Ladies and gentlemen, good day, and welcome to Q3 FY 2024 earnings conference call of South Indian Bank, hosted by ICICI Securities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference 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. Chintan Shah from ICICI Securities. Thank you, and over to you.
Yeah. Thank you, Yashashri. Good evening, everyone, and welcome to the Q3 FY 2024 earnings conference call for South Indian Bank. We have with us from the management, Mr. P. R. Seshadri, Managing Director and CEO, along with other senior executives from the management team. Without further delay, I would now like to hand over the floor to the MD, sir. Thank you, and over to you, sir.
Thank you very much, Chintan. Good evening to all of you, and thank you for joining us for the South Indian Bank Limited quarter three FY 2024 earnings conference call. I'm here together with my colleagues, Mr. Thomas Joseph, Mr. Anto George, Mr. Sanchay Sinha, Ms. Chithra, and others. Let me start with the key highlights of the financial performance for the quarter ended December 2023. Total business grew by 10% to reach INR 176,641 crore. Total deposits grew by 9% to hit INR 99,155 crore, just a touch short of INR 100,000 crore. Gross advances grew by 11% to hit INR 77,686 crore. Net profit for the quarter grew by 196% year-on-year to hit INR 305 crore.
CASA amount increased by 3% year-on-year to INR 31,529 crore. Net interest margin for the quarter stood at 3.19%. Provision coverage ratio, excluding write-off, improved by 688 basis points year-on-year to reach 67.08%. PCR, including technical write-off, improved to a touch under 78%. Gross NPA reduced by 74% basis points from 5.48% to 4.74% on a year-on-year basis. Net NPA reduced by 65 basis points from 2.26% to 1.61%. Improvement on ROA to 1.07, so this quarter, our return on assets came in at 1.07%.
Given the structure of our balance sheet, that resulted in a return on equity of 16.38% against 6.42% for the same year, same quarter in the prior year. Recovery and upgradation in NPA accounts stood at INR 377 crore. CRAR at the end of the quarter stood at 15.6%, of which Tier One stands at 13.37%. We continue to grow our gold loan business. It now stands at approximately INR 15,369 crore. Personal loan, another segment where we are a late entrant and we have a small book, but the book continues to grow. We launched our pre-approved personal loan business in December 2021.
As of December 2023, our book stood at approximately INR 2,186 crore. Credit card is another area of some growth. This was launched in 2022. As at December 2023, we had issued 377,134 credit cards with monthly average spends of approximately INR 22,780 rupees per card. The total book, as on December 2023, was INR 1,427 crore. On the liability side, core deposits grew 7% to INR 95,088 crore. NRI deposits continued to grow and now stand at INR 29,236 crores.
Investment, approximately, our total investment books stood at INR 26,654 crores, of which HTM was INR 22,374 crores, and AFS and HFT the rest. Fresh slippages for the quarter was 267 crores, which is among the lowest numbers that we've had in recent times. And it is in line with the guidance that my predecessor had given you. The overall restructured book stands at INR 894 crores, and the bank holds standard asset provisions, including standard restructured and FITL loans, of the extent of INR 451 crores. Net interest income for the quarter was INR 819 crores. Core fee income increased 19% year-on-year to INR 178 crores. Treasury profit for the quarter was INR 113 crores.
You would have seen from the investor presentation that has already been uploaded, that a significant portion of our growth continues to come from the corporate side. On the asset book, corporates now constitute roughly approximately 39%. And we also have included a section that talks about the steps that we're going to take going forward to rebalance our balance sheet, improve our efficiencies, and also improve operating results for the institution. So we continue to maintain momentum in disbursements and collections. Our strategy has not fundamentally changed. We continue to focus on elements that my predecessor had focused upon with nuanced changes as to how those need to be implemented as we go forward.
The results that you see today are a reflection of the fact that, you know, the underlying basis on which the strategic elements were put into place were sound, and we hope that as we continue to go forward, our outcomes will be suitably rewarding. With that, let me turn you back over to Chintan.
Should we begin with the question and answer session, sir?
Yes, please.
Ladies and gentlemen, we will now begin the question- and-a nswer 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. In order to ensure that the management is able to answer queries from all participants, please restrict your questions to two at a time. You may join back the queue for follow-up questions. We will wait for a moment while the question queue assembles. We have our first question from the line of Rakesh Kumar. Please go ahead. We have a question from the line of Parth Mehta. Please go ahead.
Sir, my one question is: How is the cost of funds panning out for us vis-a-vis competition?
I think the numbers, you'll find in our investor deck. Our cost of funds continue to rise on account of the fact that, our deposits are repricing. So our deposit cost, the cost of deposits is right now at 5.18%, and I think that compares favorably with some of our competitors, who are Kerala-based, and so we continue to be well-placed on this front. But, you know, as our deposits mature and as they get repriced upwards, we do have continuing cost of fund increases, as can be seen in this chart on page 16 of our investor deck, actually.
Okay. Okay. So, is there any cap that we are looking at, or it will be a moving phenomenon as we go ahead?
You were asking me, you know, about our peer banks and our cost of funding.
Yes. Yes, yes.
-to them. You can see that on the Federal Bank investor deck, if you so desire, and compare the numbers yourself, and,
Okay.
You'll find that we compare favorably.
Favorably. Okay. And the way ahead for us? It will get better... It will keep on rising from here on?
The prediction is that it will continue to rise from now on.
Yeah. Okay. That's it. I'll join the queue. Thank you.
Thank you. We have our next question from the line of Rakesh Kumar from B&K Securities. Please go ahead.
Yeah. Am I audible, sir?
Yes.
Yes, you're audible.
Yeah. Thank you, sir. So sir, firstly, considering the disbursement number for the nine months and the book outstanding that we have, loan book, would like to understand what is the average maturity of the loan book that we have, sir? Average maturity of how much?
We, we've not computed that, as such. So our loan book consists of multiple parts. There is a corporate loan book, which is the largest chunk of our balance sheet, as you can see. Then there's gold loans. Gold loans are on average, six months maturity. Then there is, home loans and mortgage loans and, stuff of that nature, which is a smaller chunk. And then there's MSME, which is, you know, between overdraft and term, which have, you know, reasonably long maturities. The area where we have, very significant, repayment and then dispersal again, is on the corporate side, and, we've not computed, the average maturities at this juncture. We can make that available to you. We believe that it does in an a rising interest rate environment, it offers us some advantage.
In the sense that we are able to reprice our assets, periodically, keeping in view the price, of, on the liabilities end, and therefore, the structure as such is not disadvantageous to us under these circumstances.
That's good.
notes of accounts-
Mr. Kumar, you're sounding muffled. Please use your handset mode. No, we can't hear you.
Is it better now?
Yes. Please go ahead.
The another question was just pertaining to the notes of accounts. There is a mention of provision for around INR 3.1 billion, around INR 300 crore for security receipts. If you can elaborate on that, what is the change that we have found in the, you know, RBI guideline pertaining to the security receipts?
I think you are referring to an event that took place in the Q3 of the prior year, wherein certain provisions were made on a, to the assets that we were held, that were held by us in the form of security receipts, and they were written down to the extent of that amount. And this is not an event that has taken place in this quarter. This is an event that happened a year- ago. The consequence of that was the fact that profits for that particular quarter were depressed. And as another consequence, the profits for this quarter compared to that quarter seem, you know, consequently, 200%, greater.
Okay. Okay, sir. Okay. Sir, this fraud account, there's a provision for the fraud in one branch. So, so what was that related to?
That is related to an event that has taken place in one of our branches, a consequence of which is that we suspect that there could be an impact to the extent of INR 28.6 crore or thereabout, and that has been fully provided.
Mr. Rakesh Kumar?
Sure. Sure, sir. Thank you. Thank you, sir. Thank you.
Thank you. We have our next question from the line of Saransh Sethi from Sama Wealth Managers. Please go ahead.
Am I audible?
Yes.
Yes, please.
Sir, my question is about cost to income ratio. As we see, it is higher compared to peers. How does management see this one or two years down the line? And what is the guidance on net interest margin for coming years?
So let me answer that. There are two questions, cost to income and net interest margin. On the cost to income side, as you rightly mentioned, compared to our peers, our cost to income ratio is higher. We are currently at about 61.98%, which is very close to 62%. So if you see our investor deck, you know, there are five areas that we as a management team are going to focus on. One is enhancing our portfolio resilience, which is basically a complicated way of saying that we want to have a more granular book. We want to improve our branch productivity, and third is cost optimization. So, we are seized of it.
The current high levels are on account of a few one-timers that we've had to take. So this quarter, we've provided for the IBA rate settlement, which that happened. We were accounting for it at 15%, and in this quarter, we've had to make a difference between the 15% and 17%, which is the final settlement amount, and we estimate that is approximately INR 24 crore, the incremental provisions were taken. So to that extent, our expenses are overstated from the normal. But having said that, our base expense ratios, even without this one-timer, is higher than our peers. And as a management team, we are looking at methods of you know addressing that and attacking that as we go forward.
Thank you.
With respect to net interest margins, our net interest margin for the quarter came in about 3.19%, which is sequentially lower than the prior quarter. That is on account of basis risk playing out in the sense that our liabilities are now repricing faster than our assets, and as a consequence, squeezing our margins. To address this, there is no short-term method of addressing this very, very quickly. The only way to do that is to change the structure of our balance sheet from an assets perspective, and that we have walked you through in this strategy parts of the deck that we put out. The other thing that I want to bring to your attention is what I just mentioned. Our assets are of shorter duration.
The lower-yield assets, which are put out to very high quality corporates, are of very short duration, and the hope is that as interest rates rise, we'll be able to transfer some of that to our customers and consequently keep the NIM at reasonable levels. So I trust that answers your question.
Is there any guidance on this for upcoming years?
Sorry, sir, could you repeat that question?
Sir, any guidance on NIM for upcoming years?
I hesitate to give you a guidance, because we are in the process of putting together a long-term strategic plan for our institution at this point in time. All I will say is that we want to restructure our balance sheet and have higher yielding assets, larger proportion of them on the book. So from a directional standpoint, we will be working towards taking NIMS up, as we go forward. We are hoping that all our analysis and work can be done reasonably quickly, and we can come back to you, with a guidance, reasonably quickly.
Thank you, sir. That's all from my side.
Thank you. We have our next question from the line of Prabal from Ambit. Please go ahead. Mr. Prabal?
Hello, am I audible?
Yes, please go ahead. If you can speak a bit louder, please.
Just, just give me one second. Is this better now?
Can you use your handset mode?
Yes, sir, I have. Is this better now?
Yes. Please go ahead.
Okay. Hi, sir, congratulations. So my first question is just an extension of the previous participant question. How do you get in branch productivity and cost optimization? If you can explain your strategy with this.
So on the branch productivity, we've done a few things. We've started. See, branches do two things, Prabal. One is they provide service. So customers come in, they have a query, they need something, they provide that service. The second is they sell products. So we are doing, we've started, you know, we've done a whole bunch of analytical work to figure out, on average, different products when they are sold to a customer, what the revenue stream is in the future. And we have discounted that back to arrive at, an expected value per product. And we have started measuring, and this is something we call sales value added, and at the branch level, we've started measuring what is the value addition that is happening at the branch.
So all our products that we sell out of a branch, we have this metric. So at any given point in time, we are in a position to tell how much sales has actually happened and value addition has actually happened. So that measurement metric has now been rolled out, and we are using that to also provide some form of rewards to our people at the branch. So we hope that this will make for two or three things. It will make for comparison between one branch and the other, because in the past, you know, branches sell various products. We are an old generation, private sector bank. The branches sell not only liabilities, they also sell assets, they also sell funded, non-funded products, all kinds of products they, they do.
Comparing one branch with the other became very difficult because you had to compare them on many axes. With this, you can compare them with one number, and given that we've also started a mechanism by which our people can be rewarded on their performance, we think that will change, bring out, you know, some amount of increased productivity at the branch level. The other thing that we've done is that we are working on our processes and our systems. We had implemented two loan origination systems, one for our retail businesses and one for our wholesale business - not for wholesale, but the MSME business. These are generic system installations, which enabled us to book any type of customer for both the retail and the MSME business.
We are fine-tuning these so that these can be, these become more, these become frictionless environment, positioned to actually do these loans quickly. So there's a whole work stream around that, which is an enablement work stream that enables the branches to service our customers better. So all of this is actually in the, in the deck. I'm happy to walk you through it in greater detail at another time. But in the interest, given the fact that we have a large number of people on this call, I'm afraid I'll have to end this, you know, at this point, but I'm, if there are other questions, I'll be able to give more clarity.
Yes. Thank you for this. Next question will be, so the MSME book has been sort of flat in last three quarters. So what is, what is happening there, and how do we ramp up the book from here on?
Okay, the MSME book has been flat. In fact, it's declined marginally. It is an area of, you know, focus for us. Again, you know, it has two elements to it. One is, we have to get our sales engines firing, and we also have to get our processes and the technology arm associated with the processes working again. The good news is, the new originations in quarter three were the highest that we've had in recent times. Some of the reduction in balances that you noticed are because of utilizations coming down in our overdraft accounts. But having said that, it's still not robust enough for growth to come. So this is an area of great focus. We are working with our teams.
We are trying to enhance the number of people in this business, and at the same time, we are trying to change the process so that, product, process, all of that, to make it more, appealing in the marketplace. So this is, something of a long haul. We need to work on it so that we get the appropriate results as we go forward.
Okay. Just last question. So how much of our deposits will be coming from Kerala? And, just a related question will be, we have improved our credit to deposit ratio in last few quarters, so-
62% of our deposits come from Kerala. What was your second question? I'm sorry.
Second would be, we have improved our credit to deposit ratio in last few quarters. How is our treasury team thinking about any range that we would want to settle at, credit to deposit ratio?
So we are currently at about 78 and change, credit- to- deposit ratio. We would like... I think there's a few percentage points left where we can go up on the CD ratio, without creating any issues on liquidity management and impacting other liquidity-related metrics for the bank. It'll also be profit accretive if we were to be able to do that. So from the bank's point of view, point of view, two things have to be noted. Our deposit book grew 9% year-on-year. And we believe that the 9% growth is predicated by the fact that on the deposit side, our pricing has been such that our landed cost of deposits are lower than our immediate peers.
Should our asset side growth pick up very dramatically, we believe that we can get more deposits quite easily. And therefore, from a, from a, credit to deposit ratio point of view, we believe that we are well placed. 78% is not too high. I think, even RBI is talking about between 70% to 80% and so on and so forth. 70s, early 80s, I guess, is an area of comfort for them. This is my understanding from whatever newspaper reports I've been reading. So we think that we are well placed. We think that there's space for us to grow this, and that will be P&L accretive. So at this point in time, that's where we are taking our business.
Great. Great. Thank you so much, and all the best, sir.
Thank you. We have our next question from the line of Umang Shah from Kotak Mutual Fund. Please go ahead.
Yeah, good evening. Thanks for taking my question, and congratulations on the quarter, sir. Just two questions. One, on the capital raise, just wanted to understand, has the board taken any decision in terms of timing, quantum of the capital raise, and the route through which we would like to do the fundraise?
Umang, I would say, on this subject, there is no information that I'm to give you at this point in time, because no decisions have been taken. And, at the right juncture, we will make all this information available as we go forward.
All right. Okay. Sir, the second question is, now, while we do appreciate that, clearly, you and your team are in the process of putting out a long-term strategic plan for the bank in place, but just want to understand that, clearly we have crossed the 1% ROA mark after a fairly long period of time, right? Should we assume that, regardless of the changes that you intend to bring into the bank, the trajectory, the earnings trajectory or the trajectory of the returns ratio that we are seeing at this point of time, will more or less be sustained, and then probably we see a gradual improvement?
Or, or do we see some bit of a disruption initially and then, see a pullback? How should we look at it, from a near to medium-term perspective?
So, you know, at this point in time, business as usual continues. So we've not changed anything very dramatically over the last three months. The areas of focus that my predecessor had put in place continue to remain our areas of focus. There are some nuanced changes that are highlighted in the five or six pages that we put out in the investor deck. And the aim of these changes is to ensure that we make change incrementally, and we deliver these changes over a period of time without impacting the near-term P&L of the institution. If anything, over a period of time, the P&L should grow. At least that's our wish, desire... there is nothing that we are doing at this juncture that should have a negative impact on the immediate P&L of the company.
That's quite clear, if you were to go through these five or six pages that we have in the form of an investor presentation. Unfortunately, I think there are more numbers on these pages, but I'd urge you to take a look at it, and when we have more time, I can walk you through it in greater detail.
Sure. Sure. No, I think, I think that's quite helpful. I mean, I've already been through the presentation, so, so clearly, that's helpful, and we would be waiting for your detailed strategic plan. Just one last data point, which I wanted a little more clarity upon. In a presentation, this time around, we have put out a risk weight density, RWA density, which is at about 44 odd percent. Just wanted to understand that within our corporate book, would it be possible for you to share details as to what proportion of the book will be to, let's say, A-rated and above, NBFCs, per se?
95% of NBFCs are A at about 95%.
I think, I think we've given details on the structure of our total balance sheet, where 96% of our corporate exposure is to A and above entities, 55% is to triple A and above. NBFCs as a subset, we deal largely with high-rated NBFCs, so I would think that, you know, 19 out of 20, 95%, in other words, plus, would be A-rated and above. The exact number we can come back to you. I mean, I don't want to... but it is in that ballpark. Would that answer your question?
Yeah, sure. So just one more data point. So out of the total corporate loan book, how much would be NBFC lending?
Roughly a third would be NBFC.
Okay. Okay, perfect. No, I think that, that helps. That helps. Perfect. Thank you so much, and wish you and your team-
This includes certain types of NBFCs which are quasi-government. These are not private NBFCs. These are quasi-government, including one which is quasi-owned by the central bank.
Oh, okay. Okay. So all right. Okay, no problem. I think, I think that, that, give, gives a good flavor. Perfect. Thank you so much, sir, and wish you good luck.
Thank you.
Thank you. We have our next question from the line of Jai Mundhra from ICICI Securities. Please go ahead.
Yeah, hi, sir. Good evening, and thanks for the opportunity and congratulations on good quarter. Sir, first question is, I mean, first is thanks for adding the strategic board slides, six slides, and then the key focus area. Within that, sir, if I see, of course, you have earlier also indicated that you want to granularize the book more, and maybe you would want to debulk the corporate piece. Would that mean, sir, that the overall growth may be impacted as we go ahead, because corporate is still around 40% of the overall loan book, and hence the overall growth may look a bit weaker?
Thanks, Jai, for the question. We are trying to do it in such a fashion that growth does not suffer. So we are hoping that, you know, we'll continue to press the pedal on corporate till such time as other areas start growing. So, in the near term, corporate continues, focus on corporate, high quality corporates continue. High quality corporates with shorter duration exposures continues. At the same time, we work on other businesses so that, you know, we get them up to speed, and as they start ramping up and growing, then we start, de-emphasizing, on the corporate side. It does two things for us.
One is, it has a positive impact on net interest margins, because almost every other place where you can lend money has higher spreads than, you know, triple A-rated corporates, that too, shorter duration exposures to them. The second thing that it does is that it changes the tenor profile on our asset side. So it gives us duration on the asset side, which is matched by duration on the liability side. So our strategy, to answer your question in short, our strategy is not to take our, you know, eyes off the ball on the corporate side. We'll continue to emphasize that.
As we get growth on other areas, that's when we will see how to, you know, how to restructure our own approach and how to, how to, you know, rebalance the portfolio. Up until then, I don't think there'll be any change in the growth rates.
Understood. Thanks, sir. Sir, in your branch productivity slide, you mentioned tooth-to-tail ratio. Right, I think it's currently at 75/25, and you intend to take it to 85/15 over the period. If you can elaborate, sir, what do you mean by that? I mean, is this like, I mean, I'm a little difficult to elaborate there.
So basically, you know, what we mean is, there are, in a bank, there are people who are customer-facing and who provide services and sell products to customers. And then there are control functions and others who are back office functions. They don't deal directly with customers, they deal with papers, they deal with computer screens. They, they provide a valuable function, but they are not customer-facing, and therefore cannot generate new business for us as an institution. So in our bank, at this point in time, our estimation is that the customer-facing roles are roughly 75. For every 100 people, 75 are in customer-facing jobs, maybe in the branch, maybe in other verticals where they are directly dealing with customers, or maybe in a regional office where they deal with the branch and meet customers, everything put together. And over a period...
There are 25 people who are more control, help, process, that type of people. If you want to have a more productive organization, we need to have more people directly facing customers and offering products and services. That 75/25, we want to move over a period of time to 85/15, so that the number of, arms and legs and, you know, bodies that we have that are actually directly producing, increases. Does that answer your question, Jai?
Yes. Yes, sir, it does. Thank you. And secondly, sir, on MSME, right? So clearly that is likely to be the key focus for the bank. And you also mentioned that you want to intend, that you intend to, you know, streamline processes, frictionless processes, et cetera. But is there anything tangible also in terms of, let us say, let's say, pre-approved MSME loans, which some of the banks are doing, or some of the banks are actually lowering the ticket size for which an RM is appointed. Are such thing also on the table that, you know, which, which is more, tangible versus the, turnaround time and, you know, intangible kind of a thing?
I tell you what we've already done, Jai. Earlier, these loans were being done by a small cadre of people who... Our MSME business is divided into two parts, below 2 crore and above 2 crore. The below 2 crore had about 130, 140 dedicated people who were selling these products, and they were also dedicatedly helping in processing these loan applications. What we have done over the last three months is, we moved these 130 people into the branches, and we told all the branch people that every one of them is responsible for selling these MSME products, not just this 130. We've also trained everybody in the branch on how to use the system.
You know, the basic understanding of MSME requirements, credit, et cetera, et cetera, full training has been conducted over the last few months so that they are in a position to actually sell this product. So from 130 people, we now have 948 branches, all of them capable of selling this product. So that activity has already happened. In addition to that, we are now saying that these processes will be simplified, and systems will be set in place which enable this to happen. And frankly, any volume business, the process has to be fixed first. It is impossible for you to get volume unless your process and systems are such that they are frictionless and they actually enable things to happen. So two things have happened.
We, less than INR 2 crore have gone back into the branch. It is owned by the branch, it is run by the branch. We are hoping that that will be a big force multiplier for us. And to help that force multiplier actually deliver properly, systems, processes, et cetera, are being reworked, together with some fine-tuning of the products and so on and so forth. So all of that is underway, Jai. Does that answer your question?
Yes, sir. It does, yes. Yes, sir. And last two housekeeping questions, sir. We have done this wage revision, assuming it's 17%, but is there any residual provisions that need to be made for, let's say, pension, pension-related liability?
Yes. There could be, because at this juncture, it is not entirely clear to us as to how the pension-related aspects of the settlement would pan out. Information is not available. We didn't put that in our deck here. Anyway, if we have missed highlighting that in our deck, my apologies. There could be incremental provisions that could be required, depending upon how the IBA settlement deals with retirees. So to that extent, there could be an incremental provision. But we don't think that that is gonna be very material. I mean...
Okay. So any ballpark number? I mean, could it be like 100, 200, or even-
As we know, we have made the provision, no, Jai, we have no, we have no knowledge. So whatever is available, information that is available today, where a liability could be crystallized, that has already been taken to the P&L. Where information is not available, it is impossible for us to take that into our P&L.
Right. The last thing is that, the CET1 that we report, that is, does that include the nine months' profit or that is without including the nine months' profit?
It excludes the nine-month profit.
Sure. Thank you, sir, and all the very best for the company.
Thank you, sir. Thank you. Thank you very much.
Thank you. Before we take the next question, would like to remind participants to press star and one to ask a question. We'll take the next question from the line of Tejas Shah from Laser Securities. Please go ahead.
Hi. So this time our treasury income, if you look at the segment-wise, is around some INR 98 crore, if I'm not wrong, and earlier it used to be in a loss of INR 13 crore. Last year it was some INR 158 crore loss. So are we going to sustain this profits on the treasury side?
You know, treasury by, by definition is a little volatile. It is not an accrual income, it depends upon market factors. The trends are reasonably positive. I mean, 10-year G-Sec has been dropping. It had come all the way to 7.15%. It has picked back up now. But if those same trends remain, then I think all the banks, not just us, will have a reasonably good, year, going forward. This treasury income, we were helped by a variety of factors. Whether those factors will continue to play out, in the times to come, we don't know, but we are well prepared. And on the fixed income side, on the rate side, I think we are in a reasonably good position.
If the rates move in a positive manner, I think a very substantial quantum of income can be had.
Okay. And, can you throw some light on the higher expenditures towards, staff and other things? Because, your other expenditures have also gone up, and even I think your employees' expenditures has also gone up. So if you can... Is that going to sustain or, it persists to a little higher stress on this?
So our employee costs have gone up on account of a one-timer hit, which is basically the IBA settlement, wage settlement. We have been provisioning for it at 15%. It has come in at 17%. So for a period of 14 or 15 months, we've had to make good the 2%, and for that, we have taken a 1% one time hit of INR 24 crore. So to that extent, our employee cost is overstated. If this 17% was not the rate settlement, and it was 15%, our employee cost would have been less by INR 24 crore. We have two areas where our expenses have risen, and materially risen. One is employee cost, as you rightly pointed out, and the other is on expenses associated with our cards, credit cards business.
But on the credit card business, we also have very significant growth in revenue, and we have some significant growth in expenses, which is optically impacting the revenue trend line. So if you were to isolate or remove the credit card expense growth, you will find a more normal growth rate. Because you know the credit card business gives us a very substantial revenue growth as well as an expense growth. If you look at it on a net basis on the revenue line, you will find that the expense growth rate moderates quite considerably. As we go forward, perhaps we can give you further details so that it becomes a little bit clearer for you to understand our expense dynamics.
No problem. Thank you. That is from my side. Thank you very much.
Thank you. We have our next question from the line of Chintan Shah from ICICI Securities. Please go ahead.
Yeah, thank you for the opportunity. So first of all, congratulations on great set of numbers, and on that 1% ROA mark, and thanks for the strategy update. So there's just two, three, long-term questions from my side. So one is on the mix. So we are saying that we'll be targeting MSME and retail and shifting our focus from the corporate. So how do we emphasize the loan mix would look, year on over the next from year, over the next two, three years or so? So how much could we be safely expect us to personal and MSME from the corporate? And so, how can that play out on the margins front? Yeah, first on that.
So we do have a strategic plan, which we've worked out. We haven't disclosed it yet. We are in the process of fine-tuning it. The aim is to increase our margins. That's the reason why we are doing all of this. So over a period of time, not immediately, our total balance sheet grows. We are hoping, you know, it grows in the mid-teens. And we start with the corporate balance sheet remains where it is, which is currently 39%-40% of our total outstanding. And over a period of time, it starts shifting downwards. Over a 3-year or 4-year period, we hope to bring that down to the early thirties and grow other businesses, which I don't-- it doesn't mean that corporate shrinks, it only shrinks in percentage terms, right?
And that 6%-7% difference is added to the higher-yielding books on the MSME side, as well as LAP. We are very, very underrepresented in loan against property . Our total balance sheet size on LAP is only about INR 2,000 crore. So some of these areas where we are underrepresented, where there is an opportunity to grow, it gets added there, and we hope that that gives us a significant fill up in on spreads. Given the fact that our cost of funding is lower than some of our peers, we are hopeful that the spread for NIM expansion to us will be quite considerable if this strategy were to work out.
Sure. So this is helpful. Sir, one thing on this new initiative which we are taking by increasing the branch morale, increasing the sales focus, empowering our employees more. So is there any resilience from the employee side or the employee union or they are happy to do this in return, they'll also be getting some additional bonus or something? So how are we, is, are there rewards will also be very generous for them to work extra or how does that work, yeah?
So we are keeping those areas in... I mean, we are trying to ensure that we communicate with all the constituents of the bank actively. So far our industrial relations have remained healthy, and there is no cause for us to believe that any of the actions that we are taking will affect. So as we press forward and as we become more and more focused on these elements, we will continue to work together with the unions and associations to ensure that we maintain the current level of dialogue and discussion and the kind of relationships that we have.
Okay. And, sir, one last question from my end. So we are talking of cost optimization and so probably some decline in the cost income also in the coming years. But so with that increasing focus on MSME and retail, so, don't we see some rise in the cost as well, or the most of the rise will be front-loaded and the benefits will come at a later stage? Should we look at that here?
Well, I think you ask a very, very good question. From, from our point of view, a very significant chunk of our costs are fixed. So if we can get higher productivity, cost-income ratio will automatically reduce. I mean, that's the basis on which we've built this. As we try and create, you know, alternate distribution channels, and as we try and take out, do some of the other things that are there here, there may be expenses associated with depth, and we will, you know, we will try and report that separately, and we will try and report to you the core bank expenses separately, so that we can distinctly see where it is going. At an aggregate level, we are very, very conscious of the fact that 62% cost to income is a high level, and we want to have this reduced.
So our strategy will be built around the fact that if we are doing something new and we are investing money on something, we will try and time it in such a fashion that, you know, the trend line on the cost side is reasonable and it shows traction, i.e., the cost is headed downwards as we move forward. That is something that we'll be very focused upon.
So, sir, just one follow-up on this last one. So, sir, we are assuming that the productivity, we are expecting that the productivity will increase, but how do you make sure that this productivity will increase, and that too won't lead to any additional costs? That is my question, actually. How are we expecting that the productivity will increase only that way?
So that is the management challenge. I mean, we have to get our productivity to increase. Our people are well paid. Our employee wage costs are driven by IBA standards. We need our productivity levels are such that we believe that there is a reasonable scope for increase. And our costs associated with that increase is going to be minimal, when compared to the aggregated costs that are fixed in nature. As I said, we've launched the sales-related rewards, which incentivizes people to be more active on sales. In the grand scheme of things, the cost associated with that is not material. Which is why I say that, you know, if the management challenge can be met, then we should get higher productivity without increased costs.
Sure, sure. This is actually very helpful. Thank you for instantly for answering all my questions. I'm looking forward to this strategy. All the best to you. Thanks.
Thank you. We have our last question for today from the line of Ravindra, an individual investor. Please go ahead.
Hello?
Yes, Mr. Ravindra, please go ahead.
Yeah. Thanks a lot for the opportunity, sir, and I wanted to discuss to you in the last call as well. I did not get the opportunity. I'm a very long-term investor. From 2011, I'm invested, and I'm closely following up with the bank's progress. So one question is: if banks like IDFC First Bank, they are giving a monthly interest on the savings, and they are gathering a very good CASA. So why is it not possible for the bank like us? That is one question. Yeah.
No, sir. Do you have a second question also? I can answer both together, sir.
Yes, sir. I was going through your annual report in the Karur Vysya Bank, and there you had mentioned that, loans within INR 2 crore. There is some automation something, right? Without manual intervention, with less manual intervention, maybe. So why is it not done in the SIB?
Okay. With respect to, sir, the savings account high interest rates where paying interest on a monthly basis.
Yeah.
The reason why we haven't considered it yet is that we have a. The only banks that are offering that are the newer institutions, sir. If you look at it, it is the institute that have come into being of recent times as banks. They are the ones who are aggressively offering that product. That is because they don't have a traditional CASA base. We already do have it, and, and for us to offer that would only mean a significant increase in costs for us without very significant benefits to our customers. I mean, from our customers, we, they transact with us on the basis of the relationship they have with us and the comfort they have with the branches, et cetera. So this does not really provide anything incremental to them.
It may attract new customers, but having said that, the cost of such a change is so high that we don't think at this point in time that it is warranted. With respect to your second question, automation for less than INR 2 crore, that is something that we are working on. That is part of our strategy. Hopefully, we'll be able to do this, reasonably quickly, sir. I trust that answers your question.
Yes, sir. Recently we received a communication, there will be a fundraise using the rights issue. Is there any progress on that, or is it just a discussion?
At this juncture, sir, I'm not at liberty to talk about that.
Okay, sir. That's my last question. Thank you. Thanks a lot.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you, sir.