AUBANK — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

Moderator · Conference Operator

Ladies and gentlemen, good day, and welcome to the AU Small Finance Bank Q3’FY23

We take our first question from the line of Rohan Mandora from Equirus Securities.

Rohan Mandora

Congrats on good set of numbers.

Sir, the first question was, we have consumed contingent provisions during this quarter despite healthy asset quality trend and good profitability.

So just wanted to understand thought process of consuming the same and not building the buffers?

That's one.

Second is, in the last two quarters, we are seeing a reduction in employee base.

So what's happening there?

And third is that, currently, what are the challenges in PSLC business?

And also, why are we not tapping IBPC route in terms of selling down excess PSLs?

Prince Tiwari

This is Prince here.

So, around the first question around contingencies, like as we have articulated earlier as well, that contingencies are precisely created for a particular purpose.

And in this case, as you are aware that it was created for COVID and COVID-related contingencies.

Of course, as things are getting normalized, we'll need to resolve those contingencies and we cannot keep on it forever.

So, if you see, in the first quarter, we did utilized part of it to create floating provisions.

And the balance, like whatever is around restructure that's getting used as and when the restructured cases are getting resolved; either it is getting released to the P&L or getting created towards the NPA provisions for the forward flow from the restructured book.

As far as contingencies are concerned, very clearly, as I said, we will need to resolve it at some point in time.

And we are in discussion with the board and the auditors in terms of their view.

And as per their suggestions, whatever is required during the quarter, mind you, we are not taking any provisions through the P&L.

What we have been doing is that, if you see, we have increased our provision coverage ratios from what we used to maintain about 50% earlier to about 75% now, including technical write-off.

So that's where the utilization is.

And whatever is left over at the end of the annual financial year, basis the guidance from the board, we'll take a call in terms of what do we intend to do with the remaining contingencies.

Yogesh Jain

So, on PSLC, you know that market is subdued.

In last quarter also, though we tried, we issued ~INR 2,300 crores in last quarter also, but premium was not there.

So we will try in next quarter also.

On your question on IBPC, we balance ourselves between IBPC, PSLC and securitization.

So as we mentioned in Q2, we sold around INR 1,000 crores portfolio and this quarter ~ INR 1,200 crores.

So it's a balance between IBPC and securitization.

It is kind of a tool for our cost of fund.

So we'll see next quarter also.

Rohan Mandora

And sir, third was on the employee base?

AU Small Finance Bank Limited January 19, 2023

Prince Tiwari

Yes.

On the overall employees and the hiring, it's purely routine.

See, I think we had commented this earlier as well that during the COVID period, there were some amounts of excess capacity or buffer capacity, which was built in the system more because people were going on leave and they were (away for) 14-day, I mean, they were taking time to return and the counters had to be manned.

So to that extent, we had some extra hiring that we had done.

But as things are normalizing, as per our own business plan, things are getting rationalized.

So there's nothing more to read to it.

Rohan Mandora

Sir, is this further reduction in employee base intended or are we towards the end of that?

Sanjay Agarwal

I'm Sanjay, this side.

So in terms of HR, I think we already commented that we're really working on the productivity side.

We've built a buffer, as Prince commented.

But now things have become normalized.

And so there not be any further reduction, rather we are hiring extensively, and I think more hiring can be done for the basis of the next year business plan.

Moderator · Conference Operator

We'll take our next question from the line of Nitin Aggarwal from Motilal Oswal.

Nitin Aggarwal

Congratulations, Sanjayji and Uttamji on very good results.

Two questions I have.

One, if you look at Slide 14, the disbursement, and advances yield, they have [inaudible] over past one year from 3Q FY '22 to the current quarter.

I understand that this can be because of the scaling of the housing business?

Prince Tiwari

Nitin, your voice is not very clear.

Can you just repeat that part or maybe just come near to the mic.

Moderator · Conference Operator

Nitin, if you are on a speaker or hands-free mode, switch it to handset and speak, please.

Nitin Aggarwal

So I was saying like if you look at Slide 14, the disbursement and advances yield have hardly moved up over the past one year.

I understand that this can be because of the -- we are scaling up the housing business.

But given the extent of rate hike we have seen in the system, this still looks like a little surprising.

So if you can share some color on this?

And why the disbursement yield during the third quarter have gone down over the second quarter?

Very marginal decline, but any reason behind that?

And the second question is on the collection efficiency.

Now we have been reporting for many quarters in a row, we have been reporting collection efficiencies of more than 100%, this quarter being 107%.

So how long to expect this?

And what is really driving it?

Is it like the back book areas are higher which is driving this or is it like a prepayments which are coming through to drive such high collection efficiencies?

Any color on these questions, please?

Sanjay Agarwal

Nitin, I am Sanjay this side.

So I'll answer the second one.

So I would say that the credit compliance of the culture, I already commented in my speech that it is one of the best time for us as a lender.

People have become lot much conscious around even borrowing money.

And the whole repaying their EMI on time has come to be some kind of discipline, some culturally, AU Small Finance Bank Limited January 19, 2023 people have become more disciplined around it.

And this I'm saying across products, across geographies, across buckets.

So that is why the recovery percentage or the collection is north of 100%.

And the business momentum we are seeing, the exuberance in the customer we are seeing, I strongly believe that this year at least, I'm saying the next year -- next financial year 23-24, I would be surprised if it drops.

So that's my sense.

So I think you will see this kind of same asset quality maybe for long time now.

I can't comment or explain the long time, but the way, after the COVID, we have seen our gross NPAs coming down and the collection efficiency remains so strong.

I have more hope than a worrisome aspect around it.

So that's on the collection.

I hope I answered your question.

On your early one is around the business trend.

Moderator · Conference Operator

We have reconnected the management now.

And Mr. Agarwal, I've unmuted your line as well.

Prince Tiwari

So if I understand clearly, your question on the first part had two parts.

One was that the disbursement overall on a year-on-year basis looks flattish on an overall, what we have given on Slide No. 12.

Nitin Aggarwal

Yields have not gone anywhere year-on-year.

And this quarter, the yields have come down on disbursement.

These two parts?

Prince Tiwari

Sorry.

Yields has not gone upwards year-on-year?

Nitin Aggarwal

From 12.7% to 13%.

And this quarter it has moved from 13.1% to 13%.

Yogesh Jain

Nitin, actually for this quarter, this was active quarter.

In October, it was Diwali festive.

So because of that, in that particular month, you get business.

So yield was slightly lesser than last quarter Q2.

Aseem Pant

Nitin, the decline is only 5 bps. And that's also partly because the mix of the commercial banking has increased slightly.

Our yields otherwise have held up if you talk about the retail.

Nitin Aggarwal

So can I assume that we have been able to pass on the rate hikes that you are seeing in the system to the customers at incremental level because the yields otherwise are staying flat otherwise?

Prince Tiwari

I mean, on the vehicle side, very clearly, there has been a pass on.

And as I think Uttamji also articulated in his speech, there has been a 9 bps of sequential increase in terms of disbursement yield.

Of course, commercial banking book, if you see the overall yields have jumped up significantly given that they are floating rate and repo-linked.

In terms of SBL, it is broadly flattish.

But again, you'd agree with me that that book is already at a slightly higher yield.

So yeah, I think not really worried too much in terms of passing on the incremental cost.

Vimal Jain

So if you see the Slide No. 13, our NII (%) almost same in the last four, five quarters.- (36:43) AU Small Finance Bank Limited January 19, 2023

Nitin Aggarwal

And just a follow-up on the other question that I had around collection efficiency.

So with collection efficiency being more than 100%, does it imply that we are recovering from the back dues or we are having prepayments or can there be any other reason?

Aseem Pant

It's a across buckets, as we said in our commentary, Nitin.

So, its also on loans which are we past due where we have been able to recover now because business activity has sustained

Prince Tiwari

So our collection efficiencies don't include prepayments (Correction: ‘Foreclosures’ instead of ‘Prepayment’), Nitin, as we have disclosed.

So this is primarily -- and I think we have also articulated that, what we saw this quarter was some very strong collections both across buckets as well as across products.

So that in some way signifies that the underlying cash flows in the underlying businesses has been very-very strong.

Moderator · Conference Operator

We'll take the next question from the line of Mahrukh Adajania from Nuvama.

Mahrukh Adajania

Sir, my question was around the cost of funds.

You have obviously made detailed disclosures on incremental and outstanding cost of funds and they've not moved much if you compare it to most other banks that have reported.

More importantly, if you just calculate from balance sheet averages and cost of funds are risen much less than even what you've disclosed obviously because you disclose on daily balances.

So how is it that relative to the system you've done much-much better on cost of funds despite hike in CDs?

And what is the outlook for fourth quarter and longer term just in terms of cost of funds or cost of deposits?

That's my first question.

Prince Tiwari

Mahrukh, first of all, we haven't done any CDs in this quarter, as we have disclosed.

Our CDs have in fact been coming down.

Now as far as the overall cost of funds is concerned, you would agree that our cost of funds were quite high when we started the bank (Correction: year).

It was around 5.95% unlike some of the larger peers that you are comparing us with.

And we have benefited from some of the repricing on that book.

Now of course, if you look at the incremental cost of fund, I think that has -- as we have disclosed, it's about 23 bps up in this quarter and that is in line with the broader industry.

So I don't think there's too much to read there.

Yogesh Jain

And secondly it was a mix of our funding rate like we did securitization and we raised low-cost refinance also, which helped in our overall cost of funds.

And in terms of Q4, I think as we mentioned that we should be within what it was last year, overall year.

It was around 5.95%.

So we expect that we should be in that range only.

And for next year, very difficult, we are also reading the market.

So as we mentioned in our commentary also that this is key monitorable for us and we‘ll see with the time.

Mahrukh Adajania

And my next question is on the ECL circular.

Also, have you been filing mock runs with the RBI?

And obviously, your provisions, you've given a detailed slide on your provision to AUM in excess of 2%.

Given that, do you see any major impact from IFRS on your book?

I mean, any comment that you can give on the IFRS circular?

AU Small Finance Bank Limited January 19, 2023

Sanjay Agarwal

So Sanjay this side.

So again, this is just on paper discussion and it just came recently.

So it's difficult to comment as of now because once the overall scheme of things are settled down.

But of course, we are filing with RBI.

And by that, we have a positive impact than a negative one.

And so I strongly believe that once it is implemented, it will have a neutral to positive impact on us.

Mahrukh Adajania

And why is that so because of early provisions on certain buckets or what is it?

Like if you could just...

Sanjay Agarwal

So you know about that.

We provision so much and our net credit losses very less secured book, of course that's why our NCL is less.

So I think you're absolutely right because we provision more than what is required.

But just to make our balance sheet stronger and stronger, but in ECL we have to just estimate.

So I think this is that.

It will have neutral to positive impact.

Moderator · Conference Operator

Our next question is from the line of Ashlesh Sonje from Kotak Securities.

Ashlesh Sonje

Congratulations.

Firstly, a follow-up on one of the previous questions.

On the cost of funds front, has there been any rundown of any older higher cost borrowings on our book?

And if yes, how long do you expect that to continue?

Yogesh Jain

So we don't have any grandfathered borrowing right.

That has already been closed.

This is now six years running.

So three, four years, we had those grandfathered borrowings.

So this is in normal course of business.

Ashlesh Sonje

And secondly, on the TD front, on the term deposits, there has been a decent traction on the retail as well as bulk TDs.

They're up by 10% to 15% quarter-on-quarter.

Can you share the blended cost of deposits on the bulk TD book?

If you can answer this?

Prince Tiwari

We need to have blended cost of...

Ashlesh Sonje

Bulk TD book.

Yogesh Jain

So my bulk TD cost is around 6.4% in nine months for this year, means overall TD cost I'm telling you, fix deposit cost.

Ashlesh Sonje

So this includes both the retail as well as bulk TD?

Yogesh Jain

Retail and bulk, both.

Ashlesh Sonje

Is it possible to bring out the bulk TD cost separately?

Prince Tiwari

So Ashlesh, I think we have commented earlier as well that typically, we don't prefer bulk TD.

I mean we have been articulating that that there has been an internal drive to go more granular, more retail.

And what we are measuring right now is CASA plus retail TD index which you see is now about 70%.

So honestly, on the wholesale side, we generally prefer to give lesser rate as AU Small Finance Bank Limited January 19, 2023 compared to retail.

And on the retail side, we generally have a slightly higher mark-up.

So while we don't disclose this number independently, but if you ask me, it should broadly be similar or slightly lesser.

Ashlesh Sonje

And just one last data-keeping question.

Have we hiked the interest rate on new loans in the SBL book this year so far?

Sanjay Agarwal

Sorry, come again.

Ashlesh Sonje

On the SBL book, have we hiked interest rates on new loans during this year so far?

Sanjay Agarwal

Not much.

Still very high rate of interest book.

So it's a very long-term book.

So yeah, we don't want to push that rate on a higher side.

Moderator · Conference Operator

Our next question is from the line of Renish Bhuva from ICICI Securities.

Renish Bhuva

Congrats on a good set numbers.

So sir, my first question is on yields on the business banking side, which is the number almost...

Moderator · Conference Operator

Mr. Bhuva, sorry to interrupt.

Could you please speak on a handset mode?

Renish Bhuva

So sir, my first question is on the business banking yield.

So the yields on the business banking side has been up by 100 basis points.

I understand that it's a floating rate book, but if you can help me with the reset period.

And what is driving this high, I mean, are we able to pass on the hike or there is like a different set of customers we cater to where in large banks are not there?

Vivek Tripathi

So this is Vivek here.

The entire business banking book is linked to the repo rate and it's a quarterly reset.

So any rate hike which is there is passed on the next quarter.

So every 90 days there is a reset for each contract.

Renish Bhuva

And then in presentation what we disclosed is the disbursement yields or its blended yield?

Vivek Tripathi

No, I'm saying the portfolio yields have gone up because it was -- the entire book is linked to the repo rate.

And even in case of incremental business what we are doing, we are sourcing at the incremental higher rate because the overall regime has changed.

Even the competition has increased rates, but obviously not to the extent that what repo rate has been increased, but there is a significant rate hike on the new acquisition.

Renish Bhuva

And sir, my next question is on the bit of clarification side.

So one is on the AD1 license.

So I mean, I know we have applied, but would you like to comment on the status of that?

And number two is on the RBI divergence report.

I mean, does the audit had concluded?

And what's the outcome of that, if any?

Sanjay Agarwal

On the divergence side because we haven't published anything so that should be taken that the RBI -- the report is in well in place and is in the shape.

And your other one, the AD1 license, AU Small Finance Bank Limited January 19, 2023 yes, we applied in the month December and we are waiting for that.

And of course, the regulator has to decide, but we have applied for that.

Renish Bhuva

And any timeline?

I mean, historically, any evidence within what time...

Sanjay Agarwal

Sorry, we can't comment on that, but it generally takes maybe around five to six months.

So generally takes five.

So it's in general statement, not expecting to us.

So, and we applied it in December.

Moderator · Conference Operator

Our next question is from the line of Nidhesh Jain from Investec.

Nidhesh Jain

Sir, last quarter you sounded a bit cautious on growth front, I think that deposit cost has gone up.

What is our stance on outlook on growth now?

And going into FY'24, what is your outlook on growth?

Sanjay Agarwal

So the last time also people read more into that.

But if you have seen our growth in quarter 3, it is absolutely in line what I commented.

And because it's not about only an asset growth, we need to see how deposit is being built, at what cost, at what tenure, at what rate.

So I think we have - - we want to play very balanced role because we really want to build a very sustainable bank without any noise in any quarter.

So I strongly believe that quarter 4 is always better than quarter 3, and we are absolutely on track.

What I commented or promised as a team from quarter 1, we are supposed to deliver that.

And I would say, we are on track because our profit is growing north of around 27%, 28%.

Our asset is growing north of 27%, 28%.

Deposits, we are playing a very calibrated game where we don't want to borrow at higher rates.

So we want to be mix of them.

Our digital properties are doing well.

The SBUs are performing well.

We are building our governance structure.

Asset quality remains strong.

So I think overall, we are very happy the way we are building ourselves from last nine months.

It remains very tough because the interest rate has gone up.

We still managed to manage our cost of money at around 5.85%.

So in that sense, and now what, another 75 days for this year, so you will see the result by April 1st or 2nd.

So overall, I would say, I'm very happy that the team has come together, has navigated these challenges with the flying colors.

So very optimistic about our future, but need to take call every quarter.

And because it's a very balancing game, you can't comment or we can't be over aggressive or we can't be just look for growth at any cost.

So we have learned hard way.

So although remain very cautious, but very optimistic.

Nidhesh Jain

And secondly, sir, our share of unsecured have increased to 7% of the book, which was quite negligible three, four years back and we have always focused on secured segment.

So what is our strategy on the unsecured?

What percentage we would be comfortable with?

And I see that the large part of unsecured has been driven by credit card book.

So if you can also share some comments on the asset quality and credit cost in that part of the book?

AU Small Finance Bank Limited January 19, 2023

Sanjay Agarwal

Absolutely.

So unsecured book has three, four linkages where we do from credit card, we do straight to our existing depositors and we also want to build something around the commercial customer for QR code?

So everybody is building their business.

We are in a very initial stage.

Overall, we don't have any significant numbers around it.

So I would want to wait for maybe two, three quarters to really comment on the quality of asset, on the size we want to pursue around it.

So I think it's very early for us to comment on anything to be very honest.

So give us some time in maybe two, three quarters to really spell out our strategy around unsecured.

But I think as an organization, we're very happy that we are driving all those opportunities, whether it's through QR code, through credit cards, through your data analytics on your existing depositors.

And so it's -- we are not running that program on FOS.

That is more through digital, data-driven kind of story.

So give us some time then we'll comment more on this.

Prince Tiwari

Nidhesh, Prince here.

Just to add on that specific 7% number.

Not all of it, I mean, while it's classified as unsecured, but bulk of it, like on credit card, again, as the portfolio is growing, it's mostly the out-of-pocket that we have at any point in time depending on the spend in that particular month.

Not all of it is actually a loan, so to speak.

But I mean, it doesn't revolve.

On the second part, there is a decent chunk of SBL book there in that 7%, where for various reasons, the collateral might be imperfect or in the process of getting perfected.

And because of that, it's classified as unsecured.

But if you look at the core business wise, it's not really unsecured.

Nidhesh Jain

So INR 1,000 crores number that we have disclosed in the credit card, isn't it revolver or?

Prince Tiwari

Sorry.

That INR 1,000 crores is the out-of-profit not the revolver.

Moderator · Conference Operator

Our next question is from the line of Hiral Desai from Anived Portfolio Managers.

Hiral Desai

So if I just club what Mahrukh and Nitin asked earlier, so just wanted to get your thoughts on margin over next four to five quarters.

Because if I see the incremental spread, they are about 70 basis points lower versus the back book and the deposits might continue to get repriced at least for the next couple of quarters.

So I wanted to get your thoughts on margin actually for next probably a year or so?

Sanjay Agarwal

So again, I would say, it's difficult to comment now because, again, it's an evolving story that what type of interest rate cycles we are all are expecting.

My sense is that we are nearing to an end of a higher interest rate regime, maybe one more or maybe not more than two.

Our inflation is in our control.

We are moving as an economy.

So, and as I've already commented that bank is about balancing so many things.

It's not only about NIMs.

There are so many other things, and every year something plays out.

Like this year, there's no treasury, no PSLC.

But we are still able to manage our NIMs and other incomes from other sources.

So I would rather won't comment on this by next call because then there will be lot much clarity on many tendencies around us and also how the whole year would be looking in terms of interest AU Small Finance Bank Limited January 19, 2023 rate and all those things, how we really play our quarter 4 also in terms of our business yield.

And so I think it's more around evolving story as of now.

So give us some time.

But as I already commented that NIMs are just one part of the whole balancing.

As a bank, we remain very strong.

We know from where the deposits should come.

We know how to lend.

We know how our assets are behaving.

We know how we are building our team, how the SBUs are performing.

So I think those things are more for me as a CEO, are more important because interest rates are more transitory.

Maybe one year we might have 1% less ROE.

But as we always comment that AU is here for long-term, forever kind of story which is built on scalability and sustainability.

So for me, that is more important.

And I'm feeling very much confident by passing every quarter that we are building more-and-more on good foundation and is building on it.

Hiral Desai

Fair enough.

The other is on the core other income that you mentioned in the presentation.

So is PSLC a part of the core other income or it is outside of the core other income?

Prince Tiwari

Yes, Hiral.

So PSLC is part of the core other income, treasury profits are not.

Hiral Desai

And Sanjay, it is the first time on the investor deck where you've spoken about granularity of the fee income.

So just wanted to get your thoughts on that because credit card is obviously showing good traction?

And on the distribution side also we have tie-ups now on insurance or mutual fund and broking.

So I think most of the bases are covered.

So how should we look at the core fee income growth over the next two or three years?

Sanjay Agarwal

My friend, still we are waiting for our AD1 license which can have a huge impact on other income in next maybe three to five years.

We are building wealth product which is just in nascent stage.

We haven't seen any kind of other income from there.

And of course, our insurance is performing well.

The cross-sell is performing well.

Of course, the credit card will become bigger-and-bigger, better-and-better.

Our QR code is performing well.

So as I commented, and what I've learned in the last 5.5 years is that banks don't run from one revenue stream, it's a pool of many revenue streams.

Some years, something doesn't work and something works very well.

So we need to be very cautious and we should be very smart enough to figure out that what particular year, what kind of stream can work.

And there is already a long-term steam like insurance, wealth product, credit card and all those things.

So I think it's a balancing and mix of so many things.

But I think we are arriving on our other income aspect which was not there three years back.

So you will see better-and-better in terms of our cross-selling ability, in terms of building a lot many hooks for our customers so that they just bank with us or just they deal with us.

So I'm very happy with the way we have built our product.

And that is why our opex was also very high for so many years.

But I think you will see that results coming out maybe next year onwards.

Moderator · Conference Operator

Our next question is from the line of Punit Bahlani from Nomura.

AU Small Finance Bank Limited January 19, 2023

Punit Bahlani

Sir, two questions from my side.

Firstly, on the margins a bit.

Like on the vehicle book, you mentioned that you have been able to pass on the rate.

But if I look at the last three quarter advance yields, they have only increased by around 10 bps. Just on a disbursement basis, if I see the total disbursements made in the past two quarters, they are around over 35% of your vehicle AUM.

Just on thumb-rule basis the repricing and basis -- I think the yield impact would be more.

So is it like -- because of competition we're giving -- this exchange we have not been able to pass like some color on that?

And the second thing on the credit cards...

Sanjay Agarwal

Punit, your audio is not clear at all.

Voice is coming muffled.

Moderator · Conference Operator

Punit, maybe we can check your connection and rejoin you to the question queue.

In the meanwhile, we'll take our next question, that's from the line of Prabal from Ambit.

Prabal Gandhi

Congrats on good numbers.

Moderator · Conference Operator

Sorry to interrupt.

Management team, are you able to hear Prabal clearly?

Sanjay Agarwal

No, unfortunately.

Moderator · Conference Operator

Prabal, we'll check your connection and rejoin you to the question queue.

We'll take our next question from Pallav Garg from Star Health.

Pallav Garg

Sir, my first question is on the changes of the CASA ratio.

So while I understand that there was pressure on the rates, deposit rate, so have you seen any migration of the retail customers from CASA blocking in the long-term rate in the term deposits or some other trends that you have got in?

Rishi Dhariwal

Pallav, Rishi Dhariwal here.

I look after liabilities for AU Bank.

You're right that, yes, as with other banks, there has been a trend for some of the customers to move their deposits to move some of their savings to deposits because I think when the rates came down in the last couple of years, that was really fast.

And now when the rates have come up, customers haven't seen these kinds of rates in the last few years and they want to book their deposits at these kind of rates.

But if we talk about the CASA ratio, what I would say is that we added to our branch network in the last couple of years and our acquisition continues to grow.

And therefore, we are comfortable to be having the CASA ratio in the range that we are in.

And we continue to build our retail portfolio, retail deposits, as what Sanjay and Prince have mentioned earlier.

And you would see that the current account volumes have actually gone up for us since March.

And therefore, we continue to build on that traction both for savings as well as current accounts.

Pallav Garg

So how should we look at this going forward, let's say, next two, three quarters in the time there is a pressure on deposit rates particularly?

AU Small Finance Bank Limited January 19, 2023

Rishi Dhariwal

That I think is something that one will only have to see how the industry plays, because all banks have really gone aggressive around their TD rates.

We all know that.

And we obviously have to keep pace with the rate hikes which have been done by -- I mean, all the universal banks as well as -- I mean, the PSUs as well as the private -- large private sector banks.

So the only thing that I would mention is that maybe the spread between us and some of the large private sector players have actually come down.

And our focus continues to remain on building the transacting book, what Uttam mentioned in his speech.

And that I think is the most important part of what we have been doing.

The savings number of customers, the transacting accounts at 57% and that has moved up in terms of number of transactions per transacting customer moving from 27% to 33% a month.

And the current account transactions moving to 75% from 69% per month for almost 70% of our current account customers is what basically gives us the confidence that, yes, the customers are basically using our account to do their transactions.

And therefore, this, like what Sanjay also said, is a transitory phase and you play it as it comes.

Pallav Garg

Sir, next question is on the percentage of refinancing that you're leveraging based on your housing finance book.

If you can give some quantitative number on that?

You said that the housing finance can be used for -- to avail an NHB finance?

Sanjay Agarwal

So what's the question?

So could you...

Pallav Garg

Just wanted to understand the quantum of it, from the whole borrowing traction?

Prince Tiwari

The refinance as a percentage of the overall borrowing?

Most of it is refinance only.

Pallav Garg

But only the housing finance...

Prince Tiwari

You'll see that our CD and borrowings forms about 9% of our overall liabilities.

So bulk of it will be refinanced.

We of course have some Tier 2 bonds and other things, but bulk of it is refinance, which is through NABARD, SIDBI, MUDRA and NHB.

Pallav Garg

So now just moving back to the asset side of thing.

So if you can give some color on the yields on the new vehicle, used vehicle, tractor and the two-wheeler?

And maybe you can point to...

Prince Tiwari

Sorry, Pallav, we haven't disclosed that number anywhere in terms of various segments.

So we'd like to deal with the overall yields business number, which is already disclosed.

Pallav Garg

And anything about, any color on the gross NPAs in this particular sub-segments?

Prince Tiwari

Sorry, I missed that part.

Pallav Garg

The gross NPAs for these sub-segments, the new vehicle, the used, tractor and two-wheeler?

Any color on that?

AU Small Finance Bank Limited January 19, 2023

Prince Tiwari

I mean, both the disbursements and the portfolio yields at a sub-segment level, we haven't disclosed.

We'll prefer putting out the whole number.

Pallav Garg

And in the SBL segment, if you can give some color of where the distribution of this INR 18,000 crores in terms of either industry or geography-wise?

Any color on that basically only ballpark numbers or any sense would be great?

Prince Tiwari

The question is that in SBL business, you want a geographic split?

Pallav Garg

I just wanted to understand how does that book look like?

Sanjay Agarwal

Pallav, we just did the AU Insight on 4th of December which was on SBL business.

That presentation is there and we have given a link in the presentation itself in IR presentation as well for this quarter has all the details around the sub-segments, the geographical split, the ratios from various...

Pallav Garg

Yeah, we'll refer that one.

Sanjay Agarwal

All of that is available.

Moderator · Conference Operator

Our next question is from the line of Punit Bahlani from Nomura.

Punit Bahlani

First is on the yields business.

You mentioned that you have been able to pass on the repricing towards your customers.

But on the last three quarters, the incremental increase in yields that you have reported is around only 10 bps. Just if I compare the disbursements of the last two quarters, they are around over 35% of the yields AUM.

So what am I missing here?

Like, because 10 bps seems to be quite low.

Is it because there is increased competition, you have to do loans at lower rates, like which is common with the bank, like which is common with the commentary that other banks are reporting?

So first is on that.

Secondly, on the credit cost, even other banks have utilized their floating provisions, which even you seem to have done and accordingly the credit costs have reduced.

Any color on this like how much, do you plan to do this in the near-term?

What will be the extent of it, just on that?

Prince Tiwari

So if the first question is on Wheels, what I understand is you're saying that in the last three quarters, the disbursement yields have only gone up by 10 bps?

Punit Bahlani

Yes.

Bhaskar Karkera

Punit, Bhaskar here.

If you look over Y-o-Y, we have gone up by about close to 65 bps there.

And just over last quarter, we have gone up by 10 bps. What does happened is that by the time you knew the older rate and the new rate, the blending takes time, and that's all it is.

But there has been a clear transmission of rates starting from the beginning of this year itself where every month-on-month we have been -- barring the month of Diwali where it just takes a small blip out there.

AU Small Finance Bank Limited January 19, 2023 But otherwise, by design, if you ask me, by design, we are on the upward trajectory and by a product mix we are able to handle that and we do not really see that getting greatly impacted.

It's just a matter of the older book, new book and by the time the rate impact gets to kick in, that's all.

Prince Tiwari

As far as the second part of the question is concerned, if I understand that correctly, what you're saying is we have created a floating provision and there is a bit of contingency that we still have on the balance sheet which is related to COVID.

And as I commented earlier, we'll see at the end of the financial year, depending on the guidance from the board how to better utilize that.

Moderator · Conference Operator

Thank you.

Ladies and gentlemen, that was the last question.

I now hand the conference back to Mr. Aseem Pant for closing comments.

Aseem Pant

Thanks, Inba, and thank you, everyone, for joining us and for your support.

On behalf of the entire AU team, we wish you a happy, healthy, and prosperous 2023.

Please reach out to the IR team for any further questions.

Moderator · Conference Operator

Thank you.

On behalf of AU Small Finance Bank, that concludes this conference.

Thank you for joining us, and you may now disconnect your lines.