Bank of Baroda Limited (BANKBARODA) Earnings Call Transcript & Summary

Thank you very much. Good evening, everyone. Welcome to Bank of Baroda's Analyst Conference Call. Hope you and your family members are safe and doing well. We have on the call today, Mr. Sanjiv Chadha, MD and CEO of the bank, along with the executive directors. We will start with initial remarks from the MD, then follow it up with the question and answers. Before I hand over the call to the MD and CEO, I would like to say that the analyst presentation has been uploaded on the website, and the standard disclaimer in the presentation applies to this conference call as well. Sir, over to you for the initial remarks.

A very good afternoon, good evening to everybody. Thank you very much for joining the conference call. First of all, a very happy new year to all of you. I do hope that in the next quarter things will be better, and we can meet in person at our office. I will not take too much of your time in terms of talking about the numbers because you have had access to them. I'll just make 4 or 5 broad remarks, which I hope can cover some of the questions you might have in mind, and then we can go to the actual questions. So first of all, during the quarter, which is under review, BOB completed its merger with Vijaya Bank and Dena Bank. So as of 12th December, all the branches of Vijaya Bank and Dena Bank were migrated on to the core platform of BOB. So the mergers stand completed in all respects. It has been a fairly successful smooth execution with very few issues along the way. It also has gone a long way in terms of meeting the objectives that we had set ourselves when we get ahead with the amalgamation. There was a very aggressive plan for cost reduction, in particular, and very happy to share that the bank has adhered to that cost reduction plan almost to a [indiscernible] and in some cases actually exceeded that. We -- in terms of broad numbers, we expect this year to make cost savings of about INR 1,300 crores on account of the merger. And over the next 5 years, a total aggregate saving of about INR 10,000 crores. And as I mentioned, we are going as per plan. So among the targets that we had set for ourselves was the rationalization of 1,300 branches. That is closing 1,300 branches of the combined entity, which is pretty ambitious if we were to consider that the total network stood at about 9,500 odd. So as things stand today, we actually have achieved that target. So 1,300 branches have been closed. Similarly, there was a target to close 500 low-performing ATMs. We actually have shut 1,000 ATMs down. So these are significant cost savings that we expect to accrue. Some of them are visible within this year. And a larger proportion, they will be coming next year, when we will not be paying the rents on these 1,300 branches for the full year. So even if you were to look at the presentation, you'll see some signs in terms of these cost savings being affected. Rent, for instance, actually, are about 5% lower in this 9-month period as compared to what they were in the previous year. This is despite most of the savings coming at the tail end of this period. Secondly, if you were to look at the salary bill. The salary bill is also lower in absolute terms as compared to last year because we have not gone in for any significant recruitment at all, and we do not propose to do that also over the next few years. The second key benefit, which came in terms of costs has been through the expansion of the savings bank franchise across the entire network. So from 1st April '19, which was the effective date of the merger, the CASA ratio has increased by 400 basis points. So that's something which is very significant in terms of savings for the bank. The second point I would want to touch is in terms of the emerging business profile. So what we have been trying to do is to see how we can get a disproportionate part of the growth from retail loans and secured retail loans. So you will see that our retail loans actually have increased by about 13% during the period under review, Y-o-Y. And this loan has come from car loans, which is 22%; home loans, which is also double digit. And we believe this is a strategy we would wish to continue to pursue because the bank is, as of now, skewed in terms of balance sheet in favor of corporate, while that is indeed a very valuable franchise. BOB is the second largest corporate lending bank in the country. But nevertheless, we believe that rebalancing would be of benefit, both in terms of keeping a handle on any volatility in asset quality. And also, given the current context where liquidity is plentiful in terms of protecting margins. Now -- so corporate growth has been driven, therefore, largely based upon the desire to absorb whatever excess liquidity is there and make sure that given the uncertainty of the time, that the underwriting quality is absolutely top rate. So it is this combination of aggressive secured retail growth and corporate growth of high quality to absorb excess liquidity, which has allowed us to outperform the industry in terms of loan growth, with our domestic book growing by something like 8.3%. As we had discussed in the last quarter, in terms of deposits, we have tried to keep the discipline that deposits are required only to fund loan growth, and we should not be chasing deposits. In fact, we should not be having any deposits, which results in excess liquidity, which has to be suboptimally deployed. So our deposit growth has been as per plan. But it is, again, heavily tilted in favor of CASA -- which -- CASA is up 13%. And as I mentioned, in terms of proportion of total deposits, there is a significant uptick. Within CASA, current accounts have grown even more, where the growth that we see Y-o-Y is nearly 18%. In current accounts, a key driver of growth has been our cash management product, which is very successful. You would see in the presentation, the figures, both in terms of the deposits that we are getting on that account and also the fee income that we are earning and the rate of growth, which is there. Going forward, we believe we should be able to continue to push this product aggressively. So we are, as we mentioned, the second largest corporate bank with about 8%, 8.5% share in the total corporate lending. So there's a huge potential, which is there in terms of pushing our cash management product, particularly in the context of the recent RBI guidelines, where the current accounts are largely to be held with lending banks. So we would want to push that opportunity, and we believe that will help us drive current account growth even going ahead. The third point I want to focus on is in terms of asset quality. So we are, again, have continued to have very tight underwriting standards. And whatever growth that you see is despite to this tight underwriting standards. 3/4 of the underwritten -- corporate book that is underwritten in the period under review has come from either accounts, which are either A-rated or government entities or BSUs, right? That is 3/4 of the growth that we have seen. Similarly, on the retail side, 73% of our borrowers are credit score 725 and above. Third, in terms of unsecured retail, that is less than 1% of our total loan book. When we look at the agriculture side, nearly 40% of the growth that we see in agriculture has come from gold loans. So gold loans are about 20%, 21% of our total agriculture book. But in terms of the incremental agriculture book, they are more than 40%. And we do hope that going ahead also, 40% to 50% of agriculture growth will come from gold loans. Similarly, on the MSME side, more than half of the growth that we see, in fact, significantly more than that has come from the government guaranteed scheme. On the other growth also, a large part comes from PSB 59, which is the digital channel, which is, there for all public sector banks to access MSME loans. And here, the quality is proven to be significantly better as compared to general MSME loans. So to, again, reemphasize the point on the MSME also, the growth has come either through risk-mitigated products like the government guaranteed scheme or, again, through digital loan products, which have a better quality. The bank, as of now, is currently executing a very ambitious project for digital loans, of which MSME loans will be a big part. And we believe going ahead also, that should help us improve the underwriting quality. Having said that, we do accept that there will be some stress, which will play out in the MSME and retail book, right? That is still something which is in the works. But we believe that this stress, which we expect to see will be offset by lower credit costs on the corporate book. So our -- in terms of my NPA ratios, they -- the GNPA ratio, which is published as 8.48%. The pro forma GNPA ratio, if you would take into account the implications of the Supreme Court judgment was 9.63%. Net NPAs, which are published as 2.41%, it comes to 3.36%. There also, despite whatever we have seen, we believe that is Y-o-Y improvement. We do expect, again, that even as we end the year, despite the impact of COVID, we should end with figures in terms of gross and net NPAs, which may not be any worse as compared to what they were a year back. Coming to the restructured book. Restructured book is about 1.38% of our total loan book, right? But a part of this is, again, already counted in the pro forma NPAs. If we were to eliminate that, it is only 0.80% of the total loan book. And there is a significant proportion of this, which is likely to be upgraded within this financial year. In terms of provisioning, we are adequately provisioned. PCR is 85%. The impact of the Supreme Court judgment is fully provided, both in terms of provisions on loans as well as the interest which has been booked. The NCLT loans are provided up to 93%. We hold COVID provision of about INR 1,700 crores. And then over and above that, BOB, as we have discussed in the past, on certain categories of impaired assets like [ substandard ] loans provided at a higher rate as compared to RBI norms. 20% as against 15% and also similarly on certain other categories like unsecured loans. And on this account, we hold a provision of nearly INR 1,500 crores, which is over and above what the RBI requires. So we feel fairly comfortable in terms of where we are in terms of provisioning. In terms of the impact of the Supreme Court judgment, I think we -- I've mentioned briefly the -- what would have been the figures on a pro forma basis for gross and net NPAs. Now that also plays out in terms of the cost-to-income ratio. Because we would recognize interest, which otherwise would not have been recognized. So the cost-to-income ratio would have been near 50% as against 48% that we have in our accounts. Similarly, domestic NIM which is 3.07% would have been nearer 2.9% otherwise. In terms of collection efficiency, that continues to improve. And as compared to 91% last quarter, it is at about 93%. There will be residual challenges in retail and MSME. But in corporate, it is above 95%. Lastly, in terms of capital plans. Since we met last quarter, we have raised about INR 1,200 crores by way of fresh AT-1 funds. Of our AT-1 program of INR 4,500 crores, we have already done INR 3,700 crores. The balance, again, we are likely to do in this quarter. In terms of pure equity, we are looking at exiting the QIP market during this quarter, and that might be of the order of INR 2000 crores to INR 4,000 crores. Now in terms of overall capital position. If we were to take into account the AT-1 that has been raised and the profits that have accrued up to Q3, we would have a CAR of about 13.3%, 13.4%, which is slightly better as compared to what it was at the beginning of the year. And taking into account the likely approvals over the rest of the year and also the QIP we are talking of and some capital release we expect from certain loans, which carry 150% risk weight, which are likely to go out -- or at least there is opportunity for them to go out over the next 3 or 4 months. That also gives us the option of deploying those funds at -- in assets, which are nearer our average RWA of about 50% as compared to the nominal assets. So we believe in terms of capital, we are fairly well positioned both for taking into account any residual stress and also the growth that we want to target. So those are the points I thought, which might be useful in terms of question you might have in mind, but now happy to take whatever questions that come our way.

[Operator Instructions] The first question is from the line of Gaurav from Bowhead India.

Sir, just a couple of questions. I was looking at SMA1 and SMA2, which you have disclosed, sir, in your presentation. And I think the numbers seems to have changed for September '20. It was 5.46% at the end of September 2020, which is reported as 2.88% in this quarter for September '20. So is there anything which I'm missing? Why is that reclassification? Or is there any way -- the way you have changed the data?

So I'll request Mr. Jain, our Executive Director, to take the question, please.

Yes. This time, we have reported based on the CRILC data, and this is more than INR 5 crore.

Okay, sir, but what's the need of changing the data because you have been reporting in the previous format for like more than 8, 9 quarters. So if you could disclose maybe what is the similar number for this quarter that will help us to understand the historical context of SMA1 and SMA2. So the way you used to report till last quarter, if you could share numbers for December quarter and this quarter also that would be very helpful.

So I think, Gaurav, what we have tried to do is to get [ worthy ] of time, make our presentation as closely benchmark to what it is on peer basis. So that's healthier comparison also, but we'll give you those figures.

Great. And sir, your international slippages, they came at around INR 4,000 crores. So is there like 1 or 2 accounts, which reflect the slippage? Or like is it more of broad-based? And how do you see the run rate from this side going forward?

So you're right. So the international slippage, increase is largely on account of 2 accounts. One of that is almost, I think, INR 2,700 crores. That account has slipped in December '19, got upgraded in March, and now again it has slipped and is likely to get restructured. So that's 1 single biggest loan which is there. There's another loan of about INR 800 crores value, which is likely to get restructured. So these 2 pieces account for the major proportion. And simply because the fact that these are 2 large pieces where there was some history of stress. We do not believe that this is something which is likely to be of -- anywhere near similar proportions going ahead.

Perfect. Sir, if I could just ask another question on the Dewan Housing front, considering there is a lot of reporting from news channels. Sir, what could be your recovery considering you had INR 4,000 crore of exposure, but direct exposure was around INR 2,000 crores. So if the account recovers, let's say, in the next 6 months, how much recovery can you show in your books? Is it a INR 2,000 crore recovery or a INR 4,000 crore recovery?

So I'll just attempt to answer the question, but hand it to Mr. Jain because he will give you a more authentic reply. So as far as the exposure, which is not on our books, right, pools that we had purchased, there is no issue anyway. That is performing well. So there is no question of any significant haircuts at all there. Now when it comes to the direct exposure in Dewan, there, our recovery will be exactly of the same order of as any other bank, which is near about INR 2,000 crores. But again, I'll defer to Mr. Jain for his comments.

Yes. Our direct exposure to Dewan Housing is close to INR 2,000 crores, and we are expecting a recovery of around INR 800 crores. And this account we have fully provided for.

The next question is from the line of Jai Mundhra from B&K Securities.

Sir, if you can talk about the restructuring request: a, is this the final? Or do you still have something in pipeline, especially from the corporate side or MSME side? And maybe if you can quantify the 3 large sector and maybe the cases, individual cases above INR 500 crores.

So this is, I think, should be pretty much final, right, the window for invoking the restructuring ended on 31st December. There's still, of course, the MSME scheme, which is running up to March. But then in terms of relative proportion that is likely to be a smaller figure. So we don't expect this figure to change very much from where it is now. So -- and in terms of sectors, you will have the usual suspects that there is, of course, retail -- organized retail which is there, there is construction. So I think those are the kind of sectors that you are looking at. But again, I'll hand it to Mr. Jain, again, to give a little more color on that, please.

Yes. So this OTS is INR 9,500 crores, right? And out of this, around 1/3 is on account of the account which already has been a part of pro forma slippage, 1/3 of that. Second, account specific, it includes basically the retail. It includes the construction, it includes the power, iron and steel, textile, real estate and like this.

All right. And sir, what would be the number of accounts which are, let's say, more than INR 500 crores or more than INR 1,000 crores? Or maybe more than INR 500 crores?

It will not be more, maybe around 5, 6 accounts, not more than that.

And in the meanwhile, sir, the second question is on SMA1 and 2. So we've given the collection efficiency as 92% and SMA1, 2 is 4.4%. So the rest is actually SMA0, right? Is that the way because we've already bifurcated the pro forma number in this calculation, right?

Jain sahab?

Yes, this -- yes, remaining will be the SMA0. Right, you are.

Right, sir. Okay. And the last question, sir, from my side. The ECLGS, sir, which is -- what is the quantum? And do you suspect -- do you see any signs of maybe quality-wise incipient stress there? Of course, there will -- there should not be any stress in the near term, but just your comments there?

So I think we have disbursed more than INR 8,000 crores in terms of ECLGS loans. Early days in terms of spreads. But as a broad point, what I mentioned earlier, we do believe that when it comes to both the MSME and retail, there is going to be some stress, which is likely to play out. And MSME, of course, to some extent, it is mitigated by the fact that the ECLGS exposure is not on your books. But in comparative terms, I think this is something where there is -- you might say that the entire story has not completely played out. Now there are possibilities. And that -- and the reason, again, I mention is that we are not completely certain there. You don't have the kind of handle you have on corporates in these places because this is an unprecedented situation. Retail stress has never been an issue. But here, there's no doubt that we are likely to see stress, which is more than historical levels. Similarly, MSMEs, in terms of the resilience, they are more impacted as compared to corporate and our ability to assess the extent of stress is also a little more difficult, which is why we are being a little cautious by saying that we expect more stress to play out on MSME and retail. But we expect this to be balanced by the fact that we have a better handle on corporate and where we expect stress to be less as compared to historical levels.

[Operator Instructions] The next question is from the line of Mahrukh Adajania from Elara.

Sir, my question -- first question was on ECLGS only. So your disbursals of INR 8,000 crores, what is the base of loans on which these disbursals are made? So what is the amount of loans that have taken ECLGS of INR 8,000 crores?

So there was -- there is a clear proportion there, right, that you can give 20% of the limits. So I think we have to just multiply it to that extent and we'll have a figure. So -- but in terms of the people who are eligible, nearly 90% of, again, the eligible borrowers, again, avail of that facility. We have -- we must recognize that this loan came at an interest rate, which is significantly lower than the coupon that the regular loan carries, right? So therefore, I think we need to be a little careful also there. While -- again, there is an issue of stress in the MSME sector. But this need not be taken necessarily as an indication of the kind of book, which is under stress, because it simply made enormous good sense to take.

Correct, sir. Sir, so it's fair to assume that everyone who took the loan took the full 20%?

Absolutely, because you're getting a rate lower than what we are charging you on your main loan.

Okay, sir. Sir, and in terms of slippage, the total slippage for the quarter is INR 131 billion. That's the right figure, right? INR 130 billion around, including the standstill NPS?

[Foreign Language] Jain sahab, would you want to take that?

Right, right, right. INR 8,600 crore is the pro forma and INR 3,984 crores is the slippage. Right you are. That's correct.

Okay, sir. Sir, and my -- the other question was that just in terms of outlook, so you already gave an outlook on corporate, MSME and retail. But in -- just in terms of slippage, do you think this would be the peak because we already had INR 131 billion of slippages, which is probably the -- probably high, right? So could we say that it's the peak of slippages now?

so, yes, I would venture to say probably, yes, and that's on 2 counts. One is, of course, that when we look at this quarter, right, we have to accept that there were slippages which would have happened in previous quarters, either because -- and were postponed either because the moratorium was available or because of Supreme Court judgment, et cetera, et cetera. And if we were, just by way of testing the hypothesis, to just aggregate the slippages in Q1, Q2, Q3, FY '21 and compare that with the aggregate slippages in Q1, Q2, Q3 of FY '20, you'll find that the figures are not very different, right? That's one. Number two, again, wherever you might say there was some residual spread. There was an opportunity for large proportion of borrowers to actually elect to go for restructuring. So that's something which has also completely played out. Three, on the -- this also includes on the international side, something which you might say was an exceptional level, unlikely to be replicated in future quarters. So therefore, on strength of all these 3 points, I would venture to say, yes, indeed. I think this represents by far the peak for all these reasons.

Sir, next year, if you do -- next year, if slippages normalize, what normalization level would you anticipate, right? Because the merged numbers -- I mean, after the merger, there was a spike in slippages and then now because of COVID. So next year, if you just had to guess the level of slippages, how much would it be? Would it be below 2%? Would it be under 1.5%? What would be your best guess?

Jain, sahab?

Madam, there are 2 points. Basically, you talked about INR 13,000 crores. Out of this INR 13,000 crores, close to INR 3,000 crores or so will be upgraded when we will do restructuring. It is a part of OTR. And as per the OTR guideline, if it is not implemented, it will be a slip. Of course, since Supreme Court order, we are not -- these account have not slipped and is a part of the pro forma slippage. So this amount will be reversed, first point. And the second point, what you talked about is that slippage number is, I see bank as a whole, around INR 19,000 crores of slippage of last year '20 and our slippage is INR 8,200 crore and pro forma INR 8,000 crores. INR 6,000 crore, if I exclude INR 3,000 crores, so if it's INR 13,000 crore vis-à-vis INR 19,000 crores.

So I think the point that Mr. Jain is making is that if you look at this INR 30,000 crore figure, this includes accounts, which the restructuring has been invoked, will get implemented. And therefore, again, you will find that these do not count as slippages by March. So that is A. Number 2, if you adjust, you will find that they are actually lower as compared to the previous year and going ahead taking all these things into account, we should be fine. But Mr. Jain has not given you a percentage, but I venture that this is likely to be pretty much in that ballpark, maybe on the lower side.

As in what ballpark? What we saw in...

That 1.5 to 2 you mentioned, right?

Right, yes. Okay. Okay, sir.

The answer of Jai Mundhra's question, there are 6 accounts which are more than INR 500 crores where OTR has been invoked.

Mahrukh, is your question answered?

Yes.

The next question is from the line of Manish Shukla from Citigroup.

At one point you mentioned that there is an overlap between pro forma and restructuring and adjusted for that restructuring would be 0.8. Is that number right?

That's correct. That's correct.

Yes, sorry. Then the other question is, is there an overlap between the SMA book and the restructured book?

Absolutely.

So what would be the quantum there?

I think we can give you the exact numbers there, but I think that is absolutely correct. We can give you the exact number there.

Okay. Going back to your comment, sir, on the retail and SME stress likely going forward. One would have thought that by 31st December 2020 those loans would become NPA or they would have been restructured. I'm wondering why do you see further stress beyond the restructuring numbers on retail and SME because moratorium expired on 31st of August. So by end of December, either those loans should have been an NPA or restructured or performed. So of that performing class you still see stress, is that what you're trying to imply?

So what I'm trying to say is that we are looking at 2 context: a, that if I have to speak with higher degree of confidence, where can I have venture further? So I believe corporate because of its very nature. You have very high degree of clarity in terms of what the quality of book is and also what might be the residual stress there, right? That's a. B, if you see the restructuring figure, about 80% has come from corporate. Given the degree of stress, which might be there on the retail book because of the issues that we have in the economy, the restructuring figure is very low, which means that the stress, which might be there has not been significantly addressed through the restructuring option, right? And that might be simply because of the granular nature of the book. Three, on a historical basis, the stress in retail has been very low. So if you were to ask me that where is a higher degree of uncertainty, then I would venture to say that it is on the MSME and the retail piece. This, of course, is anecdotal. What you're saying is absolutely correct. On an empirical basis, you would expect if something had to become NPA, it would have become NPA now. But I still believe, again, that there may be a little more a note of caution which should be exercised when it comes to retail and MSMEs as compared to corporate, where we are fairly confident that we have a good understanding in terms of the degree of stress and how it should play out.

Right. And really, last question. On the international book, what is the level of comfort? I mean, obviously, we don't get much color on which country is doing how well. So in terms of any likely stress coming through from an international book? Or do you think that is fine beyond what we've seen in the December quarter?

So again, the very fact that the single largest piece of stress that is based out of the international book, right, came from an account which had slipped in December last year, got upgraded. And now it has slipped and probably will get restructured. I think that's a fair indication that the accounts which are under stress, they have been identified. And again, they are addressable. So as a specific answer, we believe that we have -- we are reasonably comfortable with our international book. The big chunky pieces, which might have caused us trouble, they are there for us to see it this quarter. And for the second loan, which is there, apart from this INR 2,700 crores -- INR 2,800 crores loan, which is there, that also is likely to get restructured. So I think the stress in the international book is immensely addressable.

Got it, sir. Sorry, last question on ECLGS. When, if at all, is that stress likely to start showing up, after 12 months, after 18 months? How is basically the scheme structure? So let's say, some of those borrowers were to fail, I mean not service the debt, when do they actually become NPA?

So I think they -- once the -- you have taken advantage of the scheme, right? They'll become NPAs exactly the same way. It's not -- there is no issue. So again, the fact is as of now, we don't really know how it will play out. Because the fact is you have made 20% of the fund base limits available to the borrower, which would mean that if there were any challenges in terms of extension of working capital cycle, they seem to be adequately addressed. So people should be all right. But again, I'm only being cautious simply because my understanding in terms of what is the kind of stress, whether it has been fully addressed? Whether there are still challenges? Do people have issues in terms of availability of labor? I think these are things which are very difficult to get a handle on in a portfolio, which is as granular as that. So I would prefer to be cautious there. But again, in terms of an exact timeline in which this possible stress would play out, tough to say.

The next question is from the line of Mahesh M.B. from Kotak Securities.

Sir, just wanted -- I just wanted a confirmation, what is the total slippages that you reported on a pro forma basis?

So I think totally INR 8,000 crores odd. Mr. Jain, again, has better head for figures. I'll request him to give you the number.

Yes. Pro forma number is INR 8,637 crores.

Okay. And would you have a breakup between retail, corporate on this?

Yes, that I can say. This agri is INR 682 crores, corporate is INR 5,669 crores.

INR 5,669 crores for...

MSME is INR 1,054 crores.

INR 1,054 crores. Okay.

Retail is INR 1,103 crores.

Okay. And...

Others is INR 129 crores, aggregating up to INR 8,637 crores.

And this INR 5,669 crores includes the international loan book of INR 4,000 crores?

No, no. International already stooped because Supreme Court order is applicable in India.

Okay. So INR 5,669 crores of corporate slippages, could we have some color on where is this coming from?

So this INR 5,669 crores includes the construction, includes the NBFCs, includes the retail. Of course, part of this is under OTR.

So as a rough figure, a significant proportion of this figure is where restructuring has been invoked. And it is likely to help us get significant upgradations.

Okay. Sir, can we also -- on this international accounts, which is of INR 2,700 crores. Could we have some color on which sector it has come from or which geography it is?

So this is -- it's a chemical company, which is there, which operates out of the Middle East.

Okay. And final question of -- this question was asked earlier. Is it possible for us to get the outstanding SMA1 and SMA2 book?

We can do that. I think we'll give you those figures. But as a general proposition, if you look at the SMA1, 2, I think, if -- even if we were to, again, go granular, the proportion will be pretty much in a similar ballpark between 4% to 5%.

Of the overall loan book is it?

Yes.

And this has improved, it has remained stable, it has deteriorated. Where is it as compared to, let's say, what it was in March?

It is elevated if we were to compare to last year, which is quite understandable, right? But again, as we mentioned that this is where, again, you might say, part of my caution in terms of the future comes from. Because even with this SMA to the extent that we have corporates, you have a fair assessment in terms of what is -- how is it likely to play out. But when it comes to smaller loans, you really don't know. As you mentioned, or maybe again, it was the previous question that if they were to have become NPAs, logic says, this should have become NPAs now. But having said that, the fact is that there are possibility which are there, right? People, again, took a moratorium. Now they have paid a few installments. Now whether they have -- it's simply a question of good habits coming back or actually they are constrained in terms of cash. That's tough to make out as of now.

Sorry, but just kind of reconfirm this. You said the reported SMA1 and SMA2, as per your presentation shows 4.4% for loans above -- greater than INR 5 crores. And how is it that it is the same for the overall loan book as well?

So I think we'll just give you the figures. If we were to adjust -- and I'm just, again, giving you -- because what happens is there are too many complications in this, which is the reason why we did not hold it out. The too many complications come from things like -- things which are showing in SMA, but actually are also part of the Supreme Court book right. Possible. There are SMAs where restructuring has been invoked. Which is why, again, we thought let's give a number, where we actually have more clarity in terms of how it is likely to play out, but we'll give you the number, but we'll have to adjust that number for again all these factors.

Sorry, just one clarification. So if I say SMA2 book of 4,000 -- 4.4%, and you've also included this quarter corporate slippages of INR 5,669 crores. So this is also included in SMA2?

Which one?

You have indicated that the SMA1 and 2 book is about 4.41.

Yes, INR 5 crores, right?

Yes. And you have reported pro forma slippages of INR 5,669 crores.

[Foreign Language] again I'm getting confused. Jain sahab, can you take this one?

Yes, yes. Let me clear, Sanjiv. So we have reported 4.41. It includes pro forma slippage. If net of pro forma slippage, it was around 3.6% or so.

Okay. Okay. Okay. Sir, if it's possible, if you can just kind of -- because the retail, we just wanted to see how much of same is sitting in that smaller ticket loans? If you could get that, that would be helpful.

Yes. We could do that. Again, we'll have to do detail numbers in terms of where restructuring is invoked, which -- how much is in the pro forma slippages, we can do that.

The next question is from the line of Ashok Ajmera from Ajcon Global Services Limited.

Hello?

[Foreign Language] Ajmera?

Sir, first of all, let me express my compliments and congratulations to you for completing this entire merger process so smoothly within the deadline that now it has -- all the 3 banks have become full-fledged Bank of Baroda. I mean, this is a great job, which you have done. Secondly, there is a very good performance. If you look at CASA, if you look at improvement in the asset quality, and still, in spite of all this happening, it's still showing a good profit. So my compliments to you. Having said that, sir, I have a couple of observations and some questions. Last time also we have discussed that in the segment-wise reporting, for the first time in the many, many quarters, you had shown a profit in the wholesale book of INR 63 crores, before that INR 3,836 crore loss. But -- and you had said that now since 85% provision has already been done, there is not much pressure on this. But again, in this quarter, if you look at segments, INR 1,800 crores of loss in the wholesale book. And all the income is coming again from the treasury books only. So can you throw some light on that?

So I think I'll request Jain sahab to take this.

Yes, yes. Ajmera sahab, point is that we have made a provision for this pro forma slippage, right? And if you see this, out of INR 8,600 crores, INR 5,700 crores is a corporate book. So whatever provision we have made, of course, it is a part of standard, I'll say, it has been factored while calculating this segment reports, and that is why it is in loss.

Right, sir. Sir, just I was looking at this NBFC exposure of the quarter. While the BBB exposure has come down by around INR 500 crore, the BBB and below exposure has gone up by INR 1,700 crore. I mean, if I'm right. So is there any reason? Or are these NBFCs, TLTRO true or -- I mean, what was it that INR 1,700 crores is the BB below book has gone up? And BBB has come down by INR 500 crores?

Yes. So I think you are right. The -- largely, it is driven by the fact that we have accessed funds under TLTRO, and also, again, taken advantage of the partial credit guarantee scheme, which is why, again, that exposure has gone up. Also, we are actively trying to see that when it comes to the private book, right? So I think a very large proportion of our NBFC exposure, I think it will be 70% plus, Sameer can give the exact figure, is to entities which are either owned by large private sector entities or [indiscernible] but of the balance, what we have tried to do is to see how it can be more diversified. That your concentration is not high in any particular exposure. So most of the exposures which are there on account of the private sector, they have come down significantly in terms of quantum, and we have substituted that by exposures on smaller NBFCs, which we believe are of good quality and where we were able to get the benefit of a partial credit guarantee.

Great, sir. Sir, coming to this just a few cost points. Now the operating expenses have gone up by INR 250 crores in this quarter that is why the cost-to-income ratio has also gone up to 47.48% from 46.15%. And the employee cost also has gone up substantially by INR 250 crores in this quarter. While we are saying that we are going to get the benefit or we are getting the benefit of the merger of all these 3 brands. What is the reason of this cost, operating cost and this employee cost going up, sir?

So if you were to look at the line, the line which says salary, right, that is showing a small decline Y-o-Y, but there are other costs which are there on account of employees. So these are largely on account of the AS-15 requirements and the provisions we had to make as per the actual valuations. But again, Jain sahab can shed more light on that.

Yes. That's -- AS-15 provision has increased because of wage revision. And since the wage reservation, the pension liability will increase so that is why we had to make higher provisions here. But you see 9 months, the salary has come down by minus 1%.

[Operator Instructions] The next question is from the line of Shashank Verma from Axis Mutual Fund.

Sir, I have 2 questions. First question on this slippage of approximately INR 4,000 crores in your international book. Have we taken any provisions? And -- that is the first question.

Yes. So I think, yes, of course, the fact is it is -- since this is something where you don't have any protection, this has been recognized, a, as NPA, and we have taken a provision as per our norms, which, is, I would believe, a 20% provision, what we provide on substandard assets.

Okay. And sir, we used to provide a watchlist a couple of quarters back of sales accounts. So I mean, we have not shown that for the last 2 quarters. So has something changed there significantly? Or is it because of a lot of these regulatory overhangs that we are not providing those -- that number as of now?

So I think any specifics again always become a bit challenging at times. So that is the reason for that.

The next question is from the line of Mohit Surana from CLSA.

Yes. Sir, I just wanted one clarification. You have said that there is around INR 1,900 crores...

Sorry, Mohit, your audio is breaking, we're unable to hear you clearly. Please use the handset.

Yes. Is it better now?

Yes.

Yes. So my question is that there is around INR 1,900 crores of provisions against potential interest reversals and against potential slippages on pro forma NPA and then there is around INR 1,700 crores of COVID provision. So is there any overlap or the 2 are separate?

Jain sahab?

Both these 2 are separate. So point is the pro forma slippage is INR 8,500 crores. So we have a provision of INR 1,522 crores, INR 370 crores and the COVID provision of INR 1,700 crores. So put together, we are having a provision of INR 3,600 crores, is against the pro forma slippage of INR 8,500 crores.

Okay. Got it. Second question is that the...

Mr. Mohit, can you please use the handset because the audio is still not very clear.

Yes. Is this better now?

Yes.

Yes. So the second question is that the 1.4% restructuring that you've mentioned, is this all -- all of this restructuring is incremental restructuring, I mean there is no carry forward from previous quarter, right?

So this 1.38% is the aggregate amount of restructuring, which has been invoked. Some of this has actually been implemented, a very small coupon of about INR 1,000 crores. The balance will get implemented over the March and June quarters.

Sure. And the last question is that employee -- on the employee expense, can we expect a similar run rate going forward on employee expenses? Or is there any provisions that are still -- that can still be made in future quarters?

So I'll just give a preliminary response, and Jain sahab to confirm that. I would believe that in March we should see a similar run rate. And possibly, we should actually see a decline after that quarter.

Yes, sir. Yes, sir.

The next question is from the line of Sonaal Kohli from Bowhead.

A couple of questions, sir. As far as your retail book is concerned, would you broadly know how much of that would be from government-based employees because at least that part of the base wouldn't have been impacted much because of COVID. What I meant was government-based companies or central or state government employees. Like State Bank gives you some idea of that kind of book. Would you have some color on that?

Frankly, no. I think the only, you might say, relevant figures that might allow us to get a handle in terms of the risk that would carry are 2 indicators, which I mentioned before: a, that 73% of credit score 725 and above; and b, that 70% of the book is home loans. So I think in terms of both quality as well as loss given default, that is where we get the comfort from. Unfortunately, and that's more, again, you might say a data issue, I don't think we have a very accurate estimate in terms of whether these employees are employed in PSUs, governments and the like.

Sir, if not an exact, a very rough estimate?

Tough. Tough.

70%, 80%, 40%?

I don't think it is going to be that large. I think it's lower than SBI most certainly, simply because of the kind of business that BOB does. But again, if I were to give you an estimate, again, I wouldn't be confident about that.

Got it, sir. Secondly, sir, do you have any idea about the -- what is the breakup of the book, which would have become NPA, had it not been for Supreme Court order? What I meant was breakup in terms of agriculture, retail, SME, corporate?

Yes. I think Jain sahab gave that figure earlier, but I'll just request him to see if he can just give that again.

Yes. This is 8,637, agri is 682, and corporate is 5,669, MSME is 1,054, retail is 1,103 and others is 129, aggregating up to 8,637.

So sir, considering that the retail part and MSME part is not that larger portion in terms of old spreads. I think for SMA1, SMA2, the similar trends would have also unfolded. So historically, you used to give SMA1, SMA2. Of all, you were one of the very few banks who used to do that. But this time you haven't shared your total SMA1 and SMA2. Would it be possible for you to share these numbers by notifying the exchanges in line with your historical trends? Or wouldn't it be possible for you to share these?

So I think the only challenge, as we mentioned, was that when it comes to large allowance, it's much easier for us to give a clear, transparent impression in terms of how, again, the overlaps play out between restructured again, things which are part of pro forma NPAs, which is a bit of a challenge, again, which is there, but we'll try to see how we can help there.

[Operator Instructions] The next question is from the line of Mona Khetan from Dolat Capital.

Just 2 quick clarifications. So this INR 8,600 crore of pro forma slippages or the notional slippages that we had during this quarter, I understand this is for Q2 and Q3 together, right?

Right, right.

Okay. And secondly...

This is as on 31st December.

Got it. So it includes both the quarters is the clarification?

Right, right.

Okay. Got it. And secondly, this -- your 1.4% of restructured book, this does not -- this is all COVID related restructuring, right? There would also be some onetime restructuring that was in part of the earlier MSME release program, which is not part of this pool, right?

Right, right, which we have separately placed in the notes on accounts around INR 4,000 crore of that total aggregated number.

The next question is from the line of [ Deepak Kumar Tapadia ], as an individual investor.

Sir, can you give me the exact adjusted book value after removing the deferred tax assets and revaluation reserves, sir?

That is a tough one for me. I wonder whether Jain sahab also would have that number or not. But let me pass it on to him.

I have to calculate, sir.

That's a tough one. It's a googly. So we'll get back.

We'll calculate and provide, sir.

He will give you the number, please.

Approximate number, sir?

We'll give you the exact number, but we just need to work it out and give it to you, please.

[Operator Instructions] The next question is a follow-up question from the line of Mahrukh Adajania from Elara.

Yes. Sir, just to clarify, the overlap in restructuring and pro forma slippages is around INR 30 billion. Is that correct? INR 3,000 crore?

Right, madam, right.

Okay. And when we talk about collection efficiency of 91% or 92%, what is the denominator? The denominator will not include NPLs, correct? it will be just...

Denominator will be standard.

Standard. Okay.

But for this collection efficiency, what is demand and what is recovery.

Got it. Got it. Sir, and one -- just one last question. I could not catch the proportion of gold loans and agri loans. Could you just repeat?

Yes. So the proportion is as of now about 21%. And in terms of incremental growth, it is more than 40%.

The next question is a follow-up question from the line of Jai Mundhra from B&K Securities.

Rating breakup -- sorry, slide, where we have written some 12% is -- is below BBB. Sir, can you give the absolute amount? I mean, because I don't know which figure to use. Is it the entire corporate book? Or I mean, what is the absolute amount for this chart number 14?

Jain sahab or Sameer, if -- Sameer, if you have the answer?

Sorry, Sameer, we're unmuting you, sir.

Yes. Hello? Jai, we will get back to you later on with this answer. I'll e-mail it to you.

Sure, sir. And just on, sir, collection efficiency once again. So I think the -- what is the meaning of this word when we have written there is a collection efficiency stand adjusted for Supreme Court order because I think you had clarified that 92% does not include GNPA, of course, and it does not include the pro forma slippages also? Or does it include that way?

It will not include the pro forma slippages, right? You can either show it as an NPA or you can show it as a standard asset.

Right. So 8% is -- so the rest, 8%, it also does not include the pro forma slippages, right?

Correct. That's my understanding. Jain sahab can confirm that.

Right. Right, sir. Right, sir.

The next question is a follow-up question from the line of Ashok Ajmera from Ajcon Global Services Limited.

Sir, if you look at the outstanding, I mean, the advances, there are 2 segments like power and telecom where it has gone up in this quarter, substantially. I mean, if you compare with the overall, which are these -- I mean, what kind of companies these are in this power in telecom? [ As it has ] gone up from INR 31,000 crore...

So there are not too many telecom companies that survive, right?

Pardon?

There are not too many telecom companies that still survive today who could borrow money.

Yes.

So I think -- so please be assured that again, these are companies which are strong, robust, where the new exposures come in, but not possible to give you names there.

All right. Same thing is in power also?

Yes, absolutely.

And sir, this -- when you say that like rating profile of standard. And when we see the exposure column of December 2020, the total exposure is INR 99,760 crore. And down below, there is a note of net outstanding advances, that is INR 93,647 crore. So I mean, the exposure as on 31st of December is INR 93,647 crore?

Yes, the outstanding would be there. That's correct.

Okay. Not INR 99,760 crores?

Yes. So that would mean, again, there may be committed lines, which might be there, undrawn limits which might be there, which is how you would compute the overall exposure.

All right, sir. And again, coming back to this collection efficiencies, sir, 92%. Now this is the collection of December quarter, or say, last demand must have been made in December. So the collection includes the collection which has taken place even after this 31st December, that is maybe from 1st January to 15th January.

Tough question for me. Jain sahab?

Collection during the quarter ended December, from 1st October to 31st December.

But demand made only in this quarter or demand of the earlier quarter also, but collection in this quarter?

No, no. Demand is of the current quarter. Collection can be of the previous quarter. What happens if your account is a SMA -- just SMA0 or SMA1, so they will pay the amount and the account may remain in SMA0 or 1. So in the numerator, it is a collection; denominator, it's a demand.

Sir, suppose -- I mean, the collection is 92% or whatever the demand was made. Now out of this 92%, some percentage of the collection can be from the demand from July to September quarter. Isn't it?

Yes. July to September -- maybe, maybe. Suppose the account is SMA1 in September quarter, right? It can be an SMA even in December quarter, but he has paid. So collection is there. So he's primarily in 0 or 1, but he's paying whatever demand for the quarter.

Okay. So in absolute numbers, can there be...

So the point is that, suppose, my demand is INR 100, and he has paid me INR 92. So INR 92, maybe of September quarter, maybe of December quarter. So you can always say that INR 5 was earlier demand of September quarter and INR 100 -- INR 105, but the INR 5 will continue for the next quarter.

So similar spillover there -- may be there from...

Yes, it can happen, sir.

December quarter to March quarter.

Yes, it can happen, sir. It can happen.

Because there was in some other public sector bank there was a great confusion on this line...

No, point is that, simple sir...

and there to clarify, earlier they said 75% collection and then they said 90% -- 87% collection. They rectified after the conference on this question.

No, but point is collection; in the numerator, collection; denominator, demand.

[Operator Instructions] The next question is a follow-up question from the line of Sonaal Kohli from Bowhead.

Sir, what kind of recovery would you expect from Dewan Housing now it's reaching settlement. And in addition to Dewan Housing, any major recoveries would you expect by the time we have Q1 results, next 6 months?

So I think Dewan Housing, we have exposure of INR 2,000 crores. So our share in the recovery should be in the region of about INR 800 crores there. In addition, there are some NCLT accounts, including a large steel company, where we do expect the recoveries to come in. Also, if you would look at simply in terms of impact of upgradation, even accounts which actually have been classified as pro forma NPAs where restructuring has been invoked, I think we should see a significant improvement on that account. But again, request Jain sahab to see if he would want to add to that.

Yes. Sir, you rightly said, our exposure to Dewan is INR 2,000 crore and expecting a recovery of INR 800 crore. And in this account, we have already been fully provided for. In addition to that, in a recovery, we are having around INR 3,000 crores of recovery where the NCLT has also approved the resolution plan. And even INR 5,000 crores where the CoC has approved the resolution plan. So we are expecting recovery there also.

So are you saying that you're expecting INR 8,000 crores of recoveries?

No, I'm not. This is in pipeline. Out of that, how much will get, it depends on number of factors.

Yes. What you're saying is that there's INR 8,000 crore towards...

No, INR 5,000 crores of accounts where CoC has approved the resolution plan. Out of this INR 5,000 crores, INR 3,000 crores, where NCLT itself is approved. Please, don't add this, yes.

Okay. And sir, you said that pro forma NPAs, which would get upgraded due to restructuring. Would you have that quantum? I'm sorry, I joined the call late, I was attending some other call by then, if you have always shared this.

Actually, this -- out of this -- maybe around INR 3,000 crores of account where the restructuring can happen in this March quarter and remaining in June quarter.

And sir, lastly, considering the economy is reviving, would any of your NPAs, which have become NPAs like pro forma NPAs because of Supreme Court order. Finally, do you expect a reasonable part of this not to become a NPA because if the order is further delayed by another 1 or 2 months, do you expect some part of it would get reduced?

Jain sahab, would you want to help?

Yes, naturally, it will reduce. When we'll do restructuring, automatically, it will reduce, first point. And second point, wherever we will get some recovery outstanding will reduce and NPA will reduce.

The next question is from the line of Shashank Verma from Axis Mutual Fund.

So there was one East-based NBFC account, which we had tagged sometime back under our watch list. Where does it come today? Does it -- is it a part of our SMA book today? Or is it separate from that?

Again, can you repeat that, which account you're talking of?

Sir one East-based infra NBFC account. We had put it on our watch list a couple of quarters ago.

Yes.

So wanted to check whether it forms a part of our SMA book today? Or is it out of the SMA?

Jain sahab?

Generally, we do not discuss about the account specifics.

Okay. And I had one more question on your consolidated operating profit, sir. Q2 to Q3, there is a sharp jump. In your PPT, you mentioned that as a sharp jump of close to INR 900-odd crores. What is it pertaining to? Because our stand-alone bank operating profit remains similar.

Jain sahab, I don't have an answer to that. Would you have any thoughts?

Q2 to Q3, yes. So maybe exact, I'll see and separately advise to you, sir. Maybe in our subsidiaries, there are some profitabilities.

We'll check it out, come back on that.

The next question is from the line of Naishi Shah from Acko General Insurance.

Sir, I don't know if I've missed this already, but could you tell me how are we placed in terms of the ALM?

I think given the fact that the liquidity position is very comfortable, I'm sure all banks are very comfortable. So I think the LCR should be of the order of 160%, 170%. So very comfortable there.

The next question is from the line of Mahesh as an investor.

Sir, you had this international slippages of INR 2,900 crore coming from some chemical company and you mentioned that this account will be restructured. So how does the accounting happen? Means once -- by when do we expect restructuring? And what will happen to the provisions which you have taken?

So this restructuring is likely to happen as per the June 7 circular, which would mean that there is a period of 12 months before it gets upgraded to standard. And that is when you write back the provision.

Okay. And which is the second account. You mentioned there is one more account, INR 800 crores. Which sector is that?

I think it's -- again, I'm not sure how can I classify that sector. Jain sahab, if you would want to have it?

How to classify, this is manufacturing of candles and so this is other sector, basically. And this account will be covered under the OTR and it will be -- once the OTR is approved, then it can be upgraded. Earlier was in 7th June and second one is in 6th August. So lot of [indiscernible]

So the first account, which is INR 2,700 crores, it will take a year for that to be upgraded. As for the second account of INR 800 crores, I think there's a reason to believe that, that should get done within this financial year or by June, either way.

And sir, there is -- we had INR 2,500 crores of provisioning from some government-guaranteed account. So what has happened to that? Have you written back the provision because it's almost 4 quarters now.

So there's been a partial write back, I believe. But again, Jain sahab can clarify that.

This provision we are carrying because exposure is more than INR 2,000 crores. And till resolution plan is implemented, we cannot reverse it back. So this is the provision we are carrying.

Okay. And sir, one large steel account, we have been waiting for Supreme Court to give some judgment. But what has been the observation is that for last 6 months, there is no hearing only, means Supreme Court just gives the date. And recently, some 29-A article has been also ratified by Supreme Court, but still the judgment is not happening. So when do we see some light on that?

So it's tough again. I will...

It's like quite frustrating. Supreme Court is not hearing the judgment only -- I mean, not giving any dates on that.

Jain sahab, would you want to answer that?

Sir, account specific, generally, we don't discuss.

Yes. But it's like -- for the industry, it's quite big and there is no hearing only.

It is both account-specific as well as Supreme Court specific. So I think we'll let the question pass if you don't mind.

Ladies and gentlemen, that would be the last question for today. I now hand the conference over to Mr. Sameer Narang for closing comments. Thank you, and over to you, sir.

Thank you, everyone, for taking out time. And...

Sorry, sir, you're not clearly audible.

Hello?

Yes, Sameer, fine.

Okay. Thank you, everyone, for taking out time for joining us today for our investor call. And hopefully, next quarter, we would be able to meet in person. All the best till then. Thank you so much again.

Thank you very much.