Q1 FY14

Non-Interest Income of course shows very healthy growth of 41% but that includes these gains, mark to market gains but even if you exclude those, core fee income still grew by 31% and remained ahead of our loan growth at 27%.

Sales of assets to ARCs. We actually reduced our security receipts book which is now down to 85crores as we recovered about 45crores. If you exclude one account which is Deccan then our recovery rate on SRs is a 106% so in almost every case we have recovered more than the original principal value of the SR. And even if you do include Deccan even then our recovery rate is over 86%

50 crore floating provision for the first time in our history and as a consequence of that we actually raised our provision coverage ratio from 70% to 80%.

gross credit cost was 13 basis points and net credit cost after recoveries was as low as 9 basis points as a consequence of which the net NPA has fallen down to 21 basis points.

interest margin has moved up albeit by a small 2 basis points. our cost of deposit actually went up by 9 basis points but we were able to reduce the cost of funds by about 6 basis points and that is why we have shown an increase in our net interest margin

Cost to income ratio because of the unusual gain that came out of the mark to market gains that we got on the securities book shows a depressed figure of 44% as against 47% last quarter but even if you net it off we have a stable cost income ratio in the vicinity of what it was last quarter.

The consumer yield is down by about 10 basis points. he fact that our loan against property LAP figure has grown now it is sizeable at about 1600crores and that is at the lower yield than the blended yield of the consumer bank.

during the quarter as we did in previous quarters, we did sell down about 2000 crores of assets which as you all know is part of our balance sheet management initiative.

Q&A

freight rates are holding up and increasing. So is that something that you people are also seeing and if that underlying business of freight is it getting better over the last 2-3 quarters. Key risks associated with LAP and how are you trying to mitigate them? FOREX is a key driver of this core fee income so if you can tell us if you can give us more color about what constitutes this FOREX income what is the split between retail, small businesses and corporates

I think we only do cash flow based lending we do not do surrogate based lending. we do not do developer funding for large ticket items neither do we do lease rent at a very high peak so we do not do developer funding at all. deeper penetration into existing, the wholesale client based whereas with the increase in the retail branches we have also FX from the retail flow and the ratio stands between around 60 to 40% but we

expect that the retail flows will have higher impact going forward because those are new businesses opportunities that are coming forward for FX.

MHCV and LCV sales volume were down whereas we have reported 15% YoY growth and 2% quarter-on-quarter growth so could you share your market share position currently and what is the gain last couple of quarters and the space for further market share gain going forward.

M&HCV market has registered a fall whereas LCV market has grown; NPA figures there is a very, very marginal deterioration in our NPA figures vis-à-vis the last quarter. This has happened predominantly only in commercial vehicle segment which is seasonal.

equipment finance book has grown 22% YoY and this sector has been under significant stress last couple of quarters and some of the NBFCs have reported higher delinquency in this space, so why we are growing this book and how do you see the asset quality in the overall book and what is your growth expectation over the next couple of quarters.

, our equipment finance is predominantly on construction equipments which are similar to the tough commercial vehicles. We do basically equipments like JCB backhoe loaders and similar equipments like that which are more or less complimentary to that of a commercial vehicle; it is used for small road projects

why loan processing fees declining last two quarters number one and secondly why market risk has increased during this quarter again?

market risk we had a higher proportion of derivative. loan processing fee as you know is a function of when the annual reviews and the new loans disbursement take place so it is purely a timing issue. You have to look at this more in terms of the processing fee over a period of time.

sharp currency movements. FOREX forwards or derivatives with customers, we have mark-to-market triggers and as soon as he comes near the mark-to-market triggers we call additional cash margin; just like lending against cash, and till now whatever mark to market figures that we see are well within the triggers that we have set for yourselves.

base rate currently is at about 10.75 which is almost higher than the peers had, almost 100 bps higher. ability to kind of attract the AAAs and the AA corporates

use the CP route, you can re-use the NCD route depending on the nature of the loans that you are targeting.

Savings balances have gone up by almost 12%,Average Ticket Size (ATS) for the accounts have moved up; ATS was 42,000, sitting on an ATS of about 50,000-51,000 average ticket size. 400-500 crores incremental flow coming on to the government business.

50 crore provision is a part of provision and that is reducing your net NPAs

a broad breakup of your FOREX income between proprietary and customer FOREX. Slide 17

Disbursement for the current quarter is 3700 crores plus 400 crores on LAP so 4100 crores for consumer

breakup of the term deposits between retail and then bulk. 30% of our deposits is CASA, just over 20% is Retail and just under 50% is Wholesale.

what is the guidance on cost-income ratio now because this ratio has declined for last two quarters now, and with so many branches coming in, and productivity likely improving, can we expect further fall there

his quarter you are seeing a sharp drop of about 3% but that was a consequence of the one-off revenue that has come.

distribution income. It has still shown 18% YoY growth.

seen a growth in the home loan disbursement. So we are doing about 150 crores of home loan disbursement per month now. distribution of HDFC products so that is giving us some growth. I think our credit card distribution is giving us another growth. LI and GI. ur LI business is still going strong, and while the rates would have come down but our volumes have grown, GI income pass on is still going strong because the disbursements are almost equal to the last quarter.

when you look at your asset/liability or maturity profile, that is as per the annual report, practically, all the loans that have increased during FY13 over FY12 have happened in the 6 months to 1 year category. There is an increase of about 9,500 odd crores in that bucket and the full year loan book has almost grown by the same amount. Is this a very large part of the Corporate book that is sitting there

The average tenor of the corporate book is about 270 days. Large part of it is working capital. Within that you have got a lot of 90-day loans which keep getting sort of rolled over. So they keep shifting in the bucket

Q2FY14

interest income was 700 crores which is a growth of 37% year-on-year and also 3% quarter-on-quarter. Other income grew 30% year-on-year but quarter-on-quarter of course it is lower because there was a one-off income that came through sale of a part of trading portfolio last quarter.

core fee income growth, that grew year-on-year 32% and quarter-on-quarter as much as 11%

cost of borrowing shot up. 3,000 crores of refinance that was available but we had not taken so we drew down on the 3,000 crores of refinance.

foreign currency borrowing now but we had raised close to $700 million just before 15th July and also that was fully hedged and that came at a blended price of almost 7.5%.

Cost of deposits remained flat at 8.18%. two reasons; one is that the repricing. The tenors of deposits were such that a chunk of deposits really came up for repricing in September only, and there also we did not do full replacement. second reason was that our CASA also went up,

our cost of funds moved up by about 21 basis points from 6.75% to 6.96%. The yield on our loan book has moved up by 11 basis points but the yield on our assets actually has moved up by almost 14 basis points from 10.47% to 10.61%.

NIM which fell from 3.72% to 3.65%. So the NIM contraction was only of 7 basis points

at gross NPAs; gross NPAs this quarter were 1.11% and last quarter were 1.06%. So gross NPAs have moved by about 5 basis points and net NPAs are flat; it was 0.21% last quarter and now 0.22%. Restructured Advances were 0.28% last quarter, they are now 0.31% because of one advance came under CDR

The credit cost is flat on a gross basis at 13 basis points; Net Credit Costs, of course, last time we had recoveries and it was 9 basis points

Provision Coverage Ratio (PCR) has actually also moved up from 60.99% to 63.77%

he sectoral breakup, there seems to be some quarterly material inch-up in real estate developer, rental book and scale which relatively is a little more risky,

there is an increase in the lease rental discounting. But contrary to what you said, I think lease rental discounting - because it is cash flow based and it has got a mortgage- is probably amongst the safest loans today.

We actually finance specific projects and we have control over two things; we take an exclusive security - regular mortgage of the property that is being financed and we have 100% charge on the receivable. So every part of the cash flows is routed through us. So these are typically very short term in the sense that the project has already taken off, 30%, 40%, 50% of sales have happened and then the remaining completion only requires a small percentage of the overall project cost and that‟s what we finance.

the cost of deposits like you said you had some refinance available this time,

Refinance eligibility comes from your priority sector book. We are one of the few banks which met the priority sector target for the last fiscal year, I think the industry as a whole was short. So the priority sector book generates refinance capability. Normally the givers are NABARD and SIDBI. We have tenures ranging from 1 year to 7 years. We have raised in the past 7-year money at 7% and this money as I explained earlier does not attract the normal statutory ratios which increase the cost by almost 70 to 80 basis points, so they are cheaper.

dollar deposit of $700 million at 7.5%. So just wanted to understand if I have to look as one year forward swap, it is available at 6 to 7%, just wanted to understand how the cost comes to 7.5%?

The foreign currency deposits that we are talking about that is our total book size in foreign currency and not necessarily taken at this point in time. So the blended cost of that book when converting into INR at various points in time works to around 7.7%. It is not that we have done the swap as of this point in time,. We have done the swaps earlier.

HL is because it is an old legacy book, so there are some NPAs which are there.

budgeted credit losses we are pricing in LAP product, for about 0.3%.

outstanding countercyclical provision is 27 crores.

percentage of your Wholesale Deposit mix, 45%.

amount of loans that we would have sold down during the quarter and compared that to the previous quarter, Rs. 1600 crores this quarter, previous quarter was Rs. 2000 crores

Loans against Property, actually in that line, we have 1,860 crores, Home Loans is next at 82 crores. But LAP is coming at a rate which is slightly higher than the rate of new Vehicle Financing.

some level of compression in the Consumer Finance division at least the pricing part, because if you have blended yield on Vehicle Finance book is in the range of 15.7% or so then anything that you lend on Consumer below that should reduce your yield because this is at 13.25%.

e outstanding loan book in used Vehicle Financing book?, about 3200 crores.

We did two things; one was to increase base rate and the other is margin over base rate. What we did was that we first raised the margins, then we changed the base rate. What got repriced in terms of base rate is also what has come over for roll over, so that was about 6,000 crores.

Total outstanding refinance is 5,900 crores.

Q3FY14

we continue to bring in 55,000-60,000 new customer accounts every month.

Core Fee Income then I think almost all elements have grown well in large double digit figures except for the Distribution Fees.

Distribution Fees has been impacted as it was impacted in the last few quarters by the dramatic slowdown that we see on the life insurance.We have mitigated that by starting a new vertical which is the Health Insurance which was launched about 2 months ago and we can talk about what sort of traction we are seeing there, but Distribution Fee sequentially has grown by 3%.

In terms of yields and costs of deposits, as I said, cost of deposits moved up by about 17 basis points to 8.35%, but there was a very handsome increase in our yield on advances. Yield on advances moved up by 26 basis points. So yield on advances is now 13.76%. Therefore, the repricing initiative that we had taken in Q2 seems to have giving results now.

Commercial Vehicle NPA moved up by about 20 basis points, but in other categories apart from Construction Equipment, in all other categories we saw a reduction in our gross NPAs. In this particular field, Two Wheelers were the sort of bright spot in a pretty gloomy sort of a situation in terms of growth and for two wheelers actually our gross NPA fell by almost 23 basis poi

In two-wheelers the market share has also increased substantially.We are slightly below HDFC in terms of volume but we are slowly catching up them. In a situation where we used to do close to about 50,000 vehicles average we are doing closed to about 65,000 vehicles average now per month.

The market shares have increased significantly but the volumes are so low that the top players have all increase their market share. But market share has been increased significantly meaning it has been increased by about 2% - 3% or 3% -4% totally. We used to be close to about 8% to 9% on commercial vehicle we are about 12% now.

The yield of the investment seems to have declined on a QoQ basis because there was nothing on from an interest rate market which kind of gives such kind of indication?

Our disbursement is close to about 20% of our total disbursement and our advance level is close to 15%.

restructuring we have had stability now for two, three quarters where we have not been involved in the large restructurings that have happened but smaller accounts if somebody, the lead bank refers it to CDR even if it is not an NPA with us we could have one or two accounts but I think in terms of basis points there is a movement of a few basis points 5 - 6 basis points.

e yields especially on the corporate book. I have seen a very sharp spike up in the last nine months. Can you just explain why it is so?

that is repricing of the books that we mentioned because if you look at the last six or eight months, I think there was a strong repricing that happened post the July event when the carpet was pulled from under the seat of banks and a 3% hike of events happened over overnight. So we are seeing today the impact of that increase because we also pressed the pedal in terms of repricing of the asset book. So it is really repricing that has caused this. It is not the sort of loans that we are doing.It is the repricing of the existing book. So it is not that we are now doing more of the lower quality and all that sort of stuff. Repricing is happening across the board.

The disbursement of used commercial vehicles vis-à-vis the new commercial vehicles is anywhere between 18% to 20% for the current year on and on an asset level the used commercial vehicle is closer to 15%.

borrowing of almost like Rs. 14,000 crores in the balance sheet roughly Rs. 6,000 crores is in the refinance side. Rs. 5,800 crores is refinance side. Then there is a foreign currency borrowing which is about $1 billion almost. So that is another Rs. 4,500 crores and then they have call market borrowings and the other borrowings. CBLO and little bit on call.

refinance is costing us around 8% to 8.2% level. Foreign currency borrowings are also in that same range 8.5% odd and CBLO is already known CBLO is at 8.2% or 8.3% and call of course we have a very small component which is around 8%.

think only one thing you have to keep in mind that the quality of loan bookings is at lower underwritings that have been done today is actually much better than the quality that was done say 3 to 3.5 years ago. So whatever credit cost that you see on the corporate side in the mid-market is actually coming for those which are happened 3 to 3.5 years ago and not which were recently on boarded.

Q4

plentiful liquidity during the quarter and we saw our cost of funds go down actually by almost 28 basis points and that happened also because we had large current account floats as a consequence of the dividend warrants that we processed for public sector units. So that is one big highlight for us.

29% growth in our Net Profit for the quarter and 33% for the full year after absorbing mark-to-market losses.

We had said credit cost budget of 60 basis points and the credit cost has actually come at 48 basis points and during the quarter our credit cost was 13 basis points. Net of recoveries our credit cost was 11 basis points.

Non-Interest Income grew actually 42% year-on-year and quarter-on-quarter grew 9%. Non-Interest Income is now 40% of our total income. It is probably one of the highest in the industry as it stands.

An 18% increase in Net Interest Income. That looks low to us as well but keep in mind the base effect. In Quarter 4 of last year we had a NIM increase of 24 basis points in one quarter and there was a massive increase in NII so there is a base effect

there.

Deposit growth was only 12%, our borrowings have gone up quite heavily compared to our deposits. But what you got to keep in mind is that borrowings have given us the much more stable base and the asset liability profile has actually improved as a consequence of the borrowings. What I mean to say is that when I borrow refinance the average tenure is well over two years. When I take deposits my tenure is 365 days.

We have added food credit but that is really the Food Corporation of India, we do not do any other item.

General banking fees really is the lot of fees that you incurred to get out of minimum deposit charges and things like that which means that people are not paying these charges which means that balances have improved in the savings bank side which itself is a good sign.

So without going in to capacity expansions, just on inflationary basis 10% to 12% increase happens in the credit growth in any case, just on pure inflation that is the requirement

So the investment banking piece is not predicated so much on balance sheet usage and I think a clear indication of that is that we do not have for instance a corporate bond book. Our corporate bond book is sub Rs. 1,000 crores. We have not built a corporate bond book because when you do lot of the debt structuring and debt syndications there are lot of stuff; actually the off spin of that is building up the corporate bond book, We are focused on the midcap business and we will continue to be focused in that space. I

We do loans largely, the model is to originate loans with the intention to sell it down and so what is very consciously trapped in the business is how much asset is used for generating fees and fee as a percentage of assets and we continuously churn this portfolio and report it quarterly internally to see that it is not the loan which is generating the fee but it is the solution which is provided around that which is necessarily the structuring advice given and the skim that you make when you sell down the asset

Our weighted average cost of SA is 6.6% on the whole float.

we show the FX for instance is shown in two lines - one is client FX which is shown in the core banking income and then there is a trading FX which is shown separately. So you saw that two slides. So our client FX is almost equally split between retail and corporate. Retail contributes a lot to FX through retail FX and through a sort of “S” of SME on the FX side. So non-borrowing customers for whom we do collections of bills etc., on a dollar basis and things like that. Plus the retail FX is got a lot of things like traveler cheque, currency and also currency cards and things like that. 47% of our client based FX income really comes from retail – very, very granular income

on trading side we saw some good upticks on the long dated MIFORs and stuff like that. So it is all across the trading part of the business. G-Sec obviously we only saw one way move in the quarter so there was not really too much of action on it but on other parts of the interest rate curve yes, we did get some opportunities which we sort

of took very nicely.

current volume for M&HCV is about 200,000 vehicles which is almost the same what it was in 2008-09 to 2011; 2009-2010 was even 248,000 vehicles. But high of 360,000 vehicles it has moved to 200,000 vehicles for the past two years steadily to 260,000 and then it became 200,000. The market did have surplus capacity of close to about 100,000 vehicles which in my opinion most of the excess capacity has been absorbed. I would say that all excess capacity has been absorbe

There are two things also which precedes this. The freight rate prevents from falling and also there is a better freight utilization. These two have happened and the asset quality has become better. I mean for the last two, three quarters I mean after the quarter ending September, people have started complaining this. In terms of both the finance companies and as well as the customers, viability of both have improved.

sale to ARC – we sold about Rs. 35 crores this quarter, last quarter we sold Rs. 25 crores. I just like to say that the SR book or the Security Receipt book is about Rs. 138 crores today and we have very clear visibility on the book falling to approximately Rs. 70 crores to Rs. 75 crores in the next six months assuming that there are no inflows on the current stock.

next phase we will add six new home markets.