent past, one which is the latest is on the LCR guidelines, the draft circular of RBI, basically, which is effective from first January to first April 2025. However, for these guidelines, they have called for certain feedback and observations of the bank. We will be giving the feedback to Reserve Bank of India directly and also through the IBA also. The ballpark calculation that we have done on these numbers, and what the industry has also done, is that the LCR may come down by between 10-15 basis points with this kind of thing. And because the RBI guidelines also says about the digital banking impact also, which will have to be factored into these guidelines.
So 10%-15% is the number on the impact of the LCR. Due to that, definitely because of that, some pressure will be there on the margins, definitely because of the impact of the LCR. And we'll have to, like, keep more, SLR and other securities aside for maintaining those kinds of margins. So that would be the first impact. But these are all ballpark numbers. All banks are working on it. And once we submit our feedback and suggestion to RBI, definitely we are hopeful that RBI will come out with some more nuanced guidelines in the final circular, which will be effective from first April 2025.
As regards the DCCO circular, which was earlier circulated, in which the banks have already given the feedback to Reserve Bank, and we have also submitted our feedback to RBI through the IBA. We definitely feel that, again, there will be some nuanced guideline which will be coming after taking into account the feedback which has gone from the entire banking system, not only from the stakeholders like banks and financial institutions, but also from the, borrower side, the industry, people also on the- and also the infra, guys who are there in the system. So, there also, we have done some ballpark computation over there. On the CET1 side, the impact will be at around 10-15 basis point on the CET1, because overall the guideline is such that it will not impact the CRAR.
So CET1 impact will be around 10%-15%, and on the credit card side, it will be also at around 15 basis point. Not much of it will be there, only that much would be there on that. As far as we are concerned, it will be there only for the new accounts, the full impact which will come in the new accounts. Very little portion is there, which will be for the existing accounts, where most of the things have already been taken care in the existing accounts. As regards your third main point with respect to the resource issues, challenges in resources side is concerned, if you see our balance sheet also, we have grown our advances by around, on a YOY basis, around INR 80,000 crore, and deposits have grown by around INR 65,000 crore.
So there is a gap of around INR 15,000 crore between the deposits and the advances. So INR 15,000 crores, let me tell you very frankly, we have re-strategized ourself in the June quarter itself, and we have started raising deposits resources, I would say, through CDs. So CDs we have raised in the Q1 quarter, and also some borrowings we have done in the Q1 quarter. So this is how we have bridged this gap. And the borrowings have been done through our excess SLR, which is with us. That also we have done. Few of the borrowings also we have done through SIDBI and NABARD also. There also we have done as a strategy. So going forward, the strategy will be that we'll be trying to raise as much as CASA as possible and also retail term deposits.
Let me tell you one more thing is that as far as Bank of India is concerned, we have a very strong franchise. And if you see our presentation also, you will see, Ajmera ji, that only 14%, it is in fact 13.6% of our total domestic deposit is bulk deposit. Which means that nearly 86% of our deposit is either CASA or retail term deposit, which is helping us to maintain our cost of deposit and overall, cost, as far as the interest income and interest expenses are concerned. So that is some part which is there, and we will be strategizing. Already we have raised INR 5,000 crore of Infra Bonds in the first week of July.
The advantage of these infra bonds will be for the bank that we don't have to keep SLRs, and CRR on this. Number two, the interest to be payout is once in a year, annualized interest rather than a quarterly interest. So that advantage will be there for the bank. So that is one advantage that we will be... We have taken a board approval for INR 10,000 crore. We may be again hitting the market sometimes in the month of September for another round of INR 5,000 crore of infra bonds. That we are thinking, and CD is always another avenue. And then we'll be also borrowing from SIDBI and NABARD and other institutions wherever we feel that the rates are lower than the rates at which the bulk deposits are coming in the market at present.
Apart from that, what we have done is as a part of the strategy is that we have 69 zonal offices and 13 FGM offices. In all these offices, 82 offices, a separate resources officer has been placed now, whose only duty in the KRA is with respect to raising of resources, whether it is retail term deposit, whether it is for CASA, and also for bringing government accounts. So a lot of tie-ups, we have given them the targets to do tie-ups with the corporates, tie-ups with central and state PSUs, tie-ups with central and state governments, so that lot of saving and current account we are able to garner. Along with that, we'll be able to get some retail term deposits, and also retail loans also, like personal loan, housing loan, and other kinds of things.
A whole lot of strategy we have already formulated for improving our resources franchise in the remaining nine months of this quarter, and you will be seeing the results coming out as we go to the September quarter. Thank you.
Thank you very much, sir.
We from-
Okay, how will be the recovery?
From the return of-
Yeah.
Better now than earlier.
Yeah.
As return of the-
... Yeah, yeah. So see, if you see the recovery side, the recovery number has also been very good for the bank. This time, if you see one of the slides, we have given a clear presentation now that we have done 1.4% of the recovery of the slippage which has happened. So that is the kind of number we have already achieved. That is for the first time we have achieved this kind of number. And going forward, again, what we have, I would clarify here is that on the return of account, we have already launched a campaign, special OTS scheme on the return of accounts. That has already been passed on, the field has started working on it. We will be seeing good traction in the coming two, three quarters in this recovery and return of accounts.
Some of the big accounts also, we will be seeing some recovery in the coming quarters. So return of account is a clear strategy for us. So we are targeting at least 5%, return recovery from return of account during this financial year. That is the internal target we have kept for the field. So of INR 40,000 crore, if 5% we do, at least INR 2,000 crore we will be getting, and this amount, entire amount would be going to the PNL of the bank. So that is the internal target we have kept for ourselves. Thank you.
Sir, Sunil Choksi from Indus Equity Advisors.
Yeah.
Sir, congratulations to team Bank of India for excellent performance in the quarter, and best wishes for times to come. Sir, dramatic changes have happened in this week on a global front, whether it's interest rate, bond market, the scenario on rates and challenges, despite many other situations led by war, may emerge or not, we don't know.
Yeah.
Oil is down. Now, based on second half seems to be very conducive where interest rates on the global scenario and domestic interest rates with good agriculture crop expected in the monsoon. Would you revise your ROE, ROA, Gross NPA, Net NPA advances, despite all the challenges which are visible on the CASA front and the deposit front? Maybe the second half is very positive where deposits are concerned compared to the first, by government as well as the public market deposits.
Yeah, you are right that lot of challenges are there. Yeah, we have fine-tuned our guidance to a certain extent over there. So as you know that there are a lot of challenges on the, CASA side and on the resources side, and the interest rates on deposits have started moving up, and bulk deposits and other deposits, it is difficult to raise. And in fact, the one-year rate at which we are getting bulk deposit is now coming at around 7.5%. That is the fact. Another fact is that if you go for triple A advances, there also there are a lot of challenges on the pricing side. So a lot of undercutting is happening within the banks also, like, banks are lending at 7.8, 7.6, to these triple A advances, where the RW is only 20%.
So that kind of challenge is already there. And with this global international scenario, if we keep aside the war, which may happen or not happen, but otherwise also on the interest rate side, as you rightly said, that there are certain challenges which may come, because now interest rate scenario is also changing globally at the international level. So definitely, though we have shown good net interest margin in this quarter, in fact, it has been better than what we had shown in the sequential quarter in March 2024. It is better for this June quarter. In fact, we have touched this number of 3 point...
If I tell you that net interest margin is, for us, 3.07, and for domestic it is 3.43, and for the international, it is at one point... So we have improved, but on the guidance side, what we are saying for March 2025, the NIM, we are seeing a guidance of 2.90%, considering the fact that the cost of deposit is going up and the yield on advances is not coming to that extent. So that is the NIM guidance we are keeping for March 2025.
Sir, but your focus moving towards RAM and retail, would you not be able to hold margin at the level which you achieved in Q1, or we want rather be conservative is the answer?
No, RAM will not impact much on the margin side.
Positive side?
Positive side, it will help rather. It will be on a positive side for the simple reason that it is externally benchmarked, and the pricing is better over there than a triple A advance on the corporate side. So RAM book, we will continue. As I said earlier also, our continuous focus on the credit side will be that 65% will be booked on the RAM side and 45% on the corporate lending side.
Based on the-
Thirty-five. Yeah.
Based on the new accounting standard, visibility of the profit in treasury may not flow to PNL.
Yeah.
But looks like the bond market may hit 6.75 first and 7 later. In such scenario, would you capitalize on those profits and deploy to credit retail, which is possible at 9% or approximate range, or you rather remain conservative and hold bonds in the challenges led by the deposit mobilization?
See, Choksi, it all depends on how the resources journey pans out. So if you see the present June numbers for us, I will not talk anything on July. June numbers, our credit growth on domestic side has been at around 17%, and our deposit growth is only around at 10%. So there is a gap of 7. And deposit growth is happening at around 11%-12%. Definitely, as a, a strategy, when if we sell those bonds, we'll have to deploy them for credit growth only. So that will be all seen how the thing pans out, and how the credit growth finally keeps the pace with the deposit growth, which is coming.
Sir, your profit-
Thank you, sir. Sir, we'll give you chance. Sir, apart from those who are present here, we are also joined by many analysts virtually. So I'm getting questions from them as well. Mr. Deepak Gupta from SBI Pension Fund has raised a query that there has been a sharp rise in SME accounts on retail and corporate accounts. Could the management provide some information on it? And second part of his question is that, could be any lumpy recoveries from NCLT referred cases?
... So as regards the SMA is concerned, the point is well taken that there has been a rise in the SMA numbers. SMA numbers in that, if you see that, there is some corporate numbers also. In those corporate numbers, we have those numbers of some—why this number is there. If you remove that, 30th number of those corporate numbers, the actual SMA for the—definitely, if you compare it to the previous quarter. But the typical thing in this Q1 was on the RAM side, especially on the retail side, was that, one, there are a lot of transfers in the system. Another thing was a lot of our staff was deployed in the election duties during Q1, and also the heat wave, which was there. So collection efficiency in the entire system got impacted, including Bank of India.
So that is where that is the basic reason why the SMA numbers have gone up in retail for our bank also, so has in the entire industry. But definitely now what we are seeing from July onwards, the SMA numbers are now coming down, and it will normalize in this quarter, in September quarter. As regards the recovery, is concerned, that recovery numbers have been already good, and we are expecting a good recovery in the, big ticket size of around, INR 500 crore, if I give a ballpark number, in this quarter itself on the large ticket NPA accounts.
Thank-
That is the guidance, yeah.
Thank you, sir. Thank you. Can we have questions coming up from you, gentlemen?
Union Bank specifically does a lot of arbitrage in FX and shows a profit of almost INR 2,000 crore-INR 3,000 crore. I'm sure you're aware of the scheme being earlier present in Union Bank team. Do we do something of that kind, or we avoid those kind of products?
No, no. Sir, if I can answer?
Yeah, yeah. Please.
Yeah. So we also do a lot of this arbitrage transaction in FX also and the best. Nowadays, I think now again, market has started becoming favorable. So you would have seen that, in the recent past, the forward rates were very low. So that's why there was not much of arbitrage opportunity. Now, I think there is the opportunity, and as and when it arises, we definitely take advantage of that.
So, keeping that in mind, how do you see your...? This accounting of profit goes to treasury, I suppose it does?
Right.
Yeah. So, but on international book, Subratji, how do you see future shaping up? Because most of the large corporates which are present in overseas market and the large corporates from India are again showing some signs of stability and expansion.
Right.
Be it in auto, steel, renewable energy, hydrogen, various things.
Mm.
How are we shaping up on that front?
No, so far as the international book is concerned, and advance is concerned, rather, so syndicated loan market is quite active there. And, and we are definitely, we are looking for even Indian-originated, any companies, operating there, because they are also tapping the overseas market for raising fund. So definitely, yes, we are participating actively in the primary as well as secondary market, in the syndicated loan market. Apart from that, trade finance, where margin is very thin, based on the requirement and wherever we can make more money and the margin is better, there only we are participating. So it's very selective. So ultimately, the bottom line is that we don't want to compromise on NIM. So that is the idea.
Just-
Also, in terms of international book, what has happened is across the industry, once upon a time, credit finance proportion used to be very high, up to 57%. Now it has already come down. Right. Our-
Yeah.
Sir, you highlight. Yeah.
According will be like that.
Sir, you highlight- To supplement what both the ADs have said, that we have also ... giving loans at the local level also. Even in the New York center, in Tokyo center, even in Hong Kong center, Singapore center, even London center, we have started some transactions on the syndicated loan side, on the local corporates also. That calls also we have-- We will be diversifying our international book, as already said, from trade finance, more towards the structured loan products.
Sir, recently I saw a tie-up we have done with Tata Power for this rooftop solar scheme.
Yeah.
Can you elaborate, what kind of growth numbers we are seeing? Because very few banks have tied up.
Yeah.
This is a big market which is likely to explore, not only for domestic, globally also. It's possible on EPC.
Yeah.
So if there's any thought process, because companies like REC, PFC and IREDA are flying high. I'm sure with a book of INR 10,000 crore, we may get a much better multiple, too.
Yeah, it is there, but see, solar rooftop is also something which will be a big paradigm game changer in the country. It has been with the government guidelines. So a lot of solar rooftop things will also be coming, and we have done also a tie-up on that. We'll be also going for that, apart from this Tata tie-up, which is there. So a lot of traction, both on the wholesale corporate solar side will be coming and also on this solar rooftop funding. Already put a mechanism over there. The product has already been sanctioned and approved, and the field has already started working on it. So-
Sir, basically, you will tie up with more EPC players who borrow on the-
Yeah, yeah. Definitely. Supply side issues are there on the solar only with the tie-up. Without tie-ups, it is not-
Yeah, I understand the risk.
I under-
Thank you. Thank you, Choksi ji. There's another question coming up virtually from Abhishek Kashyap from Sarthak Securities Private Limited. Sir, he has three parts to his question. The first being: Your top line numbers are constantly improving, numbers are not being. Shall I read the other part also?
Yeah, yeah.
Yeah. Then, can you provide any guidance with respect to the trajectory of net P/B valuation and its peers? How confident the management is with respect to catching up to the peers?
Yeah, yeah. Thank you. Thank you, madam. So as regards our income profitability is concerned, so see, if, if you see in detail, our interest income has increased by 18%. So that is all because of the increase in credit advances, which have gone up. Though interest expended has also gone up by 26%, we have been able to maintain our net interest margins, and net interest income has gone up by 6% on a YOY basis. Net interest margin 3% June 2023, which has now improved to 3.07% in June 2024. That is one number which is there. And in the quarter ended March 2024, it was only 2.92%. So some improvement definitely has come as far as our NIM is concerned.
As regarding the operating profit, which you said that the top line is improving, but the bottom lines, there is profit side, if I give you the number, it is that our operating profit, we have touched the operating profit of INR 3,677 crore in this quarter. On a sequential basis, it was in March 2024, only INR 3,557 crore. So there has been an increase over there. As regards the YOY, it is a minus by 2%, but that minus is only because of the fact that there was an income tax refund, which had come, during the Q1 of FY 2024 in June 2023, which was at around INR 450 crore.
If you remove that number, the net number then comes to around INR 3,200 crore of net profit, operating profit in Q1 of FY 2024, which means that on a YOY basis, actually, our operating profit has gone up by nearly 10%, if you remove that income tax refund. So there is no challenge as far as operating incomes are concerned and operating profit is concerned. That is a number which is there. As regards our net profit bottom line is concerned, there also, if you see, we have shown a profit of INR 1,703 crore. March, we have given a profit of 1,000 of FY 2024, in June 2023, we- it was only 1,551. So YOY also, it has grown by 10%.
So definitely, as the top line is improving, our bottom lines are definitely improving and the numbers are there. But had we not done the provisions which we have done in this quarter of INR 2,384 crore total, the net profit would have been much better. So there is no challenge as far as the operating profit, and these are concerned. And what was the third, part?
It is-
Yeah.
Yeah.
YOY.
Yeah.
Yeah, YOY.
The margins, yeah. As far as the margin is concerned, on the guidance side, the net interest margin, if you see the net interest income growth has been at around 13% in FY 2024. On the guidance side, we say that the net interest income guidance will again be at 13% for FY 2025. Net interest margin, which we have already touched, as I said, 3.07%. We say that the guidance for March 2025 would be considering all the scenarios of tightening of interest rate and other kinds of things, 2.90%, as I said earlier, would be the guidance.
As regards the yield on advances is concerned, there also our guidance presently at, we are at 8.60%, and we feel that at around 8.5%+, the guidance will be there as far as that is also concerned. As regards the share price is concerned, you would appreciate that the share price has improved over the last 12 months. And definitely other, with other peer banks, it is, I would not say it is lower side, but the benchmark is that we are below the book value. Book value is at INR 132, presently, and the share price at around INR 125. There, some gap is there.
With these good numbers, which we have given for Q1 and the even better numbers, which we'll be able to give for Q2, this challenge shall also get obviated.
Thank you very much.
So on par with the best of the bank, now 3.47. That will continue to happen. If naturally margins improve, then naturally it will translate into catching up with the book value. Catching up with the book value. The marginal difference between the book value and the market value will get, will get adjusted—I mean, we'll, we'll catch up with that without any problem in the coming two, three quarters.
Thank you very much, sir. I hope, the queries raised by Abhishek Kashyap is, satiated to the fullest. Any questions coming from which side, gentlemen?
Hi, sir. Thanks for the opportunity. Just one question I had.
Your introduction, please.
Himanshu from Aditya Birla Mutual Fund. Given the some slight rise in the SMA trends, how do you expect these slippages trends to be in the coming quarters? Although it has improved on a QOQ, but we are-
... how the slippage trajectory will be? And second part to it, how one should estimate the credit cost?
Yeah.
Third, if any calculation would you have done it in terms of giving any guidance if the, as and when the ECL guidelines comes in, how do you expect?
Yeah, okay. So as far as this SMA number is concerned, so if you see, I'll give you more details over there on the SMA side. On June, above 5 crore SMA, if you see our slide, our SMA has increased to INR 9,600 crores, as against INR 7,131 crores. Further, if you see within that breakup, the corporate number is INR 6,783 crores. So if you remove that INR 6,700 crores of that corporate book, which consists of only a few accounts, predominantly, which is from one state government, state PSUs, three, four PSUs are there in that. So the SMA number is only around INR 3,000 crores, 5 crore and above.
In that also, the maximum increase has happened in the retail SMA, which has touched INR 1,200 crore, as against the number which was there in June, which was at around this one at March 2024, at around for retail INR 183 crore, it has become INR 1,200 crore. So retail, I told that as I explained, that it was because of the issues of the Q1, wherein there was a lot of transfers happening within the bank, and then electioneering duty was there. And overall, collection efficiency had got impacted over the, across the industry, not only from the bank side, but also in NBFCs, collection efficiency are impacted.
But however, it has normalized now as we speak on third of August in this quarter, and we do not see any much of concern going over there in this, in the coming quarters, in Q2 and Q3. As regards the credit cost is concerned from there itself, the credit cost presently, as we have shown in this quarter, is 0.85%, and it has increased from 0.78%, which was there in the entire financial year. Sequentially, it has also gone up from 0.78%, but as I said, clarified earlier also, because of it is the excess provision we had prudently made during this quarter. Otherwise, we would have shown better, net profit, which would have been there.
On the guidance side, we would say that the credit cost would be at 0.70% for the current financial year. As regards slippage ratio is concerned, the present slippage ratio is only 0.35%, which was 1.58 for the entire year and 0.42 for the March quarter. And in the last year, it was 0.53. So as against Q1 of FY 2024, 0.53, we have come to 0.35. So, if you multiply it into four, like, it comes to 1.40.
But however, we are confident that we'll be able to keep the slippage ratio at around 1.20 only, during the current financial year, which will be much better than what it was in the financial year 2024. So that is the guidance which we are giving at 1.20 for the slippage ratio side. And the third part was with regard to the ECL. On the ECL also, we have done a ballpark calculation. Over there, we are expecting when the guidelines come, it will be spread across, the 5-year period. And once it is spread across the 5-year period, we have, sufficient cushion with respect to the profitability, which we'll be achieving improvement in the CRAR, which will happen.
And also with respect to the capital raising in form of Tier One or Tier Two bonds, which we will be doing, which will take care of the ECL provisioning, which will be coming to us. This year also, we have a plan to raise around INR 5,000 in capital in form of Tier One and Tier Two. Tier One will be raising in this current quarter and Tier Two in the, maybe in the, quarter three or quarter four. So both, with both these things, profitability and the capital being raised, we'll easily be able to manage this ECL extra provisioning, which will be coming in the next five years.
One more thing, if I prepare, sir?
Yeah.
Regarding the roll forward, so we have also improved there. Roll backward, we have increased from 22% to 29%, and in roll forward, which should be low, we have decreased from 26% to 22%. That is also coming down, though these are positive trends happening in SMA control also.
Thank you, sir. There's one gentleman by the name Jay Mundra, who's going to join us on an audio call for his question. Who's putting him through? Yeah, thank you.
Yeah. Hi, sir, good evening.
Evening.
Thanks for taking the question. Sir, my question is on this standard assets provisioning that we have done. If you can share some more details there. I think you also said that we have done more provisioning, more than needed provisioning. If you can elaborate some more details, is it like corporate versus some corporate stress that you are seeing, or what is it pertaining to?
Yeah. Thank you, Jay, for joining. So if you see the standard asset provisioning in our presentation also, we have done INR 359 crore of standard assets and others provisioning. Out of that, it was only 111 in Q1 of FY 2024, which was June 2023, and it was a negative INR 189 crore as on March 2024. So in this quarter, what we have done is that when we were seeing more of SMA numbers coming in retail and MSME, as you see in the SMA numbers, we thought it prudent to have more provisioning for the standard assets which are there, wherein we can have some delinquency in the coming quarter, which is a normal delinquency, which is there.
However, as I said earlier, the credit cost and the slippage ratio guidance, which we have given, will continue, and there will not be a concern. It is only a prudent decision on, these accounts which we have taken, and, it is none because of any of the corporate accounts.
Okay. Thanks, sir. And secondly, sir, if I look at your yield on advances, right? Somehow it is very volatile, you know, this quarter it has gone up. I would have thought that first quarter is slightly poorer in terms of higher slippages. But nonetheless, I mean, how should one—and you have said that your yield on advances for the full year should be 8.5% plus. But I still wanted to check, sir, if you can share maybe the dummy ledger account, dummy interest booked in this quarter, and what could have led the higher uptick in the yield on advances this quarter?
So yield on advances in this quarter generally has been at 8.6% for this quarter. For the entire year, in the last quarter it has been 8.38%, and for Q4 it was 8.47%. So it is not that it has suddenly jumped up in this quarter. So if you see our Q1 of last year, it was 8.1%. In Q4 of the last financial year, it improved to 8.47, and now it has improved by 13 basis points to 8.0%. If you see the Bank of India trajectory of the MCLR, we are the first to increase the MCLR.
During the last 12-15 months, if you see, we have increased the MCLR by 7-8 times, and we are the first one to increase the MCLR. This time also in the last repo, with effect from first of August, we have increased our 1-year MCLR by 5 basis points. So we are very proactive as far as increasing in the MCLR is concerned. For if you see our presentation also, there you see that 46% of our book, 40%+ of our book is on the MCLR side, and another 40%+ book is on the EBLR side. So the moment we increase the interest rate on the MCLR, immediately the interest income starts coming on for us. So that is the kind of thing, and we are very conscious on the pricing also.
We have, in fact, left some of the transactions in triple A, where the pricing was low. Another very conscious call the management has taken in the bank as far as the pricing is concerned, that we are not giving any external benchmark rate pricing of loans which are above 180 days. So up to 180 days only we are giving repo rate advances, EBLR advances. All other advances on the corporate side are all linked to the MCLR. So our lowest MCLR is the overnight MCLR, 8.15. So there also, the book is not very large. Majority of our transactions which are happening is on 3-month, 6 months or 1, 1-year MCLR.
So we are very conscious on improving the yield on advances, though we are saying that on the guidance side, the yield on advances for the full year will be 8.5. With the kind of increase in interest rate that we are seeing, the yield on advances definitely will be at a number which will be somewhere around 8.5 for the entire year.
Yeah, another thing,
Sure, sir.
J, another thing I-
Yes, Rupaal here.
So just add to what MD sir has said. If you look at the number, no, if you look at my interest income, it is almost INR 16,000 crore for this quarter. And if you look at my dummy ledger that I have booked, is only INR 649 crore, and there is only marginal increase on a sequential basis in dummy ledger year. So naturally, the percentage, the proportion of dummy ledger that is becoming part of the yield on advances is very, very insignificant. So actually, it has, the yield on advances has gone up by 13 basis points. 13 basis points because of you know, the mix going up. If you look at my RAM mix, it is slowly going up. It is now 56%.
So naturally, the RAM mix has been giving me a little uptick in terms of my yield on advance. It is going to go up like this because our, long-term trajectory, including the medium-term trajectory, is that, you know, we should be at least 60, 65% RAM book, and corporate book will come down. So naturally, the top line that we have, where we have sub-8 advances, sub-8% advances, will get, automatically tapered over a period of time, and then we'll have better yield on advances. So that's what we are looking at very seriously. If you look at most of the, peer banks who have 60%+ RAM, their yield on advance is at 9%, so we'll be reaching it very shortly. It may be another coming 2, 3 quarters. That's what we are planning. Okay?
Thank you very much, sir. There's another gentleman who has joined virtually, is Mr. Rakesh Kumar. Is he still there? Yeah, kindly put him through.
You are not audible, actually.
He can type his question in the chat box, and I'll read it out for him. In the meantime, anybody... Yeah. Yeah, please.
Can you hear me?
Yeah, now we can hear. Yeah, go ahead, please.
Yes, so the first question was, sir, with respect to this, the ROA guidance, sir. So what is the full year ROA guidance that we have, sir?
Yeah. So ROA, as far as the return on assets is concerned, so presently our ROA is at 0.70%, as on June 2024, which was again, on the entire financial year at 0.74%. For the guidance we are giving at 0.80% for FY 2024, for the entire financial, year for FY 2025.
0.8%. Okay. And the second question was with respect to the market risk weight. So certainly there is a decrease in the market risk weight on a sequential basis, and that we have seen in case of other banks also. But the decrease in case of our bank is relatively lower as compared to other PSU banks.
Okay.
Sequential drop in the market risk weights.
I would request if the CRO can, give the details here. Hari is our CRO-
Yeah.
So he'll be responding.
Sure, sir. Sure, sir.
Yeah, the decrease in market risk weight assets is lower because the quantum of securities that we have shifted to HTM is also on the lower side. It's only INR 9,700 crore.
... Okay.
That's the only reason why the expected assets, so far as the market risk is concerned, has come down only by INR 10,000 crore.
Yeah, the HFT book is relatively higher actually for us.
The HFT book was moved from the AFS to HFT, so there is not much of a movement over there.
Okay. Thank you. Thank you, sir. Thank you so much.
Thank you, Rakesh. Thank you, Rakesh, for joining in. Yes, you may ask.
Hi, sir.
Yeah.
Good afternoon, Ashlesh from Kotak Securities. Sir, two questions from my side. One is on the personal loans book. You have a decently sized book of more than INR 10,000 crore now.
Yeah.
What is the trend on, GNPA in this book? If you can share the numbers for this quarter as well as last quarter. That is one. And secondly, can you share the movement of your net worth on the first of April? Because if I add your, net worth as on March and add the profit which you have had in first Q, the net worth as on June is meaningfully lower than that.
Okay. On the personal number side, GNPA side, I will request my CGM recovery to give the numbers just to give you a flavor and the color on the personal book, which has now touched INR 10,000 crore as against INR 7,000 crore, which was there on a YOY basis. So the increase is around 40%, though it is because of the low base. The incremental growth of 40% is there. But just to clarify, the entire personal loan book is having secured in the sense with cash flows. So predominantly, this personal loan book is to the salaried class. And salaried class, where the salary is coming in the Bank of India savings accounts. That is one thing.
Another thing which is there is that we are giving these personal loans to mostly to CIC score of more than 700. So that is another guardrail which we have placed in our system. And the third thing which is over there is that we also have a personal loan for the housing loan customer. There also, good traction is coming, that where the housing loan has been given to the borrower, we are offering them a personal loan product where the house is already mortgaged to us. Though we are not extending the charge on that, but definitely there is a cushion with us that there is a long-term housing loan available with us. So, Prashantji, if you can just share what is the NPA numbers in the personal loan book.
Sir, exactly the numbers in personal loan, I don't have as of now. But, if we see the slippages for this year, it is very, very minuscule. The total slippages of personal loan out of the total slippages is only 1%, sir.
Okay.
For this year, this quarter only. So the numbers I can give, sir.
Just to clarify further that we are not seeing much of a stress or any of the stress in these personal loan numbers.
Yes, sir.
Within that, there is the credit card outstanding also, which is there. Again, that number is not very high. It is only INR 500-600 crore. And whatever the NPA is there in credit card is 100% provided for.
Got it. So the second one on net worth. So just one clarification before you move on to the second one.
Yeah.
Can you share what is the definition of your net slippage, which you were sharing in the presentation?
Net slippage, which we are seeing in the SMA?
Just the definition of net slippage, sir?
Yeah, it is like this. For example, the NPA calculation is always on an annual basis. So when you actually jot down the amount of NPA that we have at the end of the financial year, you have a particular amount. That is called outstanding at the end of the financial year. That is called gross NPA. Okay? Now, what happens is, during the quarter, the standard accounts, as you rightly pointed out, our Karthikeyan sir, there may be a roll forward, okay, from SMA to NPA. So they become NPA, say, in April, they may become NPA in May. And in May, some accounts may get upgraded again because there is a recovery that is coming. Because the RBI circular says the upgradation has to happen on the basis of record of recovery.
So if record of recovery is as per the guidelines, it gets upgraded. So what happens is, gross slippage is the total slippage during the quarter, minus the accounts that are upgraded during the quarter. So that is net slippage.
These are essentially recoveries which happened intra-quarter?
Intra, yes. Intra, during the quarter. Yeah.
Okay. Thank you.
Thank you.
With respect to the net worth question, see, what happened was last year, we have given a dividend to Government of India, around INR 1,200 crore. That has been accounted for this slide. So naturally, there is a drop in net worth. Okay, and apart from that, because of the new valuation guidelines of investments, there is a general reserve adjustment that have happened.
The reserve adjustment has been negative on an overall-
Negative, yes. Naturally, for all banks, the... Ours is not a big number, but most of the banks, it is negative because of the new FVTPL coming in. Okay?
Okay. Thank you, sir.
Okay. Thank you. Another question, actual question by Mr. Dhiraj Singh. So first of all, he has congratulated you for the good numbers that you have shown. The question is, what is the full year guidance for NPA? Also, any impact of Japan rate hike on our financial markets? Yeah. As regards the Japan rate hike on the financial markets, see, it will impact when other countries also start doing that, like UK and USA. So till that thing happens, not much of global impact will be there on the market. We also have a branch in Japan. Definitely, there, the cost of fundraising will go up. That will be sure. That will be the local impact, as far as our branch is concerned.
As regarding the Gross NPA and Net NPA is concerned, so we have presently, as you are aware, that we have reduced our Gross NPA to 4.62%, as against 4.98%, which was there in the month of March for the full year ended. As regards the guidance is concerned for FY 25, we are saying that we'll be at around 4% by March 2025 on the Gross NPA numbers. On the Net NPA, we were at 1.22 in March 2024, we have now closed at 0.99. On the guidance side, we are saying that we will be at around 0.90% by March 2025. That is though a conservative number, but we are sure that we'll be improving that on this number.
Thank you.
Sir, may I come in? Yeah. Sir, some color on NARCL, accounts, transfers, like a lot of things have happened in this quarter also. In last quarter also, some correction was there. So one is that, what is the status there? And secondly, how much, how much, amount of the SRs which we have received in this quarter from NARCL, because we might have provided 100% like any other SR. But here, this is guaranteed by the government. So that will help us in-
Yeah.
You know, like understanding that this is basically a standard thing on which also the provision has been made.
Yeah, yeah. So lot of activity happened in NARCL. That activity mostly happened in the month of March and April. So no new activity has happened in the last two, three months for, on the NARCL side. So only a few accounts have been shifted to the NARCL. So I don't think much of a thing happening in the immediate.
This quarter.
This quarter we have not shifted in fact any account, yeah.
No account to NARCL.
So any recovery is expected, Prashantji, on from NARCL accounts in this quarter? Just-
Nothing.
Nothing is ex-
But this quarter means in the coming-
Me, I tell you what has happened. Whatever accounts that we have shifted, they are all old legacy accounts, right?
Yeah.
So in those old legacy accounts where resolutions were not happening, so it was decided by all banks to shift them to NARCL. Then NARCL will start finding the resolutions through the process, which is there now. In all the accounts, the status which we get on a monthly meeting is the process has started. So it will take now some time, at least 2-3 quarters, for that process to get completed-
But does it go-
And then finally the resolution to happen.
Does it go off from our gross NPA?
No, no, no. It is with us only.
No, it is with us only. Yeah.
It will move.
It will move to NARCL, it will move to investment.
Yeah.
What happens is that we-
Yeah.
This is a 15% and 85%.
Yeah, yeah, correct.
Fifteen percent is a cash recovery, which we get it. 85% moves from this book as an investment to the NPA book.
Which we make 100% provision.
So for that, we make 100% provision, but then, as you rightly said, it's a government-backed guarantee is there. So where the recoveries will, are assured for that recovery, but then still the provision has been made. And, we expect that the resolutions will start coming with NARCL being very active.
My question was that in this quarter-
This quarter, Q1, we did not have any account, and there was no recoveries as far as the recovery against the SRs which is concerned. We did transfer good number of accounts in the last quarter, that is Q4 of previous financial year.
But that Q4 accounts which we had transferred, that already have been accounted for.
Yeah.
The money has been received.
That, that's all accounted.
That's all accounted for, yeah.
And some last color on the digital transformation-
Yeah.
Like, is going on for last 2.5 years, 3 years.
Yeah, yeah.
You have achieved a lot of things out of that, maybe 60, 70%.
Yeah.
Out of that INR 2,000 crore of the original, that budget, I think 75% was spent up to the last quarter. So what is the status now?
Yeah.
Any fresh budget on digital spend, and where do we stand on that? How many verticals are still pending to be introduced?
So as we have given in our I said in my speech also, that 15 products will be digitized in this financial year also. Already 20-odd products we have already digitized. They are all right from liability side to the asset side, on retail lending also, on MSME lending also and agriculture lending also, and also on the liability side, like saving current account and FD. Those have been digitized. Another thing that important thing we are doing is we are in the large stages, UAT stages, for digitizing for the current account. So that also will get opened on the digital mode. That is another thing.
On the expenditure side, as far as the digital and IT is concerned, this year also, the budget is around INR 2,000 crore, and we expect that good amount of money will be spent both on the digital and the IT side on the, for this year also. And we are also on the final stages on onboarding on one of the leading consultants in the industry, one of the Big Four, for transformation of the IT and the digital stack in the bank. So that should also happen, to my understanding by end of, this quarter, that onboarding of the new, vendor for that.
And that will help and give us a long way in taking the transformative journey on the IT and the digital side, making the bank open architecture as far as the digital stack and IT stack is concerned, and integration plug and play with the APIs and the Fintechs which are there. So that is, we are committed to that, and we are very sure that in the next coming 3-4 quarters and that our IT and digital stack will further improve. A lot of improvement has already happened. It will further improve. And this cybersecurity issue also, which is coming in the last few days, it has not impacted our bank, because all the reinforcement and the work on cybersecurity that the bank has done and the spend that bank has done on the cybersecurity side also.
These are the things which are already there, and definitely there will be some much better things happening on the IT and digital side in the bank in the coming days.
Thank you very much, sir. Again, Mr. Deepak Gupta from SBI Pension Funds has raised a question: Q1 base margin at 3.07%. Management has guided FY NIMs at 2.9%. So exit rate at end of Q4 likely to be sub 2.75%. What is the guidance around staff cost?
Yeah. So as far as the NIM is concerned, you rightly observed that the present NIM is 3.07% on a global basis, and we are giving a guidance of 2.9%, considering the fact that the challenges which we are facing as far as the resource mobilization is concerned and the costing, which is going up as far as the resources are concerned. So deposit prices are going up, and it is a challenge to get the resources and with the kind of credit growth which is happening. If we have to keep pace with the deposit growth with the credit growth, definitely we'll have to raise some high cost deposit.
That is one challenge which is there, because of which we are saying that the NIMs should be for the entire year at 2.90%. And when you have calculated rightly, that it will be at around 2.75-2.80% for the Q4, because the average for the entire year, we are giving at 2.9%. Already that we have touched at 3.0% for this financial year. It is keeping in mind the liquidity position which is there, presently, the LCR guidelines, which have been issued by the Reserve Bank, that is also we have kept in mind while we are saying that 2.90% will be the guidance, for the current financial year, because the LCR guidelines will also impact the overall profitability, in the banks.
What was the other thing regarding?
Staff costs.
Ah, regarding staff costs.
Announced staff costs.
So staff costs will remain the same for the simple reason that as per the bipartite settlement, whatever amount had to be paid and the provision which had to be done has been done, so no more provision to be done. All actual cost has been taken. So there is no additional cost on the staff side has to be done. So whatever is the number is the running number on the staff cost side, so no incremental increase will be there on the staff cost side.
Thank you, that's fine. I think we are, we've had enough questions and can we call it a day? I would request. Thank you, the top management for enlightening the our good strategy on FY Q1 results. And also, I thank all the gentlemen and one lady sitting here for having spared your precious time to be with us on our big day. Thank you very much, all of you, and I'd like to request all of you to join for high tea. Thank you.
Thank you. Thank you.