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

Good evening, ladies and gentlemen. On behalf of the Bank of India, I extend a warm welcome to the esteemed members of the analyst fraternity who have joined us today. We are pleased to announce the Bank of India's financial results for Q4 FY '23. The Bank of India has reported a stellar result with a net profit of INR 1,350 crores, which is up by 123% Y-o-Y. I would like to thank the management of Bank of India for being here with us today to address all of you. Shri Rajneesh Karnatak, MD and CEO; Shri PR Rajagopal, Executive Director; Shri Swarup Dasgupta, Executive Director; Shri Subrat Kumar, Executive Director; Shri M. Karthikeyan, Executive Director; and Shri Sankar Sen, CFO of the bank. Thank you, gentlemen, for being with us here on the stage today. We will now begin the analyst briefing. To start, I would like to invite Shri Rajneesh Karnatak to address this gathering. After which, we will open the floor for a Q&A session. Over to you, sir.

Yes. Thank you, Madam. Good evening, everyone. First of all, thank you to all the analysts for coming here today in physical and also in the virtual mode. So Bank of India has 117 years of successful journey, founded on September 7, 1906, by a group of eminent businessmen from Mumbai, beginning with one office in Mumbai with a paid up capital of 50 lakh and 50 employees. The bank has made rapid growth over the years and blossomed into a mighty institution with a strong national presence and sizable international operations. In business volume, the bank occupies a premier position among the nationalized banks. The bank has 5,129 branches in India, spread all over the states, union territories, including specialized branches. These branches are controlled through 70 zonal offices and 13 NBG offices. The bank has staff strength of 52,000 plus as on March 23. Presently, bank has overseas presence in 15 foreign countries spread over 5 continents, with 45 branch offices including 4 subsidiaries, 1 representative office and 1 joint venture at key banking and financial centers like Tokyo, Singapore, Hong Kong, London, Paris, New York and Dubai. So you already have seen the numbers which have been uploaded. Just the key numbers, which I would like to share over here is, as far as the business growth is concerned, global business has increased by 9% year-on-year from INR 10,84,000 Crores in March '22 to INR 11,85,000 crores as on March '23. Global deposits have increased by 6% year-on-year from INR 6,27,000 crores in March '22 to INR 6,69,000 crores as on March '23. As far as global advances are concerned, they have increased by 12.87% year-on-year from INR 4, 57,000 crores in March '22 to INR 5,15,000 crores in March '23. As far as the deposit is concerned, domestic CASA went up by 2.72% year-on-year from INR 2,45,000 crores in March '22 to INR 2,52,000 crores in March '23 with a very healthy CASA ratio of 44.73%. Domestic advances increased by 9.56% year-on-year. And they have touched INR 4,31,000 crores in March '23. Overseas deposits increased by 33% from INR 77,063 crores to INR 1,02,000 crores in March '23. As far as the asset quality is concerned, gross NPAs declined from INR 45,605 crores to INR 37,686 crores in March '23, a year-on-year reduction of INR 7,900 crores, 17.37% reduction. Sequentially, also gross NPAs have reduced by INR 1,100 crores from INR 38,885 crores. Net NPAs have also come down from INR 9,852 crores in March '22, to INR 8,054 crores in March '23, a year-on-year reduction of 18.25%. As far as the profitability is concerned, operating profit improved by 69% from INR 2,466 crores in Q4 '22 to INR 4,184 crores in Q4 FY '23, a sequential basis, it improved by 14% from INR 3,652 crores in Q3 FY '23. Net profit improved by 123% from INR 606 crores to INR 1,350 crores in Q4 '23, a sequential net profit improvement of 17%. For the full year, operating profit improved by 34% from INR 9,900 crores in FY '22 to INR 13,300 crores in FY '23. Net profit improved by 18% in year-on-year basis from INR 3,400 crores to INR 4,023 crores in FY '23. As far as the key ratios are concerned, NIM improved by 65 basis points from 2.36% in FY '22 to 3.01% in FY '23. Capital adequacy ratio stood at 16.28% on 31/3/2023. Provision coverage ratio is 89.68% in March '23 as against 87.76% in March '22. Cost-to-income ratio has improved by 340 basis points year-on-year from 54.48% to 51.08% in FY '23. ROA has improved by 6 basis points from 0.43% to 0.49%. ROE stood at 10.31% in FY '23 as against 10.55%. So with these key ratios, I open the field for any questions or observations. Thank you so much.

Thank you so much, sir, for those wonderful insights and congratulations on the stellar results. We request our teams and analysts here to raise their hands. One of our representatives will hand over a mic to you. [Operator Instructions] For any further questions, if time permits, we will come back to you.

Compliments to the entire team for a very good overall annual results for the whole year of the bank. I've got a couple of observations and questions and they should not be taken as one question or two questions because it can be some discussion also on that. So I request you to allow -- permit me to ask those questions and make some observations. Sir, one is that on the quarter, if you look quarter-to-quarter, I mean, the third quarter and fourth quarter, our credit growth is muted almost. I mean, the overall credit of the bank also, if you see the loan book, it is on the lower side as compared to many of the other peer banks. So going forward, are we giving a target of 14%, 15%, 16%? And how are we going to grow our credit book? This is one observation and a question. If you come on the digital -- now digital -- this thing is separate segment now started giving in the segment-wise reporting. Whereas other banks are giving the total capital employed on digitalization and the assets created and the liability created. In our case, we have not given the capital employed on the total digitalization, only given as the loss of profit of INR 32 crore or INR 80 crores after business done. So a separate segment requirement by RBI, basically to give the color that how much total capital you have employed on the digitalization, which is a separate segment? Going forward, this segment is going to be developed like anything, and it will have lakhs of crores of business through digital media and the profit/loss and everything can be calculated. So on that, though we have been hearing that so much of amount has been allocated, budgeted, spent on digital. But in your capital employed, you've not mentioned how much is capital employed on this business. This is something which needs some discussion and some clarification. On the slippage side, also the slippage in this quarter has increased to INR 2,441 crores from INR 818 crores the last time. So if some color can be given on that, some highlights of that. And if you look at the cost side, the employee cost has gone up by almost about INR 1,100 crores as compared to the last quarter, INR 1,783 crores to INR 2,867 crores. Even if you take the extra pension, additional pension, and also the wage revision, this together comes to only INR 400 crore. So it's still the total cost on the employees has gone up by another INR 600 crores. So what is the reason for that? And going forward, how much figure we should take on a quarter-on-quarter basis, considering the standard quarterly results with this wage revision and pension -- additional pension allocation? And the last one in this round is about the additional provision which the bank is holding, because if you look at the note #12, RBI circular 7 June 2019, we have an exposure of INR 7,910 crores, on which the provision is only INR 2,078 crore. Similarly, on other assets also, there is outstanding if more whether IBC or this as compared to the provision. So -- okay, as per the RBI norms and standards, these figures have been provided for. But how much COVID buffer we have in the provision and how much overall buffer we have in the provision so as to arrive at some figures in the future quarters to come. These are my -- some of the observations and some questions, and I may come back again if time permits. Thank you, sir. And welcome to you, sir, the MD and CEO, Karnatak sir. We have seen you in Union Bank doing vendors in the credit portfolio. Also there, you are heading it. And we hope that you will take Bank of India to further glorious heights. Thank you.

Six questions you've asked in the first round. So we'll take it one by one. So I'll start with the Credit One advances one. So as far as the global credit growth is concerned, we have grown by 12.87%. As far as the domestic credit growth is concerned, we have grown at 9.56%. So that is, I think, adequate growth which is there. As far as the guidance is concerned for credit growth, we are giving a guidance of 11.27% on the global side and on the domestic side, it will be 12.83%. So it will range from 11% to 12%. So if you will ask them why it is a muted growth, say, 11% to 12%, and not -- why not a 15% to 16% of growth. So the simple reason is that now the base of all the banks has increased on the credit side, not only our Bank of India, but all the banks in the banking system. So the credit growth, I do not think that it will be as robust and as high as it was in '23, '24, when it will happen in '23, '24. So that is one reason why we are giving a growth, which is around 11% to 12%. And we are very confident that we'll be able to achieve with a good mix of RAM advances of around 55% and corporate advances of around 45%, and also the international book also within that. So I think that is a good enough for advances. Another thing which is very important here is that if you see the data of Reserve Bank of India and the historical data, credit growth is normally 2x of the GDP growth. So when RBI is saying there will be a GDP growth as per March '23 numbers of 5.5%, so based on the historical data, the growth can be 10% to 11% only, if it is at 2x. So '22, '23 was an aberration as far as the credit growth was concerned for the simple reason that we were coming out of COVID. And March '21 base was very low. That is why the base of March '22, '23 look high as far as the credit is concerned. But now it will moderate to the levels which are there for the cycle for the GDP growth also. So this is the reason why I've taken -- we have taken it at 11% to 12%. So now the next question was on the digital side. I would request PR Rajagopal to please take it .

Yes. Thank you, sir. Ajmera Ji, so we have been talking about this one. If you see, I have given on slide the amount of loans that have been disbursed, assets created out of digital, and the liability is also created out of digital, we have around INR 500 crores in record. 37, sir. You can see this slide if you have. You can see that -- so if you see that, these are all some numbers that we have created in digital. So one thing that I would like to clarify is digital we have started. This is the proof of what we have done in digital. In MSME, small loans, we are already completely digitized. We are the first bank to do an STP till disbursement. And we have also digitized personal loans still disbursement. KCC, we are also the first plan to digitize this KCC till the end, till disbursement. Agri Gold is also digitized. SB account is another thing that we have digitized growing very well. So now the numbers will start coming in. That is one part of the question. So we'll actually cover it separately from next day onwards when the numbers improve. That is one point.

That segment, these figures are not segment-wise asset under digitalization too much..

So that we will put it next time onwards. We'll do that as a part of segment reporting.

35,000 crores and 42,000 crores -- 41,000 crores.

So we'll do that. Actually, we are under AS 21, we have not recognized that a segment as of now. So we will continue to recognize it going forward. It's a good suggestion. I'm taking it. So we'll examine that and if possible, we'll do that. Today, what is happening is treasury and the banking is what we have the report. So we'll do that separately. That's a good thing. But anyway, with respect to the question that you asked, whether we report what is the assets created, liability created. This is what we have started now. So it will start improving. And this is purely digital. It is not something that no, we have an LOS, [Foreign Language], is purely till disbursement. That is one point. Another point in terms of the capital outlay, the capital outlay doesn't happen. Basically, it is an expenditure outlay and so far as the IT expenditure is concerned, the budget outlet to be very precise. But next 5 years, we have already shared with you a long, long time back that 5,000 crores is the budget outlay for IT so far is we are concerned. We already spent around INR 2,000 crores plus. Now today, what is the position status of our IT is we have got LOS already in place, lending loan origination system, which is robust till disbursement. We have got a lead management system in place, which is end-to-end, and then live in terms of customers can just see whether his stat is done or not. So status is available to him on a real-time basis. So this we have already done.

100% return of it's P&L?

Yes, yes. Yes, it is obviously taken. It is accounted for fully. It is accounted for fully because as a part of the OpEx, it comes. These are all part of OpEx. The CapEx part is very, very small. In the IT expenditure CapEx part is very small, okay? It is not a big number. So only that hardware comes under the CapEx. Most of it is all OpEx only for us. Even our ATMs are OpEx. So it is observed as part of OpEx expenditure. That is another answer for you, where our OpEx goes up because our OpEx goes, naturally, our expense also goes up. That is the point. And the third question, if I remember correctly, have asked about the provisions. So yes, you are right that INR 202 crores have been made, and 183 crores plus has been made, in -- with respect to staff, family pension area, okay? Apart from that, staff expenditure has gone up by INR 600 crores you said. So this is basically what you see last 2 years, there was no much travel in terms of COVID and all. So there was a subdued expenditure in terms of travel. Now really travel has started very well. So TA is other expenditures that has come out. And we have also increased our expenditure in certain parts to the award staff as well as the officers. In terms of their perks for the drivers and all that. So that expenditure also did come. So this is the final number. This is because normally, that kind of parcel get revised once in 3 years, not once in, so it is not an issue. So this will be there. So the OpEx expenditure for IT also will remain that's what it is. Yes.

Just as supplement Mr. Rajagopal's point of view also, -- the CRM next is one area where we are concentrating much. Earlier, it was all independent. The -- whatever leads come in falls in a different places. Now we have integrated it entire thing. Whatever leads comes to the BC points, whether from the social media and other PC centers, all that gets percolated to the branch level, and we are monitoring that. So that will take care of the lead generation for -- especially under the MSME segment. Second, coming to the slippage point and your point is well taken. You should see that our slippage ratio has come down from 2.15 to 1.93. That's one good point happening every quarter-on-quarter, we are able to do that. This quarter, especially, you're right that there's a spike because you should know that agriculture had some issues in the COVID times and a lot of problems had occurred. So there are some pain points. It was in much higher numbers, but added to our continuous engagement with the field, we're able to bring down that some of the guys were mostly in the agri casing segment to renew it. So some of them could renew. And as you know, rightly, the IRF norms asset in auto thing happens. So this spike in agri. It's about INR 1,400 crores is because of this, the last quarter only. And that what we are -- it is not a problem and pain point. What is happening is if you are continuously now we have put a task force teams in each zone, to account wise being monitored at the branch level, and those are renewall. Once the renewal takes place, then this will come out. Upgradation of those assets will happen. That's about the slippages.

You are there on this CSR, there is some incremental listing out. So is there any NARCL now, which is referring to the last quarter only?

Yes. See, you should know that NARCL, we have identified 2 accounts, 1 in paper and 1 in sugar. But we have not had any transactions happening because that guarantee has to come in from the government .

And they have provided also on that NARCL SR also 100%. I was just thinking whether, you also had any such this thing where NARCL SR you received and you are provided.

NARCL has not yet started at all. We don't have any [Foreign Language] not started with BOI.

And this is 100% provided for all these.

Yes, yes. See SRs are either the MTM or in the NPI, both cases it is provided and 100%, 2,500-plus are provided.

Plus additionally, the slippage ratio also, we are giving a guidance of roughly 1.4 for the current fiscal. So the improvement will be on continuous basis.

Thank you, Mr. Ajmera. We'd like to move on to the next question. [Operator Instructions]

Yes. Thank you, sir. This is Himanshu from Aditya Birla Sun Life AMC Limited. First, a couple of clarifications. Since your exit margin is around about 3.15% last quarter, it was 3.28%. I think if I recollect, there was a -- last quarter, there was an income tax refund of INR 250 crores last quarter. What was this quarter interest on income tax refund? And if we exclude the impacts of such what is a like-to-like comparison. That's the first part.

Last time we included INR 175 crore. This particular quarter, it was INR 50 crores. So if you remove from both the sides, definitely, it is almost on the parity. There is not much aberrations from the sequentially.

Sir, second is your -- since you closed the year with a 3% margins and I need the outlook, how one should see your margins for FY '24, and what are the levers to attend the same? Like what is MCLR book yet to reprice? Secondly, since you have stated in past as well that earlier because of this PC announce you have done a lot of lending to the government-guaranteed advances. So although that proportion has come down from 12% last year to 10%, how this is going to be incrementally going forward? I really just want to understand how your margins will likely to be and what are the levers?

For the financial year 2024, the guiding number is 3.16 that is -- that's what we are planning. Then we are again telling that government-guaranteed advances, we are now leveraging. The thing what has happened earlier, we are more confined to the risk weight, and indeed the government-guaranteed advances, the risk weight is 20%. And because of some issues, we are focusing on that. But now what had happened because of that in some state governemnt, there is a concentration. So we prudently decide that in some states, we will -- where we are already reached to our threshold level, we are not going to increase it's further eposure. Coupled with that, the government guaranteed advances though the market liability side is demanding nowadays for 1 year loan, they are expecting 7.8%, 7.9% whereas if you raise a similar type of liability, it's very difficult to get. So if we take some time, they also should know that those rates are not available. Because of that reason, we are now shifting towards mid-corporate segment. And wherever the quality assets are there, we are definitely going to take those assets and protect our margins.

Sir, thirdly, how much cost of deposits you expect to increase from the current levels?

Yes. As of now, cost of deposit 50 bps is something that we are expecting. That's already factored -- repricing has already happened with respective bps, okay? So we don't expect more than this because there is a tapering that we are expecting with respect to rates. So if the tapering happens, so correspondingly, the marginal cost of deposits, we are not looking at very serious. So 50 bps already been factored.

Sure. Sir, another clarification, if you can just give your provisions on the investments is around INR 1,130 crores. If you can just give an explanation what led to this?

Yes, you can explain. I know that. See, I'll explain. See, what has happened is -- so there are security receipts, which were actually held in MTM basis. So they are actually their tenure has already crossed 8 years, the threshold. So they have been reclassified as nonperforming investments. So whatever was held as depreciation in the investment book has shifted to provisions book.

Okay, sure. Sir, just a few -- sir, last quarter, we made a provision of INR 806 crores on your standard because if I believe there are 5 accounts towards which you have provided. What is the -- what is the current on those -- view on those accounts? And do you expect any reversal or write-backs on such accounts?

If you see the accounts, already on the presentation also, if you just look at those numbers, already INR 150 crores has been reversed -- has been accounted for as a provision for NPS. It has been taken into NPL provisioning, okay? The remaining has been kept as a part of 7 June circular provisioning. An additional provision of around INR 700 crores has been made in 7 June circular in terms of RBI guidelines because of the resolution issues. So that continues to be there. So these 5 accounts, big accounts, already INR 800 crores reversal has already taken place. Only thing is it is adjusted against NPA instead of reversing it to P&L. So we did not reverse to P&L. We have taken it as additional provisioning for NPA.

Those accounts have been in order, and there is no default as per 7 June circular, 173 days, there is no default then we can -- that's the reason we...

Okay, sure. And sir, last question is since you closed the year with 0.49% ROA, how one should think what are your next target for FY '24?

We are looking at 0.75 as our ROA.

Okay, what is your credit cost guidance within that?

Credit cost guidance would be 0.75.

[Operator Instructions]

Sir, Ramesh Bhojwani from Meta [indiscernible] First and foremost, many congratulations on being appointed as the CMD of such an esteemed and such a large bank.

MD and CEO.

Pardon me?

MD and CEO, MD post is not anymore there.

Yes. the first thing is going through the results. It has been an exceptional performance here on all parameters. Wherever you look, whichever angle, whichever aspect you look, the bank has performed extremely well. And I was looking at your noninterest income, Page 10, Slide 20. There is an observation. Your recovery in written off accounts have crossed INR 1,073 crores. So -- plus there is a profit on sale to ARCs. All the hedge even here you see, it has been an outstanding performance. The thought which comes to my mind. Going forward, will we maintain this or we will even outdo this?

Absolutely. I think we have very clear -- this time, what we have done is we have identified large number of accounts on small values. So that could be able to -- we have a very robust nondiscriminatory and nondiscretionary OTS policies of the bank, which is fired, and we are able to resolve about 2.60 lakh accounts amounting to INR 5,000 crores. That's why these numbers are good. And I don't think this traction will stop, it'll keep going, and it will further get good benefits in the quarters to come.

Because I felt that your guidance was a little conservative, which is a very, very wise thing do that you under commit and overperform. That was the thought which I was carrying. Looking at this, I was pleasantly surprised that all parameters, the performance has been outstanding. So going forward, we've maintained this at least. Thank you. All the best. .

Next question.

Congratulations are very stable results. Sushil Choksey, Indus Equity. So first is we have consolidated very well between 2015 to now various challenges which emerged in that time. The balance sheet and the performance in the last 2, 3 years indicate that we can outsmart the industry in very many aspects. So credit guide on growth is one. Or what kind of initiatives are we taking to garner back our old glory?

Two, three things. If you remember when we started -- first of all, MSME, we have lost heavily during the PCAs because we said that, we cannot have BBB- and BB- accounts. So RWA was an issue at that point in time. So where to schedule [indiscernible] accounts, and BBB- accounts. So what we have done now, we have actually done a very marginal growth in BBB- and BB- accounts. If you see our RWA, it has gone up by almost INR 30,000 crores compared to the last year RWA. So the density has also increased because I'm today in comfortable capital position. I'm able to grow that portfolio also. So if you see my portfolio AAA, AA and A portfolio has come down a little, but whereas my BBB portfolio is done. So that is one thing. So I am open to taking risk now depending upon my capital position. My position is okay, so I will continue to take risk. That is the idea with respect to my medium and small industry approach. With respect to large industry approach, we have not been doing much last year because rates were very fine. So if you see our this one, what has happened was, our liability franchise, of course, was very good. But NIMs were very in low. Margins, we had a margin of almost 2.1, 2.2, that kind of margins we had in '21. So we said that this is not how we should be having our liabilities. We should actually be shedding our government accounts and other accounts where margins are not at all there. So we have some -- there was a time when people were lending at 4.5%, 5% and all. We said we consciously said we will not do that. That was the time when we actually data consolidation of our RAM book. Our RAM book used to be around 50%. We have taken it to 57%, 56% today. So almost 6% growth we have shown over a period of 2.5 years in RAM book especially our retail and agriculture, we have grown retail very, very aggressively. We have also grown our MSME reasonably. So this is what the situation is. So we are again open to corporates, for a very simple reason, corporate book is again getting repriced because of the rate hike. So 450 bps increase in rate hike, naturally, I'm getting good margins over there, started getting good margins. Still, corporate bond market is not allayed to that fact that they have to rephrase their coupons. So once the corporate bond market comes back, reprice their coupons, and if I'm able to get good pricing on corporate, I'll be open to that. So they will all come back to me for a very simple reason. I'm a two-pronged approach. One is the digitalization services, ecosystem banking, all that ICICI does, I'm also doing. All of them roll out will happen by September, without any problem. Because there was a delay. There was no doubt about it. For a very simple reason, I was suffering the effect of COVID and lack of resources from the IT sector that they did not probably mean, because there was a consolidation of other banks, IT resources were diverted to consolidating banks. And similarly, there was COVID, resources were diverted to elsewhere where there was margins for the IT industry. So I was not getting IT resources. Today, -- now again, IT is coming back to me and giving me services. So I'm able to get that. So I'll be able to roll out that -- that is one point. Another point is, this is how my book will get rebalanced. So we continue to actually project our RAM to corporate book at 55 to 45, 56 to 45. This is what, of course, we have given our update on this around 58. But in this 58, there will be a lot of medium advances where margins will be there. So because they will also be covered because MSME definition has changed. So even a mixup book will come into MSME, therefore, RAM book becomes a part of RAM. That's why we have given guidance of 58.

Every bank may implement all digital initiatives and maybe the large bank does it first and you do it later, that doesn't matter. But all these initiatives needs a lot of empowerment where your resources on the ground is concerned, be it branches of HO or ZO whatever you want to take it. And that is the real strength of bank, which is visible in the past. It is visible today. But as seniors retire and new talent comes in the bank, I suppose with the kind of initiatives which you are programming, what will you do that you engage in a better terms to re-garner those customers back .

See, basically, what is happening is, see, almost 80% plus of our asset book is built by the brands and the Zonal Office stack, okay? So still there is a lot of engagement over there. And of course, corporate book is based through our large corporate branches even today. So there, what we are trying to do is we are digitizing the processes and giving more time to our people to actually get into relationship banking, have more the RSMs, get connect and from teams and go and meet them and then garner new business. So this is what we are planning. So because of the process not being digitized, this could not be achieved in the last 2 years. Once process gets digitized fully until STB basis, we'll be able to do that. So many of the staff that we have in large corporate as well as in the with branches and zonal officer, they'll get free for sales and service. We'll be able to do a lot of sales and service and get into engagements. So there will be a lot of engagement from central office also going forward. Because we are only consolidating as you rightly said, -- so we'll again start do a very, very extensive outreach this year, and we will meet a lot of clients and then try to get the business.

Just to supplement, Rajgopal Ji, I would like to say here is that we have decided now to have town hall meetings with our staff pan India. So as to tell them what the top management wants, what the Board wants, and what kind of growth we want now for this year. So there will be a lot of engagement with the staff this year through town hall meetings, just to engage the entire staff of that NBG and that zone to make them understand what is the thrust area for the bank like ramp credit, CASA advances, retail term deposits, that is one thing. The other thing would be that a lot of customer meets, which we will be doing. Customer meet as far as the MSME advances are concerned, exporters and importers meet we will be doing, corporate credit means we would be doing also. So that is another thing with engaging with the customers. That is another thing which we would be doing so that the customer connect happens and we engage more customers. Just to say what Rajgopal Ji was saying is what we found was that our corporate credit book is holding only 500 to 550 corporate clients, which is typically INR 50 crores and above clients. So that number is quite low. We need to improve that number. That will also broad base our customer clients, #1 corporate credit. Also de-risk ourselves. Rather than concentrating on a few corporate clients, we will be derisking by making more corporates on our book. So that is another strategy we want to do this year. So there will be town hall meetings connecting with the staff, and customer meets also, wherein we will be meeting the MSME customers, mid-corporate customers typically INR 50 crores to INR 250 crores of lending, and then the large corporates and importers and exporters meet also. So all these things together, which will be helping us and another thing would be that, like we said that 10% of guidance we are giving on the deposit side, and 11% to 12% on the credit side. So that is a moderate guidance, not a very highlight. But within that, what we are more optimistic about is improving our operating profit and net profit. So any business we want to do is a business which gives us profit to the bank, and which is profitable for the bank. So that is why -- that is how we want to approach this year '23, '24, so that we have better margins, better profitability, even though the business may be 11% to 12% of growth. So this is how we want to approach it.

Sir, based on the replies what I heard from you, the rates, be it in your global books have beat. The Fed is more or less indicated, domestic RBIs indicated, the rates have peaked. More or less, maybe this quarter or in few days the MCLR would have peaked -- and the domestic G-Sec is clearly indicating it may appear 7%, and some banks treasuries in the con call have also guided that you made 6.75 at the year-end. In view of that pricing where corporate book or retail products are concerned and where your treasury is concerned, how are we positioning? If you could answer.

See, today, if you see my weighted average yield, the segment wise rated average is, so we have around 9.10 in MSME and retail book. So a very substantial pricing we are getting today. And those never gets repriced unless RBL confirm. See some of our friends there -- he has also asked about the composition of the book. 35% of my book is in MCLR, 50% of the book is in RBL. Remaining, of course, are a higher rate of interest. So this 50% of the book that we are talking about will get repriced only much, much later when RBI actually comes out as an RBLR cut. I don't think that will happen in the near to medium term. That is not going to happen. So my margins in that segment are protected as of now, that is one thing. And so far as MCLR repricing is only a very small portion of MCLR book has been repriced. So that will get repriced very, very fast because I've already passed on. So they are coming up for resets. So I'll get my interest income and my margins have continued to be protected over there. So we have good margins over there. If you see my spread also. When I say spread, I mean the difference between yield on advances and the cost of deposits is around 5%, okay? So we have a good spread today. So I'll be able to protect my margins, I'll be able to grow also. Insofar as the rate peaking that we are talking about, rate peaks no doubt. But at this current rate, so I have used to lend at 5.5%, 6%, 4.5%. Sometimes it was like that, it was below even the call rates. So that was the situation at that point in time. So that will not happen. The average lending rate today, even the biggest corporates that I'm giving, overnight MCLR are even at RBLR I'm better off. Even at RBLR 7.90 only, even without mark up. So there even a small mark up people are willing to keep a small markup of 50 bps there also. There also, I'm getting around 8.5. There is no problem for that. That is one point. Another point is with respect to MCLR book, even if I give at overnight MCLR, I'm getting around 8% today. So margins are very good. So at that rate, I am comfortable. Why I was not doing earlier with this, because I was not getting this kind of rates. Today I am getting that rate, I will do it.

So your outlook on treasury, which...

Treasury outlook in sense?

Based on whatever.

See, I will just supplement what he said. See, there are 2 things. Once we are talking about our loan book getting repriced. So please also understand, keep in mind that deposits will also get replaced with the lag right? So over a period of time, that will also normalize. This is point number one. Point number two, if you see our efficiency in raising deposits, it has come down. Deposit cost has come down. As well as if you see the cost of fund as well as the yield on fund, you see the margin. So efficiently, we are raising the resources to fund the case growth. So that also matters a lot. So going forward, treasury will also follow the same kind of thing. They will raise the resources based on the liquidity requirement by the system, internal system, very efficiently. So we'll try to minimize our cost of raising resources there. And whatever repricing happens in case it happens on a downward side, so this will take care. This will also take care and deposit will also get reprised because we are never aggressive in raising deposits that are very high rate. You would have seen in the market. So this is point number 2. Going forward, they have taken the call. I think we are having a very moderate duration at this point in time. And we have built our books also over a period of last 2, 3 months. And going forward, we will continue with the same trend. And the view is same whatever you said. It has peaked out because it is in the public domain, it's not a big thing. And it's a matter of time when it happens, maybe from October onwards this starts happening. So at that time, we'll take a call. So as it is we are comfortable we are having 4% excess SLR. So it's absolutely we can always do the arbitrage based on the market borrowing and all that. So treasury is doing that job, and interest income will always move up in this.

As far as the yield is concerned, if you are very particular about our yields and MTMs there, in AFS and the HTM portfolio. I can tell you that FRB, we have -- we are in a unique position that we have hold a good amount of floating rate bonds. So the repricing has happened on the upside in floating rate bonds for us. So therefore, our yields are also protected very well in our AFS and HTM portfolio. So there also, we don't have problems that some -- many other banks face.

Expecting good gains in the trade?

Yes, yes, precisely. our MTM losses are very minimal.

So you might have passed many enabling resolution for Tier 1, Tier 2 equity and/or -- any kind of thought process during the year, I'm not saying at front end, but during the year?

Yes. See, already, the Board has approved that equity raising plan, like INR 6,500 crores, out of which INR 4,500 crore is that equity and INR 2,000 is that bond. So that is already there. So in the quarter coming up, definitely, we will be coming to the market and raising some funds maybe in the form of bonds also.

Sir, I have a couple of questions on slippages, sir. So sir, on slippages, the last 2 quarters we had INR 1,200 crores slippages. This quarter slippages have increased, right? And even net of recovery upgrades last 2 quarters, we had negative slippages, and this quarter is positive net slippages. This is actually in divergent versus the broader sectoral trend where the slippages have been improving. So just wanted to understand what has happened.

As I told you earlier also, this -- yes, you're right, the spike has happened in the last quarter. This is just basically in this total of INR 2,800 crores, it's INR 1,400 crores is only because of agriculture advances. This agriculture advances are during the COVID time moratoriums were given. And there are some sets of agriculture who could be able to renew their KCCs, mostly KCC advances. So some of the farmers who could not do it. And you know that the bank has already from '21 onwards, the IRAC automation is started. So this accounts because of the down renewal time has fallen. But nevertheless, what we are doing is how do we mitigate is already we have started that in the month of February itself specific teams have been formed in the regional offices. And there are account specific targets that have been given to them to meet the farmers per se to ensure that they come back, renew the advances. If that renewal happens, which is very aggressively happening. In the last 2 months itself, we were able to upgrade about INR 450 crores. So that renewal, if we continuously engage with the agricultural in all as our MD and CEO said that meetings with customers. Similarly, so are the segment of these guys will be meeting in the village camps. That's what we intend to do. We have already started doing in various zones, where mostly it is in UP, Madhya Pradesh, Jharkhand Chhattisgarh. These are the 6 months where there is a lot of pain points. We will engage more closely with them. I'm sure that will not cause any problems. Once the renewal takes place, they're going to get their incentives also, in terms of pension as prompt payment. They'll hopefully adhere to them, that's the roadmap we have.

And so this quarter, at least in first Q, we should be seeing as this KCC renewal progress steps up. And there should be a reasonable amount of recovery from the account which have already slipped, right? .

Yes.

Sure. Secondly, sir, on this, I think this question was asked earlier. There is a spike in the nonperforming investment provisions. And there is a treasury gains spike, right? So I think the provisions, which now earlier was standard SR, they have now recognized as NPA. The similar offset has been in the treasury gains also. Is that right?

It's very small, it's marginal gain, not much. If you see the number, it's a marginal gain.

Because, sir, I remember that we had already provided 100% on security received.

Especially. Yes, you are right.

So on this quarter, why is there an NPI hit?

No, no, it is not like that. See, there were some SR investments, which were actually not classified as NPIs but continue to be investments where 100% has already been provided for, but shown as the MTM depreciation than as a provision. So the question is basically accounted, instead of getting accounted as provisions, it was accounted for as depreciate. No, it has moved from depreciation to provision.

Which is because of the RBI circular, which says if 8 years is over, then you have to classify as NPA. So that is the accounting treatment we have to do for that?

Right. So we were already carrying the provision.

What is the offset sir? So we have shown this as a provision in this quarter. But if we were already carrying the provision, there must be some offsets.

The offset is only to the extent of the reversal that happens in the provision. Because what happens is there are some -- the actual book value, face value and MTM values in SR are based on recovery rates. You see R1 rating, R2 rating, R3 rating, R4 rating, R5 rating, depending upon that the provision happens. So whereas once it becomes NPA, as per IRAC norms, it happens. So some marginal difference is always there between MTM and the provisions that we make under the IRAC circulars.. So to that extent, that all happens.

Okay. And lastly, on capital raise. So now we are in decent position, and we earlier are also there. And as you said, that we are targeting 11%, 12% kind of a loan growth. What could be the time line for capital raise if you have in your mind? Equity capital raise.

Yes, yes. So presently, we have not sort of here waiting. We'll talk to the analysts and others and then understand what is the best right time to go for that equity raise. And another important thing is we may not go for 4,500 immediately totally, maybe we will go in 1 tranche, 2 tranche, 3 tranche, depending on the market situation and scenario.

We'll take the last question from the...

Can you highlight our liability mix, and how do we improve our cost-to-income ratio? Where do you see?

Liability mix in sense, retail versus wholesale? Yes, so the entire thing is retail. We have got only 11% in terms of bulk deposits, to be precise 10%.

44% is our CASA in the total liability side. The remaining is the term deposit. Out of that also only 10% is bulk remaining is all retail term deposits up to INR 2 crores. So Bank of India has a very strong retail franchise we have 5,100-plus branches, and then we have INR 7 crores plus customers. So the retail franchise is one of the core domain area and the strength for the bank.

Do you see a challenge in gathering the deposits I mean system-wise, the credit, the offtake is going up. So many banks have challenges in deposit gathering, so to the tune of credit uptake, which is happening. So do you see any challenges there?

In this month, we have not seen. For example, 31st of March 2023, the FY is over. Okay. Now we have done business for 1 month. It's already April, May started. So we have not seen we have grown reasonably well in deposits this month. And here are month-on-month growth if we envisage whatever guidance that we have given for deposits will be actually surpassing it, if you continue to achieve this. So I see a lot of traction in my retail deposit growth.

More than that there is a retail term deposit to total term depost 82% is that. Our intention is 20% to 85%. It was 80%. We have increased to 82%. That means we are able to get the deposits resolved.

Renewals happened there very well.

And do you see any cost into cost to income improvement that ratio or...

So naturally, because basically see our yields are improving substantially. Once it improves the denominator effect will happen. So cost-to-income ratio -- our task has happened mostly because of IT investments, and the staff costs because of the settlement that has happened which is staff biparted settlement and other family pension and other provisions that we have made under AS50. So these things are actually done and dusted now. And added to that, we are also going to get a good denominator effect in lieu of the full years that we will get. So our cost-to-income ratio will be as projected as 47%.

And do you find any sector vulnerable, which you worry that this sector might be more carefully going for...

I see, it's actually an ongoing basis. We do it on a continuous basis. We don't take a call in the beginning of the year and say that this sector is vulnerable, we don't know. We'll have to continuously keep on assessing it and continue to do it. But basically, our expertise based on credentials and credit risk is something completely different. It has nothing to do with the equity risk. The equity risk is taken completely differently. Credit risk is rated completely differently. Even a sector is bad for equity, but it may be good for trade at this point of view. -- because it's collateral, it is tangible network, we have cash flows. There are a lot of factors that come in. So rating takes into consideration a lot of metrics on the base of which we take credit risk. So it is -- no sector is untouchable for us. But there are certain sectors that continue to be stressed based on our -- the impaired assets ratio that to the total exposure that we have, we will continue to monitor that's all.

And sir, exposure to airlines and real estate as a segment, what percent of your book will be there?

So we don't have any exposure to airlines, except Air India, which is now Tata. So we have around 17% exposure in CRE, that is commercial real estate. Tactical is there. There's a very small -- sorry, there's a growth. CRE is a very small percentage.

INR 3,000 crores.

INR 3,000 crores.

Order book we have.

Percentage [indiscernible], if you see that.

Real estate is INR 86,000 crores, correct?

Within that there is residential mortgage in which housing loan is there.

Housing loan, home loan, loan against properties, small loans, all those things.

Credit cost guidance for 0.75 we are given.

Thank you so much. Thank you, Shri Rajneesh Karnatak and the Bank of India management team. We will now conclude this gathering. Our team to share all the necessary details.

You basically talked about the ROE expanding by about almost 25 basis points in this year. Whereas basically, you talked about that the margins would likely stabilize. So barring the credit costs coming off on Y-o-Y basis, is there any other lever that you see? You talked about cost ratios coming down. I mean, every year, we would have some of the other stuff which would come via family pension. We will have something else. Obviously, the salary hikes also will happen, new staff addition will happen as I think you try to grow your book. So what could be those levers that you feel... So not only talk about the cost income ratio, if you can talk about in terms of the NII 2 assets, cost to assets, how basically the DuPont will really flow for this 25 basis point expansion?

See basically what -- that's a very good question. Basically, what we have done is the great extent, we are front loading our stat fast. You see we have already done 202. So we don't expect almost 33% is what we have already provided for how much 33% plus we already provided for -- so we have a substantial push on in terms of the rise in the staff cost going forward. That is one point. So we are not looking at cost going very, very high. Because see, if you see the numerator, I'm not very worried about numerator, of the tasks. In all aspects, and if you take entire expenses, whether it is in the interest expenses or in the OpEx, I'm not looking at huge increase in the numerator. So it will be -- the increase will be there, nevertheless, but not in a very significant increase that will affect the cost to assets, cost to other things. So my credit cards -- apart from credit cards, cost to assets are going to be severely impacted. That is one point. As another point that we are talking about is, the denominator is concerned, my cost to assets fairly does stabilize and continue to be there. So I have become very competitive in terms of my credit costs. My cost of credit to be very precise. So naturally, I'll be able to actually garner better yields. So once I do other better deals, I'll be able to do that. That's what the idea is. So the levers, as you said, is going to come from -- a major part of it will come from mid corporate book and corporate book. And apart from that, there's RAM book anyway, we are growing very, very robustly. Even today, my retail loans are giving good yields. So if you see the home loans have also reached around 9.25% plus. So that is one advantage we have. And apart from that, personal loans have also done once upon a time, has given a 10.75. And we're already seeing at around 15%, 16% being given. So delinquencies will be there in that, no doubt. But we have to choose -- we have to actually underrate properly and ensure that we don't grow very, very aggressively. Because another advantage we have is our base is very small. So we have a huge opportunity to grow. You see our home loan base is small. We see our personal loan base it is small, a vehicle loan base, it is small. We don't hold huge market share in these segments. So we have a lot of opportunity in terms of increasing market share without compromising on margins, without compromising on the quality. That's what our outlook is.

But then basically, if you look at mathematically, right, your asset book is going to grow at somewhere 11%, 12% broadly in line with the loan. your OpEx will grow at about 10% to 11%, right? So then basically, your cost-to-asset really doesn't improve. If you look at NII 2 assets, whatever said and done.

Not necessarily at 10%. See, I'm not looking at because ...

[indiscernible] income will be another [indiscernible] further also he had said a lot of things we are automating. The moment we automate the things for micro segment might...

How much difference will that make, sir?

That will make huge difference because..

if you can quantify that is basically feel can you quantify that?

If my micro entire micro segment majority of it addressed by my online things. Automatically those staff will be free. So I will not...

But that's what I'm saying. Your cost will increase by 11%, 12% or no this year. It can't be 10%, right, all along?

My point is no, I'm not -- mathematically also, I'm not looking at that kind of increase because you are looking at a corresponding increase of say, for example, I'm looking at 12% increase in the credit or even the assets by asset book. You are saying that my cost definitely will go up. So cost has got 2 components. I've already told you. One is basically interest expenses component, and another is an OpEx component. I've said my OpEx is already observed. I have front-loaded lot of my OpEx. So there is hardly any increase in the OpEx that will happen going forward. Of course, that costs are there, the staff has already front loaded. Other OpEx costs, mostly to INR 600 crores were already taken. So it is actually -- it will be stable in so far as the OpEx cost is concerned. The interest expenses are not going to increase that's what I see because a lot of repricing has already happened. If you see my repricing of my liability franchise, almost 70% of my liability franchise is repriced. And it is almost on par with what the industry liability rates are. So that is one point. So 30% has to be repriced. That will depend upon how -- if there is a rate hike, then there will be repricing on the deposits. I don't foresee a rate increase there. So if rate increase is not there, my liability may not be repriced. So there, I find stability over there. There is a reason why I'm saying I'm not looking at 11% decrease in the expenses. My total receipt today, what my last 5, 6 years, I've been looking at overheads. So I'll give you another number that it would be interesting to you. The overhead number is around 1.5% when we look at purpose of fixing MCL. It has not gone up for quite some time in so far as I am concerned. Despite all these provisions are done. So my overhead continues to be hovering around 1,5, 1.6. So as long as it hovers around 1.5 to 1.6, I will not have any problem in terms of my cost to assets. So that's what -- only if that overhead goes up, there is a problem. That I already told you overheads will not go up because my OpEx has stabilized. Okay. So interest expenses are not likely to go up because the external environment, the rate is stabilized. So these are the levers are the base, which I am actually projecting my growth.

Cost to income, 51% is their present ratio, the guidance we have given is around 47.5%. So that is another thing where it will come. And another important thing is the noninterest income, which will be driving this year, very strongly. So INR 7,000 crores plus, we had a noninterest income this year for the whole 12 months. So this year, definitely, we'll try to get it as high as possible.

The last quarter is at [indiscernible] gone up from that has been again come back to [indiscernible]

This is actually because of the quarter 1 effect. Since it was annualized, you're finding at 51.

Secondly, the question is to MD and CEO. So basically, you've come from Union Bank, where we have seen some kind of cultural shift or some tightening that we have seen over there, which obviously the investors have liked. We have seen that reflecting into the stock price as well. You believe that, that kind of things need to be done in Bank of India, number one. I know it's been not many days that you've been earlier. Secondly, is that that's from the cultural shift. Secondly, is that basically how do you -- what are the weaknesses that you see in Bank of India when you were there in Union Bank, right? I'm sure that peer comparison is always there in terms of that. This is a portfolio where they are strong. This is a portfolio where they're not that strong. Underwriting needs to be sent in, risk management needs to be sent in. So any gaps that you basically identified and that you would want to address is in the first year of the job.

Yes. So the second question, I will ask the first. See, it is too early for me to do a comparison. So both have different starting points. There was a amalgamation, which happened in Union Bank, in Bank of India, there has been no amalgamation. So that is the basic point. Another thing starting points for both the banks are different, and it is too early for me to give what are the strong points and weak points. It is just one week that I have joined over here. As far as the cultural shift, which you are seeing, which happened in Union Bank, which the market is taking it very positive. Here also, I would like to say is that in today's Board meeting, I also said that we will also go through certain transformational journeys, whether it is on the IT side, digital side, structural side and also on the HR side. So these are the things which will change the mindset of the staff and also the clients. So what I was saying earlier that there will be town hall meetings with the staff, there will be customer outreach, all these things will not only help the credit to grow, but also the recovery to happen. Once we go out reach to the defaulters also, all that kind of thing will help in Union Bank. If you compare with the 1 point on the CASA side, Bank of India is very strong. So 44% of CASA with a INR 7 crore deposit franchise, that is big. So there are already very strong points, which are clearly evident on the slides itself. So definitely, the starting points are different, but with the transformational journeys that we'll be taking place, which we'll be taking over the next 12 months, definitely, the things will change for the better.

Since we've been so kind enough to extend ourselves here. This is one last question from the digital attendee. The question is, what is the impact of RBI consultation paper proposal for ECL for next year? How much impact on capital adequacy will be there? What's BOI's position?

With respect to the ECL is concerned, we've already done our -- whatever the feedback we have to give to IBA, whatever the things that we've already given to IBA is to consolidation due to RBI, that point you have taken. And internally, we have assessed also. I think our additional capital requirement will be in the range of INR 20,000 crore to INR 25,000 crore additional capital we will be recurring and staggering in a period of 5 years. That is what -- based on that projection only. This year when you are win for our capital plan also, we are projecting around INR 4,500 crores raising of the equity cap. So we already gave a session to predict for next 5 years, I think we are in a comfortable position that is not much is going to affect as far as doing the business is concerned. So that way we are planning from the very beginning of the guideline, guidance that has come, and we're also planning to engage in consultant for -- guiding us for in the very beginning to whole approach of ECL that is also in the pipeline. And you all know very well last 2, 3 years, we are presenting the projected numbers with regard to ECL numbers [indiscernible] numbers to RBI. I think we're also getting the feedback feeler. Yes, what would be -- where are we standing and what we are going to do that already we are having a feel. So no problem that we can migrate it very smoothly. That is not a concern for us. As for the time being as we are having well plans already in place.

I hope that answers your question, Mr. Manoj. That will be all from the analyst meet. Thank you Shri Rajneesh Karnatak, and the Bank of India's management team. We will now conclude this gathering. We request you to please help yourselves to some refreshments and join us out to some snacks. Thank you, everyone, for being here today. Good evening and thanks.