National Development Bank PLC (NDBN0000) Earnings Call Transcript & Summary

Thank you for joining National Development Bank Plc's quarterly investor webinar. Today's Investor Day webinar will be to discuss the financial performance for the first half ended 30th June 2023. So webinar will follow same format like our prior webinars. Bank's Director and Chief Executive Officer; Mr. Dimantha Seneviratne will take you through a prepared presentation. At the end of that, he will open the forum for questions and answers. [Operator Instructions] This is a recorded session. [Operator Instructions].

Good morning to those joining Sri Lanka and also some of those [ varies ] . Good afternoon. Welcome to NDB's investor webinar where we are sharing our first quarter results. With me, I have my -- part of my leadership team joining today as panelist so that they will also chip in when there's a need to answer your queries. Just to give a background of the operating environment, we all know it's a very turbulent time that we have been going through over the last one year and even the six months or so. Things are getting better, but still a lot of uncertainties, a lot of changes that we saw. So that's the background that we operate at. I may elaborate more on the economic conditions and also how the impact on the banking et cetera. Of course, we saw the monetary policy being relaxed. We saw 450 basis point action in the policy rate since first of June. Of course, the earlier the [ item ] measures steep increases in the Monetary policy and all have helped to reduce the inflation. So every month during this year, we saw a steep reduction in the inflation numbers and as of July, it has come to a mid-single-digit figure of 6.3%, which is also in line with the Central Banks' expectation, government expectation to maintain a mid-single-digit kind of inflation. So it's good to see that improvement is also with the lag effect, how the policy measures taken by the government has resulted in helping curtailing the inflation side. We also saw an improvement in domestic supply conditions and with the exchange stabilizing. We saw a certain relaxation of restrictions that was imposed on the imports and also the gradual enhancement in business and investor sentiments which as also shown in the some of the surveys conducted, but that's a bank because banks are in all in economic activities we saw activities picking up during the first half. In terms of external sector performance, of course, we have been resilient amid all the challenges. We saw a good improvement in worker remittances, which is very good note to see compared to last year, full figure of $3.7 billion that we received. Up to June, we received $2.8 billion and one good thing is the informal market is virtually now not in existence, which is a good point, and we saw even in July, the work remittances has crossed $500 million about $530 million. So that's a good sign. We also saw tourist side picking up tourist arrivals crossing 820,000 as of at last week, for the year compared to of last year's 719,000. Gross official reserves also have improved to [ LKR 3.8 billion ] . And exchange rate also stabilizing to some extent, we saw exchange rate from high 360 figure in the end of last year improving to current level of 322 range. Then country saw some inflow of World Bank funds and IMF first tranche was also released, and looking forward to the release of second tranche in September, the ADB, there also $350 million that was received. So all these include and the external measures that were taken helped us to improve on the external sector performance. The other thing is on the policy rates. We saw positive rate reduction of 4.5% or 450 basis points since June 1, 2020, we saw the first reduction in June from 15.5% to 13%, 2.5% reduction. And in July, there was another 2% reduction so that the current SDFR stands at 11% and SDLFR is at 12%. And more importantly, recently, the statutory reserve requirement was also reduced from 4% to 2%, effectively improving the liquidity in the market. Again, signaling some opportunities to grow and improve other liquidity. Market rates as a result, substantially reduced from very high levels in what we saw in 2022, which was a 364 1-year T-Bills going around almost touching 30%, 29.7%. Now has come down to 13.94%. We saw even three months rates also steeply climbing down. And the AWPLR, which was around 28% in 2022, end of 2022, reducing to currently about 18.2%, and it's such a reducing trend that we have seen. AWDR also at 14.67%. The other key important announcement was the domestic debt structuring. That actually helped to reduce the risk premia assigned to the interest rates of the treasury bills and bonds side and also the uncertainties that was revolving around the banking sector or clarified through that announcement, so that also helped to reduce the interest rates. With regard to the banking sector, very broadly, we saw the sector-wide assets declining in the first half. industry-wide entire industry had seen a decline in their total assets. And also the loans and receivables also had a negative growth. We only -- one was the exchange impact from the 360 to the 320 level. But other reason was consciously because of the high environment, interest environment and the credit concerns, banks have been reluctant to grow. And there was lesser demand also from the customers because of the low growth or the low GDP situation. So instead of loan growth, all those assets have been [ sectorized ] . We saw increasing investments, basically shifting the funds to investment in the loan book reduce and then move on to investment in the government bonds and [ bids ] . The other thing is the credit quality continue to deteriorate. And the industry average was around 13.5%. The entire industry saw the decline in the credit quality. And then on the deposit side, we saw a moderate growth of deposits. Naturally, the inflation hitting so high numbers naturally as ability to use their savings or sale was impacted, resulting in lower growth in deposits -- of course, the steep increases in personal taxes also contributed to that situation. So other thing is the CASA deposits substantial decline in the entire industry saw substantial decline in CASA numbers, mainly because of the high interest parity between the fixed deposit cost, even a 3-month deposit was going at a higher rate compared to a lower savings rate. So there was a tendency for consumers to move on to even to get a short-term advantage in deposit rates. So that also had an industry wide impact on the CASA. Then liquidity-wise, there was improvement in the liquidity market, so liquidity, again, because of lack of demand. And also one of the biggest borrowers, the government sector borrowing [also curtailed ]. So both in local currency and foreign currency, the liquidity situation tremendously improved. Entire bank sector, I'm sure on the foreign currency side are very highly liquid, and that is a trend that we saw. And the other thing that we are awaiting now is now that the domestic debt structuring is over the outcome of the sovereign bonds, the discussions that are ongoing because local banks also have a substantial stake in ISB, that is the one that we have been reading for. We saw all the SLDBs, Sri Lanka development bonds were settled, outstanding SLDBs were settled during earlier this week. Total settlement by the Central Bank was about $788 million that was settled and that funds were injected into these. So that we saw and awaiting the next step, which is the ISB structuring side. All the banks have made up option provisions for potential [indiscernible] that have been indicated in the domestic debt structuring paper and looking forward to that. So that's a little bit of the operating environment that we operated in the first half. And I move on to the financial performance. It's a transformative journey that we have been going through Initially, we were going at a pace to grow the balance sheet. But last two years, the COVID impact, the huge exchange situation and all. We have transformed our strategies to a more balance sheet focus growth. If you look at the financial performance for the first half compared to last year, we had gross income year-on-year increase of 50%, going up to LKR 66.7 billion. Our profit before tax, we had 55% year-on-year growth to LKR 4.2 billion and profit after tax to LKR 2.3 billion, which is a 37% year-on-year growth. Of course, the tax rates were revised during this year. Has roughly about 8.5% increase in the tax rate. So that also resided in profit after tax increase is lower than the increase that we saw in the profit before tax. In terms of balance sheet, the total assets of the bank recorded a 5% decline to LKR 793 billion. This is mainly due to the exchange impact from high because about roughly 25% of our book is in dollars for the foreign currency. So that could have an impact when the exchange reduced the rupee to dollar exchange reduced. That is one reason, but also we saw a loan book on the rupee side also shrinking because the lesser appetite for credit and even the bank costs didn't want to take much exposure in an uncertain environment, there's a demand for credit as well. So all that contributed for a 5% reduction in the balance sheet. Loans and advances, that's where we saw 14% negative growth to LKR 470 billion, whereas on the deposits, we saw a 7% decline to LKR 628 billion. Deposits, of course, the main impact is because of the exchange impact where dollar denominated deposits converted at a lower rupee rate. With regard to KPIs, net interest margin at 3.7%. Now relative to industry, this is slightly lower. There are reasons as well, but that's something that we are working on. Return on equity has improved to 7.2% from what it was last year. Cost-income ratio, I would say, one of the better cost income ratio is 35% compared to the industry. And then on the entire loans, Stage III ratio, it has gone up to 9.2%, slightly above the industry, but we are expecting that to improve by the end of the year. In terms of capital ratios, Tier 1 has improved 11.04%, that is a separate slide on capital ratios over the five years. When it comes to that, I will elaborate more. And total capital adequacy ratios improved to 14.78%. Moving on to the financial performance income statement. We had gross income growing by 50%, as I mentioned, from LKR 44 billion to LKR 66 billion. That came out mainly from interest income growth of 70% from the LKR 26 billion to LKR 37 billion. Our interest expenses were quite steep. So from LKR 22 billion to LKR 48 billion, the interest expenses, which was about 117% growth mainly because of the high interest rates that were prevailing. Now this would get corrected going forward with the rate revisions that we saw in June. However, the first half naturally because of the high rates, the deposits have been repriced. So the entire industry saw a similar situation. If you look at the net interest income, in NDB's case, it's a small increase from LKR 14.9 billion for -- up to LKR 15 billion, a small increase mainly because of the repricing of the deposits at a high rate. But that would get corrected as we see every month substantial deposit base is getting repriced at a low rate, so they should get improved in the NIM. With regard to the non-fund base income, that our bank has done quite well when you compare with the industry also net fee and income, commission income, we had 19% growth in a challenging period where demand for imports also became less with the exchange going up from LKR 3 billion to LKR 3.657 billion but LKR 189 million growth for 6 months, which is a good one. Then with regard to the non-fund base income, it has come down to a negative LKR 144 million from LKR 4.3 billion. This is mainly due to the revaluations of the -- basically the exchange rate impact, revaluation of the capital. And with regard to total non-fund income, it has come down from LKR 7.3 billion to LKR 3.5 billion. Though the net fee and commission income had a good growth because of the exchange income impact, there was a negative contribution. So all in all, the operating income from LKR 22 billion to LKR 18 billion, that was a 17% reduction. In terms of impairment, again, it's another key element, a substantial figure in our P&L impairment charges have come down substantially from LKR 13.9 billion in last year first half to this year LKR 7.7 billion. So total about LKR 6 billion. Of course, we have been improving on our loan and advances related impairment. However, Bank had certain impairment releases with regard to the investment in ISB, mainly due to the exchange improvement, exchange rate that rupee side improved, so that the quantum that was passed in LKR reduced. So actually, that benefit. Most of that benefit actually was used to build up the impairments on loans and advances. In terms of KPIs with regard to the asset quality, the impairment loans Stage 3 ratio has gone up to 9.2% from 6.2%. This is mainly due to a couple of large funds, which we are comfortable that we should be able to get them out by the year-end. And then on the impairment cover from 37%, it has come down to 33-point -- almost 34% to again, because of a movement of a few large exposures, we are very, very secured. So that's where the impairment cover is less. Total impairment covered is now from 5.8%. It has improved to 7.84%. Net operating income, that has been up by 27% on to LKR 10.7 billion. We are moving on to the expenses side. So that's where the total operating expenses, if you look at, it has grown only by 13%, LKR 5.7 billion to LKR 6.5 billion. Now this is where NDB's focus on the digital initiatives have really paved the way despite substantial increases in the cost side, substantial inflation, all that, we have curtailed our expenses and manage well. So all in all, the increase in the total operating expenses was only 13% be one of the best among the industry when we review the competitor numbers that we saw. And the composition of these expenses are even below in the pie chart. Financial performance in terms of taxes and profitability. So there again, profit for the period, first half profit before tax was LKR 4.1 billion, a 55% increase. However, tax on Financial Services, a 43% increase from LKR 841 million to LKR 1.2 billion. And then income tax expenses substantially increased from LKR 132 million to LKR 613 million. So all in all, the profit after tax was LKR 2.3 billion, a 37% increase from last year. And the effective tax rate has increased from 36% last year to 44%, so that's about 8% increase. The breakup fee is also given here the movement in the regulated tax rate. FSVAT remains same at 18%. However, income tax has increased from 24% to 30%, a 6% increase the and SSCL, it was introduced in this year, which was 2.5%. In terms of balance sheet, as I mentioned, the total assets reduced by 5% and the breakup is given here that mainly the gross loans have come down by LKR 70 billion, LKR 580 billion to LKR 510 billion. On the deposit side, this is reflected and also there is a reduction -- substantial reduction in borrowings from LKR 81 billion to LKR 28 billion. Almost all our foreign currency volumes have been settled. And total equity side, we saw a 6% improvement from LKR 64 billion to LKR 67 billion is basically the retained profits for the first half. And I must say the first half financials have been audited by our external auditors. We did an interim audit. So that's also -- like to share that these financials have been audited by the external auditors. In terms of currency-wise compensation of loan, there have been studies in the past so we thought that we should present it. It's 22% in foreign currency versus 78% in local currency. And in terms of deposits, 27% of our deposit base is in foreign currency and 73% in local currency. So foreign currency exposure is relatively high, around 25% of the book. That's something that we want to share with our investors. So the balance sheet movement was largely in line with the industry trends and total reduction in asset reduction is also, as I mentioned, due to the foreign -- the rupee depreciation and also the lack of demand for assets. So all in line with the industry. There's nothing here, we have been basically moving along with what the industry has seen. Investor ratios, of course, at first half, we closed the share price at LKR 50. It's improved from LKR 32 in December. It has improved since then substantially to cost around LKR 84. I think yesterday, it was hovering around LKR 79. Earnings per share has also improved to 11.8% and ROE has improved from 4.75% to 7.2%. ROA also pretax from 0.26% to LKR 1. So these are some of the improvement that we have seen compared to last year. Of course, last year was a very challenging year that we have seen. And we see the recovery going and that recovery further going to get improved as we move along with the interest rates and all getting stabilized, getting reduced. Capital and liquidity position, again, we saw quite substantial improvement here. Tier 1 ratio from 9.34% to 11%. And then total capital ratio also 13.5 -- 13.35% to 14.7%, about 200 basis point improvement. Statutory liquid asset ratio, whereas the minimum 20%, bank is quite liquid with 34%. One is the adequate deposits that we have and also the lack of demand for the credit and also in the foreign currency side also, there's enough liquidity at the moment. So all that have been reflected in very high liquid asset ratio. Even the total liquid coverage ratios are very much above the regulatory requirement, as you can see from the below right-hand graphs. With regard to capital adequacy ratio, the left graph, I just want to elaborate more on this. That has -- as an input, you would see that 2021, our capital ratio moved up to 15.22% and also the -- that's the total capital ratio and also the Tier 1 improved to 10%. This was the time that we raised fresh capital to the rights issue and also where Norfund also came in as an investor. However, in 2022, you may recall with the steep depreciation of rupee from LKR 200-odd to a very high about LKR 300, the entire dollar book got highly inflated. Plus, we also had substantial tax impact. You may recall about LKR 2 billion in terms of super gain tax. All that actually impacted on our capital ratio so it came down to 9.34% in and also the total capital came down to 13.35%. So since then, we have been improving to 10% and now 11% the Tier 1 ratio. And even the Tier 2 has improved now to 11 -- 14.77%, partly due to the reduction in asset book. And also other thing is the in-built profit retention that we have been doing. So in terms of dividend, cash dividend was lower. Now this is to recoup and capture the capital adequacy ratio that was deteriorated due to the 2022 shocks that we had. Moving on to the way forward. Of course, we have been responsive and agile and that's the advantage NDB being a midsized bank. Our agility is one of the key areas. So we have recovered quite soon and now it's how we move forward. So there are a couple of strategic priorities we look at. Comparatively, our net interest margins are low. So that's something that we are focusing really hard on going forward, especially in a low interest environment, managing the NIMs, net interest margins, would be a key focus area. Then in terms of fee-based income, we have been doing above average where our fee-based income, despite all these challenges, have been static and growing. You saw that in the previous slides, and we'll be focusing on that to enhance the revenue mix coming from the fee-based income in a lower rate interest regime. Then the cost rationalization again, would have seen our costs increase -- overall cost increase for first half was only 13% in a very high inflation situation and that would help to preserve profitability and enhance the shareholder returns. Then another key area is the preserving the asset quality. That's a quality that got deteriorated. It's actually being restored. We have already set up the loan remedial management you need to support these customers who are in distressed situation, plus enhance the recovery strategies. All that has seen quite a good improvement in our recovery front. And month-on-month, we see quite a good improvement. And also, since we have not grown the asset book, what you see is naturally that as a ratio, the impacted loan as a percentage of total assets would go up when you are not growing the balance sheet. So in an area where -- now that interest rates are coming to a situation which is acceptable, there is demand for credit that is picking up, so we'll be cautious in the loan book growth. But whatever the new loans that we'll be booking, it would be risk efficient in terms of lending. We have used the RORAC base to ensure that certain minimum RORAC results are met. And also the transactional accounts that have been coming in, that should also help to manage our NIM. We would also look at supporting our customers, maintain their resilience. We are thankful to all the customers who have been back with us. Also, customers that have been onboarded recently through all our channels, including the digital channels for bank with us. And we have been helping as a true local commercial bank, fully supporting their challenges whenever they went through. So that has been one of the key element that NDB has been always using to support our customers even during the height of the financial crisis, during the height of the foreign currency crisis, this is where we scored. And those good relationships that we have maintained, 2 good things that we have supported in the challenging times, actually, we are now repaying back by these faithful customers. We will continue to manage our liquidity position strongly, highly liquid, but that would be the case going forward as well. And we will be preserving the capital in current conditions by basically not going higher -- at a higher pace, maybe managing the growth of the balance sheet, but going forward, it would be more on managing the margins from a lower balance sheet, but how you basically optimize the efficiencies of using that balance sheet to get the best in terms of profitability for our shareholders. So preserving the capital is one of the key elements. We have also announced Tier 2 Basel III compliant listed rated unsecured subordinated debenture issue going up to LKR 10 billion that could be raised during this year. We were to raise up to LKR 6 billion, that was announced in the market, however, with the -- that was to go at -- with our high rates. But we saw the interest rates coming down steeply. So we tell that because our capital ratios on the other side was also improving. So now that we have [ retailed ], most likely we'll have some announcement on how we are going to raise this in the remaining 6 months. That would naturally will come at a much lower rate. That would also help saving a substantial in raise element compared to what we were planning to raise earlier. So that would also have a substantial interest rate reduction going forward in terms of savings. And idea is to provide best possible return to shareholders and also support all our stakeholders, our staff, everybody who is contributing in these challenging market conditions. And in doing so, digital drive would continue to be a priority. We have completed our core banking upgrade now successfully, it is in operation. We have been empowering women the market -- women's market so that would continue. And also our ESG-related initiatives, those would continue as we move forward. So that's about the way forward, and that basically comes to an end with the prepared presentation. And we are quite happy to take on the questions and answer them along with my team here. So you can raise the questions. And what I'll do is I will read the question and either me or some of my team will provide you the answers.

So the first question is about what happened to your debenture issuance. We read that with good trading the issuance has been canceled. With reduction in SLR, how much more will interest rates fall? Okay, that's the second question. So I'll handle the first question that's about debenture issuance. As I mentioned, we didn't want to raise at the high rates that we have been looking at earlier. There was a building process as well. However, with the rate -- steep reduction in rates, improvement in the liquidity, we thought that we should defer this raising. So that's why we do and we announced the market and then which also withdrew the rating because we can sell the debenture issuance. But since we have the approvals to an announcement to go for a debenture issuance during second half of the year, we would be making the announcement. Once it comes to the right price, we'll be raising again to improve on our total capital ratio. With regard to statutory reserve requirement, of course, about LKR 200 billion liquidity was injected. The question is how much more will interest rates fall. Probably Niran, my Head of Treasury, he has the crystal ball to give some indication with qualifications of this.

Yes. Actually, currently, there's a big difference between the policy rates, current policy rates at 11% and 12% against the current treasury bill rates that is mainly pickup [ that fee month's rate ]. So what we will see right now, like [indiscernible] that we saw that this Stage 3 converge now. So the first thing what will happen, in fact, actually we will see our treasury bill rates coming down and move towards closer towards the policy rates. So after that, probably, Central Bank might take a policy [ resharing ] once again, if they want to reduce rates further in the coming months. But the thing is [indiscernible] closer to their policy rates.

Thanks, Niran. Another question is since you are looking to increase your loan book, would you consider factoring state receivables, for example, discount receivables owed by CEB? Now we -- by the way, we don't have that much of exposure to CEB. But we have seen, with the utility prices going up, the cash flows of the state entities who have been borrowing from us improving. And some of those payments that were overdue has been settled. So that's a good improvement. In terms of factoring state receivables, we need to find out who is willing to take that state risk and then do the factoring. If there is a case, we would be looking at it. But right now, I think things are improving. There's a question on how much impairment take on foreign currency bonds in this quarter. So I think the exchange rate improvement and et cetera, we have -- we are in line with the required foreign currency ISB-specific impairment numbers. So there's not a major change there because the provision that we made in the beginning of the year was also sufficient to cover the ISB provisions, which is in line with the industry. Next question on -- with the current rate volatility, what is the strategy of the bank? I think I briefed that. We are not keen on growing the balance sheet at the moment, but we will ensure that the current balance sheet would give the maximum returns in terms of improving on the margins and also bring on our CASA base and more on the fee-based revenue because, I think I elaborated more on that earlier, when the balance sheet is not growing, how we will improve on our margins and concentrating on fee-based income and other revenue basis, whilst of course, managing the cost side. There's a question on Stage 1. It has taken a write back, however Stage 2, 3 impairment increased Q1 -- quarter-on-quarter. What is the reason for taking movements. Suvendrini, do you want to take that?

Yes. So I think we recognize the issue and portfolio manage [ COC ] and lagging the industry. There's still -- there is a risk element in terms of asset quality. So certain facilities being conservatively or simply downgraded where we said that we need to [ toughen up ] other income and provision. So that's the reason why Stage 2 level and 3 level we have increased the impairment. So these will not be actually losses, but we have accounted for any expected credit loss that we see.

There's another one. On Tier 1, capital increased by around LKR 3 billion. What price this will...

Yes. So that is really regarding the profitability. So we reported LKR 2.3 billion profit after tax. So that has been capitalized. And also, we would -- we can watch portfolio, but in the end, our bond portfolio and the interest rate movements, we have a [ fair waiting game ]. So all that has been certified by [indiscernible] and we have capitalized it to profitable, Tier 1 capital.

There's a question about how has the T-bills and bond mix sale from 2022 levels? And how many bonds and bills bank is holding now? Of course, the mix has remained same. There's no change to that. Since these bonds are at relatively high rates, I think there can be some capital gains going forward as the rates have come down. There's a question on what's the breakdown between fixed and variable loans, expectation of loan growth for coming quarters. So fixed and variable, I think that's something we have been working on, reducing our fixed rate exposure and whatever the new loan that we are doing, it would be mostly on variable loans. And loan growth for coming quarters, we are not having high targets, but demand is gradually picking up, but it would be more cautious approach in terms of loan growth, and we would be -- naturally look at total returns that as I had mentioned when we book additional assets. So it would be a cautious growth. There's a question about has loan demand picked up in recent weeks, have you done any import financing for vehicles? Loan demand is coming up. It's improving. We have not done any import financing for vehicle, as I said. But on the import side, other imports, commodities all that, we have been supporting. So that is how our fee-based income has improved. There's a question on what's your ISB provision figure. Of course, the provisions are in line with the industry. And as I mentioned, we had a half yearly profit review and profit certification also by external auditors. What's the outlook of the asset quality review? Of course, we are not privy to that information. Okay, next question. Have you been hiring in the recent months? We see that other banks are expanding their workforce. I think the hiring, of course, we also continue to hire. Because of the economic situation and all, we had seen staff turnover, mostly going for overseas opportunities. And as a result, that creates vacuum and then all the banks have started advertising, which is an industry-wide situation that we have seen, and we also have seen [indiscernible] actually will be hiring. There's a question. Will there be further provision reversals on ISB once the external restructuring is announced? Yes. I think what we have made provisions are based on what the government has indicated as potential cuts, et cetera, but that's initial proposal from the government. I think when it comes to final negotiations with separators, especially the external ISB holders, there can be changes. So based on that, either additional provisions or reversals would be based on that. On the status of credit card delinquency over the past quarter and recent months. Sanjaya, you want to comment on that? Credit cards are -- I think one area is our credit card portfolio is much better. So we have been catering to the upper end of the card. But of course, people had challenges in terms of income, especially the taxing business and all. So it slightly increased the delinquency level, but that is managed. We have seen the flow rates reducing, the financial flow rates from one bucket to the other bucket. That flow rates have been reducing, and we have been improving in terms of our collection also to support that. So gradually, yes, it went up in the first half, especially in the first quarter with the tax impact, et cetera, but now it's gradually coming to a level that is manageable. Hotel and tourism sector loan exposure? I don't think there's an increased. 7%...

Positive dollar exchange.

Yes, yes. I think that's mainly the exchange impact because we have not increased our exposure. And what is the plan on capital raising? So as I mentioned, Tier 2 level, certainly, we have announced what the plan is. So during this year to raise debentures and make use of the current low interest rate opportunity to raise it. Then in terms of the Tier 1 level, once the economic situation is stabilized and we are clear even on the ISB side, what is the impact, et cetera, most likely next year, second half onwards, there will be some equity raising plans that the bank is looking at. What sort of dividend policy bank is intending? I think that's up to the Board also to decide, but we have been having a dividend policy of about 25% to 30% of profits. But how we will pay that? With a cash or scrip dividend is something that the Board has to decide. Next question. In what sector is the loan demand coming for the reported quarter? And also in terms of geography, provinces. Sanjaya, anything to comment here?

Yes, especially on the leasing side, there are -- there's little bit of demand with interest rates coming down. And also on the housing side. Those are the sectors that have been improved based on the rates.

Next question on is the stock brokerage of the business operating at a profit in both every quarter end? Yes. So one of the subsidiaries, I think, and in light with the market improvements, our stock brokerage arm is doing quite well. These are the questions we have received so far. If there's any questions, please feel free to raise. Otherwise, in the absence of any other questions, we thank all those who took part in our investor webinar. Thank you so much for being with us, and thank you for banking, investing in us. And looking forward to a similar quarterly update once our third quarter numbers are finalized. So thank you so much for your participation. With that, we conclude our investor webinar.

[indiscernible].

What is the question?

[indiscernible].

So there's a question, sorry, last for ISB provisions, so I think it's around 35% and above.

Slightly above 35%...

Slightly above 35%.

So actually, we have done computations based on the indications given by the DDO proposals as well. And based on our portfolio, we are maintaining 35% and above, slightly above 35%, which is [indiscernible] based on the direction that has been given now.

There's a question whether it had 5% reversal? Not really, no.

No. Not really, yes. So 30% [indiscernible], we need to add [indiscernible]. We will be a day 1 impact for all banks. So we have computed the effect, also the effect on our portfolio and the price at which we have purchased at the time and maturity. So based on that, we are quite confident that based on the direction syndication that we are given, the provision that we carry is [ selling ].

Okay. Those are the questions. So thank you so much, again, and we will conclude our investor webinar. Thank you for your participation.