Bank of India Limited (BANKINDIA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Bank of India earnings conference call. [Operator Instructions] Please note that this conference is being recorded. Let me introduce the management of Bank of India available for the conference call. Mr. A.K. Das, MD and CEO; Mr. C.G. Chaitanya, Executive Director; Mr. K.V. Raghavendra, Chief Financial Officer and his team. I would now like to hand the conference over to Mr. A.K. Das, Managing Director and CEO. Thank you, and over to you, sir.

Thank you. Thank you. Good afternoon, ladies and gentlemen, and all the analyst friends online now. I, A.K. Das, I welcome all of you after announcement of our Q3 financial results. So I'll give a brief about the Q3 highlights. The major highlight is that we had a moderate growth of about 7% in our loan books, and business growth of about -- in the domestic front 10%. And with that, we have -- for the last 4 consecutive quarters, we have sustained our performance in the profit zone. And along with considerable improvement in key performance ratios, we are near or above most of the benchmarks. And added to that is our asset quality, notwithstanding some major slippages in few accounts. We have maintained our asset quality. In fact, we have -- gross NPA, we have brought it down in absolute numbers. And net NPA ratio, we have at 5.97%. So that's a plus for us. And our net interest margin is well over the benchmark of 3%, that's another plus. And in our liabilities side, we have gone for a growth of about 10% in our CASA ratio and CASA deposits and CASA ratio also is maintained about 42% -- it's about 42.69%. This is, in a nutshell, about our Q3 performance. And we all would like to take your questions. Thank you.

Sir, can we open the call for a Q&A session.

Yes. Sure.

[Operator Instructions] We will take the first question from the line of Siddharth from SMC Global.

Sir, just want to know...

Sir, this is the operator. I'm so sorry to interrupt. Requesting you to please speak a bit louder, sir. Your audio is not very audible.

Sir, just want to know one thing. There has been a lot of, like, as you know, the stress on the telecom side. So just wanted to know from your side, if what is the outstanding exposure to the telecom company that was downgraded recently by [indiscernible]? And like, how things are spanning out on that account particularly?

Mr. Chaitanya, would you like to take on the question? My -- our ED, Mr. Chaitanya will answer this question. Yes, please.

Siddharth, this is -- regarding the telecom sector, we don't have much of an exposure in that. We have a small nonfund-based exposure to one of the telecom companies and -- which is not in the present -- the AGR issue, what we are looking at. Other than that we have some exposure, where is -- the government guarantee is there. The issue where the AGR is there, we do not have any exposure there.

[Operator Instructions] We take the next question from the line of Bhavik Shah from B&K Securities.

Sir, we had, like, strong recoveries this quarter around INR 3,000 crores. So from -- which all accounts have you recovered?

Yes. The recoveries, if you are looking at, we have recoveries from the NCLT also to the extent of around INR 2,000 crores. And we have an outside NCLT also to the extent of around INR 900 crores -- we have.

In other income, we have strong recovery from written-off accounts. So what lies in there and that would be [indiscernible]?

Yes.

Yes.

Okay. And sir, what will be the impact of [indiscernible] in interest accretion to the net interest income?

It's about INR 370 crores.

INR 370 crores in interest net income. And sir, slippages we have around like INR 6,000 crores of slippages this quarter -- INR 6,700 crores. So out of which approximately INR 4,000 crores would be Dewan. So can we -- have not got breakup of where did the other slippages come from?

Major is -- as you said, is -- this NBFC, the major one.

Out of about INR 6,716 crores of slippages, about INR 5,000 crore is accounted for -- by 3 major NBC is there, so -- NBFCs. So it comes to about effectively INR 1,716 crores is the slippage, excluding this. These 3 accounts have been there in many banks' books. So compared to a slippage of INR 3,166 crores in the previous quarter, this quarter it has been INR 1,700 crores, nearly a drop of 50%. I think that's where slippage management has been quite good.

Okay. Okay. And sir, what would be our ICA standard spend exposure? And how many accounts would we have there?

Yes, one second. [indiscernible] without...

Chaitanya ji?

And which one you're talking about?

ICA?

ICA.

[indiscernible]

17 accounts.

17 accounts around. Bad debts, the provision outstanding is around INR 12,700 crores.

That is [indiscernible] institutional.

Can I have the question once again, please?

So sir, we have ICA-signed accounts. So I just wanted how many accounts have you signed ICA, and their standard. And how many accounts would be NPA with exposure?

We have around 17 accounts with INR 12,700 crores exposure levels. And then we have a provision in that up to the extent of around INR 6,000 crores.

Okay. And the NPA ones?

The numbers you want...

No.

The number you have?

We don't have that -- breakup of that.

I mean we will forward it, we will forward it.

Sure, sir. In these 17 accounts, how many accounts are on the verge of resolution? So basically, the June 7 circular says if it is not resolved within 180 days, we'll have additional provisions. So do we envisage 20% of INR 12,700 crores to be provided in the coming quarter or how is it?

No, no, see, if you see the provision levels what I was talking about INR 6,000 crores, it takes care of the majority of the provision. And what kicks in, in the Q4, it depends upon the filing and admission to the NCLT. So we may look at the provision of around INR 500 crores may come, depending upon the admissibility.

So INR 500 crores would be with respect to the June 7 circular?

Exactly.

Okay. And sir, so we had our large SME 2 -- exposure in SME 2, SME 1 a while back with respect to Air India. Sir, I mean, how has the account been performing?

It's performing well. There is deduction around INR 1,000 crores in that.

So, as in -- have they paid everything or it is still, like, partly there and partly there?

Partly.

Out of INR 2,500 crores, we have INR 1,000 crores is paid off right now.

Okay. And sir why has our SMA 2 book jumped this quarter?

SMA INR 10,161 crores is -- the jump is visible there compared to INR 9,828 crores March '19. And INR 10,161 crores also includes one major government account of about INR 2,800 crores, which is already [indiscernible]. So in effect, it's about INR 7,000 crores only.

INR 1,000 to Air India.

INR 1,000 crore Air India.

So this INR 1,000 crore Air India plus INR 2,800 crores government account?

Yes.

Sir, which sector does this government account belong to?

Electricity generation -- power distribution.

Power distribution. And sir both these accounts are in SMA 2?

No, they are in SMA 1 -- SMA 0. They are moved already to SMA 0. This is 31 December position.

Both of them are SMA 0?

Yes.

So then the SMA 0 won't be a part of SMA 1 and 2, right? SMA 1 and 2 is INR 10,000 crores.

It's a present situation that's being said, to date.

Okay. Okay. As of today, it has moved to SMA 0. Okay, sir. Okay. I got you. But sir, as on 31 December, 2019, they would be under SMA?

Bhavik, could you please repeat the question?

Sir, these 2 accounts would lie in SMA 1 or 2 as on December 31, 2019? So that was my question.

SMA 1. SMA 1 and other SMA 2.

So Air India would be?

SMA 2.

Okay. Sir, excluding Air India also, we have seen a sharp rise in SMA 2.

That is only because of that other government guaranteed account, whatever is referring to INR 2,800 crore. So in effect, INR 3,800 crore out of this INR 10,161 crores is in 2 accounts only.

Okay. Okay. And sir, have we -- other banks have been rationalizing their exposure to Indiabulls, so have we done anything so far in that respect?

We are also looking at from that angle, because presently, it's fine, but we are looking at sanctioning the pools also that we may rationalize it. We are looking at it.

Okay. So what would be our exposure approximately?

INR 4,000 crores.

Okay, Indiabulls. And sir, last question from my side. Sir, there have been a lot of NCLT recoveries on the verge of getting completed. So sir, for the next quarter, do we see a healthy recovery pipeline? And from the recovery pipeline, how much would be already written-off? And how much would be provided? And how much will be the provision?

We are looking at an NPA reduction of around INR 3,000 crores in the coming quarter. From the expected -- from the NCLT, we are looking at around INR 2,000 crores.

Okay.

And no written off required.

No written-off. Around 14 accounts what we are looking at.

14 accounts. And these are not written-off?

No.

So as in -- like this quarter, we had a lumpy recovery from written-off accounts, that won't happen next quarter. So this will be internally in the NPA schedule.

It is there, right? The way the Q3 happened. In Q4, also, we were expecting around -- a recovery of around INR 650 crores to INR 700 crores, which reduces NPA by INR 2,000 crores.

[Operator Instructions] Next question is from the line of Jai Mundhra from B&K Securities.

First of all, sir, congratulations to you on elevation to MD, CEO.

Thank you, Jai.

And -- sir -- and I just wanted to know -- understand a few things on the asset quality side. First is, you have shared the SME 1 and 2 number. But out of that, how much is corporate SME 1 and corporate SME 2 number, just to understand the corporate asset quality?

Just a second.

Which one is corporate?

He is asking about how much is the corporate?

Corporate.

How much is corporate? How much is [indiscernible]?

Leaving aside Air India's [indiscernible] INR 1,500 crores, and Rajasthan Vidyut [indiscernible] INR 2,200 crores. Rest is corporate.

So you leave aside Air India and Rajasthan Vidyut, so INR 4,000 crore almost and just around corporate only.

Okay. So I mean, any account, which is more than INR 100 crore, let's say, large corporate, except PSU names that you said. So...

Yes, there would be.

What are those accounts, can you please tell?

So [indiscernible], if you can tell?

No.

We don't disclose it.

Jai, we'll revert back. Any other questions as we work out the numbers.

Sure. Sure, sir. And sir, I mean, if you can sort of -- we also had some bond provisioning to Dewan. So I hope what is the coverage there because that would have also fallen to NPAs? And what is the provisioning that we are carrying for Dewan exposure?

Actually, for the bond coverage, we have fully covered it. Otherwise, we are covering for Dewan around -- INR 600 crores is the provision what we have given.

Okay. So INR 600 crores is around 15%?

Yes. Yes.

Okay. And sir, any signs on the pool buyout that we have or that has no impact whatsoever?

Presently, we don't find any signs for the pool buyouts, what we have done. Can I get your question that what's that you are looking at?

No. No. I was wondering if the -- do we have any pool -- retail pool that we had purchased from Dewan?

We have. We have that purchased. We have Dewan [indiscernible] except that there is a stoppage of the part of it, but it's only the temporary phenomenon that's happening. Otherwise, we don't find that stretch at this point of time.

[Operator Instructions] We take the next question from the line of Ashok Ajmera from Ajcon Global.

Sir -- congratulations to you, sir, for taking over as the MD and CEO of a great bank, Bank of India.

Thank you.

And we are with you and other, of course, Bank of India team. We are looking forward for the bank to come back to the past glories soon. As you said that, sir -- and one good thing is that still you're earning profit in spite of all the odds and all the problems and heavy provisionings and all that.

Very true.

Now first, immediate question is that what is the now road map ahead. I mean, I joined a little late because I was busy in interpreting the SBI results also, today, that also came. So what do you think now -- the scenario in future, immediate, this current quarter as well as maybe next 1 year or so. How -- what do you think? I mean, where are we heading?

See, what we look at is, Ashok, we are growing at the rate of around 7% in the credit. We look at the guidance of around 8% to 10% that what we will be growing on the credit. The retail, also, if you look at that as being a focus area, we are growing at 10% that we maybe increasing to 12% to 14%, what we are looking at on the retail side. And coming to slippages, you must have looked at that the stabilization happened on the slippages except the on and off any big accounts that's coming in. And the recoveries are geared up as you find it in the NCLT and then the coming Q4. We find the good recoveries that is lined up around 14 accounts because you joined a little late. We were telling [indiscernible] -- so it's around 14 accounts in NCLT, what we are looking at. In addition to that, the ARC sales, also, we are finding some bits in another 14 accounts to the extent of around INR 1,500 crores where we are looking at recovery inside that.

Sir, ICA, can you tell the total quantum of...

Last year, we had INR 12,700 crore.

INR 12,700 crore. And what are the prospects of and the time horizon?

See, ICA presently, also, the prospects, as you know, that everybody puts it on a top priority. We have provision levels of around 60% provision levels we kept it in ICA, also. And we look at that what the resolution -- you know that we expect it and it gets delayed or we may get it before time that is to be seen in Q4.

Okay, sir. Now coming back on this Dewan. Again, I was late. So as far as the bond is concerned, you said you are fully provided for, isn't it?

Yes. Yes. Yes.

And the remaining is around 15%?

Yes. Exactly.

So out of the overall exposure of about INR 4,500 crore.

INR 4,200 crores.

Pardon, INR 4,000 crore?

INR 4,200 crore.

INR 4,200 crore. So going forward, I mean, in the coming quarter, you will be having the -- another 25%? Or do you think or some [indiscernible] from this account?

See, Ashok, it depends upon the way the administrator looks at because there are different transaction audits are also kept in 3 ways. And how it pans out and how the call will be coming, that is to be looked into.

Okay. And sir, on agriculture front, what do you see? I mean -- and of course, I'm not exactly aware of your bank situation. But as SBI Chairman said that they are looking for some clarity from RBI on agriculture account and provisioning, is there anything like that substantially in our bank?

I don't know, what is that he is looking at. But basically, in agriculture what's happening is because all the debt [indiscernible] what happened and what the amounts that is going to come also. Still, some amounts are yet to receive, also, in the debt waivers. Right, in such scenario that how we are doing the fresh funding and how we are going ahead. What's the point? We don't know when SBI Chairman said that what...

I feel he would have spoken this in the context of recent divergence what Reserve Bank of India...

Yes, yes, divergence. Yes, yes.

So that -- particularly, agriculture is in distress. So government also and regulator also, they are keen to lend a supporting hand. But I think in many banks this divergence was pointed out, probably some special preferred treatment to this sector, which I am sure tomorrow's budget announcement will have good pleasant surprises.

That's what we also feel.

This sector, like never before, it deserves a lot of attention now. And this is probably the only sector, which will revive a lot of demand in the [indiscernible] sector. So we keep our fingers crossed and look forward to some good news.

Good. Good. Okay. That's what we also expect. So sir, on the whole, it's good. Congrats to you. On this last piece of information, of course, you already said...

Sir, I'm so sorry to interrupt, but there's a lot...

Okay. Sorry.

[Operator Instructions] We take the next question from the line of Bhavik Shah from B&K Securities.

Sir, I just wanted a broad update on, as in, how do you envisage the next year at Bank of India in a sense as in [indiscernible]. How is the loan growth as in [indiscernible] was looking at the loan growth [indiscernible] we anticipate? To what levels do we bring down net NPA and what will be our business strategy going forward? And considering other PSUs are into merge-integration, I mean do we see healthy growth at Bank of India?

See, in the current year, we are already through with 10 months, where we have had a loan growth of about 7%. And we visualized, by March, we should be able to ramp it up, up to in the range of 8% to 10%. And -- with a lot of initiatives already taken and some good positive announcement, likely, I think our GDP, which is a key factor in creating demand for both CapEx and other activities, I think next year, maybe Q1 or Q2, we should see the revival insights. Accordingly, we will -- between 12% to 13% credit growth on a base of about INR 3.8 lakh crores, INR 4 lakh crores we would envisage. And our focus segments will continue to be RAM: retail, agri and MSME. And with our midcap, what we call Star Prime, good government-backed accounts and NBFCs, which are backed by PSUs and good-rated NBFCs. So these will be the 5, 6 segments where we'll try to focus so as to have a 12% to 13% growth in the next year.

And sir -- so I understand this was -- like outlook on the growth front. And sir, how would be the outlook on the asset quality front?

Asset quality, see, we are at about 16.30% -- 16.3%. And you will also appreciate that these are issues, they get affected by both the numerator and denominator, while in the numerator front, we have done reasonably okay. I think it's the denominator that is the overall loan book size. Once we are able to clock that kind of growth, 12%, 13%, we can look forward to reduction or rather improvement in absolute and percentage numbers. So by next year-end, maybe around 14%, 15.5% gross NPA and in the range of 5% net NPA is what we are envisaging.

Sir, we don't plan to write-off chunky pools so that we can bring down...

Not as of now. Write-off is always the last option.

Okay. And sir, what would be the slippages around roughly for next quarter? In a sense, outlook, would it be more than this excluding Dewan and the other 4 NBFCs that we had this quarter of around INR 1,600 crores, INR 1,700 crores.

On a conservative basis, I should say it will be in the range of INR 2,000 crores to INR 2,200 crores. It is still possible to move it downward. But on a conservative basis, INR 2,000 crores to INR 2,200 crores. So that we would like to contain our slippages to.

Sir, are we very comfortable on a corporate book? Or we are still getting surprises there?

The corporate books, as you understand, it also -- it's good presently -- after the AQR and after the time lapsed, we have seen all the -- whatever is moved out. But still an on and off, you will find it -- things coming down.

[Operator Instructions] We'll take the next question from the line of Shreya Shivani from CLSA.

I have 2 questions. First is a simple bookkeeping question. For your accounts filed by Bank of India at NCLT, can you help me what is the coverage that you've kept here? And the second question is on your retail book. While some of the segments, I think the auto segment and residential mortgage has been [indiscernible] 10% to 9%...

Ma'am this is the operator. We are unable to hear you, Shivani. You'll have to repeat your question, please.

Yes. Okay. So the first question was on the NCLT account booked by Bank of India. What is the coverage? And on -- the second question is on the retail book. While I see that the residential mortgage and auto finance book has been growing at 10% to 9%, I just wanted some qualitative commentary on the stress or lack of stress, any form of stress being seen in this segment?

Coming to the -- Shivani, coming to your first question of it, the NCLT. The coverage, what we find -- the total NCLT is 78%.

Okay. It was 87% last quarter, right?

Yes. It's 78% at this point of time. Retail side of it, we have seen that previously, we were growing at the levels of around 20%, also came down to 18%. We are presently showing growth of -- in the retail, around 10%, we are showing it. We have focused more on that. And then we have opened many processing centers also, and we have qualitatively improved on the CIBIL score also. So we wanted to grow more. We are looking at 12% to 14% is growth levels what we are looking at retail. And on the stress that it is coming in, we don't find much of the stress. And we put all the measures and more monitoring on that.

Okay. So something like a [ CVCE ] segment or any particular segment of auto, according to you is not seeing the stress, is it?

We have not seen. Auto's also decently we have grown. We have not seen the stress.

We take the next question from the line of Ashok Ajmera from Ajcon Global.

Yes. My number has come again, sir. I just wanted to know something on capital raising. I mean, is there any plan or this question is covered earlier, I don't know, what are your plans and time lines for that, sir?

See, we are -- now it's work-in-progress. We are contemplating to go for a QIP, hopefully, this quarter. And I think still it is work-in-progress. As soon as...

Maybe around INR 1,500 crores, INR 2,000 crores?

Yes. Yes. That's the range we are looking at. So we will soon deliver that.

Okay. And sir, coming back on this loan growth and advances, other than the retail, retail, of course, is the main focus and it is growing also. But in the other cases, there are certain contemplations about new introduction of an account or an account existing even -- the rating -- the external rating is a great concern these days, and everybody is trying to increase the quality of the book by taking the better-rated accounts. But is there -- I mean, what is the internal ceiling or your own internal sort of, say, decisions on this matter that if the loan can be priced properly in spite of rating being down. But otherwise, other parameters are good. Is there any such rethinking or opening for the increase in the advances to take the BB+ or BBB accounts or some takeovers from the other banks or something like that. Is there any such thought?

Yes. Yes. Ashok, as you look at that, basically, we look at an external rating, but our credit call mainly depends upon our internal rating. That's where we take a majority of the credit call. Even if it is a BB, [indiscernible] -- we look at internal rating and then...

No, because, sir I heard saying some of the branch heads and they're saying, "no, no, no, if it is BB, don't even approach us or don't even come to us." So something like that, I mean, in some of the banks. So in your bank, you say that the cases are being accepted, but only thing as for the internal rating they are, again, looked at, isn't it?

Yes. Yes. Yes. Mainly, our call lies on the internal rating and even the takeovers, what you were talking about. We are very bullish on the takeovers also. Because whatever we could not do during our prompt, corrective action where people have moved out that we are taking them back first. Those are the people we are targeted in taking them back.

Yes, that's a great idea, actually. And it will definitely increase even the book also. And at the same time, you can take -- get the quality accounts also.

[Operator Instructions] Ladies and gentlemen, that seems to be the last question for today. I would now like to hand the conference over to Mr. A.K. Das, Managing Director and CEO for his closing comments.

Yes. Thank you very much. I would thank all the analysts who took keen interest and asked very pertinent questions. I believe we have been able to answer the questions to their satisfaction. And if at all there are any other questions that analyst friends would like to pose, we welcome them to touch base with us, any of our team members and we will be too glad to respond to such questions. Thank you. Thank you, once again.

Thank you. On behalf of Bank of India, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.