Abu Dhabi Commercial Bank PJSC (ADCB) Earnings Call Transcript & Summary

Hello, good afternoon and good morning, everyone. This is Rahul Bajaj from Citi Research in Dubai. We are very delighted to have with us Abu Dhabi Commercial Bank management team to present their second quarter '24 earnings conference call. Representing the ADCB management team, we have Deepak Khullar, the Group's Chief Financial Officer; Robert Muller, the Group Treasurer; Paul Keating, Group Chief Risk Officer; and Harsh Vardhan, Senior Head of Investor Relations. Without further ado, I'll pass on the call to Harsh to take the call forward. Harsh, over to you.

Thank you, Rahul. Good day, ladies and gentlemen. I would like to welcome you to ADCB Second Quarter 2024 Financial Results Call. We will be referring to our earnings presentation, which can be found on the Investor Relations page of our website. As Rahul said, I'm joined by Deepak Khullar, Group's CFO; Robert Muller, Group Treasurer; Paul Keating, Group Chief Risk Officer; and Monica Malik, our Chief Economy. We will be taking you through key highlights from the quarter and half year period before opening the floor for questions. I will now hand over to Deepak to begin the presentation from Slide 5.

Thank you, Harsh, and welcome, everyone, to our quarter 2 earnings call. I'm pleased to report that our strategy for accelerated growth is driving strong momentum in the bank's operational and financial performance. ADCB has continued to reinforce its strong market position through broad-based credit growth in the context of favorable economic fundamentals in the UAE. Net profit before tax grew 30% year-on-year to AED 2.59 billion in quarter 2 and rose 28% to AED 5.02 billion for the first half. On a post-tax basis, net profit was AED 2.32 billion for quarter 2 and AED 4.46 billion in the first half representing a return on average tangible equity of 16.5% and 15%, respectively. The broad-based nature of this growth has maintained good equilibrium across our businesses. The Retail Banking Group, RBG, continues to leverage digital platforms to expand customer reach. Meanwhile, the Corporate and Investment Banking Group, CIBG, is capitalizing on rising levels of corporate investment and capital markets activity. ADCB is proud to be playing a central role in the region's economic expansion. Our assets have expanded at 14% CAGR over the last 3 years to cross the AED 600 billion mark at June end. In the first 6 months, we recorded AED 30 billion in net loan growth driven by solid demand from corporate and individual customers. The bank is strategically prioritizing high-quality, low-risk credit counterparties with GREs accounting for 51% of gross loan growth in half 1. Given the strong performance and our healthy credit pipeline, we are updating our full year 2024 guidance for net loan growth to approximately 15% from the previous range of 8% to 10%. ADCB's strong franchise continues to attract significant customer deposits, which were up 23% year-on-year and 7% year-to-date. Amidst the high rate environment, the funding mix is naturally tilted towards bank deposit, yet the bank has successfully attracted inflows of CASA deposits, which have increased 14% over the last 12 months. There has been a significant improvement in cost of risk, which stood at 58 basis points for half 1 well within our guidance. On Slide 6 and 7, you will see the income statement highlights. We are pleased to report -- the record half yearly net profit before tax with quarterly pretax net profit growing steadily over the last 12 quarters to reach a record AED 2.59 billion. The bank is moving at a good pace recording double-digit year-on-year growth in both net interest income and noninterest income with half 1 operating income exceeding AED 9 billion. Significantly, revenue generation remains well diversified across core business segments. Turning to Slide 8. The bank has capitalized on a strong credit pipeline over the last 12 months and it's driving benchmark rates. In line with our strategy to rebalance the lending portfolio, loans to GRE have increased considerably over the last 2 years and now accounted just over half of the year-to-date growth. In parallel, the higher rate environment has resulted in greater representation of time deposits in the funding mix. In this context, net interest income in Q2 increased 12% year-on-year to AED 3.28 billion and declined marginally on a quarterly basis. For the 6-month period, net interest income was 14% higher at AED 6.58 billion. Risk-adjusted NIM in Q2, improved due to the rebalancing of the loan portfolio towards GRE up 9 basis points on a quarterly and an annual basis at 2.16%. For half 1, risk-adjusted NIM improved 6 basis points over the prior year to 3.11%, supported by a 15 basis point improvement in cost of risk. Meanwhile, NIM declined 11 basis points year-on-year and 7 basis points sequentially, to 2.63% in quarter 2. Cost of funds rose 70 basis points year-on-year to 4.35% in half 1 given the context of rising rates and increase in time deposit. Turning to Slide 9. A key aspect of the bank's growth is the enhanced diversification of the bank's revenue streams with noninterest income representing 29.3% of the total operating income in the first half, compared to 27.5% a year earlier. This is a direct result of deeper customer relationships and a sophisticated offering across all core businesses. In the first half, noninterest income increased 24% year-on-year to AED 2.73 billion, with strong performance seen across the board. Half 1 fee and commission income was up 20% year-on-year to AED 1.51 billion. Notably, the Card business continues to perform well, issuing more than 64,000 new cards in quarter 2, while credit card acquisitions were up 23% year-on-year. Meanwhile, CIBG's strong advisory offering and product suite continues to drive a market-leading fee-to=income ratio. Half 1 net trading income of over AED 1 billion was up 20% year-on-year, mainly on higher gains and financial assets at fair value to P&L. Other operating income in half 1, AED 208 million compared to AED 95 million a year earlier. This was primarily driven by higher gains on non-trading securities, which were partially offset by lower property management income following a divestment of an 80% stake in Abu Dhabi Commercial Properties in Q4 2023. Turning to Slide 10. We continue to invest significantly to drive scalable expansion of the business, particularly in areas such as digitisation and sales initiatives while maintaining disciplined management of our long-term cost trajectory. Operating expenses in the quarter were therefore 16% higher year-on-year and up 8% sequentially at AED 1.53 billion. This included costs related to the establishment of the new branch in Saudi Arabia and other growth opportunities as well as the timing of variable pay accruals and payments. Importantly, for the first half, cost-to-income ratio improved 30 basis points year-on-year to 31.7% with cost investments in revenue-generating initiatives yielding a 17% income growth. On Slide 11, you will see that our balance sheet remains strong with total assets increasing 8% year-to-date and 17% year-on-year, exceeding the AED 600 billion, a key milestone for the bank. ADCB's liquidity position is robust with a liquidity coverage ratio of 129.9%, a liquidity ratio of 30.7%, and a loan-to-deposit ratio of 85.2%. Please turn to Slide 12 for a closer look at our loan book. ADCB is playing an increasingly central role in the region's economic dynamism. The bank is driving strong loan growth in both retail and corporate and the businesses are benefiting from a robust credit pipeline. The bank extended AED 73 billion in new credit in the first half with repayments of AED 41 billion. This robust growth has been marked by an increased exposure to GRE which comprised 27% of gross loan, up from 25% at December end, while exposure to real estate further reduced to 15% from 17% in 2023. The bank also improved lending to diverse segments, including financial institution, trading, transport and communications as well as retail customers. As mentioned at the start of this call, following robust credit expansion in half 1, ADCB has updated its full year loan growth guidance to approximately 15% from the previous range of 8% to 10%. I will now hand over to Robert to discuss the investment portfolio and funding mix.

Thank you, Deepak please turn refer to Slide 13. The investment securities stood at AED 133 billion at June end, that's up 3% year-to-date and 9% year-on-year. As we stated before, the portfolio is growing in line with balance sheet growth. 74% of the portfolio is accounted for amortized costs, and 26% at fair value through other comprehensive income and mark-to-market on a daily basis. Moving to Slide #14, you will see that ADCB has maintained a well-diversified funding mix and has continued to attract strong deposit in flows. In a high rate environment, time deposits have increased 12% year-to-date and 32% year-on-year to AED 218 billion. The bank also continues to attract significant CASA deposits, up 14% over the last 12 months to reach AED 170 billion. CASA deposits accounted for a healthy 44% of total deposits. On Slide 15, you will see details of our capital position. The bank's capital adequacy and CET1 ratios have further strengthened to 16.43% and 13.17% respectively. This improvement was driven by strong retained earnings in the bank's enhanced risk profile. The credit risk-weighted assets only increasing by AED 6 billion in the first half, while net loans grew by AED 30 billion. I will now hand over to Paul to discuss the [indiscernible].

Thank you, Robert, and turning to Slide 16. As you have already seen, impairments have significantly reduced this year. As a result, cost of risk was 48 basis points in Q2 and 58 basis points in the first half, well within the guidance of less than 80 basis points. The NPL ratio was 3.59% as of June end, declining from 3.73% as of December end and 5.1% a year earlier. The provision coverage ratio was 95% and including collateral held, which was 146%. Please turn to Slide 17 for updates on our Al Hilal Bank. The Al Hilal super app continues to attract more user with over 43,000 new banking customers on-boarded in Q2. This brings the total number of banking customers joining the app to over 348,000 since its launch 2 years ago. In quarter 2, the bank signed an agreement with Abu Dhabi's Securities Exchange, ADX, enabled instant subscriptions to Shari'ah-compliant IPOs through the app. Moving on to our operations in Egypt, which is covered in Slide 18. ADCB Egypt delivered a very strong financial performance, driven by robust loan growth, despite a backdrop of macroeconomic challenges. The net profit in the first half increased 142% year-on-year to EGP 188 million, representing a return on equity of 39%. Net loans increased 37% year-on-year to EGP 42 billion, while total deposits were up 34% from EGP 99 billion. I'll now hand back to Deepak.

Thank you, Paul. On Slide 20, we provide an update on digital transformation which continues to be instrumental in ADCB's success in gaining market share. ADCB Group's UAE operations, including Al Hilal Bank, welcomed approximately 192,000 new customers in quarter 2, with 85% on-boarded digitally. Furthermore, ADCB's on-boarding app welcomed the highest numbers of new customers in a month with 44,000 registered in May. As of June end, subscribers to digital banking, which includes Internet and mobile banking were up 34% year-on-year with active users up 38%. The bank has achieved its highest ever level of digital engagement with 90% of customers now registered for Internet and mobile banking, self-service retail financial transactions represented 97% of all customer transactions in quarter 2. On the Corporate side, the bank also improved the customer experience on its escrow platform and upgraded its liquidity management solution for CIBG clients. Turning to ESG on Slide 21. As part of the Net Zero Banking Alliance NZBA, ADCB continues to implement its road map for setting targets for carbon-intense sectors by May 2025. The bank is also monitoring progress on its commitment to extend AED 125 billion of sustainable finance by 2030. And on this slide, you will see a number of select sustainable finance deals and transactions facilitated by ADCB. We've also conducted a number of workshops to develop internal capabilities in preparation for the adoption of IFRS S1 and S2. Turning to Slide 23 and the operating environment. The macroeconomic fundamentals of the UAE remains robust with continued confidence and investment momentum. EMR Data remained strong in the context of domestic demand. The external facing service sectors are also performing well as the global economic outlook remains steady, with softening inflation, leading to expectations of rate cuts in the second half. To summarize, the bank is performing well and continues to make good progress against full year and medium-term guidance. To reiterate, the bank has revised its full year net loan growth guidance to approximately 15%. Our strategy continues to focus on the UAE market and banking relationships across regional economic corridors, while retail growth momentum is supported by UAE's strong economic fundamentals. Loan growth has been steered by strategic targeting of high quality low risk credit counterparties. At the same time, rising fee income is enhancing the diversification of the bank's revenue streams. We are very pleased with this growth trajectory and look forward with positive second half of this year. Thank you. This concludes our presentation. Operator, you may now open the floor for questions.

[Operator Instructions] Our first question comes from Shabbir Malik.

Just a couple of questions from my side. When I look at your NIM guidance for full year and compared to your first half NIM, there is a bit of an upside there. So I think first half, your NIM is 2.66%, your full year target is 2.7%. Considering that NIM in the 2Q was actually a bit lower compared to the first quarter. And I think you've explained that your growth in GRE is part of the reason for this lower asset yield. How do you -- what confidence do you have that you'll achieve your full year target of NIM? And what drivers do you think is going to take you there? So that's my first question. The second question is around fee income. So fee income trend has been very good in the second quarter. As we head into the summer season, do you expect a slowdown in fees? Or do you still think that the drivers that were at play into 2Q continue into the third quarter? And finally, on asset quality and provisioning. On the cost of risk side, there was a bit of a surprise if you can please give more details on what caused that? And how does it tie up with the credit quality metrics, which showed a bit of a deterioration this quarter. So NPL ratio seems to have gone up a bit. And so if you can please comment on those on credit quality metrics as well?

Thank you, Shabbir. So yes, on the NIM, we've seen a decline in second quarter and overall 2.66%. We've guided to around 2.7%. NIM still remains quite challenging because of the intense competition in the marketplace and we go up with our increased the positiveness in term deposits. We hope that the capital deposit mix should go up in the second half, and that's what we're aiming for. Also, the reserve requirements of the UAE Central Bank has now been implemented. So it moved from 7% to 11% last year and then now 11% to 14% so that's come in -- so that's also been baked into our forecast. But I think it's more around the profit -- sorry, the deposit mix and also the growth in the second half that we see coming through. We probably see more higher-yielding assets coming in the second half. Fee income growth, I think we will remain the same. We expect strong fee income growth to continue in the second half as well as you've seen in the first half. So I don't think as a result of the summer months, we have seen much slowdown. On asset quality and cost of risk, the right asset quality has improved with NPL ratios coming down. Cost of risk has also come down significantly from -- down to about 56 basis points or 58 basis points -- seen that come down. The reason for the coverage ratio coming down a bit is because its in and out movement, certain accounts that were fully provided for were written off during this quarter as we do regularly every quarter and certain Stage 2 and Stage 3 accounts move into -- stage 2 accounts moved into Stage 3 accounts. So that's the reason for the provision coverage ratio. But I also ask Paul Keating to comment if he wants to add anything?

Thanks, Deepak. The other thing I'd say is some of the June movement that you're looking at the nonperforming loans in terms of [indiscernible]. I think it's more [indiscernible] perspective because looking at the overall NPL ratio between 3.73% and it's landed at 3.59%. So still heading down from that context, but even though it was slightly up from the March period, [indiscernible] point of your timing perspective anything. Sorry, can I maybe just one more comment on the [indiscernible] development. As we mentioned that on the previous call in the first quarter, it was about the composition of our time deposits. We could see higher inflow of time deposits.

Sorry, can you speak up a bit? Sorry, I can't hear you very clearly the last speaker please.

So I'll just make a comment on NIM that as we have said in the first quarter -- or quarter 4 that we did see an inflow of time deposits at the end of last year as well as a higher inflow of time deposits and that's something we're trying now to actively manage and that should help us going towards [indiscernible].

Deepak Mentioned something about CASA growth. So is there any specific initiatives that you think is going to provide that CASA growth in the second half?

The special additions are basically driving that with a focus to bringing higher CASA deposits from the retail segment and the corporate segment to drive through our cash management proposition, which is extremely strong. We're making further enhancements to the cash management platform, which we believe will be well received by our corporate clients and help us drive the CASA element with the corporate clients as well. So it's a very active focus on getting more CASA deposits from both corporate and retail customers.

This is actively being incentivized by Treasury. So -- and we're also controlling very much the external pricing towards our clients. And so we have to control the [indiscernible] going forward.

Next question comes from Aybek Islamov.

This is Aybek Islamov from HSBC. Well, 3 questions, please, yes. So the first one -- how does -- what's your thought process about your international lending? The fixed -- the fact that your loan mix is shifting more international over time. If you fast forward by 3 to 5 years, how this is going to impact your decision-making on your provision expenses on your cost of risk, right? What kind of cost of risk do you see in the longer term? That's my one question. The second one is when you look at your fee income and you're quite aware of the economic conditions that they're cyclically strong, what's your sense of how above the trend line is the fee income today, right? That's another thing I would like to know. And I think thirdly, on your NPL ratio, let's say, you're in a situation where you have to write off your NPLs, which are older than 5 years, what would happen to your NPL ratio in that case? What kind of decline in NPL ratio you would see if you have to write off these older NPLs? Thank you.

Yes. So on the international lending. So yes, there has been -- as Deepak mentioned during his commentary is that we have been building our [indiscernible] looking at the [indiscernible] between the UAE and KSA. UAE and Egypt and also the UAE and [ Tajikistan ]. So that's a deliberate part of the strategy. You said then, has [indiscernible] our thinking in terms of cost to us. Maybe in terms of -- which is on Slide 24, still has it going out to '24 to '26 at less than 80 basis points. So at this stage, that's not changing in terms of the profile. On your question on NPL. So I think you are driving that the change that may be coming from the credit risk management standards [indiscernible]. We're obviously aware of that for a period of time. The standards also allow pass-through write-off. So banks over this period have taken the opportunity to the full write-off to partial write-off. The 5-year mark starting now, does not exist so marginally, we would need to act on anything that's on the base in the book. And therefore, it tends to come down for case by case analysis depending on the cash flow, the actual, the cooperation of the customers, et cetera, and the actions on the write-off and impact on NPL growth. So nothing specific impacted the guidance from NPLs that [indiscernible].

Yes, fee income, I think we still expect to see double digit growth into the second half of the year. It's been strong. First half and we expect that trend and that momentum to continue into second half as well.

Our next question comes from Naresh Bilandani. They have now lowered their hand. [Operator Instructions] There are no further questions on the line. Our next question is from [ Ali Patel ].

Congratulations on a good set of numbers. I just had a few questions. The first is on OpEx. The OpEx growth has been quite high double digit now for quite a few years. I appreciate going back to 2022 there was investment in digital tech investment, but now we're still sort of at that 16% growth in OpEx for the first half of 2024. Just wondering when this might tailor off and what sort of the key drivers other than any digital investment there? The second question is on NMC, once we had some news flow that this entity might be listed. Just any thoughts on what this could about by way of recovery for you, if any? And the third question is on your credit growth in Saudi or participation in Saudi. What you assign by way of waitings to any syndicated loans that you participate in Saudi. I noticed that risk-weighted asset that has come down quite a lot.

Let me take the question on OpEx first and then credit growth in Saudi probably Paul will answer that. OpEx, yes, we said we will continue to invest in revenue-generating operations, which the cost growth is primarily coming to drive sales and income growth. So this is not an investment in back office or processing the needs of the bank or risk management, et cetera. These are frontline relationship managers driven new dealers in treasury, et cetera. These are directly related to the revenue generating opportunities. So whilst we see 16% growth in cost due to a 17% growth in income, and as a result, our cost-to-income ratio year-on-year for the first half has declined by 30 basis points. So the bank will continue to make those investments. We are growing back in now over AED 600 billion. So from an absolute cost perspective, we don't expect to remain static. We will continue to invest in the business, new operations in Saudi, that's an investment that's going in, in people, systems, processes, real estate, et cetera, in Saudi. The revenues from that will probably come later on in this year and next year. So there's a little bit of front-end of the cost before the revenues can come in, and other opportunities as well, where we're investing in other digital or formulating other strategies of growth. So some of those investments are happening there. But I think we're still quite pleased that growth in cost is going towards revenue-generating costs. These are people related and directly related to income. On NMC yes, there is progress been made by that company in terms of coming out better for being in terms of its profitability, et cetera. And the timing of when it comes to market will be decided by NMC, but we expect that to be sooner than later. And that -- once they're ready, obviously, they will announce when they come to the market. I cannot tell you what the recovery amount would be, but we stand to gain if the enterprise value of the company is higher than we invested in them. So any upside on that the noteholders will share in the proportion of notes that we hold. So -- and that will depend on what the realization of that company would be. Credit growth in Saudi, probably Paul can you take that?

So just to clarify, we've participated in Saudi [indiscernible] loans for a period of time. Yes, we've got approved from [indiscernible] in terms of opening the branch for that branch we'll be operational towards end of the year. So I think the risk way to [indiscernible] that you're seeing on our [ total bank ] was -- is more driven by the earlier comments, the growth in the GRE within the UAE has had a lower risk-weighted impact on the bank. So part of that growth or a large portion of the growth in our loan book has been through the GRE sector in the last half.

Okay. Great. That's very clear. Just one follow-up to the final answer. If you find that your capital ratios start to improve as a reflection of lower risk weightings. Could you still keep your dividend payout ratio the same? On a post-tax basis, the 40% to 50% payout that you do despite a higher capital ratio?

So our guidance still remains 40% to 50% cash payout ratio at the end of the year. And the capital density, we will see what comes in the second half, we'll be very focused on management of scarce resources of capital, which is somewhat really well with strong capital ratios. But our guidance on dividends remains the same which is 40% to 50%.

So just one other comment. Obviously, the capital ratio [indiscernible] as well, which are ever increasing in terms of climate risk, for example, we're now being set in [indiscernible] risk over and above the traditional interstate banking book and credit [indiscernible] capital we need to maintain a buffer as well that we're obviously mindful of in terms of configuration as [indiscernible].

Okay. And just a final one. Sorry, are you looking at any -- I know you've not mentioned anything on M&A or any potential targets. Can I just -- can we just have a debate, please, on M&A strategy?

So M&A strategy remains what it was earlier. We look for both organic and inorganic opportunities primarily in the UAE and the last one we did was in 2019, which is UNB and Al Hilal, post that we also acquired the mortgage book of Abu Dhabi Finance. So if there is an opportunity here within the country, which fits in complement our business, we will absolutely look at that. But outside of the UAE, we're not looking at any M&A activity at this stage.

Our next question comes from Naresh Bilandani.

Deepak, a bunch of questions have been answered. I just had a few follow-ups. One is -- and I know the International segment continues to be the key driver of your volume growth. Could you kindly explain how much is Saudi in this entire mix, I would assume majority of this is Saudi, but just can hear from you, how much of the Saudi is within the international mix? How should we think of this mix evolving 3 years out? Where would you see this as a portion of the total loans? And clearly, because there's a significant amount of investor focus on NIMs in Saudi Arabia, where -- which are under pressure due to funding cost and competition. Just keen to understand from you, even if in very broad terms, what is the level and what's the range of high-grade pricing that is currently extend in the Saudi market especially in the segments that you are currently present in? So any color that you can throw on Saudi pricing and the mix and how much is it currently in the book. That will be very helpful. That's the first question. Second is, how much further growth potential are you seeing in the cards origination? I know this business has been extremely strong for you over the past 4 to 6 quarters. Do you think we are close to the peak or at least on the new origination side? Or do you recon there's further momentum to go from here? That's the second question. And my third and final question is with regards to the tax rate. And pardon me, I joined the call late, so I don't know if you've already discussed this, but has there been any further discussion with the regulators on increase in the tax rate to 15% compared to the 9% that is the current?

Thank you, Naresh. Let me take the last one first. Tax rate. No, we haven't done anything further from 9% to 15%, still remains 9% that will be to be doubled -- and then moved to 15%. But I think it is dependent on a number of countries moving in that direction, not the UAE alone. That is my view. So there's no change to that 9% piece. The growth that we've seen is not primarily driven by overseas growth. In fact, we've seen very significant growth coming from within the UAE. Yes, there is a proportion coming from outside the UAE as well. But if you look at our loan exposure outside the UAE so just moved between 18% to 20%. But most of the growth has come from GREs government infrastructure development projects with the UAE. And these are -- some of them are 0% risk-weighted either to sovereign or fully collateralized loans as well, so that's one thing. On Saudi, we cannot give a breakout of each individual country, which is Saudi, et cetera. Pricing is competitive because of the counterparties as well. And can't tell you pricing is, but yes, it is very competitive, but still from a risk-reward perspective that still makes sense for us. As your other question was 3 years out, what would be the proportion of this lending outside of the UAE, I would say, probably marginally grow from 20-odd percent or a little bit more 25-odd percent. So as the overall size of the book also grows, we will continue to keep opportunities in Saudi. That is the reason why we're also setting up our branch, which should be fully operation, hopefully, by the end of the year or early next year. So we intend to participate in deals in Saudi in the coming future. So we'll see a larger proportion coming from Saudi as well. Paul, anything to add from your end?

No, just also have a look on Slide 12. Just on the bottom right, you also see the retail profile across all the different products [indiscernible] balances from June '24 versus June '23, a double digit again. It's not just one particular segment that's going, we're getting growth from both the wholesale and the retail sectors.

Just a follow-up question on cards business, please? And where do you see this business going through into the medium term?

Cards is very -- sort of active growth area for us. We've seen growth in the cards issued, received and expand. And so if you look at our percentage increase in acquisitions throughout fourth -- quarter 2 '24 quarter 2 '23, that's gone up 22% in acquisition. In terms of portfolio balances, it's up 16%. Card spend is also going up. And I explained earlier the reason for Card fee income being down is that the one-offs that we got last year, which are not repeated annually, but would happen next year, we'll see that move up as well. So overall, Cards is a very profitable business for the bank. We think we'll continue to grow in this area. And there's a lot of focus to making it grow. We've done a number of partnerships with third-party providers, especially Talabat, which is performing really well. We launched the 365 Card, which is again doing very well. And we recently relaunched our Traveler Card with much higher benefits, and we hope that, that will take up to -- while we've not just got on a couple of days ago. So a lot of activity in that area, and we expect growth to come through in the card business as we go forward.

There are no further questions. So I will now hand back to Rahul Bajaj for any questions on the speaker line.

This is Rahul from Citi. I just have one follow-up question, if I may, please. This one is on provisioning. I know you have a medium-term cost of this guidance of less than 80 basis points. But as the business mix sort of revolves towards the GRE, less than 80 basis points is a very wide range. So you think where there is no cost of risk to the much lower than the less than 80 basis points number that have been announced. Directionally, you should be probably heading towards much lower cost of this? Or do you think that's not going to change in the medium term?

I think the line wasn't very clear. So let me just try and read back to you what we heard. So you're talking about provisioning that our guidance is less than 80 basis points, where we actually much below that, and it's a very wide guidance or what I caught that. And going forward, would it still be below 80 basis points significantly or more. Is that the question? Or did I get it wrong?

Yes, Deepak. I mean I was thinking more in terms of the change in business mix. So we do more GREs. Now GREs are above 27% of your loan growth and that percentage of GREs grow shouldn't that of risk sort of number we -- maybe less than 60 or less than, I don't know, less than 70 and not less than 80, in your medium-term guidance. So that shouldn't -- that be revised down as business mix changes quite materially?

Actually, what you're seeing right now, the cost of this is coming down absolutely, you've seen that in Q2, you've seen that overall first half. But also on the horizon in the new credit risk management standards, which [indiscernible], which I don't know when they will come into play, but maybe in the second half of this year. And so that may also be more prescriptive in terms of how provisioning needs to be done, but I'll let Paul comment more on that.

Yes. I think the dimension is -- I still think there's a lot of uncertainty in the market in terms of geopolitical in Middle East itself, but also, obviously, the U.S. elections, et cetera, and they have chance with that in terms of the global stage, produces [indiscernible] growth rate, what's going to happen with interest rates, et cetera. So I guess we're mindful of that as well as what Deepak mentioned that the previous management stand of that issue and they gave potential uses for the industry around collateral [indiscernible] that need to be applied and rigorous requirements around staging and staging movement. So at this stage, until they're released and until we get certainty around the macroeconomics and sort of longer-term global environment, with guidance -- medium term guidance at the 80 basis points [indiscernible]. But we certainly consider that as we move in our journey over the second half of this year and early into '25 we need to revise that. Obviously, we've done with loan growth, we do that revision as well as we see the trendy volume.

Understood. Deepak. That's all from my side. Operator, are there any further questions?

There are no further questions. So this can be the Q&A session, and I will now hand back to Rahul for closing remarks.

Thanks. Harsh, would you want to with the closing remarks?

Well, thank you very much to all attending on the call and questions. If there are any further questions that were unasked, but please do write into our Investor Relations, and we'll be happy to come back to you on that. But I'd just like to thank everybody on the call.

This concludes the call. Thank you, everyone, for joining. You may disconnect.