Ladies and gentlemen, good day and welcome to CSB Bank Limited Q1 FY 2023 earnings conference call. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Shukla from Axis Capital Limited. Thank you, and over to you, Mr. Shukla.
Thanks, Nirav. Good evening, everyone, and on behalf of Axis Capital, I welcome you all to this earnings call. We have with us Mr. Pralay Mondal, MD and CEO, Mr. B.K. Divakara, CFO, and their senior management colleagues to help us understand the results better. I would request Mr. Mondal to make some initial remarks, after which we can open the floor for Q&A. Over to you, Mr. Mondal.
Thank you, Manish. Good evening, everybody, and thank you for joining the call. Let me just briefly tell you our perspective on the global as well as what's happening in the macro, followed by how the bank has performed. Our CFO, Mr. Divakara, will take you through the numbers, and then we'll open it up for the Q&A. On the macro side, I think we all know that the world is going through a very difficult phase of you know, inflation and tightening of financial conditions and among elevated financial vulnerabilities. FOMC is expected to increase the Fed rates again anywhere between 75-100.
The debate is, you know, within 75-100, there's no doubt about another hike, which means RBI may have to look at also a hike between 35-50. The key question is can those central banks have a soft landing, and we'll wait and watch how it works out. Mostly it is expected the front loading of rates will be used as an instrument to have a soft landing of the huge key challenge which is facing the global economy today. On the domestic market side, I think, most of the actually on the Indian domestic side, things are looking a lot better. Some of the high-frequency indicators like GST collections, railway freight, electricity, etc. , is looking better. The IIP numbers were better.
On a higher base, the inflation is also stabilizing little bit. Rupee of course, we know that it has touched 80. RBI yesterday also said, I think that they will use whatever instruments possible within 10% of their forex reserves to stabilize the rupee, which means around, you know, we should see somewhere between 79 to 81 the rupee. The monsoon has been good. We are seeing a recovery in manufacturing activities, and hopefully the commodity prices has come down and hopefully it remains there, though the oil prices has gone back little bit back to around 105 levels. Broadly, when we look at the global as well as the local macro, some amount of uncertainty will always remain.
The CAD also hopefully should be able to contain within 3%. Broadly, that's where we are today. On the credit side, I think the banking ecosystem is growing between on the liability side around 10% and on the asset side it's growing around 13%. In CSB of course, as you have seen the result that we have grown our liability by 9% and assets around 17%. We are broadly in line with where the market is. Maybe assets we have grown marginally higher, but on our small balance sheets little bit here and there doesn't matter. We have to look at a slightly longer-term perspective what we need to do. I'm not going through the detailing of the numbers, Mr. Divakara will look at it.
Broadly, profit has improved by 9% on a quarter-on-quarter basis. Net profit has gone up on a YOY basis by 88% to INR 114 crore. We also have significant provisioning buffer close to INR 200 crore over and above the regulatory requirements, of which the COVID provisions itself is around INR 106 crore. We could still maintain the NIM, though last quarter I said that NIM will be under pressure, but we could still maintain the NIM around 5% because our cost of funds still we are able to hold. In fact it has come down from 4.21 to 4.10 this quarter.
That may not sustain for long because cost, obviously cost of deposits are going up in the ecosystem. Average CASA growth has been 10% Q on Q, 15% Y O Y. This is a good story gradually evolving because average CASA is something which augurs well for us. Net advance, as I said before, grew by 17%. Gold portfolio did very well, 26% year on year and 8% Q on Q, so it continues to do well. Yield on advances has remained at a similar kind of a level of 10.62%. The asset quality, like most other banks who are coming out with results, similarly, we have also done well. Pretty well, I must say. We fared well on all indicators, GNPA and NPA.
PCR is almost 90%, and if you take the COVID provision it crosses 100%. Excess standard asset provisioning is higher than NPA. We are continuing with our accelerated NPA provisioning, as I said before. On the CRAR, I think we are one of the highest in the industry, 25%. Low proportion of risk-weighted assets compared to the industry, primarily because of gold loans. Book value per share has been elevated to INR 151, EPS 26.8%, and ROE close to 18.5%-19%, which was 12.65% in Q1 of FY 2022. I think on ROE side also we have improved a lot. We plan to, as I said before, we plan to open around 100 branches every year.
We are trying to front load that this year in the first half. 52 locations have already been approved. On the technology side, we are making significant progress, whether it is corporate LOS, retail LOS, you know, LMS, looking at how we want to look at the core system. Everything is changing because if we have to add more products, which I promised last quarter, we first has to create the basic foundation. Once we have all these things right, then scaling up the retail businesses, etc. , because that requires technology, leadership, process, and channels, partnerships, everything.
Because we'll focus a lot on the partnerships for customer acquisition, we will ensure that that our technology is up to the mark to scale these things up, and that will take little time. We will see gold loan continuing to do well for us for the next 12-18 months. Then also it will do well, but as a ratio, other products will start picking up after that. Launch of credit cards will happen very soon. And gradually we will launch most of the other products. The last thing I would say before I hand over to Mr. Divakar is that everything which we are working on a planned manner for the next two years, five years and eight years kind of a scenario going up to FY 2030.
Almost everything is on track as per plan. We will not move away from investing into the franchise to build a full service bank. We will continue to focus on leadership, technology, distribution, products and partnerships. More importantly, we need to add a lot more customers. You will see almost every year, at least for the next few years, we'll be doubling our acquisition base of customers because our primary focus will shift to liability. As we grow, I think asset growth will happen. To support that asset growth, we need to build up granular and stable liability, and that requires a lot of customer acquisition, which in turn will also help us in building our cross-sell on fee businesses, retail asset businesses, on the SME side, supply chain, everywhere.
Also you'll see that the core fee business, which is things like insurance, processing fee, asset related fees, commission fees, LC/BG fees, all of this core income, which I had said last time also will continue to grow. This quarter also we have grown and will continue to be our mainstay going ahead. Of course, we have some challenges on the, like most banks have, but our challenge is much lesser on the treasury side. Also as Mr. B. K. Divakara, when he takes his commentary, we will share that how the PSLC income.
We took a very tactical view of not selling our PSLC book in this quarter, but buying as much as we could on the PSLC side. We bought so that we could take care of the full year PSLC requirement on the micro side. We are still sitting on our entire PSLC book, which you can sell. We will maximize those revenues in the next two to three quarters. With that, I assure everybody that whatever we said that we will do to build our franchise, we'll continue to do that. I hand over the conference to Mr. B. K. Divakara to take us through the numbers.
Good evening, friends. I will be making a brief presentation about the performance of the bank for the quarter ended June 30th, 2022. Unaudited financial results of the bank for the quarter ended June 30th , 2022, which is subjected to limited review by the statutory central auditor, was taken on record by the board of directors of the bank at its meeting held today. Friends, June 2022 is yet another good quarter for the bank in terms of capital ratios. As you may be aware, capital adequacy ratio is one of the best in the industry at 25.46%. Asset quality, so NPAs are at historical low at 0.60%. Liquidity, so LCR is much above the RBI stipulation and stood at 147%. Earnings is consistently growing and profitability track record is maintained.
Our primary objective of building the balance sheet for the future continued in this quarter as well. The buffer provisioning built during peak COVID times remains untouched at INR 106 crore. Whatever pressure slippages that have happened, it has been provided from out of our current year's profits. Bank continued with its policy of making accelerated provisions for NPA much above the regulatory requirements. If we reckon these two additional provisions made, PCR will go even beyond 100%. Accumulated losses in the balance sheet is gradually coming down and expected to be wiped out completely during this year. Deferred tax assets created on account of accumulated losses has already been wiped out. We continue to follow conservative accounting policies and SR's level has substantially been brought down. All these measures have strengthened the balance sheet to a larger extent.
Now let me take you through the main highlights of the published working results. Net profit of the bank increased from INR 61 crore for the quarter ended June 30th, 2021 to INR 114.5 crore during the quarter ended June 30th, 2022 on the back of lower provisions. Provisions for NPAs has come down drastically during this quarter. In other words, net profit increased by 88% on year-on-year basis. As I said earlier, so it is on account of lower provisions that have been provided during this quarter. Last year, during this period, we had provided INR 97 crore as against which we were i t is a reversal of INR 1.20 crore during this quarter.
Sequentially, though, it looks net profit has fallen from INR 130.70 crore in March 2022 to INR 114.5 crore in June 2022. It is on on the back of higher reversals of provisions during the last quarter. Operating profits of the bank stood at INR 154.7 crore during this quarter. While operating profits have decreased on year-on-year basis from INR 174.7 crore to INR 154.7 crore, sequentially it has increased by almost INR 13 crore over March 2022 level. Excluding treasury profits and PSLC premium, operating profits in fact have increased by INR 10.50 crore on year-on-year basis. Net interest income for the quarter stood at INR 311 crore, clocking a year-on-year growth of 16%.
For March 2022 quarter, the growth of net interest income is 2%. NIM has improved from 5.04% in June 2021 to 5.17% in June 2022, or by 13 basis points. On volume side, average advances grew by 10%. On mix side, average CD ratio improved from 75.8% to 79.50%. Average yield on advances remained at 10.62% for both the quarters, that is June 2021 and June 2022. Yield on investments reduced from 6.38% to 5.79% during this period.
The impact of reduction in yield has been offset by reduction in cost of deposits from 4.48% in June 2021 to 4.10% in June 2022. From Q4 position of 5.42%, NIM has reduced by 25 basis points to 5.17% due to reduction in yield on advances from 11.19% to 10.62% or by 57 basis points. It is sixth quarter in a row that NIM is in excess of 5%. Time lag of one quarter for resetting the interest rates has since been changed to T+1 day, effective from first of July 2022. This will effectively take care of passing on the cost to the customers instantly.
As against the treasury pro-profit of INR 19.50 crore in Q1 of financial year 2022, treasury profit of Q1 of financial year 2023 stood at INR 5.2 crore, impacted by the upward trending interest rates. Due to reduced PSLC premium in the market during June quarter, we have adopted a wait and watch policy and decided not to book any PSLC income this year, as against INR 12.50 crore booked in Q1 of financial year 2022. Excluding treasury profits and PSLC premium, other income has increased by INR 10 crore on year-on-year basis, powered by growth in commission income by INR 7 crore. Sequentially, non-interest income excluding treasury profits has decreased by INR 7 crore. Annual savings bank account and debit card related charges of INR 15 crore is accounted only in Q4, and this has caused the decrease, quarter-on-quarter basis.
Staff cost during the quarter has increased from INR 97 crore to INR 122 crore or by INR 25 crore. Payroll cost has gone up by INR 14 crore as the head count increased from INR 4,508 crore as on June 30th, 2021 to INR 4,780 crore as on June 30th, 2022. AS 15 provisions increased by INR 11 crore with increased provision for DA for pensioners in lieu of the CPI increase. Compared to Q4 of financial year 2022, staff cost is lower by INR 21 crore, as Q4 of financial year 2022 included annual incentive of INR 13 crore and one-time ESOP cost related to previous MD and CEO provided. Other operating expenses has increased from INR 67 crore to INR 89 crore year-on-year.
Between June 2021 and June 2022, number of branches has increased from 514 to 603, and this has caused increase in rent and other expenses. BC type costs increased by INR 5 crore. Further, we had bought PSLC for meeting the shortfall in micro enterprises targets, causing a premium payout of INR 3.70 crore. Cost-to-income ratio has increased from 48% to 58% on year-on-year basis, and decreased from 61% to 58% quarter-on-quarter. As we are on the expansion mode, costs will go up in the short run, but eventually it will taper down over the year. Credit cost. Provision for NPAs during the quarter has been a reversal of INR 1.20 crore as against additional provision of INR 97.3 crore in Q1 of financial year 2022.
While there was additional provision requirement of INR 16 crore on account of process leakages or migration of existing NPA accounts to a higher provision category, the same has been offset by recoveries in technically written off accounts of equal amount. For Q4, financial year 2022, reversal of NPA provisions stood at INR 37.3 crore. ROA has increased from 1.03% to 1.75%. Book value per share has increased from 144 as on March 31, 2022 to 150.7 as on June 30th, 2022 or by 5% quarter-on-quarter basis. Year-on-year basis, it has grown by 26% from INR 120.
Gross NPA at INR 293 crore or 1.79% has remained more or less flat as on thirtieth of June 2022 compared to March 31, 2022. Net NPA has come down below the INR 100 crore mark to INR 97 crore as against 107 crore as on March 31, 2022, and INR 444 crore as on June 30th, 2021. PCR now stands at 90.5%, up from 89.7% as on March 31, 2022, and 70.2% as on June 30th, 2021.
Capital adequacy ratio continues to be comfortable at 25.46% as on June 30th, 2022 as against 21.63% as on June 30th, 2021, and 25.90% as on March 31st, 2022. Liquidity coverage ratio stands comfortable at 147%. Leverage ratio stands at 9.27%. M duration of AFS portfolio stands at 0.83. Total advances grew by 9% year-on-year basis and CASA ratio stood at 35.14% as on June 30th, 2022 as against 33.09% as on June 2021 and 33.66% in March 2022.
Advances grew by INR 2,324 crore to INR 16,142 crore on year-on-year basis, registering a growth of 16.83%. Gold loans grew by an impressive 26.30% year-on-year basis and 8.17% on quarter-on-quarter basis. With this, share of gold loans to total advances now stands at 41.6%. To conclude, I can say bank has done well under most of the parameters. We will build on this position further during the coming quarters. Now, I will stop here. Thanks for hearing me patiently. We are happy to receive your questions.
Thank you very much. We'll now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. First question is from the line of Mona Khetan from Dolat Capital. Please go ahead.
Yeah. Hi, sir. Good evening. My first question is on the gold yields in the gold book, which have declined by about 120 this quarter-on-quarter. I understand that the gold NPAs have normalized and to some extent, lower recoveries will also back the yield. Just wanted to understand this 120 basis points decline, how much is out of recoveries and how much is owing to the lower yields from teaser?
Thanks, Mona for your question. That breakup we'll give you, but on a high level, what is happening is that because of the easy liquidity that was available last year, we had seen a little bit of a yield reduction on the gold side across the industry, and hence to remain competitive, we had also done that. As we talked last month, the industry is normalizing, so we have also taken the interest rate up and also processing fee up on the gold loans. We should see in the next one or two quarters by the time our overall cost of funds starts going up because it is bound to go up, right? Given where the interest rates are. By that time our main portfolio, which is gold loan, which is around 42%, we should see the yields pick up again starting to go up again. That's broadly at a high level where we are. Mr. Divakar, would you like to answer the breakup between-
Yeah, yeah. Interest reversal is INR 7 crore during Q4 of last year, and this year in Q1 we have not reversed any income.
Okay. Got it.
That's correct.
Last year we got INR 7 crore, but this quarter we couldn't get any income.
Because last year we have not got any income this year because of the NPA reversal. NPA has remained, you know, there was no major slippages. To that extent, primarily this is pure play yields which are coming. But as I said, we are already improving our yield, so we should start seeing a reversal in our yield in gold loan again.
Sure. I f I could understand a bit, in terms of how much its contribution is from the recoveries, which is not playing out this quarter. The interest reversal component, the INR 7 crore component.
That's what we said, Mona, that interest recovery last year we had got INR 7 crore. This year we have got nothing because we didn't have nothing to recover.
Right. The 120 base, how much would be the impact of this INR 7 crore is what I wanted to understand. The INR 7 crore not being there.
Maybe 20, 30 basis points will be around that. Rest will be probably due to.
Sure. Got it. That was helpful. Another probably 80 basis points or so are owing to just natural declining yields.
Mona, the thing that we are again changing our strategy.
Will be normalized. Yeah. Right. I understand. That's the industry thing. Yeah. Got it. Sure. In the SME book, you know, despite it being a key focus for you, we are not seeing growth coming by this quarter. So what's really holding you back on the SME growth side?
Yeah. On the SME book, what's happening is that we have two parts to the SME book. There is an old book, and we also have little bit of a term book in the SME. What we are trying to do two things. The old book is gradually running off, and not necessarily we are, you know, renewing many of these, etc. , and some of the term book also runs off. We, that's where the issue is on the SME book. Also what happened this quarter is the utilization level was slightly lower, because some of our SMEs are in, you know, textile and all of that, where the input costs started coming down, this year. The commodity and the input cost, et c.
Because of that, I think the utilization came down slightly. More importantly, I think the term loan term book and the old book was running off. Now we see that it will start growing from there. We see one of our major growth, the largest growth will come from gold, followed probably by SME this year. We see a positive on the SME going from here.
Sure, sure. On the retail book side, you know, in terms of the new products and the rollout of those, you mentioned we are on track. Does that imply that by the end of this fiscal, most of the retail products will be rolled out o r where are we on this?
Product rollout will happen from a credit and product perspective but r eally, in the real sense to roll out products, you need the technology backing. Once we have the LOS, LMS in place, and after that need to give it another six months, nine months, 12 months to start really see the pickup. You will see most of the products rolled out by the end of this year. To see the pickup really t he momentum of that business, it will take another year. Take it another 18 months.
Got it. Got it.
We don't want to make mistakes because in retail, if you don't have system processes and you roll out products, then you can be challenged. Because retail is one business where everything should be in place before you press the accelerator. We are not willing to press the accelerator. After 2024, retail and that's exactly our plan, next two years, five years, and seven years, when we look at this, we clearly have retail, which is going to be the primary growth momentum. As a business mix, we expect by FY 2028, 2029, the retail to be one of the largest component in our entire asset book.
Sure. You know, last year we had a lot of benefits from good recovery. On the credit cost front, we had good benefit from the gold recoveries, which resulted in negative credit costs for large part. Now that this book has largely normalized, what sort of credit costs can we expect, you know, going forward?
First of all, we don't want to have a slippage and then reverse it and feel happy about it. I think the best way to handle a business is that slippage itself is controlled and managed well. Even in this quarter, we had a marginal negative credit cost, so, 1.20 cost. It's a marginal, almost close to zero. T echnically, still it was negative. The way I look at it is this, if you do not have slippages, we will not have recovery also. We are okay with that kind of a model. The business as usual will take over. Actually, if you ask me, I'm quite happy with that kind of a scenario.
Okay. In general, the credit environment remains extremely benign, is what you see at this point?
For us, it has been last few years, we have done pretty well on the credit side. It's just that the Gold loan was a very technical k ind of an issue, right? 97% LTV. This, we had to go through this cycle. We have gone through that cycle. Now we are back to where it is normal. I think we should not see too much of slippages and, as a result, we should not see too much of recovery also. I think that's the way it will play out.
Sure. Got it. Just two housekeeping questions. What's the share of CTC-based employees as on today? And what's the floating and EBLR linked book in your case?
We have around 4,800 employees. Out of that, IBA will be around 1,300. Rest will be around 3,500 CTC. That's one. We will add another close to 2,000 people this financial year, and all of them will be CTC. This 3,500 will probably go somewhere between 4,500 to 5,000, and IBA will be around 1,200 or something like that. 1,250, something like that. As a ratio, this will constantly come down because we are expanding our base as well. What is the second question? EBLR?
What share of e-floating rate book, and of that, how much is EBLR linked?
Okay. I think we have around 54% is fixed rate of interest loan only, and MCLR linked is 31%. The repo linked, that is TBLR, is almost 7%-8%.
I'll give you a flavor, Mona. Typically, the repo-linked is mostly SME. The T-bill link is mostly wholesale, means mid-market and ECG, emerging corporate. Wholesale is broadly 50/50 in term and floating. The same is almost on the SME side. Retail is mostly fixed. I think some home loans is there, which is floating. I think that's where it is. B. K. Divakara gave you the overall picture, 54/46, right?
54 is fixed, rest is floating. MCLR is 13%. TBLR is, that is repo linked is hardly 8%. Basically SME advances only, and that too working capital loans. Term loans will continue MCLR rates only.
Yeah.
Sorry. Can you just come again on the EBLR and T-bill part?
T-bill part is 5%, 4.8%. I think it is about 8% . 42% of our advances comprises of gold loans only. Here, more or less, it is fixed. Rate of interest we take. That is why overall, if you can look at it, our fixed rate of loans is high at 54%. Rest is 46% distributed amongst MCLR, EBLR and treasury related loans.
Sure. Got it. Thank you so much. I'll come back in this.
Thank you. Next question is from the line of Nirmal Bari from Samiksha Capital. Please go ahead.
Yes, sir. Thanks for the opportunity. My first question is on during the commentary you said that over the next two years you'll be focusing on liability side and retail. Is this a change of strategy from early?
Sir, sorry to interrupt you, but your voice is breaking terribly. We were not able to hear your question.
I got your question. Let me respond to it. There is no change in strategy. Liability, always we said, is a function of how much. See, there's no point raising liability and not utilizing it, right? Liability has always been based on a need. Now we are seeing a consistent growth over the next many years because we are building our retail. The gold loan is looking consistent. SME is also building up. Wholesale is also building up. From that perspective, we are more assured of a consistent credit growth. In a rising interest rate scenario, we have to be more focused on our liability franchise because otherwise cost of borrowing can go up, right? To that extent, when the growth comes back, we have to focus on liability. When we say look at liability, we have to look at granular and consistent liability. That's why we are saying that focus is on liability, just because we are seeing the growth coming back to us right now.
My second question was, during the previous call and post that in some interviews you talked about that we would be looking to grow at around 1.5 x the industry growth rate, on the advances side. Within that, obviously for the current year and probably next year too, gold loan is expected to drive it. Outside of gold loan, what kind of growth should we expect? Should we think of it as growth closer to the industry growth rate or how?
The way it will work out is when I said that in the commentary, I said on a CAGR for three years, we will be around 1.5x Of the industry growth rate. Okay? I didn't say this year. I said on a CAGR of three years. Obviously, we cannot catch up to that level unless we are at least at the industry level this year. We'll definitely be better than industry level this year. That's one. Coming to composition, I think next 12 months at least, the primary growth will come from, gold loan. But most other negative carry which we had in retail or SME and some of the, even, some part of wholesale, et c., all that will go away. Almost every business will now contribute positive. That itself is one. Because we have an old retail book and we have an old SME book where run-off happens. To cover that up, we have to build retail as well as SME book.
Because a fair part of our wholesale book is also term loan that runs off, so we have to fill it up. We are doing two, three things. One is we are trying to gradually increase our ratio of working capital in our business, which ensures that run-offs are lesser going ahead. B is, definitely retail will start picking up. Meanwhile, the filling will happen through SME and wholesale to some extent, and within the SME and wholesale more will happen through SME.
Agri and microfinance, that book and microfinance is important because that helps us in managing our micro and some of the other PSLC requirements. That is something we'll retain focus and agree, you know, first quarter, all the banks have suffered on the microfinance because of the regulation change. Now I think things are settling down, we should be able to see growth from agri and microfinance portfolio. We will see neutralization of negative carry on the negative growth on the retail. We should be able to see some positive growth in retail this year. We will see definitely positive growth and good growth in SME and we'll see some growth in wholesale, and gold will grow much faster than last year. Probably will grow even faster than where it is right. What we saw in this quarter, so we'll grow even faster. Overall, I think, next 12 months at least, I see gold going to almost 45% of our portfolio and then gradually tapering down because some of these other products and businesses will start picking up.
Okay, can we think of this quarter as the bottom in terms of non-gold book growth?
Yeah, I think that's well put. I think that that's pretty much it. Yes.
Okay. I had one bookkeeping question on the same lines. In the presentation you give a split between gold and other segments. That number adds up to INR 17,666, while the balance sheet figure for advances is INR 16,142. What is the difference there?
That is technical write-off. In balance sheet, what we have shown is net of technical write-off that has been done at the HO level. The composition, whatever that we have given it is inclusive of written off accounts also. Provision, sir, s orry, net advances, net of provisions, net of written off accounts.
Okay, sir. Yeah, I'll get back in the queue for further questions. Thanks.
Thank you. The next question is from the line of Parth Shah from Anubhuti Advisors. Please go ahead.
Yeah. Good evening. My question is with respect to the advances growth. On Q-on-Q basis, the advances have grown by 2%. Is it possible that we can grow it in this fiscal at 20%?
See, that possibility always remain. That will be our attempt, but depends on how the overall ecosystem plays out. I mean, that's definitely possible if we execute well. Yes.
Okay. Majorly the contribute?
I told you the major contribution will come from gold followed by SME and to some extent wholesale, and then, agri, microfinance, and then, the negative carry on the retail will be taken care of. We will start seeing neutral to positive growth on retail.
Okay. Yeah. My next question is with respect to the number of branches. In March end we are having 603 branches, and as on June we are having 604 branches. There's only increase of 1 branch. When we are targeting a year, I mean, there's no momentum in increase in the branches. Are you seeing very much high increase in the number of branches in Q2 or Q3 where the addition would be happening in number of branches?
What will happen is, if you had a equation of saying that what is the average man days in a branch, this year will be much higher than last year because lot of our last year branches came in the last quarter. This year we are trying to see that we don't have to wait for last quarter for most of the branches. Most of the branches will come in Q2 and Q3. As we are talking, 52 branches already work is on, so they will be gradually rolled out in this quarter itself. Q3 we should be able to see rolling out almost 70%-80% of the branches. We'll have very limited branches in the Q4. We consciously have taken a call to get some productivity in the branch rollouts this year earlier in the year. That's where it will be. On an average, we should have 50 branches in the whole year if you take a man days kind of a thing.
By the end of this year, I mean March 2023, would that be a net increase of 100 branches on average?
100% it will be.
Okay. Got it. My next question is with respect to CASA ratio. As of now we are having so do we see this ratio going to 40%-45% in this year or maybe next year, March 2024 on a longer -term basis?
I hope it was so easy to take CASA ratios by 10% in one year l arge banks struggle to even take it by few basis points here and there, so it will not happen. Okay? In fact, i t's a good question, so let me respond to it little differently. This percentage is always this thing because your first question was can it grow by 20%? Suppose we grow by 20%, can CASA ratio go up by that much quantity? Answer is no, because then you cannot. See, CASA is a gradual movement, right? CASA will come over a period of time. It's like a drop kind of a thing that will come. If our asset book grows, then we need FD to cover the liability side.
CASA ratio will be little volatile for us till we settle down to a steady growth on the asset side and we settle down to a lot of customer acquisition on the, liability side. I will say that, it's a combination of asset growth, correspondingly liability growth, and then CASA ratio. We have to see all three ratios together. On a standalone basis, CASA will continue to grow the way you are going. For example, you saw average CASA grew by 10% quarter-on-quarter. Year-on-year, CASA grew by 15%. I can assure you that we'll grow faster than that. If the balance sheet grows much faster than that, then CASA ratio may be stable at the same level. It's a question of the headline growth of the balance sheet.
Okay. Got it. That was helpful. Thank you.
Thank you. Next question is from the line of Aalok Shah from Monarch Networth Capital. Please go ahead.
Yeah, thank you. Thank you for the opportunity. Sir, congrats on a good set of numbers. I had two questions primarily. One is when I look at your corporate exposure, the top three sectors are textile, construction and infra.
NBFC also is there.
NBFC. 8.9%. While we understand the help of NBFCs as we hear some of the NBFC players, what's your experience of the corporate in these three sectors, the textiles, construction and infra? And maybe if you could add there further between the state-owned construction infra activities and central government-owned construction infra activities.
We have not seen any stress in our wholesale book. If you can look at it though, we would have substantially increased our exposure to these sectors. We have not seen any major corporate accounts going, even it is not under SME position. Maybe at a certain extent a few SME accounts are falling under this category. By and large that we have not seen any stress in any of these accounts, sir. Our portfolio is robust, and it may not cause us any concern as of now.
The other side of your question is how do you see the growth in balance sheet from which segments, et c., on the wholesale side? I look at it this way. Almost 40% of our corporate book is NBFC. Okay? I see as interest rates going up, you know, that book will continue to do well, right? I mean, in terms of, they will be dependent on bank credits and things like that, because for them, the other funding avenues will dry up. Banks will be at an advantage on NBFC funding. Having said that, we don't want to take it up beyond where we are. We are looking at other segments as well. Road transportation, we are looking at HAM projects which are National Highways and HAM projects, NHAI. We are looking and we understand the textile business extremely well. It's almost like the way we understand gold loan business, we understand this business well.
To that extent, we have people who understand this, so that helps us. We know that the commodity prices come down, the cotton prices come down to some extent. That's why some default provisions have come down. That's okay. That's good for the industry, so we have no problem. In fact, we had worries when the prices were going up, because at the end of the day, the credit is more important than the growth in the business. Also we are taking a very clear segmental approach in terms of healthcare, in terms of. What we are doing on the wholesale side is we are building up our coverage strategy and we are building a lot more coverage in western part of the country, northern part of the country and south.
Wherever we are already strong, we are going to leverage. Also our securitization book is doing well. Between all of these, I think the wholesale book is very small. To that extent, it should not be a problem to get businesses from these segments where we are talking about. What we are looking at is basically increasing our coverage little bit more and creating a little more distribution across the segments.
Okay. This helps. I had another question which was more on the gold loan side. Could you kind of help us understand the client profile? You know, because we kind of had this math around the AUM and the number of clients, you know, it's typically on the higher side. What is the client profile? Is it more an SME client who comes for a gold loan? A bit of some understanding there.
Okay. No, our client profile is not so much of SME. That will be very small. Most of these will be retail in nature. There will be some who has you know in our Kanakadhara gold loan product. There will be some of the businesses which you're talking about, and that also we are consciously not growing. We are bringing it down. But otherwise most of them are retail. Our segmentation, if you ask me, it will be between where the NBFCs are and between the large private banks are. Somewhere in between is our sweet spot. Because our operational efficiency and capability is well, customers are satisfied with us.
For example, as Mr. Rajendran used to tell this again and again, that auction is not an option, provided we know the customers well. Because we went through that and we proved it last year. We didn't do too much of auctions, still we managed to recover most of the money because this gold is very dear to these retail customers. O ur ability to renew these customers is very high. The customer loyalty is very high with us, and through reference we get more business. Overall, in short, what it means is stable product, stable customer franchise, loyal customer franchise, growing customer franchise based on retail reference and SME part is small here and hence to that extent consistent and the quality of the book is good. Our segmentation is between the top and private sector banks and the NBFCs.
If I could just add two more questions to this. One is the gold loan, is it more to the repeat customers or, I mean, there is a new addition of new customers as well, but we've seen that with a lot of other banks and NBFCs, there is an element of repeat customers on the gold loan side. The second is, you know, with whatever you talked about, what's the average ticket size of gold loan customers? Is it like INR 1 lakh-INR 2 lakh rupees or on the higher side?
Yes, first question first, which is the repeat customers. Obviously you cannot grow a gold loan book of 26% by just doing repeat customers. We get enough new add-on customers. If you look at it, our tonnage growth has been around 20% and our business growth is around 23%, I mean, volume growth. What it means is that we are getting lot of new gold also to the bank, and most of it will come from new customers. Okay? To that extent, we have a sales machinery which is going and getting new customers. Also, branches do it through reference selling, through our own loyal customers, which I was mentioning.
The second question about ticket size, I exactly don't have the number, but I think it's around INR 1 lakh, INR 1.1 lakh or INR 1.2 lakhs, if I remember it correctly. I'm telling from my memory, but it's in that kind of range, around INR 1 lakh. It is not in thousands, neither in INR 3 lakhs, INR 4 lakhs, INR 5 lakhs. It is somewhere in that INR 1 lakh range.
Sure, sir. This helps. Thank you. I'm done with my questions, sir. Thank you.
Thank you. The next question is from the line of [Shirish Patel] from Moneylife Advisory Services. Please go ahead.
Yeah. Hi, sir. My question is regarding gold loan and gold loan yield. As you had mentioned that the delta between NBFCs and our yield is quite high. Wanted to understand the reason for this. Secondly, how are we looking at the competition from other larger banks who are also kind of looking at gold loans as a key growth driver going forward? Thanks.
Yeah. The first question you said is NBFC yields are higher, our yield is not so high. Have I got it right?
Yes, sir. Wanted to know the reason for this.
The reason is, see, banks are very, very highly governed by RBI and regulators because we are not only in the business of gold loan, we have to do many other businesses, and we have to be absolutely 100% clear on compliance, on processes, on governance and everything, whichever business we do, right? To that extent, lot of ring fencing we have to do in terms of processes and governance. That's why, you know, we cannot always do all the businesses, which if you don't have a bank license, you can take those chances. We cannot take those chances. Also, we are not in those small ticket sizes, where some of the NBFCs play, which is actually the money lender community.
You know, where the money lenders instead of that, the interest rates which some of these NBFCs are charging is much lesser. We are not playing in that, in that segment. Coming to your other question, whether it is SBI or, PNB or, ICICI or some of these other banks, they are also getting into gold loan. See, the, business is large enough for everybody to have their own share of pie. For us, the kind of focus, the kind of loyalty base which you have, the kind of markets, it's very loyalty-driven, this business, okay? They will continue to do what they want to do and what happens is because we'll remain focused on this.
Other banks, they will do it and then once the wholesale business starts picking up and all that, for their growth, at the end of the day, at their balance sheet, even a INR 1 lakh crore is nothing. For us, even INR 7,000 crore is 42%. The focus which we give to these customers and to this business is very different compared to some of these huge balance sheet large banks. I actually launched gold loan in HDFC in 2005. I can tell you that some of these large and I was actually running in Axis also gold loan was a part of my retail assets portfolio.
The focus we see in this bank at every branch level, that focus cannot be there in those banks because that's a very small portion of their overall balance sheet. Focus helps, and our knowledge, understanding, operation, controls, processes is very different. That does not worry me at all. We should be able to do well in our gold loan, and we'll continue to do well. Having said that, we'll diversify and we cannot be a single product bank. We will have all products eventually across retail, you know, bouquet of products.
Thanks, sir. My second question is regarding the demand for gold loans outside of our key geographies of Tamil Nadu and Kerala. Gold loan is a very popular product in these geographies. How are we seeing the demand outside of these geographies as we expand our branch network?
Yeah. If you see our gold loan portfolio in Tamil Nadu is as big as Kerala. Okay. If not more, I have to just check, but it's broadly similar kind of a range. We are just kind of getting our, you know, distribution right in Tamil Nadu at this point of time. In the whole of South, I think there is enough opportunity in gold loan, and we are growing our gold loan book faster outside Kerala, in Tamil Nadu and some of these other locations in the first place when you look at overall South.
Looking at West and North, we will have gold loan branches, we will have gold loan products, but those are the markets also will look at liability, also look at assets, also look at other businesses, etc . Hence, yes, primary growth will come from South, but in other locations also gold loan is picking up and we will continue to do that. That's why I'm saying that as we expand our geography and distribution, the other products will also pick up and we will continue to grow through our gold loan growth. Somewhat, see, what happens is on the base, even if you do much lesser gold loan in the North and the West compared to South, but that's by adding on to the denominator, right? That itself will help. Plus the existing base in Kerala, Tamil Nadu and some of these other places will also help.
We have Kerala 36%.
Mr. Sijo Varghese is giving me the numbers. As we are talking, what I told broadly is correct, that Kerala is 38%, Tamil Nadu is 36%, and rest are, Maharashtra is around 15%, and rest is equally distributed. If you look at the time machine, you will see that, Tamil Nadu has grown much faster than Kerala on gold loans as well, because it has almost caught up. With 36% and 38%, there is hardly any difference. If you execute it right, actually Tamil Nadu is a very high potential for gold loans as well, and we are expanding there big time.
Got it. Got it, sir. Thank you, sir. I will get back into the queue.
Thank you. Ladies and gentlemen, that was our last question for today. I will now hand the conference to the management for closing comments.
Thank you, Manish, and thank you everybody for attending our Q1 FY 2023 investor conference results conference. We'll be happy to take any further questions. You can always get in touch with us for any further questions, whatever you want to understand. In short, what I can say is that whatever the journey which you have started, we will embark on this journey and you will see every year our franchise mix is changing. We are looking at growth. We are looking at lot more profitable customers. We are looking at leveraging our full service banking franchise and the banking license what we have on a pan-India basis.
With that, I think the growth is given and our primary focus will be on growth and quality of the portfolio. These two primary focus. At the same time, we'll also try to manage the cost along the way, but we will not shy away from investments and we'll not shy away from special investments into distribution, into customer acquisition and into technology. That's the most important thing. We will not shy away from that. Thank you very much for attending our results investor meeting, and look forward to see you again next quarter.
Thank you very much. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.