BANKINDIA — 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

Thank you, Sir.

Participants, you will notice a small icon on your screen.

A hand sign.

Once you press this, it will alert us that you would like to ask a question.

We will go around one by one.

The Analysts asking the question will be unmuted and you will get a notification on your screen to unmute yourself.

Kindly do so.

Identify yourself before asking the question.

Each participant will be allowed to ask two questions.

If they have more questions, they are requested to join the queue again.

We shall take on the basis of time availability.

Allow us a moment for the queue.

The first in line is Mr. Ashok Ajmera.

Sir, please unmute yourself and proceed.

Mr. Ashok Ajmera.

Thanks for giving this opportunity.

Except for this higher provisioning, which has dented our profit for the quarter, the results are good.

The performance is very good.

And the various initiatives which you have taken will definitely bring in a lot of fruits in the coming future.

Having said that, Sir, what is this provisioning for Rs.1,826 crores in this quarter, NPA provision is Rs.2,043 crores.

And, how the same increased so much vis-a-vis the last quarter?

Shri Rajneesh Karnatak, MD & CEO: Thank you, Mr. Ajmera.

Thank you so much for your observation.

As regards to this provisioning, you are right that we had made a provision of Rs.2,043 crores in this quarter, in Q4. If you compare it with the Q4 of FY23, the provision is quite higher.

That time it was only Rs.546 crores.

However, if you look at our YoY numbers, the provision is only Rs.4,109 crores on bad and doubtful debts as against Rs.3,602 crores.

So the increase is only 14% in the provision.

Now, coming to your point, why is this Rs.2,000 crores and what does it comprise of?

So let me clarify here that it comprises of additional provisioning.

There is one number of around Rs.800 crore, which is due to the ageing.

That is one provision.

Then there is reversal of provision in the Prudentially Written Off accounts to the P&L due to cash recovery.

That is around Rs.312 crores.

There is one provision of reversal of Security Receipts (S.R) which is Rs.125 crores.

And there is some correction of provision in the SREI accounting, which we had done in December 2023.

That is to the tune of around Rs.55 crores.

Then there were certain NPAs because of which the provision had to take place.

And we have also done some prudent provision with respect to small MSME accounts and other accounts where we thought that the security is not there and the provision was on the lower side.

So we have treated those small loans as unsecured and made full 100% provision.

So thereby totalling to Rs.2,043 crores.

May 13, 2024

Thank you, Sir.

Next in line is Mr. Jay Mundra.

Mr. Jay Mundra

So my question is, last quarter actually we had a negative third quarter and fourth quarter we have seen higher slippages.

Right?.

So I mean, what is the reason for the higher slippages in this quarter?

Could this be a new normal for the Bank or, what are the key reasons for rise in Agri, SME and Corporate slippages this quarter?

Shri Rajneesh Karnatak, MD & CEO: As regards, slippages are concerned.

See, if you see the slippages in the Q4 of FY 23 was Rs.2,625 crores.

In this quarter, the slippage has been Rs.2,038 crores.

Though the slippage in this quarter, Q4 of this financial year, have been lower than last year, Rs.2,038 crores is still on a higher side because we had shown a fresh slippage of only Rs.1,313 crores in the Q3 of FY24. So, it is higher, definitely.

We agree. but if you see on the YoY basis, our slippage in last year, FY23, was Rs.7,969 crores and in this year, total aggregating for 12 months, it is only Rs.7,551 crores which includes fresh slippage and debit in these accounts.

Further breaking down, as you ask, what is this breakup of Rs.2000 crores of fresh slippages, if you see, 70% of this slippage is in Agriculture and MSME only and remaining Rs.440 crores is in one of the large corporate accounts which is there in Odisha and another State Government account in Punjab.

Let me tell you that there is Rs.300 crores plus account which slipped to NPA in Q4 in Punjab.

Out of that, Rs.

65 crores of overdue has been recovered.

Another Rs.65 crores will be recovered within next 10 days and this account will get upgraded.

So this Rs.

300 crores will get upgraded out of that.

We are cognizant of that and we are trying to minimize the slippage.

However, if you see our SMA numbers which was Rs.16,900 crores in above Rs.5 crores number as on March 2023, it has come down to Rs.7,100 crores as on March 2024 and which is only 1.28% of our total standard loan book.

If I further give you a colour on this number of Rs.7,000 cores, out of that, there are four accounts of Rs,4,400 crores of State Government of Telangana accounts.

If you remove them, then our SMA of Rs.5 crores and above is only Rs.2,600 crores which comes to only 0.47% of the total Standard book.

So we are very confident that this quarter has been an aberration and definitely moving forward in Q1 and Q2 the slippages will be considerably less than what has been in Q4. May 13, 2024

Moderator · Conference Operator

Thank you Sir.

Next question is from the line of Mr Rakesh Kumar.

Please proceed.

Mr. Rakesh Kumar Thanks Sir.

The first question is just a continuation of the last question.

You are saying that in Q1 and Q2 slippage would be reasonably less.

Could you quantify that.

How much less and what would be the number.

Shri Rajneesh Karnatak, MD & CEO: If you see our slippage ratio for this quarter, you must have seen in our presentation also, that the slippage ratio has decreased considerably.

It was 1.94% in March 2023.

It has come down to 1.58% percent in this March 2024.

We are very confident that for March 2025, it will be considerably lower and we are giving a guidance of around 1.20% for March 2025 as far as the slippage ratio is concerned.

Mr. Rakesh Kumar Okay Sir.

In SMA 1 and SMA 2 in the Agri as on December 2023 was Rs.259 crores and what was the slippage in this quarter, Sir, in Agri.

Shri Rajneesh Karnatak, MD & CEO: In Agri the net slippage was Rs.

626 crores.

Gross slippage in this quarter from Agri was Rs.1,021 crores.

Mr. Rakesh Kumar The SMA 1 and SMA 2 put together is Rs.260 crores in December.

Shri Rajneesh Karnatak, MD & CEO: SMA 1 and SMA 2 is for Rs.5 crores and above accounts in the presentation.

This slippage is a global slippage which includes all accounts even our Rs.10,000 account comes under that.

This is final slippage.

Mr. Rakesh Kumar So what would be the SMA in the below Rs.5 crores accounts in Agri currently, Sir.

May 13, 2024

Thank you so much Sir.

Next in line, we have Ms. Mahrukh Adjania.

Ms. Mahrukh Adjania Just to hop again on slippages.

I know that YoY, on every 4th quarter, there may be high slippages and you also explained earlier on that in September and March.

You know, their seasonality and slippage is generally tend higher in Agri and maybe even in MSME but this time around, the QoQ growth in MSME and Agri slippage is much higher than the last few years.

So what really drove that?

I mean, why is it that the seasonality is sharper in the 4th quarter this year.

That's my first question.

I'll ask the next question later after this.

Shri Rajneesh Karnatak, MD & CEO: You rightly observed that there has been more slippage in Agri and MSME in the last two succeeding quarters in December quarter also in March quarter also.

That is because of the fact that there is some stress building up in Agriculture and MSME sector, typically small ticket accounts.

As you have heard in the previous question also, why this above Rs.5 crores is not reflecting here because these are all small accounts where this slippage has taken place.

That is why it is not showing up in the presentation.

They are typically those accounts that are very small accounts and obviously less than very much less than Rs.5 crores.

They are, in fact, less than Rs.50 lakhs kind of accounts.

So that is where the slippage is and in Agriculture there are couple of States.

Every quarter, seasonally, a couple of States show stress and NPA in Agriculture.

This time also, there were a couple of States where Agriculture NPA came out larger in numbers than in other States.

Ms. Mahrukh Adjania Okay Sir and in terms of provisioning, you mentioned a lot of breakdown so what was the SREI portion and are you certain that in the first quarter a lot of the Agri and MSME slippages will revive in the first quarter as in that they'll be upgraded?

May 13, 2024

Thank you, Mahrukh ma'am.

Next in line, we have Mr. Sushil Choksey.

Sir, you may unmute yourself and proceed.

Thank you, sir.

Next in line we have Mr. Raunak Daga.

Sir, you may unmute yourself and proceed.

Mr. Raunak Daga The question from my end is that you had lower Standard Asset provisioning in FY24. So can you elaborate on the same?

Shri Rajneesh Karnatak, MD & CEO: This Standard Asset provisioning, which was there earlier, that was mainly because of the 7th June circular, which we had to do.

So if you see the Standard Asset provisioning, which was there at Rs.2,354 crores for the 12-month ended March 23, it has come down to minus Rs.162 crores.

That is because whatever the accounts we had to provide because of the 7th June circular, all these accounts were showing Regular in performance and SMA 0, 1, 2 stress was not there.

So, with the discussion with the Auditors and others, we have taken out these provisions in the Standard book.

This was typically all because of the 7th June circular in certain accounts.

Mr. Raunak Daga And so what will be the Standard Assets provisioning in FY25?

May 13, 2024

Participants, you may click the hand icon to join the Q&A session.

Next in line, we have Mr. Ashok Ajmera with a follow up question.

Sir, you may unmute yourself and proceed.

Mr. Ashok Ajmera

Yes, thanks for giving the opportunity second time.

Sir, what is our total TWO book or PWO book?

What is the overall aggregate figure?

And how much do we expect to recover in FY25?

Shri Rajneesh Karnatak, MD & CEO: Rs.

43,000 crores is our total PWO book.

Okay.

How much do we expect to recover year after year or say in FY25?

May 13, 2024

Moderator · Conference Operator

Thank you Sir.

Next question we've received in the chat from Mr.Narendra.

His question is what would be our guidance on Cost to Income Ratio.

Shri Rajneesh Karnatak, MD & CEO: As regards Cost to Income Ratio, in March 2023 we had a Cost to Income Ratio of 51.08% which increased to 51.73% in FY24 for the simple reason that the employee cost had also gone up because of the wage revision and the full impact of it up to March 31st, 2024 we have taken both on the employee number side and also on the AS-15 side.

So, as regards the guidance for March 25, we are saying that the Cost to Income Ratio shall be around 51%.

Thank you, Sir.

Last in line, we have Mr. Ronak Daga with a follow-up question.

Ronak, you may proceed.

Mr. Ronak Daga

Yeah, thanks for the opportunity again.

So, Sir, what will be the tax rate in FY25?

Mr. B Kumar, General Manager & CFO: Tax rate.

It will be 25%.

We have already migrated to the new tax regime in September 2023.

So, we will continue to maintain the same tax rates.

That is the rate that will continue.

Okay.

And the last question will be, what would be the impact of the new guidelines on Investment classification and valuation, which has become effective from 1st April?

Mr. Uddalok Bhattacharya, General Manager, Treasury: Basically, the volatility in the GSEC portfolio, especially the investment portfolio, will reduce because the shifting is no longer allowed.

So, we will be focusing more on May 13, 2024

Moderator · Conference Operator

Thank you.

With this, we would conclude our Analyst Call.

I would now request Shri Rajesh Karnatak for his closing comments.

Shri Rajneesh Karnatak, MD & CEO: I would just like to clarify on behalf of the Bank, two points to all our Analysts who are there.

So, I was expecting some question on that but it has not come, because some of observations were coming in the Press Meet also with respect to our non-interest income and the Operating Profit.

So, just want to clarify further in detail.

As regards non-interest income is concerned, we had a QoQ reduction in the non- interest income from Rs.3,099 crores in Q4 of 2023 to Rs.1,751 crores in March of 24.

YoY, there is a reduction of 43%.

However, we would like to clarify that in Q4 of March 2023 there was one time income of Rs.1,646 crores on the Security Receipt (SR) side which were booked under the profit from sale of investments so that was the one time book entry which was there.

If we net it off, last year's non-interest income, Q4 of FY23, was only Rs.1,453 crores.

So, actually, there is a growth of 21% on the non- interest income side on a QoQ basis.

As regards the YoY basis, non-interest income, if we net off this Rs.1,646 crores from the total non-interest income of the year of FY23, the net income from Rs.7,100 crores comes down to Rs.5,454 crores and this year we have shown a non-interest income of Rs.6,095 crores which is an increase of Rs.641 crores.

So instead of a negative growth of minus 14%, our non-interest income has gone up by Rs.641 crores.

Non-interest income, in fact, has gone up by 12% if we remove that one off item which was a book entry which was there in the last year.

Similarly on the operating profit side, if you see in our presentation in Q4 of FY23, it is Rs.4,184 crores.

Again, this Rs.1,646 crores of SR impact, which was there in book entry last year, if we net it off, the Operating Profit for last year Q4 was Rs.2,538 crores.

If we compare the netted Operating Profit with Rs.3,557 crores of Q4 FY24, there is an increase of Rs.1,019 crores.

So, as against the presentation which is there at minus 15%, after netting, we have an increase of actually 40% in Operating Profit on QoQ basis.

As regards YoY basis, we have shown last year Rs.13,393 crores of May 13, 2024

Thank you Rajneesh Sir for the detailed explanation.

On behalf of Bank of India, I announce that this conference concluded you may disconnect.

Thank you for joining us.

Questions and answers

UPADHYA · Research Analyst

May 13, 2024

rp l rifet · Research Analyst

Bank of India, congratulations for very stable numbers, barring one event which is not in your hands.

My first question comes from your TV interview where you spoke about credit growth, credit pipeline already visible.

Can you elaborate that a little bit?

Shri Rajneesh Karnatak, MD & CEO: So as regards our credit side is concerned, you are aware that we have touched Rs.5.85 trillion on the credit number with a growth of around 13%.

And Sushilji, if you see our domestic credit numbers, there the growth is more than 14%.

So for the guidance for FY25, we have given a guidance of 13% to 14% of global credit growth.

Presently also we are having, as I told in my TV interview, that pipeline of nearly Rs.50,000 crores we are having as on 31st March 24.

Out of which Rs.38,000 crores in Corporate Credit and Rs.12,000 crores in RAM segment, typically in Retail and May 13, 2024

Your processing and ability speaks for the volume.

So, I don't elaborate on it.

We have signed up with REC, PFC, IREDA and various other organizations.

Are we doing some kind of a joint lending program or it's a down sell which is more happening, underwritten process by them.

Shri Rajneesh Karnatak, MD & CEO: No. The MOU which we have signed is only with the REC.

There also we are very selective on the projects which we will be taking.

So, it is not a down sell.

It is a joint lending whichever we are doing.

So, we are open to all things.

Further, we are open to all syndicates also, which are happening.

We are also open to syndication teams which are there from HDFC, ICICI, AXIS Bank, SBI Caps apart from REC, PFC, etc.

And my next question is, India is getting included in various indices on the global market where the bond market is concerned and this will have a huge impact on not only Money Market but also in FX market.

Being a leading institution with global presence, how are we capitalizing on this opportunity, which we may have, starting May 13, 2024

My question was more pertaining towards your participation, linkage with investors who are coming to Gift City or there may be huge inflow of FX as well as Depository participants or participation via bond market, where our Government security - SLR and holding is concerned.

I was looking from that direction.

Because besides your Corporate Credit, Treasury can have a super profit at the same time Retail can grow on a sustainable basis.

Shri Rajneesh Karnatak, MD & CEO: Our Gift City is already looking into it.

Some products we are contemplating for having in the Bank for which we are already working on.

Thank you, Sir.

Thank you for answering all my questions and best wishes for years to come.

Moderator · Conference Operator

Thank you.

Sushil Sir.

Sir, the next question we've got a text via Mr. Jay Mundhra.

His follow up question is, can you give some guidance on FY25 loan growth, NIMs, Credit Cost and ROA.

Shri Rajneesh Karnatak, MD & CEO: Okay, Credit Cost.

As I have already explained, the credit cost part, we are saying that we'll have a credit growth of around 13% to 14%.

As regards NIMs are concerned, if May 13, 2024