Ladies and gentlemen, good day, and welcome to the Q4 FY 2022 Earnings Conference Call of ICICI Bank. 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 then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Bakhshi, Managing Director and CEO at ICICI Bank. Thank you, and over to you, sir.
Thank you. Good evening to all of you, and welcome to the ICICI Bank earnings call to discuss the results for Q4 of financial year 2022. Joining us today on this call are Vishakha, Anup, Sandeep Batra, Rakesh, and Anindya. We hope that you are safe and in good health. In January, we saw a sharp rise in the number of COVID-19 cases that resulted in a moderation in the pace of economic activity. However, the impact of this third wave of the pandemic was mild, and with the decline in the number of new COVID-19 cases, economic activity gained momentum in the months of February and March.
This was visible in the bank's ultra-frequency index, comprising several high-frequency indicators tracked by our economic research group, which rose from 112 in January to 114.9 in February and 124.4 in March. Some of the major factors leading to improvement in this index were increase in power demand, rail freight revenues, e-way bill generation, and GST collections. We extend our gratitude to the medical and health workers fraternity for their tireless efforts in this fight against COVID-19. At ICICI Bank, we aim to grow the core operating profit within the guardrails of compliance and risk through our 360-degree customer-centric approach and focus on opportunities across client and segment ecosystems.
We focus on growing our loan portfolio in a granular manner with a focus on risk and rewards, with return of capital and containment of provisions below a defined percentage of core operating profit being a key imperative. We follow a micro market-based approach to create an efficient distribution and resource allocation strategy by using analytics to identify opportunities. We aim to steadily grow our business within our strategic framework and strengthen our franchise, delivery, and servicing capabilities, backed by a range of digital initiatives. Coming to the quarterly performance against this framework, growth in core operating profit in a risk-calibrated manner through the focused pursuit of target market segments.
The core operating profit increased by 18.7% year-on-year to INR 101.64 billion in this quarter, and 22.3% year-on-year to INR 383.47 billion in financial year 2022. Excluding dividend income from subsidiaries and associates, core operating profit grew by 21% year-on-year in Q4 of 2022. The profit after tax grew by 59.4% year-on-year to INR 70.19 billion in this quarter. For the fiscal year 2022, the profit after tax increased by 44.1% year-on-year to INR 233.39 billion. The board has recommended a dividend of INR 5 per share for financial year 2022, subject to requisite approvals. Further enhancing our strong deposit franchise.
Total deposits grew by 14.2% year-on-year at March 31, 2022. During the quarter, average current account deposits increased by 23.6% year-on-year and average savings accounts deposits by 22.7% year-on-year. The liquidity coverage ratio for the quarter was about 130%, reflecting continued surplus liquidity. Our cost of deposits continues to be among the lowest in the system. Growing our loan portfolio in a granular manner with a focus on risk and reward. The retail loan portfolio, excluding rural loans, grew by 19.7% year-on-year and 6% sequentially at March 31, 2022. Disbursement across various retail products increased in Q4 of 2022 compared to the previous quarter.
The business banking portfolio grew by 43.2% year-on-year and 10.2% sequentially at March 31, 2022. The SME portfolio grew by 33.6% year-on-year and 11.3% sequentially. The growth in our SME and business banking portfolios has been driven by our digital offerings and platforms like InstaBIZ and Merchant Stack. The domestic corporate portfolio grew by 9% year-on-year and was flat sequentially at March 31, 2022. The domestic loan portfolio grew by 17.5% year-on-year and 5.7% sequentially. The overall loan portfolio grew by 17.1% year-on-year and 5.5% sequentially at March 31, 2022. Leveraging digital across our business.
Our various digital platforms, such as iMobile Pay, internet banking platforms, InstaBIZ, and Trade Online, provide end-to-end seamless digital journeys, personalized solutions and value-added features to customers, and enable more data-driven cross-sell and up-sell. In line with the philosophy of open architecture of our digital platforms, recently, we made our InstaBIZ interoperable. That is, all the benefits of the app are now available to all merchants, including those who do not have current accounts with us. This initiative enables merchants to instantly create digital collection solutions like UPI ID and QR code, and start collecting money from their customers. We have shared some details on our technology and digital offerings in slides 18-32 of the investor presentation. Protecting the balance sheet from potential risks.
Net NPAs declined by 24.2% year-on-year and 5.2% sequentially, to INR 69.61 billion at March 31, 2022, from INR 73.44 billion at December 31, 2021. The net NPA ratio declined to 0.76% at March 31, 2022, from 0.85% at December 31, 2021. During the quarter, there were net deletions from gross NPAs of INR 4.89 billion excluding write-offs and sale. The provision coverage ratio on the NPAs was 79.2% at March 31, 2022. The total provisions during this quarter were INR 10.69 billion or 10.5% of core operating profit and 0.53% of average advances.
This includes contingency provision of INR 10.25 billion made on a prudent basis. The bank holds contingency provisions of INR 74.5 billion or 0.9% of total loans as of March 31, 2022. Maintaining a strong capital base, the capital position of the bank continued to be strong with the CET1 ratio of 17.6% at March 31, 2022, after reckoning the impact of the proposed dividend. The Tier 1 ratio was 18.35%, and the total capital adequacy ratio was 19.16% at March 31, 2022. Further, the market value of the bank's investments in listed entities of the group is about INR 840 billion.
As has been announced, Vishakha has decided to pursue opportunities outside the group and will step down from the board effective May 31. We thank her for her outstanding contribution to ICICI and wish her all the very best. Anup will take over Vishakha's responsibilities at the board level. The board has today approved the elevation of Rakesh as an Executive Director, and he will take over Anup's responsibilities. Anindya will take up the role of CFO and will report to Sandeep Batra, who will continue to head our corporate center. At ICICI Bank, we strive to build a sustainable and responsible business and make a positive impact on the economy, society, and environment. The bank has focused on various aspects of ESG in its business as well as CSR activities. We have adopted a board-approved ESG policy along with governance and oversight framework for ESG.
Looking ahead, we see many opportunities to grow our core operating profit in a risk-calibrated manner. We will continue to focus on our objective of catering to all the banking and financial needs of the customer with a focus on risk and reward. Our ecosystem-based approach and creation of multifunctional teams has helped in nurturing relationships and offering the entire bouquet of services of the bank to customers. We continue to be guided by the twin principles of one bank, one ROE, emphasizing the goal of maximizing our share of target market across all products and services, and fair to customer, fair to bank, emphasizing the need to deliver fair value to customers while creating value for shareholders. We remain focused on delivering consistent and predictable returns to our shareholders. I now hand the call over to Rakesh.
Thank you, Sandeep. I'll talk about the balance sheet growth, credit quality, P&L details, growth in digital offerings, portfolio trends, and performance of subsidiaries. Starting with the balance sheet growth, Sandeep covered the loan growth across various segments. Up to the last quarter, we used to report rural loans as part of the retail portfolio. From this quarter, we are reporting the rural loans separately. The retail loan portfolio, excluding the rural loans, grew by 19.7% year-over-year and 6% sequentially at March 31st. Coming to the growth across retail products, the mortgage portfolio grew by 20.3% year-over-year and auto loans by 11.3%. The commercial vehicles and equipment portfolio declined by 1.3% year-over-year. Growth in the personal loan and credit card portfolio was 31.9% year-over-year.
This portfolio was INR 879.35 billion or 10.2% of the overall loan book at March 31st. The rural loan portfolio increased by 6.5% year-on-year and 4.3% sequentially. The retail and rural portfolio together grew by 17.6% year-on-year and 5.8% sequentially. The overseas loan portfolio in U.S. dollar terms grew by 5.9% year-on-year and was flat sequentially at March 31st. The year-on-year increase in the overseas loan portfolio was primarily due to increase in the India-linked trade finance book. The overseas loan portfolio was 4.8% of the overall loan book at March 31st.
The non-India linked corporate portfolio reduced by 48.2% or about $597 million year-on-year, and 6.8% or about $47 million sequentially. Of the overseas corporate portfolio, about 82% comprises Indian corporates, 10% is overseas corporates with Indian linkage, 4% comprises companies owned by NRIs or PIOs, and balance 4% is non-India corporates. Our direct exposure to Russia and Ukraine is negligible. We have exposure to an Indian oil refinery, rated AA- externally, where a sanctioned Russian entity owns 49% stake. The exposure is largely non-funding nature. The oil refinery's operations are largely in India. Coming to the funding side, average savings account deposits increased by 22.7% year -on -year in Q4 and 23.5% year -on -year for the full year.
Average current account deposits increased by 23.6% in Q4 and 31% year-on-year for the full year. Total term deposits grew by 9% year-on-year at March 31st. Coming to the credit quality, the net deletions from gross NPAs were INR 4.89 billion in the current quarter compared to INR 1.91 billion in the previous quarter. There were net additions of INR 1.23 billion to gross NPAs in the retail, rural, and business banking portfolio and net deletion of INR 6.12 billion to gross NPAs in the corporate and SME portfolios. The gross NPA additions were INR 42.04 billion in the current quarter compared to INR 40.18 billion in the previous quarter.
The gross NPA additions from the retail, rural, and business banking portfolio were INR 37.36 billion, and from the corporate and SME portfolio were INR 4.68 billion. Recoveries and upgrades from NPAs excluding write-offs and sale were INR 46.93 billion in the current quarter compared to INR 42.09 billion in the previous quarter. There were recoveries and upgrades of INR 36.13 billion from the retail, rural and business banking portfolio and INR 10.80 billion from the corporate and SME portfolio. Corporate and SME recoveries and upgrades include a power sector account, which was upgraded post-implementation of a resolution plan under IBC. The gross NPAs written off during the quarter were INR 26.44 billion.
The non-fund-based outstanding to borrowers classified as non-performing was INR 36.4 billion at March 31st, compared to INR 36.38 billion at December 31st. The bank holds provisions amounting to INR 20.51 billion at March 31st against this non-fund-based outstanding. The total fund-based outstanding to all standard borrowers under resolution as per various guidelines declined to INR 82.67 billion or about 1% of the total loan portfolio at March 31st from INR 96.84 billion at December 31st. The sequential decline was mainly due to prepayment by a borrower in the construction sector. Of the total fund-based outstanding under resolution at March 31st, INR 60.43 billion was from the retail, rural, and business banking portfolio, and the balance, INR 22.24 billion, was from the corporate and SME portfolio.
The bank holds provisions of INR 25.30 billion against these borrowers, which is higher than the requirement as per RBI guidelines. Coming to the P&L, the net interest income increased by 20.8% year-on-year to INR 126.05 billion. The net interest margin was at 4% in this quarter compared to 3.96% in the previous quarter and 3.84% in Q4 of last year. The impact of interest on income tax refund on net interest margin was 1 basis point in Q4 of this year compared to six basis point in the previous quarter and 1 basis point in Q4 of last year.
The domestic NIM was at 4.12% this quarter compared to 4.06% in previous quarter and 3.94% in Q4 last year. The cost of deposits was 3.48% in this quarter compared to 3.47% in the previous quarter. Of the total domestic loans, interest rates on 41% loans are linked to repo rate and 7% to other external benchmarks. Non-interest income, excluding treasury income, grew by 11.4% year-on-year to INR 46.08 billion this quarter. Fee income increased by 14.4% year-on-year to INR 43.66 billion in this quarter, driven by growth across various segments.
Fees from retail, rural, business banking and SME customers grew by 14.3% year-on-year and contributed about 77% of the total fees in this quarter. Dividend income from subsidiaries and associates was INR 2.32 billion in this quarter compared to INR 3.57 billion in Q4 of last year. The dividend income in Q4 of last year included interim dividend from ICICI General and ICICI Securities PD. The bank's operating expenses increased by 17.4% year-on-year this quarter. The employee expenses increased by 21% year-on-year. The bank had about 105,800 employees at March 31st. The employee count has increased by about 7,000 in the last 12 months.
Employee expenses in this quarter include an impact of INR 0.69 billion due to fair valuation of ESOPs granted to all employees post April 1, 2021 for the current quarter as required by RBI guidelines. Non-employee expenses increased by 15.6% year-on-year in this quarter, primarily due to retail business and technology-related expenses. The technology expenses were about 8.5% of our operating expenses in FY 2022. The core operating profit increased by 18.7% year-on-year to INR 101.64 billion in this quarter. Excluding dividend income from subsidiaries and associates, the core operating profit grew by 21% year-on-year. The core operating profit grew by 22.3% year-on-year to INR 383.47 billion for the full year.
There was a treasury gain of INR 1.29 billion rupees in Q4 compared to INR 0.88 billion rupees in Q3, and a loss of INR 0.25 billion rupees in Q4 of the previous year. The total provisions during the quarter were INR 10.69 billion rupees or 10.5% of the core operating profit and 0.53% of the average advances. During the quarter, we made contingency provision of INR 10.25 billion rupees on a prudent basis. The bank continues to carry COVID-19 related provision of INR 64.25 billion rupees as contingency provisions at March 31st. Thus, the bank holds contingency provision of INR 74.5 billion rupees at March 31st. The provision coverage on NPAs continued to be robust at 79.2%.
In addition, we hold INR 25.3 billion of provisions on borrowers under resolution. At March 31st, the total provisions other than specific provisions on fund-based outstanding to borrowers classified as non-performing were INR 179.18 billion or 2.1% of the loans. The profit before tax grew by 63.1% to INR 92.24 billion in this quarter. The tax expense was INR 22.05 billion in this quarter, compared to INR 12.54 billion in the corresponding quarter last year. The profit after tax grew by fifty-nine point four percent year-on-year to INR 70.19 billion in this quarter. The profit after tax grew by 44.1% year-on-year to INR 233.39 billion for the full year.
The consolidated profit after tax grew by 58% year-on-year to INR 77.19 billion in this quarter, and the consolidated profit after tax grew by 36.6% year-on-year to INR 251.10 billion for the full year. Coming to the growth in digital offerings. Leveraging digital and technology across businesses is a key element of our strategy of growing the risk-calibrated core operating profit. We have seen significant increase in the adoption of our mobile banking app, iMobile Pay. There have been 6.3 million activations of iMobile Pay by non-ICICI Bank account holders as of end March. The value of transactions by non-ICICI Bank account holders in the current quarter was 4.9 x the value of transaction in Q3 of 2022.
The value of credit card spends grew by 77% year-on-year in Q4, driven by higher activation rate through digital onboarding of customers, including Amazon Pay credit cards, automated and effective portfolio management to grow spends amongst existing card customers, and diversification through commercial cards. The bank has issued more than 3 million Amazon Pay credit cards since its launch. The bank has recently tied up with Emirates Skywards, the award-winning loyalty program of Emirates and flydubai, to launch a range of co-branded credit cards that enable customers to earn reward points on travel, lifestyle, and everyday spends. The value of financial transactions on InstaBIZ grew by about 44% year-on-year in the current quarter. The value of transactions on the supply chain platform in the current quarter was 2.7 x the value of transactions in Q4 last year.
The proportion of end-to-end digital sanctions and disbursements across various products has been increasing steadily. About 34% of our mortgage sanctions and 44% of our personal loan disbursements by volume were end-to-end digital this year. The bank has created more than 20 industry-specific stacks, which provide bespoke and purpose-based digital solutions to corporate clients and their ecosystems. The volume of transactions through these solutions in FY 2022 was 2.7 x the volume of transactions last year. The value of transactions done on Trade Online increased by about 80% year-on-year this year. Coming to some portfolio information. We have provided the details on our retail business banking and SME portfolio in slides 43-46 of the investor presentation.
The loan and non-fund-based outstanding to performing corporate and SME borrowers rated BB and below was INR 108.08 billion at March 31st, compared to INR 118.42 billion at December 31st. The amount of INR 108.08 billion at March 31st includes INR 23.89 billion of loans under resolution. The sequential decline during the quarter was mainly due to prepayment from a borrower in the construction sector, where resolution had been implemented as per RBI's COVID resolution framework. The details are given on slide 41 and 42 of the presentation. Other than two accounts, one each in power and telecom sector, the maximum single borrower outstanding in the BB and below portfolio was less than INR 6 billion at March 31st.
At March 31st, we held provisions of INR 12.32 billion on the BB and below portfolio, compared to INR 15.75 billion at December 31st. This includes provisions held against borrowers under resolution included in this portfolio. The builder portfolio, including construction finance, lease rental discounting, term loans, and working capital loans, was INR 269.48 billion at March 31st, compared to INR 257.53 billion at December 31st. The builder portfolio is about 3% of our total loan portfolio. Our portfolio is granular in nature, with the larger exposures being to well-established builders, and this is also reflected in the sequential increase in the portfolio.
About 9.5% of our builder portfolio at March 31st was either rated BB and below internally or was classified as non-performing, compared to 11% at December 31st. Coming to the subsidiaries and key associates. The details of the financial performance of subsidiaries and key associates are covered in slides 53-55 and slides 76-81 in the presentation. The VNB margin increased from 25.1% in FY 2021 to 28% in FY 2022. The value of new business increased by 33.4% year-on-year to INR 21.63 billion in FY 2022.
The profit after tax of ICICI Life was INR 7.54 billion in FY 2022, compared to INR 9.6 billion in FY 2021. The embedded value increased by 8.7% year-on-year to INR 316.25 billion at March 31st. The profit after tax was INR 1.85 billion in this quarter, compared to INR 0.64 billion in Q4 of last year. The gross direct premium income of ICICI General was INR 179.77 billion in FY 2022, compared to INR 140.03 billion in FY 2021. The combined ratio was 108.8% in FY 2022, compared to 99.8% in FY 2021.
The profit after tax was INR 12.71 billion in FY 2022, compared to INR 14.73 billion last year. The profit after tax was INR 3.13 billion this quarter, compared to INR 3.46 billion in Q4 last year. Prior period numbers are not comparable due to the reflection of the general insurance business of Bharti AXA in the current period numbers. The profit after tax of ICICI AMC was INR 3.57 billion in this quarter, compared to INR 3.48 billion in Q4 of last year. The profit after tax of ICICI Securities on a consolidated basis increased by 3% year-on-year to INR 3.40 billion in this quarter from INR 3.29 billion in Q4 of last year.
ICICI Bank Canada had a profit after tax of CAD 4.3 million in this quarter compared to CAD 5.1 million in Q4 last year and CAD 11.5 million in Q3 this year. Profit after tax was higher in Q4 last year and Q3 this year due to write back of provisions. ICICI Bank Canada repatriated CAD 220 million of equity capital to the bank in Q4 this year. ICICI Bank U.K. had a profit after tax of $3.1 million this quarter, compared to $2.8 million in Q4 of last year, and $3 million in Q3 this year.
As per Ind AS, ICICI Home Finance had a profit after tax of INR 0.53 billion in the current quarter, compared to INR 0.15 billion in Q4 of last year and INR 0.48 billion in Q3 this year. The year-on-year increase in profit after tax is mainly due to decline in cost of funds and lower provisions. With this, we conclude our opening remarks, and we will now be happy to take your questions.
Thank you very much, sir. We will 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 will wait for a moment while the question queue assembles. The first question is from the line of Mahrukh Adajania from Edelweiss. Please go ahead.
Yeah, hi. Congratulations. My first question is really on the margin outlook. I know you don't give any specific guidance, but given intense pricing competition in some segments, you know, unsecured salary and then even mortgages, do you think repo rate hikes will benefit margin?
Mahrukh, it will be a function of, you know. The net interest margin is, you know, difficult to give an outlook. I think, you know, in addition to the competitive pricing, you know, that you talked about, like you rightly said, it'll also be a function of, you know, the repo rate movement, you know, through the year and the timing of it. We do have a reasonable part of our book, you know, which is linked to external benchmarks now, like, you know, most other banks, as well. You know, like we always say, you know, our target would be to try and see, you know, how we can, you know, maintain our margins.
It will be a function of, you know, what is happening in the market. If you look at the, you know, current quarter, Q4, our margin was about 4%. If you look at it, you know, in the past years also, Q4 traditionally for us has, you know, seen margins to be about, you know, 8-10 basis points, you know, higher, you know, just because, you know, of the fact that the quarter, you know, has lesser number of days. The annualized, you know, computation gives a slightly higher margin. On the core basis, I would say between Q3 and Q4, the margin was, you know, kind of flat.
You also saw the fact that the cost of deposits were, you know, kind of have now, you know, bottomed out, you know, at 3.47-3.48%. We will have to kind of, you know, navigate through this period, you know, before the repo rate, you know, starts to increase. Then thereafter definitely, you know, the existing book yields will go up. But the incremental lending rates will still be a function of, you know, how much liquidity surplus continues in the system.
Got it. Just in terms of mortgages, so your mortgage book has been growing very well. If you see the sectoral deployment, sector loan growth is just 8%, when everyone's talking about a very good real estate cycle and very good registration. What kind of explains that?
If you look at the last, actually, you know, several quarters, our growth has been, you know, at similar levels of around 20%. I think the focus that we have had on the entire, you know, retail business in terms of the customer 360, where we are, you know, looking at the entire, you know, set of products and services to be provided has really helped us, you know, in growing, you know, both the asset book that you're seeing as well as the strong growth on the liabilities, you know, that we have, you know, seen. Of course, in the mortgage market also, you know, the lending rates have declined.
There has been a fair degree of, you know, balance transfers also that have been happening. Those are the reasons, you know, that we have seen. I'll ask Anup to add if anything is.
No, I think, Rakesh, you have broadly covered it. Our focus on micro markets and our focus on just making sure that we have decongested many of our processes and make it easier for customer onboarding. Added to that, our micro market and go-to market focus is increasing our share, and that actually is leading to this kind of growth model.
My last question is that RBI has come up with master directions on credit and debit cards. Would your Amazon Pay ICICI Bank card be fully compliant with those master directions?
Yeah. Mahrukh, I think glad you asked this question because I'm sure, you know, subsequently many would have asked this question because it's a very recent development. As far as we are concerned, we have read through the guidelines. We are looking at it more finely. At the first reading, we will be quite unimpacted by these guidelines. These guidelines seems to be, you know, on co-brand, but there are various aspects of co-brand, particularly data sharing and revenue sharing and all of it. We will be unaffected largely by this circular. We are also going through it with a fine-tooth comb if there are any issues, but prima facie it doesn't seem to have any.
In fact, of course, there is another bucket on customers on activation after one year and, if somebody requests for deactivation, within seven days we have to reactivate. I think those are very, very good customer service measures that are coming. I would put it in two buckets, co-brand and customer service related issues. We seem to be good on both so far.
Thanks a lot. Thank you.
Thank you.
Thank you. The next question is from the line of Mona Khetan from Dolat Capital. Please go ahead.
Yeah. Hi, good evening. Firstly on the SME and business banking book, what are our incremental yields? If you could give some color on in terms of growth, is it led by increased working capital demand due to higher commodity prices or higher inflation?
We don't separately disclose yields by portfolio segments. Like we were responding to earlier question from Mahrukh, indeed, the business banking and SME segment is also extremely competitive. We continue to focus on the entire customer 360, so it's not just about the loan, but also the float income on the current account side, you know, FX and trade and all the other income that we get from the customers. We have been seeing pretty strong growth in this portfolio for the last few years.
I think it is a, you know, combination of the focus that we have had on this segment, plus of course, you know, all the investments that we have made on digital and technology, in terms of, you know, for servicing the customers in this segment, which has really helped, you know, with this growth for us.
Okay. I mean, would you be able to give some color on whether a large part of this incremental growth is also driven by increased inflation and commodity prices, et cetera?
If you look at it, you know, if you go back, say, six months, you know, even then the portfolio was, you know, growing at, you know, broadly this kind of a pace, you know. I don't think there is any, you know, specific delta impact of, you know, inflation per se. Of course, you know, in this segment, you know, most of our loans are, you know, working capital loans. You know, the amount of term lending will be, you know, much more limited.
Right. Sure. I'm assuming that on the margin front, there is no one-off in terms of income tax refund or anything this quarter.
You know, I talked about the income tax refund. That was like, you know, 1 basis point or something. So there is no one-off per se, but like I mentioned in Q4, typically we have the margin which is about, you know, 8-10 basis points higher, you know, than Q3. You know, that's how it comes out. In Q3 was 3.96%. That included about, you know, 6 basis points of the income tax refund benefit. So if you look at it, I think, you know, 3.9% is where we were in Q3, broadly, you know, around that level in Q4 on a core basis. Full year also we are in that region of, you know, 3.9-3.95%.
Just to add, Rakesh, on that. On the SME portfolio and the BB portfolio, our ticket sizes largely are similar. It is enhanced coverage and decongestion of processes, which is, I would say, put more weightage on leading to the growth on the balance sheet.
Sure. That's helpful. Just finally on the credit card book, where could our revolve rates be versus pre-COVID levels?
We won't disclose that separately, but yeah, you know, it would be, you know, it will be somewhat, you know, lower than where we were, you know, pre-COVID.
Sure. Thank you.
Thank you. The next question is from the line of Suresh Ganapathy from Macquarie. Please go ahead.
My questions are all related to credit cards. Anup, do you explicitly share data with Amazon? That's the first question on the co-branding or any of your co-branded partners. The second question is that, you know, the credit card book is up 10% QOQ. QOQ, have you seen any change in the revolve rates? If you can tell us, because obviously the credit card outstanding is up QOQ. Finally, you know, there is one school of thought with respect to this new guidelines of credit cards is that the Reserve Bank of India could be a bit more open to give licenses to NBFCs for credit cards, considering that there are severe restrictions imposed on co-branding. Do you subscribe to that view? Thanks, Anup.
Firstly, as I had mentioned earlier to Mahrukh's question, we have read through the guidelines. There doesn't seem to be any impact on us prima facie. We'll of course go through the guidelines more closely to see if there are any impacts. That will cover the data and all other aspects that you sort of asked about. I think the other important question that you asked is that now if there are restrictions on co-brand, will NBFCs be allowed to issue their own cards, et cetera? I think this seems, again, you know, these are all speculative. It seems that it points more towards other fintechs rather than an NBFC bank type of tie-ups. It looks more fintech than other things.
From that perspective, I will say that competitive intensity might come down instead of up, from banks' perspective. There are a lot more guidelines around customer service and being fair to the customer, which I think are very positive. That is also a positive to us. Will other NBFCs try to get a card? Actually, if you, when we saw, you know, there was an old guideline of RBI where RBI could have given a permission or approval to issue a card, but you have to have an issuing bank. But you could, and which is not co-branded. But you know, nobody has launched, but I'm sure many people might be open to launching those things. We'll have to see.
The large players who might be open to launching such a thing, they already had co-branded cards in one way or the other. Let us see how it evolves. Overall, at this point of time, for our co-branded, there doesn't seem to be much impact or in fact any impact from the first reading. Second, on the competitive intensity, I think it is going to be less than or equal to, doesn't seem to be greater than or equal to, of the larger players coming and issuing or having their own credit cards. That was always an option, but has not materialized. It might happen. It is good. It's a large market, Suresh. You know, increased competition, et cetera, you see, we have to basically play our own games.
Competitive intensity, you know, does impact, but at the end of it, finally, you know, we'll have to play our game well. Only then we'll win.
Just one other clarification. QOQ, have you seen increase in revolve rates because your outstanding book is up 10% QOQ?
No. QOQ also. QOQ, as you know, there are revolve rates and there are transaction portion also because Q3 was very good for us. Our spends was very good because we also focus, because we have festivals, we focus on spends, we focus on ads, we increase the spends, et cetera. Part of it is that as well.
Okay, thanks so much, Anup.
Thank you.
Thank you. The next question is from the line of Manish Ostwal from Nirmal Bang. Please go ahead.
Yes, sir. Thank you for the opportunity. I have only one question. On your FY 2023 loan growth outlook, where do you see the growth rate given the inflation-related demand pressure in the economy?
We likely, you know, always say that we don't have any specific, you know, loan growth, you know, target and or outlook. I think our focus is entirely on growing the risk-calibrated core operating profit. You know, we will, you know, grow in line with, you know, the market opportunities which are there. We will look at, you know, the risk and the return, you know, parameters to be within, you know, our, you know, thresholds.
In terms of the opportunity, if you look at, you know, the across the portfolio, we have seen, you know, pretty consistent growth across, you know, retail, business banking, SME, corporate, and, you know, to the extent we do calibrate our growth, you know, where we find that the pricing is, you know, not in line with what we expect. The entire focus is to, you know, not look at just the loan book or the loan growth, look at the entire, you know, operating profit contribution coming from the customer, coming from the ecosystem. That is how we will, you know, continue to evaluate these opportunities, you know, on a market basis.
On the loan growth part, just to add, Rakesh, see we, our market shares in individual micro markets are still not fully saturated. We have the option today to pick up more profitable growth, profitable pools, et cetera, and using data analytics and our reach and understanding of micro markets, we are, we will certainly strive, and we are of course in pockets also able to pick up those profit pools and those growth in the market. We focus on growth, but we focus, we try and focus on profitable growth and more sustainable growth and certainly a risk managed growth.
Thank you, sir. Thank you.
Thank you. The next question is from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead.
Yeah, hi. Thanks for the opportunity. I have three quick questions. First is again around growth. What sort of growth opportunities are we looking at in the wholesale business, as growth trends over there has been quite modest and especially in context to the trends being reported by a peer bank? Second, question is if you can share some color on the kind of business the bank is garnering from non-ICICI Bank customers who have used ICICI mobile banking services. Third is around the provisioning expenses. If you can share more color on it, the context of contingent provisioning, the provisioning is almost negligible for the quarter. Some color on this and also the outlook that on the provisions to keep up guidance. Any thoughts around that over FY 2023?
Yes. On just to, you know, maybe I'll talk about the provisions, you know, first. As you said, you know, for us this quarter, largely, you know, the provisions were the contingent, you know, provisions that we made of INR 10.25 billion. On the rest of the NPA and the restructured book, the provisions were, you know, negligible. That reflected, you know, one, the net deletion in NPAs, you know, that we had during the quarter. It also reflected, you know, the prepayment, you know, of our corporate restructured, you know, loan that we talked about that would have resulted in, you know, write back on the provisions that we held for that restructured loan.
We have continued to recover, you know, well on both, you know, the corporate side and of course on the retail side as well. You know, especially on the retail side, the high level of addition that we have seen in the last, you know, 4-5 quarters, those recoveries have been, you know, coming in. I don't think, you know, we should be extrapolating, you know, this quarter, you know, from a go-forward perspective. I think in the past we have talked about the fact that we would, you know, always want our, you know, provisions as a percentage of core operating profit not to exceed, you know, 25%.
That is, of course, you know, through a cycle and it will, you know, vary up and down, you know, depending on the stage of cycle, you know, where we are, and also the composition of the portfolio. You know, there's no specific guidance that we can give there in addition to, you know, what we have already said. On the wholesale banking opportunities, I think the good thing is that, you know, we get to look at, you know, pretty much all the deals that are happening in the market. Wherever it is, you know, franchise business which is adding to our overall, you know, core operating profit, we are happy to do the, you know, do that business.
You know, wherever it is standalone lending opportunities at very fine pricing, you know, where the, you know, only objective could be, book growth and does not really contribute to the core operating profit, you know, we are very happy to stay away from that. To some extent, you know, that is what is reflected in the loan growth, you know, you know, for us. As we have said in the earlier calls, I think the entire corporate banking team is also focused on the ecosystem approach towards business. We don't look at just the loans. We look at, you know, all other potent services for the corporate client.
We look at all that we can do with the employees of the corporate, you know, in terms of our retail businesses, you know, as well as the dealers and vendors, you know, from an SME perspective. We track, you know, the profitability in absolute terms and the ROE for the corporate client as well as, you know, for the entire ecosystem. That is the approach that we have and we'll, you know, continue, you know, with that. We will be competitive, you know, wherever required from a franchise purpose. That's how we look at, you know, the market. The opportunity is there, you know, in terms of, you know, growth.
As long as it comes within our risk and return, you know, parameters, we are happy to grow. Sorry, I missed your third question.
The third question was, that what happens to the non-ICICI Bank customers?
First, I think we should start to really look at it from a point of view that who are our customers? We'll have to start to expand our way of how we think about our customers. We would think that it is not just deposit customers or asset customers who are our customers. Anybody who's using our services becomes our customer. If it is iMobile Pay, they may not have deposits with us today, they may not have assets with us today, but if they start using iMobile Pay, they become our customer. Similarly, FASTag, for example. FASTag, there are many FASTag customers, they're all good customers, they're all affluent customers. They may not have deposits with us, but they may not have assets with us, but they are also our customers.
I would say that non-deposit customers and not non-asset customers, because that today is one of the largest flows of good quality leads, for banks like us. Our experience with that is very, very good because they tie into the brand. They get to see and experience adjunct services that we provide. More data footprint they leave with us, better is our ability to pre-approve them, better is our ability to understand them, and better is our ability to, in a sharp, focused manner, give them proposition that will give them a reason to start overall three sixty banking with ICICI Bank. Our experience is good, and I thought I'll just expand it a little bit to just share with you what is our general approach to non-ICICI, the so-called non-ICICI Bank customers.
They're all ICICI Bank customers. They are service customers. They are not deposit customers. They are not asset customers.
Sure. Thanks a lot, and all the best, Rakesh, for the new role.
Thank you.
Thank you. The next question is from the line of Sameer Bhise from JM Financial. Please go ahead.
Yeah, hi, thanks for the opportunity. Just wanted to get a sense on the AFS portfolio. Can you share the duration here because we still have a small trading profit this quarter.
We don't, you know, share the duration separately, but overall, you know, again, our approach has really never been to take, you know, high duration, you know, into the AFS portfolio even if we have, you know, some strong view on, you know, interest rates going down, that view would be taken, you know, in the HTM book per se. The AFS and trading book is, you know, very actively, you know, managed and, you know, traded by the prop trading, you know, group. If you look at the current quarter on treasury, you know, I don't think on fixed income side, you know, we would have, you know, made money or any other bank, you know, would have given how the yields have moved.
For us, you know, it would, you know, reflect more, you know, revenues.
Sure. Secondly, I think this one is for Anup. Are you seeing pickup in the spend levels on the credit card or large part is driven by new acquisition spends? Or are you how are you seeing like the fee item on the credit card side? How should one read this on a sequential basis?
No, we certainly see that the spends are slowly increasing. Now, as you know, in credit card, it is you get a customer, then they activate, and then they start spending, and then they start revolving. There are many facets of this life cycle. You have fees somewhere and you have interest rates somewhere and all of it. We are certainly seeing consumption coming up as COVID normalizes, and it has normalized quite a bit, almost fully. We are seeing now spends coming up and revolve also slowly moving up, and that will make all other downstream things which is revolve and fees and all of it should start to look healthier.
Any comment on spend behavior for customers who are probably acquired through last year or have been with you for years?
Yeah, spending behavior is improving and because many of you are interested in Amazon card, I'm happy to share that actually.
Yeah, yeah.
The non-Amazon spends on Amazon has been quite healthily growing. That is a very happy thing for us and that was the desired outcome as well from us. We are seeing that across categories now spends are increasing and it is evident through other parts of our, as our MD also shared with you on the ultra-high frequency index. Also, if you look at the components of the index, you will see economic activity everywhere. These economic activities only reflect in the card spends and on the commercial spends. So far so good. Let's see.
Great. Thank you and congrats on a strong quarter. That's all.
Thank you. Thank you.
Thank you. The next question is from the line of Anand Dama from Emkay Global Financial Services. Please go ahead.
Yeah, thank you for the opportunity. My first question is that we've been focusing a lot on the core profitability growth. This year and this quarter we have clocked somewhere about 90-odd% core profitability growth. Now, moving into FY 2023 where margin expansion will be a challenge, what could be the levers of, you know, core profitability growth that you can talk about that would be great.
From a core operating profit perspective, you know, I think, you know, the yield and the cost, the margins, you know, that you talked about, you know, that is, you know, of course a prime driver. You know, in addition to that, you know, in terms of, the fee income, you know, the business sourcing cost, you know, and the other expenses. We look at, you know, all the levers, and we have to manage, you know, all those levers, you know, optimally, to get the desired outcome on the core operating profit.
You are right that this year, you know, we have seen, you know, increase in our margin by, you know, close to 25-30 basis points on a year-over-year basis, which has definitely, you know, helped us in the strong core operating profit growth. As I said, you know, we will have to navigate, you know, through this, you know, coming year, especially with the interest rate scenario also changing. We will, you know, do the best that we can do in terms of, optimizing on all these levers and, you know, continuing to focus on doing, you know, granular good quality, business, you know, as we do this.
Do you think that the fee income actually can improve from here on, and what could be the levers for improvement in the fee?
The way we look at is not, you know, fee income, say in aggregate, you know. As, you know, Anup also, you know, earlier mentioned, I think it's all about the focus on the, you know, the micro markets and customers. We don't, you know, target an overall, you know, fee income growth or something like that. What we are focused is, you know, to look at, you know, the customer level, the ecosystem level at the micro market, you know, what we can do. It can be, you know, it can be if, you know, margins are higher, lower fees is fine, you know, or if margins are low, you know, we would need to, you know, look at more fees.
It is something which, you know, optimally each of the business teams looks at on what needs to be done from the point of view of, you know, what works the best, and the most fair, you know, for both the customer and the bank. In the aggregate, you know, it is not something that we are focused on, and there can always be ups and downs, you know, in some of these, you know, metric going forward as well.
Next year and maybe over next two to three years, you know, there is a peer bank which is going to look at deposit mobilization, you know, to the extent of about 5 trillion or so. Deposit mobilization is an area where there is gonna be a lot of competition. How do you see basically in terms of your branch expansion, customer acquisition and deposit rates going forward?
At any point of time, you know, it is a competitive market on deposits, on lending, and we don't see, you know, that changing over the next two or three years. I think there is a certain approach that we have in terms of, you know, our liability franchise and the growth that we look at, and then how we deploy, you know, those funds. I think we will continue with our approach. Again, you know, in terms of number of branches and all, you know, all of those things, you know, they are decided by the respective businesses, you know, in terms of what they are seeing on the ground in their respective micro market.
If they believe, you know, addition of branches, addition of people will help them grow their deposits and more importantly, the core operating profit, you know, then they're absolutely happy to go ahead and invest. That is how we look at it. If there is more competition, I guess we will have to just live with that and see what best we can do.
You could see an acceleration in the branch expansion primarily because of the competitor going crazy.
That may not be the only factor. As long as, you know, we are seeing opportunity in the micro market for us to, you know, to grow, you know, we will be happy to, you know, add branches. Of course, you know, the type of branches have also evolved a lot, you know, so there are, you know, various format branches. The branches is not the only thing, it's an important thing. We will definitely, you know, look at, you know, adding branches, but it's not, you know, just as a, you know, reaction to any, you know, competitor that we look at it as.
Sir, at any point of time RBI has asked our housing business to be merged in with the bank, though it is very small in the overall scheme of things, but.
No, not really.
Okay. Sure. Thanks. Thanks, sir.
Bye.
Thank you. The next question is from the line of Adarsh Parasrampuria from CLSA. Please go ahead.
Yeah. Hi, team. Couple of questions. First is, we are firmly in like a benign credit cost cycle, including what you see with your results in the last six months. Do you expect, you know, as you know, do you think that we are in a structurally lower credit cost mix of book and hence over a medium term does the pricing reflect that and both lines, both margins and credit costs are just lower because we are clearly undershooting what we've ever mentioned as a guidance on provisions?
Yeah, Adarsh, I think you know we'll have to you know see that you know over a you know slightly longer period. Clearly our focus has been on you know what we call as return of capital in all our lending. That should result in you know lower credit costs for us you know through cycles. It is just you know too early to kind of you know talk about that.
Of course, in the last couple of quarters, like you mentioned, we have also had the benefit of significant deletions, upgrades from NPAs coming because of the larger additions that we have had in the earlier periods because of the COVID. Overall portfolio, definitely if you look at the rating profile on the corporate SME side, which we disclose every quarter, you look at the retail portfolio, how the NPA additions there have been moving, it does give us good amount of confidence.
You know, we don't want to kind of, you know, right now, you know, talk about, you know, how low or high these numbers, you know, could be. Our approach would always be to see, you know, how we can, you know, have it at an optimal level, you know, from a growth perspective.
Got it. One question you did mention, when we look at how much the retail products are penetrated within our customer base, it's still not optimum and there's a lot of leeway. Any sense and direction you can give as to how you look at it, where you are next three to five years, where you all want to get, either some numbers or any sense of quantum or direction?
Those are two things we have certainly strengthened over a period of time. I think over a period of time, last three, four, five years, there is more and more and more digital footprint that the customers have kept with us because of our very strong digital properties. So that helps us also in understanding them better and also figuring out from various other public sources and CIBIL and other places, you know, if they are and of course, auto debit on our liabilities, they deposit where are they banking with. Then we have to give them a very strong reason why they should shift to our bank and bank with us in a more holistic manner. I mean, the onus is certainly on us. That is one.
There itself saturation is okay, but we can certainly make it better. The second place is at the micro market level itself. We have a reasonable sense of what is the profit pool in a micro market, given the kind of business that is happening, given the kind of economic activities that underpins the micro market, and generally a reasonable idea, I'll not say it is exact, but a reasonable idea of what is our percentage share of that profit pool that is there. There we use in both cases very extreme and very good quality focus, outcome focus data and analytics. There we see that there are many micro markets we are quite under-penetrated.
It is our endeavor to put the proposition, reach out to the customer, and try and crunch the timeline from the opportunity to conversion. That is really the big job. Every day, full teams are focused on. These are the two clear opportunities. One, customers who are with us. Second, customers who are not with us, but in the micro markets.
Got it. You know, done. Rakesh Jha, thanks for your answers. All the best.
Thank you. Ladies and gentlemen, we take that as the last question for today. I now hand the conference over to the management for their closing comments. Over to you, sir.
Thank you everyone for spending the Saturday evening with us. We'll be happy to take, you know, any residual questions separately. Thank you.
Thank you. Ladies and gentlemen, on behalf of ICICI Bank, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.
Thank you.