Indian Bank (INDIANB) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. I welcome you all to Indian Bank's post result conference call for the second quarter of financial year 2027 posted by Nuvama Wealth Management Limited. From the top management, we have with us Shri Binod Kumar, MD and CEO; Shri Ashutosh Choudhury, Executive Director; Shri Banrang Singh, Executive Director; and Ms. Mini, Executive Director. I request the MD sir to briefly summarize the key highlights from Q2 FY '27 results. And also provide strategic directions for growth, margins and asset quality, post which we will have the Q&A session. Over to you, sir.

Good evening, and thank you all for participating. So key highlights, I will say thereafter, we'll go to Q&A. So total business grown by 14.22%, deposit growing by 12.50%. CASA we have seen good growth of 13.77%. Sequentially, it has come down a little bit because of the FCNR basically. But Y-o-Y basis, it has gone up from 38.87% to 39.36%. Bulk deposit has come down last quarter, it was 1.62%. This quarter, it is INR 1.52%, that means 10,000 bulk deposit has come down. Corp -- advances has grown by 16.39%. Corporate has grown by almost double-digit, 9.92%. RAM has grown by 17.74%, almost all segments equally growing. retail 17.37%, are 17.18% and MSME 19.06%. RAM constitute around 67% of the total portfolio. Coming to the profitability side. There, I will give few parameters, I will give few numbers because during the quarter, we have some share of NSE unlisted. So we -- it has been listed. So on account of that, we have booked some profit and some MTM , it has gone -- part of that has gone to -- we have booked at INR 252 crore and INR 1,134 crores has gone towards MTM. So net profit has grown by 14.71% to INR 3,462 crores. Operating profit has grown by 46.58% cross INR 7,000 crores. But apart from NSC contribution also, it has grown by 18%. Net interest income has grown by 17.83%, Other income has grown by 58.5%, basically contributed by NSE. NIM has Y-o-Y basis has grown by 8 basis points, but 2 basis points sequentially, domestic by 1 basis point, global 2 basis points. And -- we have done some turning in the overseas portfolio, so overseas NIM has expanded by 8 basis points. Return on asset is flat at 1.31% sequentially. Return on equity is 19.66%, 18 basis point expansion Staff expenses flattish basically 14.56%, INR 337 million Other expenses, INR 1,545 crores has grown by, I mean, negative 0.29%. Then cost-to-income ratio. Cost-to-income ratio, actually, it is 44.55%, if you take NSE into account, if we don't take it, then it is 39 basis points. [indiscernible]. Provision coverage ratio 98.22%, credit cost has come down by 1 basis 0.22%. Earning per share, 102.8 value, 535 Cost of deposits has expanded gone up by sequentially by 9 basis points. Yield and advantage also has gone up by -- sequentially by 8 basis points. And yield on investment has also gone up by 2 basis points sequentially. Total Tier 1 capital is 16.21%. Out of that CET1 is 15.18%, Tier 2 is 1.03%. Gross NPA has come down to 1.61%; net NPA, 0.14%, slippage ratio 0.69% it has come down by 8 basis points from the last quarter. SMA has come down from 7.35%, last year to 4.19%. And basically, the absolute number of 29,748. SMA to more than INR 25 crores, INR 25 crores is around only INR 400 crores. So -- and we are not seeing any major stress in any of the account. And -- going forward, I think we have -- I have given guidance of deposit 9% to 11%. I'm revising that to 11% to 12%. And the advances you have given guidance of 11% to 13%. At that time, revising to 13% to 14%. Recovery, I think I'm not revising guidance, but I think we will be doing better than what we have given guidance. Recovery also, if I talk of between, I mean, a smaller account or bigger contest, I mean, more than INR 1 crore, we have INR 756 crore recovery and less than INR 1 crore, INR 791 crores. So it is almost equally distributed. We have a pipeline of credit corporate credit. We have a pipeline of INR 63,000 crores. Out of that INR 30,000 crores is sanctioned and yet to be disbursed and in principle given in INR 10,000 crores and remaining some discussion and a preliminary discussion around INR 23,000 crores. So these are basically a few things. . During the quarter, last few 2, 3 things I will highlight. Last few quarters, we have taken many initiatives on basically CASA, like salary account, maintaining floats in various accounts and also giving fintech solution to the different companies have different time in companies or government departments. So these are giving good results. Through CRM also, we have launched through CRM, which has been launched in July only. We have been able to add business through CRM INR 1,500 crores approximately. In this quarter, Fintech solution, we have provided to 23 companies, government department taken together. In that, we have added around INR 5,000 crores. Similarly, in CMS, CMS, we have started, and there also CASA is around INR 7,000 crores. So these things are giving us good results. NGC through NGC not only being used for the -- I mean, query resolution query resolution, it is also being used for lead conversion. And through that, we have converted around 5,000 leads and amounting to INR 200 crores. So these are the few initiatives we have taken. MCLR book I mean, constitute 43.19%. External-linked benchmark 49.65%. 25 basis points, all of us, it has already been increased repo rate. So we should see some expansion in the NIM, maybe 5, 6 basis points. Going forward, as and when it unfolds, we will see how what will be the scenario. So these are the few highlights. Now we can -- I will request my colleague, Mr. Ashutosh to talk about the digital initiative and thereafter, we can take forward.

Thank you, sir. Good evening, all. I will just highlight a couple of the initiatives that we have taken recently this Q2. One is AI conversational banking. We have named it as TARA, that is trusted AI relationship assistance. So this particular initiative is for ease of doing the transactions, it's a voice best command transactions. With this, we anticipate the customer engagement and the customer experience will improve. And that will help us in growing our dear low-cost resources. The next 1 is we have introduced a smart wealth AI-powered PFM, that is personal finance management. This -- in the first Fed in Q2, we have started with only an analysis of expenditure and that investment analysis it gives -- in the second Fed with an intelligent insight, it will also able to guide the customer what kind of expenditure they can reduce, what kind of investment they are looking for. And accordingly, it will guide -- so along with all these digital initiatives, the digital business has grown 18% year-on-year basis. Thank you, sir.

So many people will have concern regarding treasury. So upfront, I'm explaining. Without NCI will explain because I consider is a onetime. So if I talk of H1 last year, we have earned INR 854 crores. This two also have around INR 794 crores. If I talk of the Q2, the last 2 last year, INR 152 crores and this year, INR 90 crores Other than NSE, there is MTM of around INR 11 crores. in MTM loss.

We will now open the floor for Q&A?

Yes.

[Operator Instructions] We'll take the first question from Mr. Ashok Ajmera.

Congratulations to you for a very good set of numbers. In spite of that, whatever is happening in the markets and whatever is going on globally, your performance is excellent. And I think you are in the third public sector bank having declared the result. So expectingly, I think this time, all the banks are maybe I don't know, I mean, the region maybe we come in Diwali or maybe something happening there at FMO. But every bank is rushing up declaring the results and our results are also, I mean, it's one of the best set of results which are there so far. Sir, a few things, like the provisions of the standard assets, I think, gone up from INR 733 crores to INR 1,882 crores -- but for this extra provisioning, the profitability would have been much higher, but I think you have taken the benefit of that MTM profit of the being listed. And so on that, can you explain that this is because of the ECL provisioning or some extra provisioning which you wanted to do. And in the income and the profits, there are certain items which are -- 1 is that miscellaneous income has gone up to INR 468 crores in this quarter as against INR 157 crores in the last quarter. If you can throw some light on that. I have a couple of other questions and some observations also if you can answer this now, and then I will take it up to further questions, sir.

Yes. So provision very rightly, basically 1,500, we have made for ECL. Last quarter, we have made 1,000, now we have made INR 1,500 crores. So ECL have totaled. We are expecting total impact of INR 3,500 crores. So because of that, I think since we have some so why not to make it when time is good. Other income, that is basically some -- if you see last September also, it was good around 500 something. June it was less, again, it is INR 400. Some income tax refund has come an increase on that INR 27 crores and interest on that.

Okay. So INR 271 crores is the interest on the income tax refund that is to this info which may not be continued feature in the next quarter, actually?

Yes.

Yes, sir, on the treasury, it's our treasury front also competitively -- of course, there is a pressure because of the yield ardening with every bank in the treasury, and you have competitively performed better than so far other bank. But going forward, I mean we'll have to depend only on this yield movement and the hardening of the yield, even in the U.S., a little bit softening is there yesterday and today, but -- going forward, what do you see, sir? I mean, where do we see the income coming from the treasury, maybe from the trading opportunities or arbitrage opportunities, if it is there at all. So how do you see the treasury income unfolding in the coming quarters, sir?

Yes. So see, one thing I will say in the last -- in this meet I have also told. Treasury since we have not earned very handsome and that was part of the strategy, very handsome income last year or so. So of course, treasury income going forward will be muted. I don't see very high profit from treasury -- but impact, in my case, will not be very severe because we have still not booked in very good yielding securities. So impact will not be much. Only one thing we were also earning some good income in ForEx. So let us see how that pans out. Some guidelines have recently come from RBI, how that pans out, that is to be seen. But treasury overall, since I see, overall, I have not accounted for very high profit from treasury. So that is not going to impact my numbers.

Sir, now we have grown well in the -- on the deposit front also, even in this quarter also, the growth is 3.5% almost and mention you are credit and giving help to be credit. But now with this FCR window, I mean, all those routes are closed and where we got a lot of good dominant deposits -- going forward, do you see the pace of deposit at the same rate? And whether the credit growth, which is 5.5% in this quarter will match in the remaining 2 quarters also, and we will revise our targets for the deposit and credit both going forward in this -- and another coupled with this is, yes, sir -- sorry for this interruption. this MCLR, you said, is 43.19% MCR linked credit. So the benefit on the remaining loan book, the benefit must have started immediately with this increase in the rate of 0.5 -- I mean, 25 basis points. So as far as the increase in the deposit rates are concerned, whether it is going to have some -- I mean what do we plan and what I understand is that deposit rates, which are already going on are not going to increase, even if we increase the deposit and interest on the deposit, even if we increase, it will take some time, there will be less prior. So you said the overall difference in the NIM will be about to basis points will NIM will increase from this rate increase?

Yes. Yes. So let me. So growth, see deposits, I have already told whatever FCNR we got, we have managed it very well. bulk, we hated around INR 10,000 crores. Retail also, we've gone a little slow. So overall, if you see my deposit growth, it has not contributed much by FCNR. Last quarter also my deposit growth by around 12%. So 12% deposit growth, I'm expecting that I will be able to maintain. Advantage growth is 16.39%, it has come primarily on account of the loan being taken against the FCNR deposit, which may not be in the next quarter. But having said that, I am expecting that 14%, 15% growth in advances we will achieve. It will not move down substantially, and I am comfortable with 40%, 15%. So I'm comfortable with that. Regarding MCLR, of course, I mean, very next day from the repo rate increase on the external benchmark, it has started accruing, and rightly told our NIM, I think NIM will increase by 6, 7 basis points in this quarter. And going forward, as and when repo rate unfolds, we'll see.

See, our corporate book also is growing well. So what is the status there of the sanctioned pipeline and the projects which are still under sanction also the -- some idea about that, that are going to take the help of the growth of business in the corporate more as there is a situation now in the rain, everybody is chasing that -- so what is the strategy or towards increasing our loan book through the corporate book?

Corporate, I will say, a growth of 10%, 12% I'm targeting in corporate. Earlier in, basically corporate is also function of capacity building. Earlier, if you see my growth in corporate is 1% to 2%. We -- I have taken various initiatives started intensive training for credit. So this thing -- because of these things now people are gradually capacity building happening. And I'm expecting that corporate, I will growing lower double digits because see, is also build up in the good time only. So that I also have to be mindful that we should not enthusiasm we should not start building a risk in the book.

For the next question, I request Jayant Kharote to ask the question.

Congratulations on a good set of numbers, sir. So first, if you could -- maybe I missed this FCNR numbers, if you could clarify how much did you raise total? How much was on your own book, the leverage given and the status as of 30th September, if you utilize this liquidity completely? Or do you have some still remaining ones?

See, still I'm in borrowing side. So you can say, I don't have -- you can see I don't have any surplus liquidity. We rose -- we raised FCNR of 2.3 billion. That makes around INR 21,000 crores. So INR 10,000 crores, bulk has gone down by around 10% from 1.62 to 1.52 and normally, my retail term deposit growth used to be in the range of 10,000 to 11,000 which this quarter, we have targeted around 5,000 to 6,000. So 5,000, 6,000 there. So remaining INR 5,000, we have utilized. So there is no surplus liquidity on account of FCNR with us.

So if I'm right, you raised 21,000, of which you paid off 15 -- I mean, you did renew 15 of your bull and another 5, 6 in the retail side that you did not. And on the asset side, sir, you have how much sales leverage on this book? .

Leverage against a deposit of INR 21,000 crores, you can say, I mean, 2.3 billion, you can say roughly around EUR 2 billion will be the loan book. And there, we have preferred loan against the FCNR. People are taking loan up to 90%, 95%, 96%.

Okay. And this is what you meant by the rejig in the international book, right? You've not run...

Yes.

Understood. So just looking into the next quarter, some of this international book growing that should weigh on our NIMs and, of course, the benefit from the rate hike. How should we think about the yields for the next quarter? And ancillary question to that is -- we see CD market again hardening in the last 1 week or 2 weeks. So I don't think people are waiting for the quarter to end before starting to raise. So how do we see that wholesale market -- basically, I just wanted to understand the NIM construct for this quarter.

See, NIM, I will be very cautious in raising bulk also. Maybe if need be, we will go for other resources like we have taken approval for INR 5,000 crores up to INR 5,000 crores infrastructure bond. We may go for that. We are also exploring a refinance opportunity. If I get a good rate better than CD rate, better than bulk rate I may go for that. We are exploring various opportunities. So otherwise, also in bulk, I remain very cautious. That's why if you see I'm not changing growth, 12%, 13% growth is okay, I'm okay with that. So the NIM, I expect that overall, particularly if you ask for this quarter, I think there should be some expansion of around 5 to 6 basis points. Because the deposit will replace at subsequent route, bulk already we have accounted for some -- I mean ultimately, we will not get anything less than 720.

Yes. So when you say expansion, you adjusted for the self leverage on the book as well as the some tightening on the bulk and the rate hike impact all put together there still expect expansion in third quarter.

Yes, yes, yes.

And sir, second question is now on the ECL. I think you've already disclosed how much is the onetime impact and you have showed up provisions. But on the recurring side, the steady-state impact -- on the last call, you had said the range of 12 to 15 bps, 1 of the banks have reported said the hardening of field has an impact as well. So would you like to revise your estimate upwards or downwards. I mean, is that number still holding up? The recurring talking about the onetime impact. I'm talking about the steady-state recurring impact on credit cost post-ECF.

Hardening or field how it is going to impact? I'm just trying to understand how it is going to because see, this is a function of [indiscernible] default and loss given default. So I mean if interest rate is hardening then are they expecting higher default rate? I don't know. But as per my calculation, I am not reign that number. Region being, I expect the default rate will be under control. So -- because that is reflective of the SMA book. My SMA book, as I told, it has come down from 7.5% to 4.19% and more than INR 25 crores also hardly anything. -- smaller accounts, we are already seeing elevated defaulted, which will continue, maybe a little bit here or there. So not expecting any increase in default as a consequence -- going forward, I have the same I'm maintaining that 10% to 15%.

10 to 15 bps. And sir, how do you think you manage that in the ROA construct? Do you want to pass it on in pricing or -- how do you see that play out from -- because some banks are impacted, some banks are not. So unfair to say everybody passes on uniform.

I don't think people will be able to pass on, very clearly, I'm saying because people are -- they are not maintaining now 6% still they are giving rate on a few of them. I mean, big loans, they are still giving 6%. Passing out will be very difficult. Only thing what I'm expecting. 1 year, I cannot say because 1 year, even I will wait and watch how things pan off because it is a new concept it will take 1, 1.5 years to 2 years in stabilization, model with which all and a lot of discussion will happen. Maybe a regulator may not buy in my assumptions. So 1 year, it may take in a stabilization. Thereafter, as you see, every quarter, if we are making some additional provision. So I think that will be compensating that 10 to 15 basis points.

Understood. Sir, one last question. For the LGD assumption for ECL, how many years back have you gone on your book?

Five years.

Across products, it's a 5-year window?

Yes, 5 years. .

We'll take the next question from the line of Mahrukh.

Congratulations, sir. So I had a few questions. Firstly, that given that there has been aggressive lending in SME, even agri and retail, do you see any points of stress.

Not reflecting so far. I mean, very candidly, I'm saying not reflecting so far. All of a sudden something comes, then I cannot say. But as of now, not.

Okay. Sir, what are your disbursals under ECLGS? ECLGS, how much have you disbursed so far? .

ECGLS, okay. ECGLS has already happened. [indiscernible] disbursements happened already in 31,000 accounts.

Okay. And do you see the scheme coming back, given drought. I mean, how will the banking sector face the drought now?

Drought. ECS will not come for that. Ratos actually then there will be a postponement of the repayment. But fortunately, in the state where drought has been declared, my exposure is very minimal, not even in 1,000. .

Okay, sir. Sir, and do you have any comments on banking sector consolidation often on reports keep coming on M&A and banks? Any views? Any thoughts you would like to share?

I also know the same thing which I read from the newspaper or media. I have no additional information.

We'll take the next question from the line of Jai Mundhra.

Sir, I was talking about, if you can give this SMA 0, 1 plus 2 figure for all inclusive book, book, which is like INR 29,700 crores. That amount separately, sir.

And take it [indiscernible].

So that means that it's SMA 1 and 2, they have been very unchanged, right? Actually, they have improved slightly only versus last quarter.

Yes, slightly well has improved. Right.

Sir, and you continue to hold 10% provision on both SMA 1 and SMA 2, right?

Yes.