IDFC First Bank Limited (539437) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the IDFC First Bank Q4 FY '22 Earnings Conference Call, hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kunal Shah from ICICI Securities. Thank you, and over to you, sir.

Thank you and good evening, everyone. This is Kunal Shah from ICICI Securities. Today, we have with us Mr. V Vaidyanathan, Managing Director and CEO; Mr. Sudhanshu Jain, CFO and Head Corporate Center; Mr. Saptarshi Bapari, Head, Investor Relations from IDFC First Bank to discuss their Q4 and the full-year FY '22 earnings. So over to you, sir.

Good evening, everybody. Thank you very much for joining us for this call this evening. I've got with me Sudhanshu Jain, who is the Chief Financial Officer of the company.

Yes, good evening, everyone.

I've got Saptarshi, who head the Investor Relations and many strategic affairs for the company.

Hi, good evening, everyone.

So nice to speak to all of you. I'd like to give a few opening remarks and then Sudhanshu will be ready with his comments to with his numbers to share with you. Number one, we'd like to say that for the last 3 years or so, you've heard us say that we are consolidating the balance sheet and strengthening it. So the reason was that, we had a very large loan book of over INR 1 lakh crores at the time of merger, but we had only retail deposits of INR 10,400 crores, so that was clearly unsustainable. So we slowed down the overall loan book for the first 3 years and our loan book grew by FC GR of only 6% from FY '19 to FY '22. But the deposits, the retail deposits grew at a CAGR of 72% in the last 3 years. So that clearly shows that we are very focused on first addressing deposit side. I'm happy to share with all of you that, that phase of, let me say, consolidating the balance sheet or strengthening the balance sheet whichever way we put it, that phase is now behind us, they're quite strong. So we think that from now on, we will be able to grow the loan book comfortably, that's the point number one. Number 2, you see that if you were to get a sense of where the loan book will grow from here on for the next few years, we think that to grow the loan book from now on -- overall loan book, retail, wholesale, all put together to grow that at between 20% to 25%, it should be very possible, so we will break out, out of our CAGR growth of 6% and get into the normal growth lead with all let me say good quality private sector banks are growing probably a little faster than that. Number 3 for the growth, we also think that we have a very, very strong lending model. Our incremental lending model by our internal assessment is dealing us a return on equity of 20% and that's very strong. And you might ask how? And if you notice, even in capital first, we were posting 15% return equity on the book itself, forget the incremental return of equity which was much higher, maybe 18% or 20%. So that itself was 15% on a cost of funds of [ 9 ], on cost of funds of 5, it's certainly you can see how 15% can easily jump to 20%. So you can see that that's coming and in case this is despite the fact that we started the prime home loans, now all that's factored into the ROE of 20% that I'm talking about. So on that kind of the business model the book is beginning to grow and that is why you will begin to see the profit jaw begin to open from here on quite strongly. My fourth comment or third comment is that the all legacy accounts of the bank which we have often talked about whenever we had. Now all of those issues are all addressed either they are straight away in NPA like some of the toll accounts we talk about and the power accounts we talk about or you are current, there's very little SMA zero, 1 and 2 that is left in the wholesale book now. And whatever is there, we have provided for it. So please don't have much concern on that front. My -- number fifth comment is that the incremental quality of wholesale lending for the last 3 years have been pretty good because earlier with infrastructure and all of us know, it is not that someone did a good job or bad job, it's just nature of the digit was like that. So -- but incrementally, we haven't done much of intra, we've actually focused on regular corporate lending, which is regular cash flow based, good quality name based, balance sheet based and all that. And that book we have sanctioned close to INR 17,500 crores of wholesale loans in last 3 years and I'm really happy to share with you that the net NPA even after 3 years and it has gone through the stress of COVID, the NPA is zero, so on that book. So you should be comfortable now that there is no real issue coming up on this front. The fifth point is that you might say [indiscernible] going to grow the loan book by 20% to 25%, that's on a loan book of INR 1,32,000 crores, which means our loan book should grow by anywhere about INR 20,000 crore, INR 30,000 crores a year. You might see look where you're going to get INR 30,000 crores in deposits -- deposits for doing that. I must say that in the last 3 years alone, we have grown retail deposits by INR 54,820 crores. Now that's retail deposits, retail cost, retail-term deposits, that clearly shows that and by the way, last 3 years, we've had every problem I think around relatively start-up banks, we had COVID, we had lots of issues and all that. But basically despite that if money could come to us, we can clearly see that we will be in a position to fund our self for that sort of deposit growth, we feel frankly very comfortable on the front. To put it in context, our CASA for example is now touching 19%, [ 50% ] and it's been around that number for now 4 quarters in a row. And we feel quite confident that even next year, we will be able to sustain our CASA at 50% give or take a few basis points here or there. Now therefore to be able to have a strong deposit franchise, with CASA 50%, ability to grow is a tremendous source of comfort for all of us. And also gives us lot of confidence that we can now, so to say, press the pedal on the lending side. The next thing to remember is what's happening on the -- you might say that, look, you might do that loan 20,000 crores, 25 crores, so what's the quality? Now our asset quality, I'm happy to say that the gross and net NPA for the bank -- for the retail side and we specifically call out retail because that's the large part of the book as you can know and when we say retail, we mean both retail, there will be the personal credit, which is the retail and then the commercial financing which is basically business loans, business banking, commercial vehicle, those kind of stuff growth, largely the businesses, we have 2 categories we track. Now on the retail side, the categories which I defined, the gross NPA has now come down to 2.63% and the net NPA has come down to 1.15%, it has come down to 1.15%. Now we have always guided that the gross NPA and the net NPA of the retail side will come down to 2% and 1% respectively gross 2 and net to 1%. We feel quite confident on that front and for that you should see the trend to give you the comfort. In March '21, when the COVID hit, let me go back a little more in time, pre-COVID let me say, December 2019, the gross [ NPF ] retail was 2.26%. In March '21 just when the peak of the COVID was there, the gross NPA came down to 4.0 -- it went up to 4.01%. In June, it came to 3.86%. In September, it came to 3.45%, in December it came to 2.92% and in March it has come down to 2.63. So it's not hard to see why this number should come down to 2 as per our guidance. Now let me talk on net NPA. In December '19, pre-COVID, our bank's retail side net NPA was 1.06%. In peak of COVID, it went to 1.9%, which is in March '21. June it came to 1.82%, September it came to 1.66%. December it came down to 1.28% and March '22 it has now come down to 1.15%, so like 1.15% since touching distance of one, so hopefully there should be no concern. In fact, our own internal estimates will go down below 1 rather comfortably. So you get the drift about how we think of the asset quality side. Now the next point to address after addressing deposits, after posting growth -- addressing growth, after talking of asset quality is our confidence on the capital front because after all if you want to grow the book at 20%, we need to have capital by our side. So on this front, our bank is strongly capitalized, we've got 16.8% is our capital. And we also have significant headroom for Tier 2 because we haven't raised that much of that. So we can always raise on Tier 2. And we have sufficient headroom to grow. Now next thing is about incremental unit economics and on this front I already described to you that our retail lending business giving us 20% return on equity and all we have to do is just keep doing that in a safe way, in a quality way, keeping an eye good eye on quality. On quality front, if you permit me, I still have to -- if you give me confidence to note, it's a 10-year track record. Now 10 years is not a quarter or 2 quarters, 10 years is straight 40 quarters. And for us to continuously for a long time keep a gross NP of 2 and net NP of one must give you confident that we will get there. And if we can do a good return on equity with low drop and low net NPA and a reasonable credit loss, we should be just fine and be able to grow it from here. The next point to note is credit loss percentage. Now I'm [indiscernible] numbers to you that helps you. Now as far as credit cost is concerned, if you note -- if you remember in the -- when the COVID, the second wave hit us, then -- when we came out with June '21 results, we took a big block of provision for COVID second wave. At that time and it was a pretty large hit, we took INR 1,872 crore provision, not all of it was retail, it had some lot of wholesale, infrastructure account et cetera, but still it had retail, retail was a big component of that. Now at that time, we had given a clear guidance of what we expect Q2, Q3, Q4 of FY '22 to look like. At that time, if you recall, I had publicly said to all of you that our Q2 provisions will be less than Q1, Q3 will be less than Q2 and Q4 will be less than Q3. I'm happy to share the following numbers with you as it turned out. So gross, our Q2 provisions was INR 475 crores, Q3 provisions of INR 392 crores and Q4 provisions were only INR 369 crores. And the sum total of all these 4 numbers is INR 3,100 crores. Now our average loan book for the year was INR 1,18,700 crores. So if you divide, you'll get a number of 2.5% to 2.6%. Now you can think and calculate for yourself that in a COVID ravage year, where Q1 was so hard hit and by the way in Q1, there was lockdowns across the country, I can't say across the country, but across large number of states, practically national lock down, but there was no moratorium, so slippages were there. So despite such a quarter and a year, our credit loss for the whole year was only 2.5% to 2.6%, you can do the math, somewhere there between the 2, I think is 2.6%. So therefore, if at COVID -- here it was 2.6%, really it's not hard for you to also deliver that next year in the guiding is 1.5, we have done our maths for that. So if we take annualized credit loss, then for Q4 our annualized credit loss is only 1.2%. Now -- so that's 1.2%, we are guiding for 1.5%. So we kept our self-sufficient cushion to when we say that next year is 1.5. And therefore, there is enough data by our side that when we were running this so earlier was 2.5%, now even if COVID year is 2.5, now it is -- we are guiding for 1.5, so you get the drift. And therefore, we believe that we are building pretty much a phenomenal model at our end, where we're able to lend to multiple segments of the market, also the prime home loans, but also to a 2-wheeler customer, also to a consumer durable customer, also to a personal credit customer, also to a credit card customer, also to micro enterprises, also the business loans, we are spanning a wide range of -- also for affordable housing to -- spanning a wide range and blend at 1.5, it's a really a good number. We are frankly very happy about it. We're just waiting to -- we just wish could pass over time and be able to report 1 year of our numbers to you and I'm just waiting for such a day when we'll be able to share our numbers with you a year from now. So we are that much phased up internally. Now coming back to the last thing about -- 2 more things I want to share with you is the fee income. Now our fee income is not only from the businesses like your loans, we have income coming from loans of course where we get disbursal income and prepayment income and all that kind of stuff. But also we also get income from on the liability side, from insurance distribution, mutual funds, just some annuity income. On the wholesale side, we make income in the form of [ LCDGX ], et cetera. Wealth management is growing pretty well for us. Then the cash management business is firing very well, we've got a really fantastic cash management product. So basically the list -- the span of business that giving us income is very -- is very good for us. Now for us, retail fees constitute 84% of the total fee income. So if it's retail giving us 84%, we know it's sustainable and simple through next 2 quarters can only grow from here. Now I got only 2 more points to add to you. One is that as a business model, we -- since they're building it ground off and we don't have a legacy sort of in a business model to worry about in terms of what we are incrementally building on retail side. So every product of our bank is very much a customer-first product. For example, look at credit cards, you tend to think of it like there are lots and lots of fees and charges and some lots of opacity often times, everything about our bank is transparent in the way we design the product. Similarly on the loans and on the deposits and all that, so that's one thing. And then my second -- an ultimate point is about the operating profits and this is very important. Now in terms of the operating profit, let me read some numbers off to you. Yes, now you can -- you should note the following numbers. In FY '19, FY '19 December 2018 when we merged, so we have taken December quarter operating profit, December and the March quarter, then we have taken them together and then they have annualized it. So they are the full benefit of capital first and IDFC Bank is coming in it. So that number and then after annualizing it, we find the operating profit of the bank post merger, so that there is a like-to-like comparison is INR 1,105 crore. In FY '20, this number shot up 60% to INR 1,764 crores. In FY '21, this number grew by 8% to INR 1,909 crore, this is a COVID year where obviously income was troubled. Then in FY '22 is operating profit has jumped from INR 1,909 crores to INR 2,753 crores, with a growth of 44%. So you can clearly see that there is a 3-year CAGR of 36% including a COVID year. And therefore, our big, so to say happiness is coming from the fact that we operate -- all of you might point out that our operating expenses of the bank are quite side, which frankly agree. But I'm seeing net of that expenses in the bank, our operating profit has jumped by 44% in last year from INR 1,909 crores to INR 2,752 crore. Now that alone even doesn't tell the full story. Now you compare this quarter-by-quarter. If you take quarter-by-quarter, again, the Q3 FY '19, the quarter in which we emerged, our operating profit excluding trading income is which is basically is -- was which is like core, core, core was INR 276 crores. Now this quarter, this number the Q4 FY '22 this number has touched INR 836 crores. Now just think INR 276 crore going to INR 836 crore despite whatever expenses we may have. So we are feeling really very good about our incremental economics of this bank. And I am a firm believer that the incremental economics are so strong. All we have to do is just sit and deliver Rahul Dravid style, not play any false shots, no cross PAT and nothing and then this will jump from here. And then straightway if you adjust for a reasonable credit loss, you will get to see strong return of equity. So somehow -- so we feel broadly that a bank is headed for a fantastic return on equity and that game will play out. Many of you have had concerns over the last 2, 3 years because you said you're always coming and saying this legacy or that legacy, that really was never the intent, but unfortunately turned out like that. But I can safely say that 3-year period is behind us, we've done, we fixed everything, now we're just looking forward to growing the bank and hopefully if you're staying foot with us, you will get to see the results from our side. So thank you very much. That's my quick thoughts on an overview level, maybe my friend Sudhanshu can give you a quick commentary on the specific this quarter's numbers.

Thank you, Vaidya. I would like to start with an update on the growth of asset -- on the asset side of the business. As Vaidya said, we have witnessed strong business momentum continuing into Q4 FY '22. The overall funded assets of the bank grew by 13% during the year to reach INR 1,31,951 crores as on March 31, 2022. This was mainly driven by the growth in retail loans and commercial finance loans, which grew by 28% and 15% respectively on a Y-o-Y basis. Disbursements were strong and in the retail segment, we were higher by 32% in Q4 '22 as compared to Q4 FY '21. Within the retail segment, the home loan segment registered the fastest growth and that book grew by 52% on a Y-o-Y basis. The bank has seen strong traction on the prime home loan segment since the launch of its attractive interest rate for prime home loan customers. The dual finance book within retail, which includes funding to strengthen groups, Kisan Credit Card, micro housing loans and some small enterprise loans, that book grew by 12% on a Y-o-Y basis. The bank has maintained its conservative stand towards commercial loans, which includes business loans, commercial vehicle loans with strict underwriting norms and that book grew at 15% on a Y-o-Y basis. On the wholesale side, the bank continued to bring down its infrastructure book after the stated strategy and it reduced by 36% on a Y-o-Y basis and 14% sequentially. The non-infra funded book remains steady with a growth of 5% on a Y-o-Y basis and 9% sequentially. The top 10 borrower consultation has steadily come down and reduced to 3.7% as of March 31st, '22 as compared to 5.9% in March 31, 2021 and 19% in March 31, 2018 before the merger. The bank plans to grow corporate book going forward based on the right opportunity, pricing and the assessment of risk. Infrastructure book is now just 5.2% of the overall funded assets. We are happy to report that guarantees which were given by the bank for Spectrum has now been released. The bank had more than 7 lakh credit issue -- credit card so far mostly to existing customers on the book. Our spend per active cards are higher by 35% as compared to the industry average. On the liability side, the bank CASA deposits have grown by 11% on a Y-o-Y basis to reach INR 51,170 crores and the CASA ratio as on March stood at 48.44%. However, point to note is that average startup for FY '22 stood at 49.88% as compared to 41.50% in FY '21. Overall, customer deposits increased by 13% on a Y-o-Y basis to reach INR 93,214 crores. The proportion of current account in the overall CASA mix improved to 18.29% at March '22 as compared to 11.8% in March last year. The bank has managed to bring down the excess liquidity during this quarter as the NCR was at 136% as compared to 149% last quarter. As the business and economic environment device going forward, there would be scope for further improving on these metrics. This quarter bank added 42 branches to take the branch count to 641 branches. 70% of the new branches were opened in semi-urban and rural areas. The bank has substantially granulared the liability base since merger and Tata and PD less than INR 5 crores to add 85%. In terms of asset quality, Mr. Vaidyanathan has covered that we have seen a substantial progress, our provision complains ratio including technical write-off has increased to 70% at March 31, '22 and it excludes one Mumbai dual account which became NPA in Q1. The provision coverage ratio stood at 77%. Of course, we have seen a sharper improvement in the retail segment. On the P&L front, very quickly, the bank has seen strong growth in profitability. NII for Q2 increased by 36% on a Y-o-Y basis and by 32% on a quarter-on-quarter basis. The net interest margin improved to 6.27% from Q4 FY '22 from 5.17% in Q4 FY '21, driven largely by decrease in cost of fund and however asset yields stayed broadly stable. So for the full-year, the net interest margin stood at 5.96% as compared to 5.03% in FY '21. On the fee front, again, there was a healthy increase of 40% on a Y-o-Y basis. The fee was INR 841 crores as compared to INR 600 crores in Q4 FY '21. For the full year, the fee increase was 66% and the fee for the full-year was INR 2,691 crores. Fee income growth was largely contributed by increase -- increase-related to loan sourcing, higher transaction fees and best management fees, as Vaidya mentioned. The fee growth was 13% on a sequential basis, which also indicates a strong performance on this front. Core operating income increased by 37% Y-o-Y to INR 3,510 crores in Q4 FY '22 from INR 2,561 crores in Q4 FY '21. The core operating income of the bank for the full year grew by 38% as compared to FY '21. Operating expenses grew by 24% at INR 2,674 crores for Q4 FY '22, as compared to INR 2156 crores for FY '21 on account of increased business activities and lower ways due to subdued economic activity due to COVID last year. As a result, the core operating profit of the bank for Q4 increased by 106% to INR 833 crores from INR 405 crores in Q4 FY '21. Provisions were lower by 36% on a Y-o-Y basis and as Vaidya mentioned, the credit cost for the quarter is up at 120 basis points and this has come down on a quarter-on-quarter basis. The bank has not utilized any portion of COVID provision in this quarter and carried forward COVID provision of INR 165 crores as on March 31, 2022. As a result of all the numbers which I talked about, the profit after tax increased by 168% to INR 343 crores in Q4 FY '22 from INR 128 crores in Q4 FY '21. Sequentially, it went up by 22%. PAT for the full year was at INR 145 crores. We had posted a negative PAT of INR 650 crores loss in Q1 due to higher provisions of INR 1,872 crores to tackle unprecedented COVID-19 second wave impact. Thereafter, the profitability has improved gradually to INR 152 crores in Q2 to INR 281 crores in Q3 and now INR 343 crores in Q4 '22, driven by gradual improvement in the core operating profit and sustained credit cost levels. The bank has maintained strong capital adequacy and its car was at 6.74% as of March 31 '22 with CET1 ratio of 14.88%. This -- the overall car has improved by close to 298 basis points vis-a-vis last year. The bank also mobilized the year 2 of INR 1,500 crores during the quarter in its maiden terms of [ Maruti ] investor, including LIC, which came with 60% part acquisition. The bank is comfortably safe in terms of capital as compared to the mandated levels and look forward to growth going forward. With that, we can hand it towards for Q&A.

[Operator Instructions] The first question is from the line of [ Ash Moonka ] from Asterisk Capital.

So I had this amazing experience with a preapproved credit card from IDFC First Bank. So it was actually on my app to use second, after I agree to the document you send. So the text that supporting such function shouldn't have been as simple to develop as has been the experience and would definitely entail a good amount of operating leverage as the volumes increase. Other than this, we have also observed increased tech hiring and marketing regarding the same from IDFC side on platforms like LinkedIn and YouTube. So what's the bigger picture Vaidyanathan sir? And how should an investor expect this to transform IDFC First Bank way of doing business 3, 4 years down the line?

Thank you, thank you for that for the experience you shared makes our team feel better and for that. Now yes, we have spent money building all these good stacks and giving our customers really good experience. And the benefit we see is actually lower cost on an incremental basis. So for example, in the credit card business, I would maybe be surprised to know we have no DSAs. And the entire, as you know, the industry for the last 20, 30 years have been built about giving 15 days to originate credit cards to you. And we have 7 lakh cards, no DSA. So this ability comes to us because we developed good processes and then we, of course, reach out to these marketing centers and we originate loans. So we believe it will pay back in terms of operating leverage when they used to come back. So one of the reasons why we are very bullish about our self which you can't see today because you're seeing the numbers today and probably happier and happy about some of our numbers. But we internally feel happy because we know that you fast forward the story 1 year forward, 2 year forward, straight away the income will rise rather a bit disproportionately.

Makes sense. So sir, what is the top and mid-level management attrition rate for FY '22? And how do they fare to the industry? How does the company continue to see the credit underwriting culture in tact if you are growing at 25% plus rate continuously, as so many new people enter the business.

So both great question, somehow attrition did not put any public numbers, but I can tell you briefly that our attrition at senior management, let me say, a top 2, 3 management it's very, very low. I mean you can -- we really come across -- we all come across a case only once in a odd while it's quite low, very stable. Now attrition is more in the bottom of the pyramid really when people join for the first job, work for 2, 3 years, find a higher composition somewhere go away or move for personal reasons or whatever. So attrition is typically more on the lower end of the hierarchy chain. Now with regard to credit, that's an easy one to answer because we think that our credit will hold up with scale and that's something that we feel very confident of. That's because this whole credit architecture of this bank, we have built ground up, so we know every bit and every moving part of this place we meaning not I, I mean the whole team. We understand what we build, to understand the stack, to understand the credit criteria. We know how each of these evolved, we knew what we did in 2011 and '12 and '13 and '14 and '20 and '21, '22, every time the scorecard has evolved by -- with the learning. So we've been through this process basically inside out of it. The second thing is that with in due course underwriting capabilities in this country is only improved because of more availability of data and ability to scribe data and multiple sources, et cetera. So what we do is actually not just believe in these numbers or this process alone, we only -- we even track our self by certain out sports. So there are certain number of things we track. We track -- we track to monitor whether it's performing well, for example, we track off the loans we booked, what is the number of customers who returns cheques text next month itself, we call it first EMI, cheque profit, cheque is only metaphor normally NASH. But we say that first EMI cheque bounce is x percentage of what it was. So I'll give one number for example pre-COVID our, if index was one of cheque bounces, today on the first EMI bounce basis for the definition I said earlier, the cheque bounce is 0.7. So cheque bounces are 70%, only 70% what it was pre-COVID. Then we track similarly bucket 1, bucket 2, bucket 3, we check SME, then we check vintage analysis, we check recovery, so we track many fronts like these and frankly we are very, very cautious about this because we the last thing we want to just have a problem in credit loss on our book maybe few years from now, that won't smell right for us. So we're very cautious about it, we have the right tools, we have right technology, so we see confident.

Just a final question from my end, so as per our aspirations we want to become a world class bank and our today's balance sheet is nearly at 1.9 lakh crore and the plan is not switch off until the numbers become much, much larger. So what are the current biggest weaknesses that stop us from becoming one and the ones that you're focusing to resolve over the next 5, 7 years.

Truth is that when we say world class bank and the thing is it's not the size alone doesn't make anybody us our bank and maybe there are some amazing institutions also world class, that's also true. But in our case, our loan book is only 1,20,000 crore. So for us even if I grow at 20%, 25% we know at 25% we can travel your balance sheet in 3, 3 and half years you double it again in the 3 and half years. So for us it's not difficult for you to imagine that is 1.2 lakh crore bank will become 2.4 core loan book, may the 3, 4 years from now and that's may be 3, 4 years from then may be 5 lakh crore book and from there hopefully another 10 lakh crore book. This story will never stop at all, just not stop because the lending is running by a machine here, is running by a set of formula and a bit of credit underwriting processes and there is credit unserved credit in the country. So you see large amazing banks at ICICI Bank, 20 years ago, they were just INR 200 crore loan book. So who would have imagined they'll become a 6 lakh core retail book today. So it just compounds that's it over a period of time, look at HDFC Bank, look at Kotak bank, look at the other banks, they are all great banks. So for us to keep compounding from here the loan book and play a steady straight game for next 15, 20 years, really, I don't see a problem.

The next question is from the line of Lalit Deo from Equirus.

You know understand on the margins [indiscernible]. So in this quarter, it was like about 6.27%. So was there any one-off in the quarter because as we see like that core have improved by about 28 basis points on a sequence.

Yes, Lalit, there were no one-offs during the quarter. So this is a steady increase which has happened on a quarter-on-quarter basis.

Okay. And sir, another data question, can you, sir, tell us the gross slippages and x slippages for the -- during the quarter?

Yes, gross slippages for the quarter were about INR 1,400 crores and net slippages were about INR 700 crores. We saw strong recovery during the quarter.

And there was one corporate account of about INR 250 crores that slipped during this quarter. It was a legacy corporate account. But if you net that out, the numbers would get comfortable.

The next question is from the line of Ishan Agarwal from Erevna Capital LLP.

So first of all, congratulations on a super performance on all fronts that you have again surpassed my expectations in terms of the execution.

Thank you.

So first question is that, given the levers that we have for increased NIMs from here on, even at 6.27%, if I have to name a few, we are booking retail loans at 14.5% to 15%, we are replacing INR 25,000 crores of high cost deposits over the next 3 years. Our LCR drag is there right now on our balance sheet and our incremental cost of funds is 5%. Then why are we saying that NIMs should taper off from here on, wouldn't these levers push the NIM to a higher trajectory of, say, 6.6% to 6.8%?

Yes, yes, it could still rise from here.

It could still rise from? And what will be your guidance on the OpEx front for FY '23? Will it be in line with your overall loan growth? Or will it be lower?

Lower, lower because that's where the operating leverage comes in because if you remember the first speaker, gentlemen spoke, I think Anish, if I'm not mistaken, he talked about that experience. So basically...

So if the loan book grows by say 22%, 23%, OpEx should grow at a slower pace is what we are expecting?

Think about it as what the NII plus income fee income will grow at and think of the OpEx, OpEx should grow lower. But more than the percentages, what is important is the fact that -- remember the NII, the NII plus fee income, they tend to grow on a larger base.

Right.

So a larger base growing at a greater percentage because we have OpEx growing slower, but on a slower base, that is what actually expands the P&L so sharply.

Okay. My last question...

Keep your number, I just got some numbers here. So I'll explain. So let us look at the income line for the bank for financial year FY '22. So our NII plus fee income without trading gains, okay straightforward only income -- core income, that was INR 12,397 crores. So -- and obviously, OpEx is much lower. So just think that if and last year, this income has grown by 38%.

Right.

If you take the quarter-on-quarter, this number has grown by 37%, that is Q4 FY '22 divided by Q4 FY '21, that's 37%, but the income --the OpEx line has grown only 24% on a lower base and that is certainly the operating level, certainly otherwise you might wonder how did the income -- the core, what we call the core operating profit, how did it jump from INR 400 something towards INR 800 crores. This is the reason. And this is what makes us feel good about next year also, hopefully, when we talk say 1 year from now, you'll see that the income would have grown further and OpEx would have grown at a slower pace.

Okay. Great. So my final question is, you've achieved with 2 of our primary 3 goals that we had said at the time of the merger in terms of the liabilities issue being sorted, the asset quality issue being sorted. On profitability, when do you see the bank reporting double-digit ROE?

Soon.

How soon?

Definitely, I think by our own internal estimates are that by fourth quarter of next year, we should be getting there.

Fourth quarter FY '23?

Yes and then you know the trajectory. Remember, they're coming from zero.

Right.

So we already touched the 6 and next year if we can touch 10 then you can imagine what the next year, what exit quarter will look like and then we are like any other good bank in the mid-teens. And then actually, our own belief is that we will not be mid-teens bank, we'll be little higher than mid-teens bank when this story stabilizes. Do we have any capital raise plans for FY '23, given we already are envisaging a 20%, 25% loan growth, Tier 1 capital I'm talking about. No, no.

The next question is from the line of Rohan Mandora from Equirus Securities.

Sir, just want to understand, can you help us understand in terms of the OpEx expenses between say fixed OpEx business linked variable and future capitative building, what is the split? And in the last 2 years, how have each of these line items grown?

Well, we don't have any of those numbers ready for you, unfortunately maybe we'll try next time, but let me just say that we definitely, a portion of our expenses are towards building the future. There are 2 types of expenses we are having, one is of course run the bank as usual. Second is remediation of any of the existing systems, for example, there is fixed stack and many of the parts of the fixed stack require remediation because some parts may not derive, maybe the core systems, may be the enterprise stuff, maybe the channel phasing, tech systems, maybe the CRM. So some of these things often require maybe some systems talk to each other or reconcile each other. So those kind of things, remediation work is always there. The third sort of expenses of course investing for the future, which is basically building a really, future really text tech and we are very focused on that to build those kind of capabilities that customers can get instant solutions. For example, we're going to launch, we have launched a mobile app, but we are going to -- we want upgraded version of mobile app, where customers should be able to purchase mutual funds, et cetera on the fly. On the fly meaning not just buying a mutual fund, actually they can go, they can -- they've done API connect with all the mutual fund companies. And therefore we -- through an integrator whereby customers can come there, customers can do a query of the highest performing mutual fund, either a MorningStar or something and then they can book, click the fund they want to buy, then they can see the categories of companies, categories of investments underneath, they can see the companies under mutual funds, they can click, click, click and buy what they want to buy. So these kind of capabilities we're building in the bank. And I think all of these will add value to the bank in the longer run, you may not be able to see it in the end of this quarter next quarter, but we are building a bank for the long run. So they will all add up.

Right sir. So sir, any ballpark range where we are operating in terms of these expenses towards future technology addition?

No, we don't have a specific number on this one.

And sir, what was the total OpEx for say, the DSA distributor payouts in FY '22?

We don't share that -- those specific numbers.

Sure sir. And sir employee count as of as of March '22? And where do we see employee per branch trending in say next 3 years, which has come down from 50 or to 40 from, say '19 to '21? And where do we see that trajectory in the next few years?

We think that for most of our regular businesses like home loans, car loans, personal credit, et cetera, we don't need people anymore, I mean in the sense we don't need to extend the team at all. And that very much the existing team that we built should be able to just have a higher disbursal of about 25% straightforward just because of the way the economy lifts and the way people become more productive over time. But for maybe new booking that we launched, so our hiring attendee will only be for that, there's nothing any for existing businesses.

Sure, sir. And just employee count as of March '22, can you share?

And that's one of the reasons you will operating leverage, suppose when we had x number of employees doing all the loan businesses and the same team supposing a loan book is just make it up, say INR 90,000 crores, INR 93,000 crores and you make it up suppose INR 93,000 crores to say INR 120,000 crores or something we had no people. You get the drift, you straightaway see what it will do to profitability. That's how operating level plays out. So we will need people only for newer bank branches before where we need to have people, maybe add some bulk management, maybe add something in gold loan, maybe add something in some businesses where they had to build in private sector like -- so those kind of things will add people, but not really for regular businesses.

The next question is from the line of Bhavin Gala from [ Marine ] Capital.

I really congratulate the entire team of IDFC Bank for doing the heavy lifting and pulling the bank across last many years. I have few pointed questions. First is on the retail banking operations. The recent earnings do suggest that the retail banking operations have turned around. They have posted a PAT of INR 400 crores plus. So what explains this turnaround? Was there a one-off or the entire contribution of -- has come from recurring activities in terms of -- from the revenue stream? The second question is, though in the PPT you have mentioned entire spectrum-related BGs have been repaid. So if you could help us in terms of specific numbers on the exposure of Vodafone-Idea? Yes, that's about, that's from my side, sir.

Yes, so on the retail front, definitely, there has been a turnaround. We have seen lower provisions during the quarter. And hence, what we see in external segment back for retail banking, we are -- there is a profit of INR 430 crores. So there is no one-off with us, this has come to lower provisions and robust growth in the retail asset book. And on the telecom front, about INR 2,100 crores of guarantees were released. This was towards guarantees given to Vodafone and Bharti. And on Vodafone, now we have an outstanding of about INR 500 crores. This exposure used to be about INR 3,200 crores at one point of time.

And one last question. So if I heard correctly during the call, the blended growth for the asset book for FY '13 is in the vicinity of 20% to 25%, right? We are not referring only to the retail book, the 25% of loan asset book is on the blended book?

That's right. That's right.

The next question is from the line of Sahil Sharma from [ SS Capital ].

Congratulation on great set of results. My first question is to understand our CASA strategy. If you look at our CASA book, it's growth has been slightly lower than our loan book growth in Q4 and also FY '22. The liability franchise is the backbone of any modern retail bank. So what I'm wondering is what is our strategy on the CASA side and whether it is possible for us to improve our CASA ratio even from here beyond 50%. Related to that, I think what was mentioned is that current accounts are 15...

Hold on, let's take one question at a time and make our life easier. So this -- yes, the CASA easy one to handle actually, see last year, we were running LCR of 150%. So that's a lot of money excess lying either with RBI or in REPO or somewhere, so our reverse REPO so -- we were not thinking of returns. So this year onwards, we want to grow the loan book, we will press the accelerator on deposit, we will be risk. We really don't see any concern. I mentioned in my opening remarks how we raised about INR 25,000 crores even in a COVID year. I'm telling you, maybe you -- there are concerns about our bank that you might have had about profits and all in the past. But I hope you'll agree with me that our bank really is a respected brand. We give deposits huge deposits from retail, not the bulk deposit kinds. And when we just want to press the pedal on the liabilities, it just comes pouring in.

I see. So can we expect it to grow roughly at the rate of the loan book, so that the CASA ratio is maintained, roughly?

Yes, yes, yes, we'll go at little bit fast -- we think that 50 is no problem for us to maintain.

Okay. Okay. So next to that my question was, I think your current accounts are around 15% to 18% of CASA right now? I wanted to understand what kind of initiatives you are taking to grow the current account book and whether there's an opportunity to cross-sell our current accounts to our MSME retail borrowers?

Great question, that's a good observation also that our current account is as a proportion of CASA so to say, it's not good enough. And we need to improve on that. For us, savings account pressing the button on savings account is easy one, we just press we got it. But we will start working on current accounts a little more because that requires as you know, I've built this is in a previous organization that it takes time to build it because you need to build good technology, good ecosystem, capture the flow of money from end-to-end, from business-to-business. Then give add multiple solutions to customers, which are not just banking related, it could be accounting solutions, an HR solution, legal solutions, they're going to build all those capabilities. So we're building this up right now and we are quite confident that we will make a mark in that space also.

Okay.

Just to add, the question of car in the -- overall CASA has improved from 11% to 18% and our endeavor would be to take it to 30% in due course like other good banks.

Okay, okay. Sir, last question from my side. We had launched an amazing credit card product and the rate of interest is sort of dependent on the customer credit profile. I think the idea here was that it might encourage some of our customer base to revolve credit the ones that are comfortable revolving credit. So have you seen that actually pick up? And like can you share any kind of data on what percentage of our credit card customer base is actually evolving their credit and how this compares to industry?

We see it for -- by the way there's lot of disturbance on your line if you don't mind, there is one mute mode, it will help others. The -- as far as credit card is concerned, we just -- we are in first -- if you don't mind just go on mute mode I think disturbing just...

Yes sir, has muted the line.

Yes, yes hurting the ear. So back to you. So on the credit card front, typically, the business takes time to start getting about a 50% of the loan of the book to start having interest income. So typically, you can think of it like about 25% book would be revolver, about 25% of the outstanding could be installment based, where the customer is not revolving, but customers choosing to convert the transaction to an installment. So and balance 50% straightforward transaction, they just pay up on time. So we would say they are a little behind the industry at this point of time because we are still a newer player, we're just 1 year into the business. But as this plays out for the next 1 or 2 years, we will definitely get better. But our good thing about our bank is that our customer complaints are really very low, customers by the way we are a new bank, it's not that people knew our credit cards compared to other banks who have 15, 20 million cards each or maybe 15 million and we just have maybe 600,000, 700,000 today. So despite being a new player, the spends on our cards is really good and delinquency is very low on the business for us. So all this is coming because right in the beginning when we launched the card, we didn't try to gain the customer, figuring out if you price it like this, I'll make more money, less money, straightforward made a really good product for the customer. We didn't say that if you spend so much, I'll waive your fees, if you do that, we've straightaway said it tree for life no annual fee. We straightaway paid good reward points. We straightaway said that reward point can be redeemed for the next purchase, something that's really nobody does in our knowledge, everybody wants to give some catalogue against it. So though we are planning to introduce a fee structure for redemption of the reward point, but I guess it will be nominal, customers will get -- will -- have already been notified. So basically, we have put a really simple product and with really customer-friendly product. So I think it will pay back in due course, maybe a little slow, but it will pay back very well and pay back in a sustainable manner to us.

We'll move to the next question from the line of Ashutosh K. Mishra from Ashika Stock Broking.

Yes, so my question is that to understand the long-term evolution of the NIM, especially from a 3-year perspective, keeping in mind where do you see your composition of retail and commercial finance books going ahead from here. We have launched prime home loans also. So how you see the NIMs getting between the advantage which we have on the paying off the high-cost borrowings and the change in the retail and commercial loan book going forward from here?

Sudhanshu, I'll take this. See, the thing is that when we started the whole post merger, we put out a number that retail be a percentage of the book 70% all that. Now we passed the state, so we don't want to put any more guidances on what percentage it will be. We want to -- we ideally would like no business to have more than 15% of our total book. So we have so many businesses, we have credit card, we have personal loans, we've got commercial vehicle, car loans, home loans, loan against property. We've got rural financing and we've got wholesale credit. So the way now we're thinking is not in terms of 70, 30, 20, 80, 20 we don't have any those benchmarks now, we are beyond that stage. Now we are focusing on saying that we launched so many businesses, everything stays below 15, except for mortgages and loan against property, we'd like them to be -- where -- they like the cap to be about 20% each. And in the corporate side, we don't have a lower limit, but we don't -- we think that about it upper cap would probably be 30%. So we are more there in the upper caps, not the lower caps anymore.

Okay. So we actually we can maintain...

That you could -- we don't peg a number that was little bit say 30 or 20 or 10 nothing like that. Whatever gives us good returns, whatever gives very diversified, whatever where we are -- where our credit underwriting standards are well proven and we feel confident to grow whatever is very diversified, whatever need and wherever we have our own strengths. So whatever growth as long as it doesn't above the particular limit we'd like to grow it, that's it.

Got it. So we can expect NIM to remain above 6% or 5.5% see from 2.5 years down the line roughly?

Yes, yes, yes.

Okay. And my second question is on, again, same way on the fee income stand. So 80% of our -- the core fee income comes from the retail front. So do you see the growth to remain in line with the growth of our retail loan book? Or do you see some changes or some no, because we are hearing lot of technological product may impact the retail fee income growth of the bank in general. So we want that, sir?

Yes, if you, I'll take that. If you see in the fee income to total income is about 22% of the ratio, again, we feel that we have a lot of opportunity to increase in there. Of course, some part of the fees come through lending, right? But there is a huge opportunity to earn fees through non-capital consumption linked revenue sources like you've trade, like your toll, like your credit card and so on and also selling third-party products, right? So we feel that we will be able to register strong growth going forward as well and there is a huge opportunity to increase.

Okay. Okay. And on OpEx front, does bank has any internal cost to CI ratio's target? And how do you see that panning out over the next 3 year?

See, very clearly, we should not take a start-up bank first 2, 3 year cost and think that even so the cost structure of this bank, it won't be. We are finding that cost to income will begin to come down with simply by scale and its operating leverage. And of course, I'll give you a color on the incremental, one of the things we track internally, which is not a number we release to the market anything with that. One of the things to track internally is incremental cost to income ratio. So how this incremental cost to income ratio works is that, the year goes by, we know the bank has generated a certain amount of income and bank incur a certain amount of OpEx this year. So that becomes the incremental and that number for us is trending down pretty quickly and will trend down next year also. And finally, the incremental cost to income becomes the cost income eventually on a scale the book. So to give you an idea, the -- this year, in this quarter, in Q4 FY '22, the -- and so you may take your back to FY Q2 FY '22. So at that time, our OpEx growth was 47%, but income growth was 41%. So obviously, it's not a great cost income ratio. You come to Q3 FY '22, so our expense growth was 30% and income growth was 34%. Now you come to Q4 FY '22. Our income growth is -- our expense growth is 24%, but income growth 37%. So you see how the jaw is opening. So it should not surprise you at all if you wake up next year or year after that to see the incremental cost to income coming down for the bank. It will come down.

Okay.

I'll tell you another very big factor, which many people are missing when they are evaluating our bank. The -- so you think of today cost to income as x percentile we say 78% or so something of that if you take the latest call it 76%. When we say 76 actually not -- we strip up all kind of treasury income and everything, we just mean 4 co, which we can measure quarter-on-quarter. So that's somewhere there. Now you think that there are 3 businesses that is dragging this down. You know those 3, call them out. One is credit card and the credit card business, our expense is more than our income by close to about INR 320 crores, okay? So that's been basically the loss of the year. Now that's less a bit of credit cost. So now obviously, we're not going to be incurring say 24 crores of gap within operation income forever, it's just the state of building it. So let's say that make it up that next year it comes INR 100 crores, the year after that it breaks even frankly it will become positive in our opinion. So that's one item just keep it there. Number 2 on the retail liability side. So we've told you that already, we told you that it's incurring a loss of about INR 325 crores a quarter for us. You multiply that by 4 you know about 12, 15, INR 1300 crores they are losing the business because these are branches, ATM, everything they set up to build up CASA -- faster number there. Now the legacy item of that what we talked about INR 27,000 crores at 8.8% we're monitoring. So you add these 3 numbers. Now simply add that because you know we're going to fix this for sure, certainly we're not going to run the bank like this forever. So you just add back those 3 items back to an income line there it will help for sure. And then you will see our cost to income has already come down to 64 already, even today, just add that these 3 numbers. So which means that if you did nothing, just fix these 3 items and don't do any more operating leverage will be 64. Then on top of it we had our operating leverage. So income down to 50. So I can clearly see that this bank is getting to a 50% cost to income ratio. It's only a matter of time, you're there, I'm there, you can see the numbers as they play out.

Sure, sure. Sir, the last question I will have to on credit card, the RBI has come out with the new regulations on that. What's your view? And how do you see our bank is doing in this? Because your product is -- they really could last -- in the last con call, you have asked one of the analyst to pick this and I have taken that and I really find very good product. So what's your view on RBI regulation first? And how do you see the bank's long-term strategy on the credit card?

We like it, we are very proud about the product we launched. I'm also happy like the first gentlemen who spoke that your card about experience. And so with a good product we this book will now begin to continue to grow for us. I told you credit quality is excellent, customers are happy. We hardly have complaints. So basically, we think we'll keep doing this and there is a lot of profit to be made in this business. Right now in this all the composition of cost to income and adjusting ROE, et cetera, I'm merely talking about matching expense to income, there is not going to be a matching thing, there is going to make in our opinion, maybe 3, 4 years from now, our internal estimates are we'll make a PAT of not less than INR 500 crores to INR 600 crores on credit cards alone, okay? So that's the kind of picture we have seen on this business. And with regard to your second question, frankly, those all norms are good norms, basically inactive cards will get leaded out. And any other new banks, we don't have much to lose on the existing base. And we don't have co-brands yet, so even the co-brand issue doesn't may cross.

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

Sir question is on your SAR mobilization. I just wanted to get some more quantitative aspects here. So clearly, the SAR mobilization story has been phenomenal without in the last 3 years without too much putting too much branches as well. If you can help us to understand the granularity of the SAR portfolio. Clearly, your LCR disclosure shows as per the last quarter that it is clearly granular in terms of if I do the retail regulatory retail breakup is probably in line with some of the larger peers. But I just wanted to understand if you can further break that into may be into ticket size which ever you feel appropriate, maybe 2 lakhs, 5 lakhs or maybe even 10 lakhs, just to how much is between certain ticket sizes? And if you also have the breakup for individual wholesale, government, trust, et cetera?

The, see the way we think about it that, yes, I think on the savings account front I think, yes, [indiscernible] actually quite a good job. But I think on the current account front, we've done okay job I think because our current account business should grow faster. In fact, it should outstrip the growth of savings account for us to get a decent balance mix of car and the SAR. So we'll work on that and India is open -- opportunities are open. We have a really good bank and really good product, really, really good products. So we will definitely address that issue as that goes along. With regard to the balance per account and this as we speak maybe you can ask your next question and I'll pick the answer by that time per account how much balance you get et cetera I don't have the number upfront.

Sure, okay.

As we speak about the answer, so...

Sure. So I don't think the average number, I actually wanted if you have the breakup maybe by ticket sizes, maybe by S&I or maybe by ultra-HNI or maybe by salaries, retail or maybe a normal, let's say, 50, 50, 50 plus.

I'll tell you, as a bank, generally speaking, we are -- if you're trying to get a sense of segment, we are attracting a slightly upper middle class income segment kind of -- or S&I kind of segment, which is naturally kind of gravitating to us. That's because the kind of branches we put up, I don't know if you've been to any of our branches, they are really high-quality branches, spacier and very, very -- so they're really good branches, employees are really core. So our branches are like that, our products are also such that there is a -- our brand is also such that people tend to believe that we have good products and so on. And our wealth management offering is really good, so last time I told someone to take a credit card, now I'm going to request you to take our wealth management business, just try our operation, you'll understand what really is super platform we built. So our wealth management business is very good. So -- and our interest rate is to attract SNI customers more. So let me just say that we get a upper income customer base to our bank. Largely, we also get the people open 10,000 account, but we get more the opponent.

Right. And similarly, sir, if I were to see, how much of your asset side customer, what could be the proportion of savings account which is coming from your existing asset side customer? Or is it that the asset or the SAR acquisition strategy is slightly different from asset side of customers?

Basically, our -- on the asset side, we have 2 kinds of customers, one is the consumer durable and 2-wheeler kind of that they -- they represent certain income profile. That income profile doesn't leave much balances actually. And we -- if at all, they take, they probably take the 10 k product of the bank. But there's not much of a penetration we have in that segment, though we'd love to. I mean, we like every segment and we -- but we haven't made much of a penetration there. But our segments are more like I said, people who are having a home loan from us, or people have a business form us, who then also tend to have a bank account with us. Like I said, we are a little slightly upper middle class kind of income segment.

But any number, sir, that you want to put to get how much of your SAR would be funded?

We'll come better prepared next time on this good question, that's what I would like now.

Sure, no worries, no worries, sir. And on your number of employee, sir, if you can give that number and maybe because you have clearly higher yield and you are -- you are arguably sort of dealing with on the asset side slightly, let's say, self-employed SME sort of customers. If you can also help us what could be the number of employees which are engaged in recovery/collection/monitoring? And is that proportion slightly higher than other banks? Or there is something else which is driving such a better asset quality performance?

See, basically asset quality, some quality of underwriting and the skills developing them. It's got some correlation to yield, but not really a lot. So for example -- so basically, these days even everything is getting digitized, even collection side is all getting just like sales. So we not put out any specific division-wise numbers in the market side, I have no intention of sharing that. But I can just say that, I mean, I don't like not to, not that I have it on my hand, but we don't set it any way put a division wise, that's not the data they are in the presentation. But generally speaking, we have actually find that the number of employees inter say over year is only coming down, although the book is going up. And that's because more and more work is happening digitally. To give you one idea for example, let me say, even a year ago or 2 years ago, if x number of customers return their cheques unpaid and a certain percentage, let me pick a number, say x percentage of then, x percentage of that Y was going to visit the customer. Now it's not x percent because now we're sending UPI Link to the customer, customer are paying through UPI, so nobody is going to the customer's home. So you get a sense about the entire activity of somebody going to the customer's home, picking up their cheque et cetera has come down. So that's why these -- that's where all these operating cost also comes down and budget.

We will take the last question from the line of Aditya Shah from Vikram Advisory Services.

Congratulations sir on the wonderful set of numbers and I've been looking at the improvement over the last 3, 4 as you've mentioned. My question is, what should we expect as steady-state NIM for the next 2 to 3 years?

I know many people asked the question, actually, but we like to play it along -- there are some reasons why we feel it will go up, there are some reasons why we feel it will come down. And we'll go to take as a complaint or if you're doing more home loans, yield should, NIM should compress. We're also doing the other business that are growing very well with good credit quality that should increase the NIM. So we don't know where it will settle, but let me just say that it could inch up from here.

Right, so that is for this year, but overall, on a 2, 3 year basis, should we expect anywhere between 6% and 7%?

Yes, yes. That's our internal estimates also, probably not -- we're not touching, we're not 7%, but certainly should stay in the 6% plus 6-ish plus league.

All right, sir. My next question is, why is there a sudden change in the savings bank interest rates in the last 1 year. First, we were at 7%, we came down to 6%, then to 5% and then again to 6%, probably from 1st May, we are doing it for balances above 10 lakhs.

I'll say why we did that, very simple answer. See, last year, there were just too much of excess cash for us is the way we had -- I told you that in a COVID year of 2021, I said this number to you earlier, we got INR 25,000 crores, INR 26,000 crores of cash pouring into the bank at that rate. Now we couldn't take that because we're not growing the loan book, what do we do is another INR 25,000 crore lands up. So we had to reduce the rate at that point of time. And as you could see now, then we slowed down the growth of the profits and we were still very liquid, we're still sitting at 30% and 40% even today for that matter. But then this year onwards, we are seeing strong growth. And that's why we have accepted that we're doing on a progressive basis this time, we're not paying from the first rupee, so that way doesn't add to the cost so much. But yes just of course we are paying 6 and other banks are paying 3 or 4, the fee is going to be higher cost for us. But really, like I said, it's more a measure of how much money we need. I have always told people that I don't -- I am not going to take a position that we will never raise it, we will never drop it, I don't see any of those things. I could, I'm playing cricket, go front foot, go back foot, I could do anything whatever -- whatever the ball deserves I will do.

It's just that it's quite sudden that is why you're staying from moving 3 percentages down or 2 percentages down to moving 1 percentage, that is why this question because it doesn't give stability in terms of the customers who are -- your scaling bank customers because the expectation changes pretty fast in 2, 3 months or 6 months.

No, no, I appreciate the question and I appreciate the comment also. You're absolutely right. But thing is that for a whole year, we had kept it at 5%. And so it's not like we change in 2, 3 months. So for a whole year, we kept it there. And even now as we speak, really like as we speak, we don't need money at 6% really. But then preparing for the whole year, we are seeing a strong demand coming up. So we didn't want to be -- so we want to be just prepared so to say.

All right. And my last question is regarding the reverse merger with the IDFC Limited since the AMC has been sold, when do we expect any announcements on that front?

Really, I'm not able to make any comment on about that at this stage.

Okay. So should we say 6 months to 3 months or somewhere around that and because probably things will get sorted by then?

No, I understand the question, but unable to comment because we did inform our interest or to take the merger process forward, which we still maintain. But -- so there's no doubt there's no -- absolutely no issue about intention from our side. But I think to put a time to it is difficult because we don't know there are so many points to close before you get to that point. So, but there's no intention issue, definitely intention is on, but things have to work.

All right sir, all right sir, thank you so much for your answer.

Thank you so much, but the earlier, someone asked a question about return on equity and we half answered, I mean we answered it kind of. Now you see this quarter's profit INR 340 crores and then you multiply that by 4 and you know that -- and then you annualize it and then you divide their equity. We are already now looking pretty much better than what it was before, not that we had a great benchmark in the past, but pretty low, but at least it's becoming respectable now, but it's still less of the respectable I would say. But then you add the -- you add -- they are for 3 businesses, the ones that I named earlier credit card, retail liabilities and legacy liabilities. These 3 alone, if they were to just breakeven, forget being profitable, if they were just breakeven, we will add on a PAT basis post tax this is INR 500 crores per quarter. So you add that INR 500 crores to the INR 340 crores that takes us to about INR 840 crores. And you annualize 840 crores into 4, that INR 3400 crores and you divide INR 3400 crores to INR 20,000 crores or INR 21,000 crores, you get to see it already touching an ROE of 15% plus. So therefore, it should not surprise you at all when we touch 15 ROE because all that we adjust 3 buttons and [indiscernible] from loss making. So see if any of you have any concerns about our return equity, I'm telling you we are already there. Only we got to work on those 3 items and rest it will increase. So don't at all be surprised when our ROE touches 15 and it will definitely happen. And then you can imagine what a good -- well governed bank with a good ROE, growing at 25%, technologically very abled, what we should be valued at, you can do the math for yourself. That's all my closing comment is, but anyway I just want to say thank you to all of you who are on the call and for talking to us.

Thank you, everyone for joining. Have a great weekend.

Yes. Thanks Mr. Vaidyanathan and thanks Sudhanshu for patiently answering all the questions and all the best for the future. Thank you all the participants for participating on the call. Thank you, and have a good weekend.

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