Mercury General Q2 23/24 Earnings Call Transcript

Quartr
Provided by Quartr
October 21, 2023

There are 7 speakers on the call.

Operator

Ladies and gentlemen, good day and welcome to the ICICI Bank Q2 FY 'twenty four Earnings Conference Call. As a reminder, all participant lines will be in a listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Bakshi, Managing Director and CEO of ICICI Bank.

Operator

Thank you and over to you, sir.

Speaker 1

Thank you. Good evening to all of you, and welcome to the ICICI Bank earnings call to discuss the results for Q2 of FY twenty 24. Joining us today on this call are Sandeep Batra, Rakesh, Anandya and Abhinay. The Indian economy continued to be resilient amidst the uncertainties in the global environment, reflecting the actions and initiatives of the policy makers. The underlying growth momentum is visible with expansion in Manufacturing and Services PMI, real estate buoyancy, Increasing steel and cement output, higher tax collections and demand for travel.

Speaker 1

The government led CapEx cycle is continuing. Though there has been a pause in the policy rate hike cycle in India, global and domestic inflation and the liquidity and rate environment continue to evolve. At ICICI Bank, our strategic focus continues to be on growing our core operating profit less provisions, I. E, profit before tax, excluding treasury, through the 3 60 degree customer centric approach and by serving opportunity across ecosystems and micro markets. We continue to operate within a strategic framework and strengthen our franchise, Enhance our delivery and servicing capability and expand our technology and digital offerings.

Speaker 1

The profit before tax, Excluding treasury, grew by 35.7 percent year on year to INR137,310,000,000 in this quarter. The core operating profit increased by 21.7 percent year on year to INR143.14 billion in this quarter. The profit after tax grew by 35.8 percent year on year to INR102.61 billion in this quarter. Total deposits grew by 18.8% year on year and 4.5% sequentially at September 30, 2023. Term deposits increased by 31.8% year on year and 9.2% sequentially at September 30, 2023.

Speaker 1

During the quarter, the average current and savings accounts deposits grew by 7.1% year on year and 1.1% sequentially. The bank's average liquidity coverage ratio

Speaker 2

for the quarter was about

Speaker 1

122%. The domestic loan portfolio grew by 19.3% year on year and 4.8% sequentially at September 30, 2023. The retail loan portfolio grew by 21.4% year on year and 5.5% sequentially. Including non fund based outstanding, the retail portfolio was 46% of the total portfolio. The Business Banking portfolio grew by 30.3% year on year and 10.6% sequentially.

Speaker 1

SME portfolio grew by 29.4% year on year and 7.2% sequentially. The rural portfolio grew by 17.3 percent year on year and 3.5% sequentially. The domestic corporate portfolio grew by 15.3% year on year and 3.1 percent sequentially. The overall loan portfolio, including the international branches portfolio, grew by 18.3% year on year and 5% sequentially at September 30, 2023. We continue to enhance the digital offerings and platforms to onboard new customers in a seamless manner, provide them end to end journeys and solutions and enable more effective data driven cross sell and up sell.

Speaker 1

We have shared some details on our technology and digital offerings in Slide 15 to 26 of the investor presentation. The net NPL ratio declined to 0.43% at September 30, 2023 from 0.48% at June 23 and 0.6% at September 30, 'twenty 2. During the quarter, there were net additions of INR 1,160,000,000 to gross NPAs, excluding write offs and sales.

Speaker 2

The total provisions during the quarter were

Speaker 1

INR 5,830,000,000 or 4.1 percent of core operating profit and 0.2% of average advances. The provisioning coverage ratio in NPAs was 82.6% at September 30, 23. In addition, the bank continues to hold contingency provisions of INR131,000,000,000 or about 1.2% of the total loans as of September 30, 23. The capital position of the bank continued to be strong with a CET1 ratio of 16 point 77%, Tier 1 ratio of 16.86 percent and total capital adequacy ratio of 17.59% at September 30, 23, including profits for H124. Looking ahead, we see many opportunities to drive risk calibrated profitable growth.

Speaker 1

We believe our focus on Customer 360, extensive franchise and collaboration within the organization, Backyard digital offerings, process improvements and service delivery initiatives will enable us to deliver holistic solutions to customers In a seamless manner and grow market share across key segments, we will continue to make investments in technology, people, distribution and building our brand. We will remain focused on maintaining a strong balance sheet with prudent provisioning and healthy levels of capital. The principles of return of capital Fair to customer, fair to bank and 1 bank, 1 team, 1 ROE will continue to guide our operations. We remain focused on delivering consistent and I now hand the call over to Anandir.

Speaker 2

Thank you, Sandeep. I will talk about loan growth, Credit quality, P and L details, growth in digital offerings, portfolio trends and the performance of subsidiaries. On loan growth, Salip covered the loan growth across various segments. Coming to the growth across retail products, The mortgage portfolio grew by 16.2% year on year and 4.1% sequentially. Auto loans grew by 24.1% year on year and 5.5% sequentially.

Speaker 2

The commercial vehicles and equipment portfolio grew by 12.3% year on year and 4.5% sequentially. Personal loans grew by 40.4% year on year and 10.2% sequentially, and the credit card Portfolio grew by 29.5% year on year and 6.2% sequentially. The personal loans and credit card portfolio were 9.4% and 3.9% of the overall loan book, respectively, at September 30, 2023. The overseas loan portfolio in U. S.

Speaker 2

Dollar terms declined by 6.3% year on year At September 30, 2023, the overseas loan portfolio was about 3.3% of the overall loan growth at September 30, 2023. The non India linked corporate portfolio declined by 26.9 percent or about $115,000,000 on a year on year basis. Of the overseas corporate portfolio, about 90% comprises Indian corporates, 6% is overseas corporates with India leakage, 2% comprises companies owned by NRIs or PIOs and the balance 2% is non India corporate. Moving on to credit quality, there were net additions of INR 1,160,000,000 to gross NPAs in the current quarter compared to INR18.07 billion in the previous quarter. The net additions to gross NPAs were INR 13,450,000,000 in the retail, rural and business banking portfolios And there were net deletions of gross NPAs of INR12.29 billion in the corporate and SME portfolio.

Speaker 2

The gross NPA additions were INR46.87 billion in the current quarter compared to INR 63.18 billion in the previous quarter. Recoveries and upgrades from gross NPAs, excluding write offs and sales, were INR 45,700,000,000 in the current quarter compared to INR 35,110,000,000 in the previous quarter. The gross NPE additions from the retail, rural and Business Banking portfolio was INR43.64 billion in the current quarter compared to INR50.72 billion in the previous quarter. We typically see higher additions from the Kitan credit card portfolio in the 1st and third quarter of our fiscal year. Recoveries and upgrades from the Retail Rural and Business Banking portfolio were INR 30,190,000,000 compared to INR 31,400,000,000 in the previous quarter.

Speaker 2

The gross NPE additions from the corporate and SME portfolio was INR 3,230,000,000 compared to INR 2,460,000,000 in the previous quarter. Recoveries and upgrades from the corporate and SME portfolio were INR15.52 billion compared to INR3.71 billion in the previous quarter. The gross NPAs written off during the quarter were INR 19,220,000,000. There were sale of NPAs worth INR 1,790,000,000 in the current quarter compared to no sale in the previous quarter. The sale of NPAs included INR0.14 billion in cash and INR0.53 billion of security receipts.

Speaker 2

As these NTAs were fully provided, we continue to hold provisions against the security receipts. The non fund based outstanding to borrowers classified as non performing was INR38,860,000,000 As of September 30, 2023, compared to INR 37.04 billion as of June 30, 2023, The bank holds provisions amounting to INR20.64 billion against this non fund outstanding. The total fund based outstanding to all standard borrowers under resolution as per various guidelines declined to INR 35,360,000,000 or about 0.3% of the total loan portfolio at September 30, 2023 from INR 39,460,000,000 at June 30, 2023. Of the total fund based outstanding under resolution at September 30, 2023, INR 30,000,000,000 was from the retail, rural and business banking portfolio and INR 5,360,000,000 was from the corporate and SME portfolio. The bank holds provisions of INR11.07 billion against these borrowers, which is higher than the requirement as per RDA guidelines.

Speaker 2

Moving on to the P and L details, net interest income increased by 23.8% year on year to INR183.08 billion. The net interest margin was 4.53% in this quarter compared to 4.78% in the previous quarter and 4.31% in Q2 of last year, the sequential movement in NIM reflects the lagged impact of increase in term deposit rates over the last year on the cost of deposits. Impact of interest on income tax refund or net interest margin was nil in Q2 of this year Compared to 3 basis points in the previous quarter and no impact in Q2 of last year. The domestic NIM was at 4.61% this quarter compared to 4.88% in the previous quarter and 4.45% in Q2 of last year. The cost of deposits was 4.53% in this quarter compared to 4.31% in the previous quarter, reflecting primarily the increase in term deposit rates over the last The rates of incremental retail term deposits have largely stabilized.

Speaker 2

Of the total domestic loan, Interest rates on 48% are linked to the repo rate, 3% to other external benchmarks and 18% to MCLR and other older benchmarks. The balance, 31 percent of loans, has fixed interest rates. Non interest income, excluding grew by 14% year on year to INR 58,650,000,000 in Q2 of 2024. Fee income increased by 16.2 percent year on year to INR 52,040,000,000 in this quarter. Fees from retail, rural, business banking and SME customers constituted about 78% of the total fees in this quarter.

Speaker 2

Dividend income from subsidiaries and associates was INR 6,480,000,000 in this quarter, the same as Q2 of last year. On cost, the bank's operating expenses increased by 20.8% year on year in this quarter. Employee expenses increased by 20 percent year on year in this quarter. The bank had about 139,000 employees at September 30, 2023. The number of employees has increased by about 29,000 in the last 12 months.

Speaker 2

Non employee expenses increased by 15.3% year on year in this quarter, primarily due to retail business related and technology expenses. Our branch count has increased by 174 in Q2 of 2024, and we had 6,248 branches As of September 30, 2023, the technology expenses were about 9.2% of our operating expenses in H1 of this year. The core operating profit increased by 21.7 percent year on year to INR143.14 billion in this quarter. Excluding dividend income from subsidiaries and associates, the core operating profit grew by 22.9% year on year. The total provision during the quarter were INR5.83 billion or 4.1 percent of core operating profit and 0 point 2% of average advances compared to INR12.92 billion in the previous quarter.

Speaker 2

The sequential decline in provisions reflect Higher NPE additions from the Kitan credit card portfolio in Q1 of this year and corporate recoveries and upgrades as well as recoveries from written off accounts. The provisioning coverage on NPAs was 82.6% as of September 30, 2023. In addition, we hold INR11.07 billion of provisions and borrowers under resolution. Further, the bank continues to hold contingency provision of INR131,000,000,000 as of September 30, 2023. At the end of September, the total provisions Other than specific provisions on fund based outstanding to borrowers classified as non performing were RUB 229,100,000 or 2.1 percent of loans.

Speaker 2

The profit before tax, excluding treasury, grew by 35.7% year on year to INR137,310,000,000 in Q2 of this year. There was a treasury loss of INR 0.85 1,000,000 in Q2, similar to Q2 of previous year. The tax expense was INR33.85 billion in this quarter compared to INR24.78 billion in the earning quarter last year. The profit after tax grew by 35.8% year on year to RUB102.61 billion In this quarter. To talk about the growth in digital offering, leveraging digital and Technology across businesses is a key element of our strategy of growing the risk calibrated core operating profit.

Speaker 2

We continue to see increasing adoption usage of our digital platform by our customers. There has been more than 10,000,000 activations of IMobile Pay by non ICICI Bank and large e commerce firms such as digital current account opening, instant overdraft facilities based on point of sale transactions, Connected Banking Services and Digital Store Management among others. We have created more than 20 industry specific stacks, which provide bespoke and purpose digital solutions to corporate clients and their ecosystem. Our trade online and trade emerge platforms allow customers to perform most of their trade finance and Foreign exchange transactions digitally. Our digital solutions integrate the export transaction lifecycle with Solutions providing frictionless experience to our clients and simplify customer journey.

Speaker 2

About 71% of trade Transactions were done digitally in Q2 of this year. The volume of transactions through the Trade Online and Trade Emerge platforms in Q2 2024 grew by 29.7% year over year. Moving on, we have provided details on our retail business banking and Turning to performing corporate and SME borrowers rated BB and below was INR 47,89,000,000 at September 30, 2023, Compared to INR42.76 billion at June 30, 2023, and INR76.3 INR8 1,000,000,000 at September 30, 2022. The increase during the quarter is due to the upgrade of 1 borrower from non performing status, which has been rated BB on its classification as a performing account. Other than this account, the maximum single borrower outstanding in the BB and below portfolio was less than 5,000,000,000 standing in the BB and below portfolio was less than INR5 1,000,000,000 at September 30, 2023.

Speaker 2

At September 30, 2023, we held provisions of INR8.17 billion on the BB and below portfolio. This includes provisions held against borrowers under resolution included in this portfolio. The total outstanding to NBFCs and HFCs The total outstanding loans to NBFCs and HFCs were about 8% of our advances at September 30, 2023. The builder portfolio, including construction finance, lease rental Term loans and working capital was INR 430,580,000,000 at September 30, 2023 compared to RUB427.12 billion at June 30, 2023. The builder portfolio is about 3.9% of our total portfolio.

Speaker 2

Our portfolio largely comprises well established builders and this is also reflected in the sequential increase in the portfolio. About 3.5% of the build up portfolio at September 30, 2023 was either rated BB and below internally or was classified as non performing compared to 3.7% at June 30, 2023. Now moving on to the consolidated results, the consolidated profit after tax grew by 36.1 percent year on year to INR 108,960,000,000 in this quarter. The details of the financial performance of and key associates are covered in Slide 46 to 49 in the investor presentation. The value of new business margin of ICICI KCI Life was 28.8 percent in H1 of this year compared to 32% in fiscal 2023 and 31% in H1 of last year.

Speaker 2

The value of new business of ICICI Life was INR10,150,000,000 in H1 of this year compared to INR10,92,000,000 in H1 of last year. The annualized premium equivalent was INR 35,230,000,000 in each one of this year compared to INR 35 point INR19 1,000,000,000 in H1 of last year. The profit after tax was INR4,510,000,000 in H1 of this year compared to INR 3,550,000,000 in each one of last year and INR 2,440,000,000 in Q2 of 2024 compared to INR 1 point INR9 1,000,000,000 in Q2 of 2023. The gross direct premium income of ICICI General was ruprs 3,860,000,000 in Q2 2024 compared to ruprs51,850,000,000 in Q2 2023. The combined ratio stood at 103.9% in Q2 2024 compared to 105.1% In Q2 2023, excluding the impact of cat losses, the combined ratio was 102.8% in Q2 2024 and 104.3 percent in Q2 2023.

Speaker 2

The profit after tax was INR5.77 billion in Q2 2024 compared to INR5 INR0.91 billion is Q2 2023. The profit after tax of Q2 2023 Included reversal of tax provisions was INR 1,280,000,000. The profit after tax of ICICI AMC as For India, it was INR5.01 billion in this quarter compared to INR4.67 billion in Q2 of last year. The profit after tax of ICICI Securities as per India on a consolidated basis was INR 4 point INR24,000,000,000 in this quarter compared to INR3,000,000,000 in Q2 of last year. ICICI Bank Canada had a profit tax of CAD21.1 million in this quarter compared to CAD12 1,000,000 in Q2 of last year.

Speaker 2

ICICI Bank UK had a profit of US3.3 million dollars in this quarter compared to US1.5 million dollars in Q2 of last year. As per India, ICICI Home Finance had a profit after tax of INR 1,120,000 in the current quarter compared to INR 0.6 INR1,000,000,000 in Q2 of last year. With this, we conclude our opening remarks, and we will now be happy to take your questions.

Operator

Thank you very much. We will now begin the question and answer session. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Maruk Arujania from Nuva. Please go ahead.

Operator

Yes, hello. I just had

Speaker 3

a question on the sector and Then even on margins. So there's a lot of stuff going around on unsecured loans, on which segment of unsecured loans is And which is seeing higher delinquencies. So what is your The sense you make of all this from the Bureau data and from your own customer data, that's the first question. And then in your experience, as veteran banker, do you think that the stress in one Say, below 50,000 can easily spread to other segments. So that's my first question.

Speaker 2

Yes. So, Maruk, I think, of course, we track This portfolio quite closely and we have been doing so for the past several quarters. As far as our portfolio is concerned, We feel that the trends are quite stable and the credit delinquencies and credit costs are well within what we would have I sort of expected them to be. As far as the industry The outlook is concerned. I think we have also seen some of the research which has come out which makes this Distinction between the smaller ticket size loans and the larger ticket size loans.

Speaker 2

As far as our portfolio is concerned, we have very minimal presence in the smaller ticket size segment. So I but I think you're right in the sense that if we start Seeing significant increase in delinquencies on personal loans that would have implications for Other parts of the portfolio as well, potentially. But I think if we have kind of focused the portfolio as we believe we have On existing customers, on cross sell and on customers with credit scores above a certain level And also properly assessed and monitored their level of leverage and How many loans we are servicing at any point in time? We feel that the risks should not be Something which would cause too much concern, but we will continue to monitor this as we go along. As things stand in our portfolio, The numbers are pretty comfortable and that is why you would have seen us growing the portfolio also at a similar pace this quarter as we have been growing For the past several quarters.

Speaker 3

Okay. But as the portfolio seasons even in your portfolio,

Speaker 2

Would it

Speaker 3

be fair to say that there would be rising delinquencies over the last 6 months?

Speaker 2

There is nothing early to call out. I mean, if you look at, for example, We have been saying for the last several quarters that in absolute terms as the retail portfolio grows and Seasons and some of the higher recoveries coming out of the stock of NPLs that got created During COVID, as that comes through, the net additions to gross NPS in the retail portfolio will go up, but they We're moving in quite a stable way. And in fact, in this quarter, you have seen it coming down actually sequentially, Which is partly due to the absence of or I would say largely due to the absence of KCC NPLs, but even on the retail side, The performance has actually improved slightly.

Speaker 3

Maureen, would it be possible to get

Operator

back to the ticket side? And if you request you to join back the queue, please?

Speaker 2

Sure. So we have not really given that out. But as I said, our presence in the smaller ticket size would be manageable.

Operator

Thank you. Ladies and gentlemen, in order to ensure that the management is able to answer queries from all participants, Please restrict your questions to 2 at a time. You may join back the queue for follow-up questions. We'll take our next question from the line of Saurabh S.

Speaker 1

Just two questions. One is the recovery and upgrades, so your retail slippages are running at 3% and your recovery upgrades are like 60% of that. Is that what you would consider like as a normal run rate in this business now?

Speaker 2

I guess so. I mean, if the portfolio goes in absolute terms, it may go up, but We expect these trends to be reasonably stable. There could be some little variation quarter to quarter.

Speaker 1

Okay. And And the second side, again, back to the PL, the 40% growth that you have seen, your approval rates on loans will be Where would this be versus, let's say, 2023 and versus like 2019 in terms of your internal credit filters?

Speaker 2

We have not really talked about approval rates and so on. I think we've given our outlook on the portfolio and we will continue to monitor it as we go along.

Speaker 1

Okay. But your credit filters internally have come down over the last 1 years? Or I mean, if you can give us directional color?

Speaker 2

No, I don't think we would have diluted our credit filters. In general, I think we have been focusing on progressively more on the upper end of the spectrum.

Operator

Thank you. We'll take our next question from the line of Chintan Zushi from Bernstein. Please go ahead.

Speaker 1

Mr. Chisholm? Hi, Harshad.

Speaker 4

Thank you for the opportunity to ask the question. I have 2 areas. 1 is on kind of lending and deposit yields and second is on your branch expansion strategy. Pending yields have gone up 5 basis points this quarter, which felt a little low and cost of deposit yields So cost of deposits has gone up substantially. How much repricing is left on the deposits and on

Speaker 1

the lending side? That's the

Speaker 4

first question. And the second question is HDFC is growing branches quite aggressively now. It's leaving some of the other Private sector banks behind on market share relative to the private sector. How does this impact kind of your branch expansion strategy on a 3 year view?

Speaker 2

So as far as the first question is concerned, I think you are aware that the way Margins for most banks have moved over the last few quarters. It's that in fiscal 'twenty three, banks saw the Benefit of the increase in the repo rate on the external benchmark linked loans, primarily mortgages and others. And the deposit rate started to also go up last year, but because the deposits are fixed rate, fixed term, that repricing impact It's playing out through the quarters and we are currently in this situation where the policy rates are on And therefore, the external benchmark linked loans are not seeing an increase in yield. But the deposit cost based on, say, the Deposit rate increases that took place last year are continuing to reprice as they come up for maturity and so on and so forth. So that is why, in fact, we had articulated even in the call last time that the repricing of the loan book From here on would not be significant and that is the way that it has played out.

Speaker 2

We would continue to expect to see Some increase in the cost of deposits on the book and therefore some moderation in margin over the next quarter or So as well as we have articulated in the past, but on a full year basis, we continue to expect that The margins would be at a similar level as they were in fiscal 'twenty three. On your second question on Branch strategy, so we have added about 3.50 branches in the first half of This year, we are really looking at what is our network across different micro markets And what is kind of our assessment of the opportunity in those micro markets and what is the capacity We need to add to kind of serve that. And that is the basis on which we are adding. We are not Looking at what any other particular bank may or may not be doing.

Speaker 4

That might leave you losing market share relative

Speaker 1

to the other players. Are you happy with that?

Speaker 2

As I said, we are looking at what is the Our assessment of the market in each place, in each kind of geographical area and how And what is the kind of network expansion we need to do based on that? So it kind of is aligned to whatever our It's about growth aspirations.

Operator

Thank you. We'll take our next question from the line of Hardik Shah from Goldman Sachs. Please go ahead.

Speaker 5

Hi, this is Rahul here. Am I audible?

Operator

Yes.

Speaker 5

Yes. Good evening, everyone. Actually, I've got 2 quick questions. Number 1, can I just get your thoughts on the competitive dynamics, particularly in mortgages and deposits, Because clearly, the systemic growth has not been very strong in mortgages? And of course, some pricing pressure Here anecdotally has started coming through.

Speaker 5

So are your experience in that?

Speaker 2

So on mortgages, yes, there is I mean, it has always, Rahul, as you know, been a competitive segment and it continues To be so. So we do have players offering in particular segments that they are targeting pretty competitive rates. But we are sort of calibrating our response and trying to make sure that we optimize Across the portfolio. But overall, I think on loan pricing, there is a reasonable level of Comparative intensity across the system.

Speaker 5

Got it. And the reason I was asking is, of course, credit card has been extremely benign. So do we choose to pass on some of that and strengthen the position in the secured portfolio because the Unsecured earlier portfolio is fine, but RBI I have found it out. Everybody across the board has been saying that the portfolios are fine, but when we speak to some of the bureaus, they do tell us that Some downgrades in super prime customers too. So just trying to get some head around as to how this cycle will play out.

Speaker 5

So while it is looking pretty strong at What are they saying, what the bureaus are saying in the prime, super prime customers? Is there a need for you to increase your secured Portfolio of some sale and therefore offer some of the pricing out there? Just trying to understand that how it evolves?

Speaker 2

I don't think it is like that. If you look at our secured retail portfolios, those are going pretty well. Mortgage is growing at 16%, 17%, also It's growing above 20%. Commercial Vehicles, which was flat or growing just about in single digits for a long time. This quarter, the year on year growth is more like 14%.

Speaker 2

Our SME and Business Banking portfolios are growing At the 30% kind of level. So I think we have pretty broad based growth and certainly we are not reliant On personal loans for growth, it's still less than 10% of our loan book. Credit cards, of course, we would want to continue to And our franchise, personal loans, we will continue to monitor the portfolio and whatever comes through our credit filters In the customer segments that we are comfortable with, we will take that. So in any case, we are not particularly You know targeting a certain level of loan growth with credit conditions are not so favorable in our view And we need to prune it by a percentage point or 2, that's fine. But there is no Currently, in that sense, softness in the secured loan categories item.

Operator

We request you to join back the queue for follow-up questions. We move on to our next question from the line of Kunal Shah from Citigroup. Please go ahead.

Speaker 6

Yes. Thanks for taking. So firstly, in terms of the international NIMs, They have gone up almost like 56 odd basis points. Are we seeing obviously, the portfolio is quite small now, But eventually when we look at it, is this a steady state in the overall or maybe we see Further improvement in the names as well looking at the rates globally?

Speaker 2

I think it is not particularly consequential, Kunal. That's a The whole portfolio incrementally, mainly what we are doing there is a short term working capital trade finance kind of portfolio. So we do that basis, the funding that is available and the rates That are off. Wherever we see that the lending rates give us appropriate some level of spread over that funding, Particularly for some of the Indian corporates, etcetera, that market also, the Indian banks tend to be quite competitive. So in the case in the overall scheme of things, it doesn't really make much sense.

Operator

Yes. And secondly, in terms of

Speaker 6

the unsecured, So if you look at the retail slippage run rate, which is there, any change in mix between the secured and unsecured incrementally? And is there a need to increase the rates in any of the in any segment of the personal loan portfolio, Either maybe due to the industry delinquency levels or what we are seeing. And is there enough or maybe if you Talk about the competitive intensity even within the TL, is that giving us any kind of leverage to increase the rates if need be or it's extremely competitive from the other players?

Speaker 2

So I would want to increase rates for every loan category, every customer given because as I said, the loan Markets across all segments for, I think, the quality of customers that more banks are prioritizing from Corporate through SME to retail, the rate environment is the pricing environment is competitive. As far as the personal loans are concerned, I mean, you are aware that rates in that segment have come off Meaningfully across over the last few years, I guess driven by the favorable credit And given by the entry of new players who were not perhaps present in those segments earlier. So it continues to be a profitable portfolio. So we will see it as we go along and As long as we are able to get volumes in our chosen customer segments, we will keep looking at it.

Operator

We have our next question from the line of Manish Shukla from Axis Capital. Please go ahead.

Speaker 4

Thank you for the opportunity. My first question, Ananda, is Slide 54. There is a 5 basis points Q o Q decline in yield on loans When clear figures have declined quarter on quarter, what kind of explains that?

Speaker 2

So largely, I think it's basis So the computational convention because the second quarter has One day more than the Q1. So the interest computation convention lead to some Decline, but that's mathematical, it will be stable in Q2 and then reverse in Q4.

Speaker 4

Okay. 2nd, moving back to your comment.

Speaker 2

As I said, it may not have Made too much impact in this quarter in terms of yield from a yield and advances perspective, but There is significant pricing competition in the market as well.

Speaker 4

Appreciate that, Amunya. But the fact that we are still in an elevated interest rate environment, I would not have expected it is to

Speaker 5

go down, especially when flip a

Speaker 4

leaf are lower. So that's what the question came from.

Speaker 2

The past 4 or 5 basis points can always happen either way.

Speaker 1

Yes. Going back to your comment that Full year

Speaker 4

margin should largely be similar to last year. Full year last year, we were at 4.5%, first half this year is 4.65%. That implies a 4.35 for second half. Is that the

Speaker 1

way to look at it?

Speaker 2

We can't give a specific number. As I said, we will we do expect margins to moderate further from the Q2 level. And hopefully, the extent of moderation could be somewhat lower. And we would be at a Similar level of margins as we were at last year and that is what I think they've been consistently saying for the last

Operator

Question from the line of Sameer Pasey from JM Financial. Please go ahead.

Speaker 2

Yes, hi. Thanks for the opportunity. Just a Questionally mortgage portfolio. So if I see the presentation a few quarters back, say, a year back, the average ticket size on the portfolio was Roughly 25 lakhs. It's right now at 35 lakhs.

Speaker 2

Does the sizable increase Look okay or is there something more to read into it? I don't recall the 25 lakh number. I think it was always It's a few words, but yes, there would have been some increase in the average ticket size, but looks okay. Okay. Because say 1Q 'twenty three shows $2,500,000 as average ticket size of the home loan, While it's $3,500,000 right now, so just wanted to pick your brains on the same.

Speaker 2

Final, I

Speaker 1

will follow-up offline. Okay. Thank you.

Operator

Thank you. We have our next question from the line of Ashish Sharma from Enam AMC. Please go ahead.

Speaker 4

Yes. Hi. Thanks for the opportunity. Just on the net interest margin thing, Would you be able to sort of differentiate in terms of impact, which is because of ICC, Incremental cash reserve ratio. So the NIM compression we've seen, something which will not flow through in the next quarter.

Speaker 4

Any comment on that?

Speaker 2

So, I see see would have been a small impact. As I mentioned, if you look at the sequential impact, There would have been some 2, 3 basis point impact of the absence of interest on income tax refund. The ICRR Would have had maybe 1 or a couple of basis points impact. But the larger impact would have the day count would have had some impact. But the larger impact would have been the repricing of deposits that we have spoken of earlier.

Speaker 4

Okay. And second question will be, Anindya, on the personal loan thing. So given that our growth rate, which we are comfortable at this moment, So in terms of what regulatory is saying, so I mean, I think they also have clarified the issue is on The growth part, so I mean from a delinquency perspective, we aren't seeing anything. I mean, I think you already sort of alluded a little bit on in the first question. So Yes, it's Neet.

Speaker 4

One confirming then. So I

Speaker 2

didn't allude little bit. I alluded considerably. As I said, we are comfortable with our portfolio. We believe we have underwritten it well. The delinquency levels on the portfolio are not disturbing us, But we will continue to monitor it as we go along.

Speaker 2

As I said over the last Two quarters, we have been, in any case, not present at our presence in the smaller ticket sizes Overall, the portfolio is marginal. And over the last few quarters, we would have been migrating more towards the upper segment. So no concerns on this portfolio that we have. As we we will continue to monitor The growth the credit quality and growth trends for our portfolio as well as whatever system data we take and calibrate if we need to.

Operator

Thank you. We have our next question from the line of Param Subramanian from Nomura. Please go ahead. Mr. Subramaniam, please unmute your line.

Speaker 5

[SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Hello. Yes. Yes. Thanks for the opportunity. So first question again on the unsecured piece.

Speaker 5

So Yes, we are continuing to see the strong growth at least for us. If you could highlight, explain the disconnect that we are seeing perhaps Between the broader trends in consumption, in discretionary spend as well as at least for yourself, the strong growth that we are seeing in the unsecured piece, Personal loans, credit cards, etcetera. Some of the use cases that have increased over the last few years, If you could highlight some of that which is driving the strong growth that we are seeing. That's the first question.

Speaker 2

So I wouldn't really want to talk more about the unsecured I don't think that our, for example, market share in credit card spend has increased dramatically. So there is enough Growth happening across the system in these categories and we are not particularly divergent. So no further comment that I have to make on that.

Speaker 5

Okay. Fair enough. And secondly, on this recent sign By RBI on certain basically on the cross selling of non financial products and 1 or 2 other reasons, Speak a little bit about that because when it had happened for the peer banks, especially on this cross sell of non financial products, it had been taken pretty So any comments there would be useful. Yes, that's it for me. Thanks.

Speaker 2

I think, as you are aware, the regulator conducts inspections and continuous examination The activities of banks, it's a heavily regulated activity. And while we try and maintain as best levels of compliance We can. From time to time, in any bank, there are misses for which these action can be taken And penalties can be imposed. As stated in the public release, these relate 2020 2021. And we have taken the necessary corrective action, As we have said in our release, so nothing more to add on to that.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to management for closing comments. Over to

Speaker 2

you. Thank you very much for taking time out on a Saturday evening, and have a good weekend.

Operator

Thank you. On behalf of ICICI Bank, that concludes this conference. Thank you for joining us and you may now disconnect your lines.

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Earnings Conference Call
Mercury General Q2 23/24
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