IDFCFIRSTB — earnings call

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Prepared remarks

BANK LIMITED. · Management

MR. SUDHANSHU JAIN – CFO & HEAD CORPORATE CENTER, IDFC FIRST BANK LIMITED.

MR. SAPTARSHI BAPARI – HEAD, INVESTOR RELATIONS, IDFC FIRST BANK LIMITED.

Moderator · Conference Operator

MR. KUNAL SHAH – ICICI SECURITIES.

IDFC FIRST Bank Limited October 22, 2022

Thank you.

The next question is from the line of Sahil Sharma.

Please go ahead.

Sahil Sharma

First question I have is, we are building a Bank for the next many decades and I’m sure we are also hiring with that in mind, can you please talk a little bit about the kind of credit risk team that we have on the retail side because in the Banking the most important thing is to get the money back, it’s not just about giving it out?

Vembu Vaidyanathan

Absolutely, I agree with you 100%.

So, in terms of people we are hiring it’s not so much a great managers anymore, that’s a bit of five years ago but as you know every five years India is changing so fast, earlier in credit we used to hire credit managers who really look at a file in great detail and evaluate it and all that stuff.

Of course, we still need to do that in products like loan against property or home loan, etc., you still need credit managers to physically look at some of the files, but incrementally a lot of people, or machines are doing all this work.

So, our focus, of course is on developing really good high quality algorithms using AI, and et cetera and the skill levels of people we are looking to hire it’s a really higher order, not the traditional people who will prepare files and all that.

So, we are building that kind of people, the other kinds of people we’re trying to build is the people who can build some really since quality kind of people, you of course need high quality technology people, people good high quality engineers, we provide as a Bank we provide really, really good working environment.

And our employees are very proud about the Bank they’re building because they can see from within the quality of the Bank we are building and the ethics and all that.

So, we’re able to hire really high quality people, any position we look out for like the hundreds of applications pour in, we are literally a IDFC FIRST Bank Limited October 22, 2022 spoilt for choice because that comes through, there will be, we’re looking at hiring design people for example as you speak, if any of you are hearing the program, and if you’re probably very, very good high quality, high end design person, please let us know.

I’ll be very happy to hire you right now.

You’re looking for a head of design who can set across our, you have to build really good user interfaces and UX.

So, we’re looking for that kind of profile of people.

High quality technology, coders, DevOps people and all that.

Sahil Sharma

Thank you so much, sir.

And the second question I wanted to ask about just tying back to the other speakers question.

What we as investors really appreciate, I’ve been with the Bank for like three years now roughly, is that we have really turned around the DSI institutions, plus NBFC into a retail Bank.

And that has been a fairly long and strenuous journey and on most fronts we have made tremendous progress, the last remaining thing now, which is at the top of your mind for most investors according to me is cost to income which is like most of the questions are also around them.

And so the answer is brilliant on the income side specially, which is that how the income will expand.

But, one of the things which we would really appreciate as investors is, if you can also share on the cost side, if there are like, is this the correct leverage for the cost or for example if we double our AUM, you probably shouldn’t expect to double the operating expenses for example probably the branches won’t double from here.

The lease cost won’t double from here, and things like that.

So, once you start to really to really help is, if you can give some rough guidance for the cost to income for FY23, FY24, based on your best understanding?

Vembu Vaidyanathan

Okay.

Now, first of all thanks for that.

Yes, when we are thinking of the Bank, we’re really thinking long, we’re not doing any shortcut I notice three years have gone by, we’ve not done one item that’s a shortcut, so we will not do shortcut things.

Now the second thing is about when you said you’re happy about stuff, thanks for that but I’ll tell you we’re not just building a DFI converting to retail that frankly anybody could do, but the thing is that it’s hard but people do it but what we are very proud is about with the culture we building the Bank, it’s very clean, it’s very ethical people are trained to be ethical, people come to any organization we tell them this is why we do work here, not that other people are bad they’re all good quality ethical people but at least we are building in the DNA all that is, that talks on within.

So, that’s what it is, now coming back to your cost income comment.

One is of course I specifically reconcile for you to earlier one of the speakers who talked about the weight they added up that three items of legacy, et cetera.

You add that, you will find that cost to income has come down I’m telling you within three years, you will see that you will get there, you just watch the story play out year after year after year it will go there, honestly I’m not disturbed because I can see it from I’m an insider of course I can see it, you will also see it.

So, as the scale plays out automatically cost to income will sort out that’s how it plays initially there is cost after that there is income.

So, that’s our base.

So, now with regard to the, there is one data point which none of you which I’m going to share some data points with you and this will help you understand the Bank, how the Bank has progressed okay.

Now, if you take the core PPOP of the Bank, core PPOP without any other income lines, the core PPOP of the Bank in FY19 was ~Rs.

1,105 crore, annualized for the half year that is Capital First and IDFC FIRST Bank put together both put together for December 18 quarter and March 19 quarter that is the first half year after the merger.

Now, if you take the, IDFC FIRST Bank Limited October 22, 2022 even if you assume credit cost maybe about 1.4% on the whole book, retail being 1.5, 1.6 and wholesale being little less than that then blend, if you take 1.4 which is a very reasonable assumption we were that would come to Rs.

1,300 crore in the book.

So, actually on the core the Bank was a loss machine even after merger for the first half, pre-merger, I can tell you that it was basically the income was Rs.

743 crore.

And assume credit cost was Rs.

988 crore so it is actually a loss situation.

So, that’s not the point, the point is that this was Rs.

199 crore to negative.

Now, FY20, when you do the same analysis, core PPOP minus core credit loss it will come into 250 crore positive, FY21 has gone to Rs.

400 crore, FY22 has become Rs.

1,079 crore and FY23 you can multiply this quarter’s numbers or whatever it is and analysts have put out some numbers about operating profit.

So, it is not difficult for you to guess.

So, we already guided about 50% over last year that means about Rs.

4,200 crore of PPOP.

So, the point I’m trying to is that, if something is rising from minus Rs.

200 crore to positive Rs.

250 crore in FY20 to Rs.

400 crore in FY21, to Rs.

1,000 crore in FY22 to whatever number this year it will be a substantial increment, you can see how this chart is rising.

So, we as insiders can tell you that the core is delivering very strong.

So, all items will fall in place as it plays out.

Now you watch at 23, watch at 24, you watch a 25 I don’t think this trend is changing.

Sahil Sharma

Yes, thank you so much sir.

My last question is on capital adequacy, there are around 15%.

Are you comfortable with this and would there be any need for fundraisers in the next one or two years to support the kind of 20%, 25% loan book growth that we want?

Vembu Vaidyanathan

Well, we evaluate this from time to time because internal accruals was also going to be strong now, growth is also strong.

So, we will play out this equation.

Moderator · Conference Operator

Thank you.

The next question is from the line of Sagar Shah from Phillip Capital.

Please go ahead.

Sagar Shah

I have just two questions actually.

So, first of all we have already reached about 10% ROE in this quarter itself actually instead of the fourth quarter that you were guiding for.

So, we are earning the gain actually.

So, going ahead, what are the key drivers for further traction in the ROA if we are expecting anything around, anything traction in ROE for around 13% to 15%.

So, what are the drivers first of all for the traction in the ROE and ROA?

And the second question is, going ahead since we are having almost a very good run as far as the economy is concerned.

So, going ahead, do you see even on your corporate front your corporate growth, use for credit will go up as compared to retail and my last question was, have we seen the average cost of the deposits and borrowings that is coming at around for 6% if we compare for this quarter, sorry are peeking out on the average cost of deposits and borrowings actually at least for this quarter as per going ahead?

Sudhanshu Jain

Yes, I will start with the last one.

So, on the average cost as I said, average cost for us for Q2 was about 5.5%, which was about 25 bps higher than the previous quarter, of course and many of the repo increases, are factored in the market rate and that’s how it’s playing out.

So, we don’t see a substantial increase going forward, the offset to this as I said even the loans get repriced in IDFC FIRST Bank Limited October 22, 2022 the equation, and hence we see that both should move in tandem.

So, we are not very worried on that front.

Vembu Vaidyanathan

Sorry, one thing to add to that, from our point of view we don’t take any fixed positions on interest rates in the market.

So, we are right now frankly we’re paying only 4% up to 10 lakhs and we don’t intend to touch that honestly.

But, I’ve always said that we have enough margin, and if required we will always start something or the other but we won’t let a deposit machinery slow down.

We don’t see the need as of now, but we’ll watch.

Sagar Shah

Okay, sure sir.

Now, for my first question what are the key drivers for the ROE going ahead?

Vembu Vaidyanathan

Scale.

Sagar Shah

Okay, scale.

But is this anything related to maybe your OPEX growth normalizing and your income growth increasing can we relate to that extent?

Vembu Vaidyanathan

That’s what scale means right, because expenses increased by maybe 20% to 22% but income goes by 30% odd; that straight away improves cost to income.

And remember income is, we expect it to grow by 30% on a larger base and the expenses to tend to grow on a smaller base, obviously even, so you know how scale plays out, that’s exactly scale and operating leverage.

And of course, there are so many other product lines like fees and all that stuff.

You know, so many new lines of business launched all that will grow.

Moderator · Conference Operator

The next question is from the line of Franklin Moraes from Equentis Wealth Advisory.

Vembu Vaidyanathan

It’s 7:30pm, I would love to wish all of you Happy Diwali and close the meeting.

If you have any last few questions you can push it in one if you can do that.

Moderator · Conference Operator

Just one last question sir before?

Vembu Vaidyanathan

Yes.

Moderator · Conference Operator

Yes, the next question is from the line of Franklin Moraes from Equentis Wealth Advisory.

Please go ahead.

Franklin Moraes

So, I just wanted to understand, from the time of opening a branch, to the time the entire cost are loaded, what is that period how many months does it take?

Vembu Vaidyanathan

I told you earlier, it’s hard to, everybody numbers on these things, if you take it on the basis of pure variable cost you’ll get one answer, if you fully take a fully loaded cost, you will get another answer.

So, we thought depending on which way you look at it, it could even be 18 months, it could be 24 months, it could be some in that zone depending on how you wrote the cost to look at it.

But we can ensure getting, looking at like that the way we look at it is that end of the day, we don’t want to give explanations to people that this is because of this reason, because of put IDFC FIRST Bank Limited October 22, 2022 more branches or credit card or legacy liabilities, et cetera.

These are really details which people like yourself or anybody is willing to bend a little extra back, anybody who’s willing to do some extra work, they understand these things.

But for most people, end of the day, people will just look at your ROE and say, end of the day are you improving.

So, whatever it is, all costs put together, we are committed that our ROE will go up.

So, it will go up year-on-year from here on, we have no doubt in our mind.

It’s already going up, you can see last four quarters.

We feel that this will go on.

I must say one last thing, because it’s very important.

In the context, some of the questions that was asked earlier, now you take this quarter’s PAT of the Bank.

Now, I told you that there are three items, which are those well-known items, so credit cards, legacy liabilities, and the setup cost of the branch, so you take these three items we told you it’s Rs.

525 crore, or it’s Rs.

500 crore.

Now you take the PAT impact of the number then probably be about Rs.

375 crore or Rs.

380 crore.

Now, in other words if this had just been a mature brand given three years or maybe four years and then you find that this amount of money will start coming to the P&L hopefully.

Now, this quarters PAT was 556 crore, so you add Rs.

556 crore and add that number of Rs.

375 crore you will go to ~Rs.

931 crore, you multiply this with four that’s ~Rs.

3800 crore.

And what’s the equity base today Rs.

22,000 crore.

So, what is Rs.

3800 crore you are touching, nudging 16, 17 so do you have any doubt in your mind that these three items we can’t turn these things around those three items of course we will.

So, in my mind, even if you do a simple plain math of just add these numbers and then do it Bank is heading to a very healthy ROE.

So, for those of you who are willing to wait to give us the time you will see the numbers and we have no doubt.

Thanks very much.

Thanks, I wish you all a very, very Happy Diwali from our side and let me tell you that we are feeling quite comfortable.

Kunal Shah

Thanks Mr. Vaidyanathan, and the entire senior management team of IDFC FIRST Bank for answering all the questions and thanks all the participants for being there on the call.

I wish you all a very Happy Diwali.

Thank you.

Vembu Vaidyanathan

Thank you, everyone and wish you a very Happy Diwali.

So, from Sudhanshu, Saptarshi, myself and of us at IDFC FIRST Bank, we wish everyone of you a very Happy Diwali to all the people who are listening to the program today.

Thanks a lot.

Moderator · Conference Operator

Thank you.

Ladies and gentlemen on behalf of ICICI Securities, that concludes this conference.

We thank you all for joining us and you may now disconnect your lines.

Questions and answers

Moderator · Conference Operator

Thank you.

Ladies and gentlemen, we will now begin the question-and-answer session.

The first question is from the line of Bhavin Gala from Marine Capital.

Please go ahead.

Bhavin Gala

I have only one question to the MD and CEO.

Could you please help us understand the performance in the recent quarter with respect to the Retail Banking operations because what we have seen is this segment turned profitable, a few quarters back and there was inconsistency as far as the PBT is concerned.

But this quarter what we could see is, there was a drastic decline in the PBT from this.

So, if you could help us understand the reason behind this?

Vembu Vaidyanathan

No thanks, it’s a very important question.

If you recollect my opening conversation I told you we had suddenly we discovered, not discovered, we sold SR and then we got about Rs.

200 crore of provision release.

So, that provision release we took it to retail and therefore, it is showing up there on the retail line for example, have we not got the Rs.

200 crore, we would not have, we need not have really taken this provision of retail, if to put it simply.

So, therefore if you add back that Rs.

200 crore then you know that your numbers are back to the trend line.

Was it complicated or was it okay, or should I explain again.

Moderator · Conference Operator

Thank you.

The next question is from the line of Ishan Agarwal from Erevna Capital.

Please go ahead.

Ishan Agarwal

So, I have multiple questions here.

First question being, in your last call with us you had advanced the guidance of a double-digit ROE which was originally given for Q4 of FY23. However, if I look at the core-core numbers for this quarter, excluding Treasury gains and do like to like comparison with Q1, the PBT excluding trading income is lower in Q2 at 644 crore versus 678 crore in Q1, and hence ROE and ROA excluding trading gains is lower in Q2. So, are you confident at the Bank will touch core annualized ROE of 10% ex of treasury by Q3?

Vembu Vaidyanathan

Yes.

Ishan Agarwal

Okay.

And secondly, so the annualized credit loss for this quarter was 1.2%.

That is blended for retail and wholesale, what will be the analyzed credit loss for this quarter for retail plus commercial?

Sudhanshu Jain

We have not called that number out separately but as I say overall is 1.2%.

And for H1, it’s 1.1%. we would not want to call out a separate number for a retail credit loss.

Ishan Agarwal

No, why I’m asking that is incrementally our book is.

Vembu Vaidyanathan

No, I’ll answer the question.

IDFC FIRST Bank Limited October 22, 2022

No, don’t worry, Let me explain a little more, no issue.

So, basically see the retail retail side.

If you take back the retail credit loss, the 200 crore which I said is extra provision if you don’t have that as a onetime item, it’s about Rs.

400 crore for the quarter..

So, Rs.

400 crore multiplied by four is Rs.

1,600 crore, then Rs.

1600 crore you divide that by about a one lakh crore book about 1.5%, 1.6%.

Ishan Agarwal

Okay.

And this should get better as we concentrate more on home loans going ahead, or we expect it to be at 1.5%, 1.6% and going ahead for FY24, 25?

Vembu Vaidyanathan

We like it to be considered to on this front and the sales number as we said it right now.

And if it gets better, just maybe we’ll take it as a positive.

But you factor in if you’re thinking of the Bank, think of it that retail will have, after all it’s a pretty good yielding book.

And our credit controls are working obviously very well, collections are working very well.

Otherwise, for such a low credit loss that we’re talking about in retail, it’s already pretty good so I don’t want to give any more aggressive guidance’s beyond this.

Ishan Agarwal

Okay.

So, third question is OPEX for this quarter is around 8.7% higher as compared to Q1, which is actually higher than the loan growth Q-o-Q so is it because we’ve invested more on the technology front or what is the reason for this large jump because this is also yielding to a cost to income plateauing from Q1 to Q2 at 72.9%.

Vembu Vaidyanathan

Really quarter-on-quarter it’s very hard to explain this quarter 20 crore up, 40 crore down.

Ishan Agarwal

In general the jump has been higher at 8.7%?

Vembu Vaidyanathan

No, let me finish.

So, I was saying that it’s hard to really pin down a particular quarter, there are a lot of moving parts a large Bank, a lot of moving parts but broadly speaking you should expect the cost income ratio of the Bank to trend downwards from here.

If you take a Y-o-Y all these inter quarter movements a little bit up and down gets evened out.

So, if you take a Y-o-Y basis, the Y-o-Y meaning when you compare year of 23 versus year of 22, year of 24.

If you see sequential things will keep coming down from here on.

Ishan Agarwal

Okay.

So, I have a few questions related to the Bank and not the quarter.

So, the first one being, so when Capital First was founded, I would say that we were quite ahead of the curve in terms of developing an algorithmic lending model based on multiple parameters, demographics, marital status, gender, geographical location to state of few, and hence we enjoyed a certain niche in that segment.

Now that information related to a borrower is more easily available to a larger number of lenders, thanks to aggregators, Fintech, startups, like Cred payment apps, which capture cash flow data, and also a much larger penetration of credit bureaus.

And also given the fact that now 90% of our borrowers have a credit history has the significance of that lending model reduced for the Bank?

Vembu Vaidyanathan

Actually it is a very good question.

See, as you know India is just not served simple.

Underserved would be an understatement.

So, whether we play this game or some 20 other players play this IDFC FIRST Bank Limited October 22, 2022 game this is a large story.

And therefore, this benefit, this advantage we have is not going to go away.

Because we will still grow, after all we are guiding for growth, growth of only 25%.

So, it’s easy.

Number two is that our ability to use the data, our own ability, forget what others do or don’t, I’m sure others can also do a good job on these things.

But our own ability to use this data is continuously getting better.

So, in a large underserved market we should bother about how well we do and how well we can control a credit quality and so on.

So, our ability to use the data is only improving every year on year it is only improving.

And for example, our algorithms are getting much more refined, remember one thing that our algorithm was a 10 year old algorithm that is not 10 year old algorithm, it’s been continuously refined since 10 years.

Ishan Agarwal

It’s Maturing.

Vembu Vaidyanathan

Yes, maturing the right word.

So, it’s like it’s getting, let me say more and more precise and the quality of that algorithm is getting better and better with every passing let me say year, forget year, it’s getting better every single quarter, it’s getting better and better.

So, therefore, we feel we are very, very far ahead in this game.

Because we have gone through R&D ourselves.

It’s not something that we acquired here and there, its like we remember we built the company from grass root of Rs.

94 crore loan book 10 years ago.

So, we know every single moving part of this machine.

So, we are getting better and we will stay, we will be very good in this front.

Ishan Agarwal

So, I would say that right now, it’s helping you on the credit quality front and not as much on the yield front because we are also concentrating on better yield customers?

Vembu Vaidyanathan

No, if yes or no actually, because if you notice one very definite advantage we have as a Bank, maybe we are new, we may not be as profitable as other, we may have other issues.

But the one very unique thing about our Bank is that our book itself has been created in an era or when our cost of funds was 9% or 10% or at least the models were built for that kind of a cost of funds.

So, therefore, we were specializing in lending at 14%, 15%, 16% and all that stuff probably more.

And at very good credit quality, you know the numbers I don’t repeat them.

So, therefore now suddenly over the last three years cost of funds have come down, but our capabilities have not gone, capabilities are still as strong so therefore we feel that this is a very distinct advantage.

So, if you see the mix of the book, our mix of the book would have, would probably be better yielding.

That doesn’t mean we are taking more riskier loans, it just mean that we are just more specialized.

Ishan Agarwal

Right, okay understood.

So, you will be maintaining that India is underserved and there is unlimited credit demand at least for the next 10, 20 years.

So, just for FY24 because of XYZ reason the GDP growth stagnates or it’s less than 3%, 4% even in that scenario will you envisage that because of our small size we will still be able to grow our loan book by 20%, 25%?

Vembu Vaidyanathan

Yes, of course see it’s very important if you think of a very large Bank with 20, 30 lakh crore loan book and all that stuff, of course they will be proxy to the economy.

But we are not proxy to the economy, we are very small yet.

Coming from a very low base, to give you a small idea, supposing our just typical number, supposing a loan against property or take any business we IDFC FIRST Bank Limited October 22, 2022 are bookings x number of, x 100 crore a month, let’s call it 500 crore a month, if you want to increase it to say another number, say 600 or whatever it is.

These are not exact numbers, but I think we’ll probably be close.

Now we don’t have to do anything, we don’t have to change the credit criteria.

We don’t have to relax the criteria, we do nothing, we just open some five more locations and loan and behold, everything will come on the same location you need to put up some more branches you will get it.

So, that’s the benefit of being that’s the point I am making when you’re relatively early, let me say when the book is smaller.

We have a base effect let me say.

We are nowhere close to the big players, big players are at least seven, eight, ten times our size.

Ishan Agarwal

So, if I have to put it that way, HDFC Bank is adding an IDFC FIRST Bank every quarter.

Vembu Vaidyanathan

Yes, absolutely.

Moderator · Conference Operator

Thank you.

The next question is from the line of Nitin Aggarwal from Motilal Oswal.

Please go ahead.

Nitin Aggarwal

Two questions I have, first is like we have reported some margin expansion this quarter.

Though the deposit cost are inching up.

So, if we can talk about how the incremental spreads are moving, and how do you see the margin strengthening in coming quarters, also if you can share the proportion of loans that are linked to a EBLR?

Vembu Vaidyanathan

Sudhanshu proportion of loans.

Sudhanshu Jain

Yes, I will first start with the proportion of loans, over 38% of the funded assets are roughly linked to benchmarks which could be NCLR or repo or T-bills.

And out of that about 60% is linked to repo and rest two other benchmarks.

With respect to margin expansion as you have guided earlier also, we feel that we will be comfortably able to maintain margins around a 6% mark in fact this quarter we are very close to that, we are 5.98%.

We of course had the benefit of some reset which sort of benefit was kicked in during the quarter as the loan came up for a reset it comes once in every three months.

And RBI is also very recently increased under 50 basis points, so, that benefits should be slightly higher in Q3. So, we feel that, even though the cost of funds are sort of going up, even for us during the quarter, the cost of funds on a blended basis went up by about 25 basis points, but since this reset kicked in, even for the new loans, we have to increase the pricing a bit.

So, a combination of this led to a higher sort of yield on advances and interest earning assets.

And which led to an increase of nine basis points.

So, we feel that both these things good sort of work in tandem, and in fact, we could be a beneficiary even in going forward as sort of the rate cycle plays out.

But give or take like this 5.8, 5.9, 6 in that zone, you should expect the NIM to be.

Nitin Aggarwal

Right, sure.

And the other question from a consumer loan portfolio while this portfolio has been growing like every quarter and Y-o-Y growth now is 35, but this quarter the portfolio like held essentially flat.

So, we have seen a stronger growth from other Banks in the consumer loans.

So, any specific reason that has caused this?

IDFC FIRST Bank Limited October 22, 2022

Vembu Vaidyanathan

Let’s see the numbers once. the Rs.

19,600 crore book that you are talking about?

Nitin Aggarwal

Yes, the Q-on-Q growth leg is almost like flat this time.

Vembu Vaidyanathan

About Rs.

300 crore we must have sold this quarter.

Sudhanshu Jain Yes.

So, we have sold about Rs.

333 crore of loans during the quarter which were essentially out of this segment plus Q1 also was related also a strong quarter, because of the summer consumer durable sales of equally strong and so on.

So, hence, these numbers are the way it is.

But overall, Y-o-Y is quite strong.

Nitin Aggarwal

Right.

So, basically therefore the retail book, this piece will remain one of the key growth because LAP we have been going relatively slow, but consumer loans will continue to maintain this sort of traction.

Vembu Vaidyanathan

No, not only consumer, all our lines will grow, frankly we don’t look at home loan, our home loan book is something like 15 or 16,000 crore if you think of large Banks, they’re probably four or five lakh crore or even six lakh crore So, can even compare so, for us to grow a 16,000 crore by 40%, 45%, 50%, whatever should not be no issue at all, think of loan against property that can grow, think of vehicle financing, etc. So, one of the speakers earlier spoke about the base effect.

So, let me say we are relatively small player, I’d say when you compare the big four, five Banks in the country, so we’ll keep growing.

Moderator · Conference Operator

Thank you.

The next question is from the line of Lalit Deo from Equirus Securities.

Please go ahead.

Lalit Deo

So, sir like I have just two questions.

So, firstly on the borrowing side so sir like within the borrowings, our refinance portion has increased to about 35% including the market borrowings.

So, just wanted to understand like, what is the broad range of interest which we are paying on these refinance borrowings and also could you tell us about the average tenor of these borrowings?

Vembu Vaidyanathan

We don’t do much borrowing anymore in the sense that, you might be talking about market borrowing, is treasury market borrowings, they are not the big item.

But the, Sudhanshu will say something.

Sudhanshu Jain

So, I’ll answer that, so we keep evaluating various funding options, in terms of a term deposit, refinance, and other market borrowing, we see essentially what is the prevailing rate, what is the average tenor of funding which could sort of come in, so we have done some refinance additional refinance borrowings during the quarter because one, they were of a longer tenure, and the rates which were available were relatively better.

Vembu Vaidyanathan

So, this it’s better.

IDFC FIRST Bank Limited October 22, 2022

Sudhanshu Jain

If we have to sort of, if we had to compare with the other funding options which were available.

Vembu Vaidyanathan

But the other, this is a item called other borrowings, see if you go through the list there’s something called legacy long term borrowings, infra bonds, sorry legacy long term bonds, then there is infra bonds.

These two items are continually coming down, of course refinance Sudhanshu has explained, then this item called other borrowings this could be general looking stuff.

Lalit Deo

Sure, sir.

And sir again on in the fee income part.

So, like we have been going strong in our credit card business, but on a quarterly basis the fees from the credit card and the toll business has declined on a quarterly basis.

So, now with the festive season, and we believe that the spends have been strong, so what could be the reasons for the decline in the credit card fees during the quarter?

Sudhanshu Jain

No, so that essentially it a declined which has happened on the toll business.

So, there has been some changes which have been done in the MDR right, especially on the issuing side.

And this is a notification which sort of came in in this quarter and was effective April 1 of 22, and hence that sort of readjustment happened through that line item.

And on the credit card, the fee has gone up on a sequential basis.

So, this was essentially largely because of the toll business.

Vembu Vaidyanathan

But broadly all the people who are doing very, very well, whether it’s cash management, toll or wealth or credit cards, like every product is turning out to be a big success in the market, so nothing to worry.

Lalit Deo

Sure, sir.

And in the Home Loan portfolio so like we have given some extra details on this portfolio.

So, just wanted to know if you can share the portion of the salaried customers in the home loan portfolio and how has it changed towards the last couple of years.

Vembu Vaidyanathan

I don’t have a number offline but had probably if I were to take a guess then probably be about 55%, 60% probably be salaried.

But maybe next time we’ll be better prepared on this question.

Moderator · Conference Operator

Thank you.

The next question is from the line of Ashutosh Kumar Mishra from Ashika Stock Broking.

Please go ahead.

Ashutosh Kumar Mishra

My question is basically on the cost to income.

So, we are guiding a cost to income ratio of 65% by the end of FY25, so can you guide us on what are the lever on this front which would help us to take it from the current 70%+?