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Edited Transcript of AXISBANK.NSE earnings conference call or presentation 30-Jul-19 12:45pm GMT

Q1 2020 Axis Bank Ltd Earnings Call

Mumbai Aug 15, 2019 (Thomson StreetEvents) -- Edited Transcript of Axis Bank Ltd earnings conference call or presentation Tuesday, July 30, 2019 at 12:45:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Amitabh Chaudhry

Axis Bank Limited - MD, CEO & Director

* Jairam Sridharan

Axis Bank Limited - Group Executive & CFO

* Pralay Mondal

Axis Bank Limited - Group Executive & Head of Retail Banking

* Rajiv Anand Prattipati

Axis Bank Limited - Head of Corporate Banking & Executive Director

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Conference Call Participants

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* Abhishek Murarka

IIFL Research - VP

* Adarsh Parasrampuria

Nomura Securities Co. Ltd., Research Division - Executive Director

* Kunal Shah

Edelweiss Securities Ltd., Research Division - Associate Director

* Mahrukh Adajania

IDFC Securities Limited, Research Division - Director

* Nilanjan Karfa

Jefferies LLC, Research Division - Equity Analyst

* Pankaj Agarwal

AMBIT Capital Private Limited, Research Division - VP of Research

* Saikiran Pulavarthi

Haitong International Research Limited - Research Analyst

* Suresh Ganapathy

Macquarie Research - Head of Financial Research

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Presentation

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Amitabh Chaudhry, Axis Bank Limited - MD, CEO & Director [1]

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Good evening, everyone. Thanks for joining the call. We welcome you all to a discussion on Axis Bank's Financial Results for the First Quarter of Financial Year 2020. I'm joined here by my colleagues, Jairam Sridharan, Group Executive and CFO; Rajiv Anand, Executive Director and Head of Wholesale Banking; Pralay Mondal, Group Executive and Head of Retail Banking; and Ganesh Sankaran, Group Executive, Wholesale Banking Coverage group.

Before we get into the discussion on financial performance, I would like to start by updating you all on the execution strategy that we have articulated at the beginning of this year.

Our execution strategy 2022 is centered on delivery of 3 vectors: growth, profitability and sustainability. While all 3 are important, the starting point of our strategy has always been sustainability. We intend to build sustainability in our business performance and operations with disciplined execution and conservatism at the core to sustainably deliver 18% ROE. This quarter saw us continue from the previous one in terms of our focus on sustainability. We continued to invest in our conservative stance on provisioning, compliance and risk.

Last quarter, you saw us voluntarily make some additional provisioning in certain select areas. We've built on that in this quarter, with more additional provisions toward special situations. With these efforts, the bank now holds additional provisions of around INR 2,358 crores for various contingencies over and above what is counted in our provision coverage calculations and the 0.4% standard asset provisions. Jairam will take you through some of these facts in detail later in the call.

The second element of GPS 2022 is growth. Our philosophy on growth is to allow growth rates to be an outcome of deliberate, cautious and conservative choices around sustainability rather than directly target specific growth rates themselves. If we consistently make the choices there could be quarters in which our growth rates would be modest and others in which it will be brisk.

We also believe that, if we continue on this path, the growth will come. We are equally okay anyway with both, either a slow or a high growth. Domestic growth conditions remain soft, with weaknesses seen in multiple high-frequency indicators, auto sales are weak and demand for capital goods remains slack.

That said, there are enough high-quality market opportunities available for us to deliver domestic loan growth 5% to 7% over the industry growth rate for the next couple of years. In line with that, our domestic loans grew 19% year-on-year this quarter. With the elections uncertainty behind us, transmission of lower interest rates, coupled with easier liquidity conditions, we believe will boost credit offtake and trigger a revival in private sector CapEx demand over the next couple of quarters. Continuing weakness in the NBFC sector is also helping increase banks' share of domestic lending.

On the profitability vector, the most important development during the quarter was the significant improvement in operating efficiencies. Operating profit was up 35%. We have also laid out a goal of reducing our cost to assets ratio to 2% through the course of GPS 2022, and this quarter was an important step forward. Our operating jaws was very favorable during the quarter and resulted in a fall in cost-to-assets down to 2.08%.

This quarter also saw some important moves in the bank from a talent perspective to drive greater focus on new customer acquisition on the CASA and RTD side. We created a new vertical structure in liability sales in April 2019. During the quarter, [Narendra Kumar Dixit] has joined the bank to head this function as Head of Liability Sales.

Establishing access as a digital bank is another important dimension of GPS 2022. During the quarter, we were -- [Sameer Shetty], [ex-McKinsey], who will lead our digital banking initiatives, joined us. Finally, we had Neeraj Gambhir, joining the Axis family during this quarter as Head of Treasury and Markets. With this, we now have the full team in place to turn our aspirations into reality over the next few years.

Two important product launches worth a mention. In the credit card business, we have had strong growth and leadership position for some years now. We added an important figure in that cap during this quarter, as Axis Bank launched an exclusive co-branded Flipkart Axis Bank credit card, a card that offers best-in-class benefits for the digital customer. And we aspire to build this card to be one of the largest card co-brands in the industry. The initial signs, post- launching the card, have been very, very positive.

During the quarter, we also launched Trade@20, a disruptive brokerage plan on Axis Direct, whereby our customers can avail unlimited trading at INR 20 per order, but it is also expected to add to our liability franchise because our customers are expected to maintain a certain minimum balance.

Axis Bank obviously remains committed to deliver consistent performance quarter after quarter, year after year. During quarter 1 financial '20, our operating performance was strong. Our growth metrics were healthy. Asset quality metrics continue to improve, and we have further strengthened our balance sheet and improved provision coverage.

With that, let me hand over to Jairam to take you through the bank's financial performance in detail.

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [2]

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Thank you very much, Amitabh. Ladies and gentlemen, good evening. It is my pleasure to take you through the detailed financial performance of the bank during the first quarter of financial year '20. As always, do keep our Investor Presentation handy as we do expect to refer to various slides there.

There are 5 key highlights of our performance during the quarter. First, asset quality. Asset quality metrics are progressing well and are in line with expectation. Two, we continue to strengthen our balance sheet and our provision coverage quarter after quarter. Three, our growth metrics in the quarter were healthy, led by retail. Number 4, the deposit side, where our franchise had a strong quarter once again. And finally, operating profit, which grew 35% year-on-year with a very strong trajectory on most revenue and cost line items.

We'll go through all of these in detail. Let me start with asset quality and balance sheet strength. Please refer to the asset quality section of the presentation, starting Slide 49. NPA ratios for the bank remained stable during the quarter. We ended the first quarter with a GNPA ratio of 5.25% and a net NPA ratio of 2.04%, both slightly lower than corresponding numbers at the end of March. GNPA at the bank level in rupee crore terms was INR 29,405 crores compared to INR 32,662 crores at the end of the first quarter of financial year '19.

The GNPA book has now reduced in absolute terms for 5 consecutive quarters. Net NPA of the bank was at INR 11,037 crores compared to INR 14,902 crores at the end of the first quarter FY '19.

Once again, net NPA book of the bank as well has reduced now for 5 consecutive quarters. Gross slippages in the quarter were INR 4,798 crores compared to INR 4,337 crores in the first quarter of FY '19 and INR 3,012 crores in the fourth quarter of FY '19. Slippages in Q1 do tend to be seasonally higher at the bank compared to Q4.

Gross slippage ratio during this quarter was broadly flat with the gross slippage ratio seen in the first quarter of last year. We were at 0.94% compared to 0.95% last year. Of the total gross slippages, Corporate segment slippages were INR 2,128 crores. On the net side, net slippages in the quarter were INR 2,621 crores compared to INR 1,420 crores in the first quarter last year and INR 636 crores in the fourth quarter of last year.

We had 2 chunky accounts, one in the power sector and another in the shipping sector, together contributing INR 850 crores that we downgraded into NPA during this quarter. Both these accounts were in the BB & Below list previously.

You will recall that in FY '19, Q1 saw a fairly large IBC driven recovery, which made our net slippage numbers extremely low in that quarter. We witnessed no such chunky recovery during the first quarter of this year. Of the net slippages of INR 2,621 crores, INR 1,318 crores came from Corporate, INR 414 crores came from SME and INR 889 crores came from Retail and Agri segments put together. 79% of the net slippages in the corporate book came from the BB & Below portfolio, which gets us to a very quick look at the movement in the BB & Below portfolio.

This quarter, we took another hard look at the ratings on our corporate exposures to identify accounts that might merit rating downgrades in the newly weak economic environment. Looking through our entire corporate book, with special focus on some groups that are showing some signs of stress in recent months and quarters, we identified and downgraded INR 2,242 crores into the BB & Below book in this quarter. The downgrades came largely from groups that have displayed some signs of stress in recent months and quarters and that have been in the news.

Importantly, we also witnessed INR 1,007 crores of reduction and balances with prior period BB accounts. Net of all these movements, the bank's BB & Below corporate lending book remained largely stable at INR 7,504 crores at the end of this quarter compared to INR 7,467 crores at the end of Q4 FY '19. This book is down 28% year-on-year.

Stressed groups. The current environment in the Corporate segment continues to be challenging. We continue to witness sudden and sometimes dramatic ratings downgrades in many companies across various sectors.

We would like to share some color on the bank's exposure to a few old and some newly stressed groups. In particular, I'd like to discuss, without naming them, 8 stressed corporate groups and diversified conglomerates. These groups are engaged in the areas of infrastructure finance, infrastructure, power, telecom, housing finance, travel and tourism, commodities, molded plastics and media-related sectors.

If you look at these 8 groups, our exposure details are as follows: I will split this into 3 parts, loan outstanding, investment outstanding and non-fund-based outstanding. Our loan outstanding to these 8 groups is around INR 7,000 crores. Of this, INR 1,000 crores is already NPA. Another INR 2,900 crores is now in our BB & Below book. Of the remaining INR 3,100 crores, about 2/3 is with one operating media account. All the rest is made up of various small exposures to operating entities. So that was the INR 7,000 crores loan outstanding.

Coming to investments. On the investment side, we have an outstanding of INR 2,200 crores towards these 8 groups. Of that, INR 200 crores is already NPA. Of the remaining INR 2,000 crores, we have marked to market a provision of INR 400 crores.

Finally, NFB exposure. We have an NFB exposure of INR 3,000 crores to these groups. The 1/3 of that INR 3,000 crores exposure is already NPA or in the BB & Below pool. The remaining 2/3 is to one account in the telecom space, where we have a BG which has expired, but we do not have physical guarantees returned to us. We do have a credit enhancement from a credible third-party on this account, and initial judgments in the judicial process that are underway have been in our favor. We continue to track this position closely.

So in summary, our NPA exposure to these 8 groups is limited and mostly in the already disclosed BB & Below pool. Investment exposure are adequately marked to market, and there are only 2 material exposures outside the above 2 categories, a disputed BG with a telecom client and a loan exposure to an operating media company. These 2 together form 0.75% of our customer assets.

Moving on beyond corporate lending, I would like to spend a minute to highlight some facts on retail asset quality. Gross NPA ratio in retail continues to be modest. In the first quarter, gross NPA ratio in retail was lower than in the first quarter last year, which, in turn, was lower than in the first quarter of the year before. Net NPA ratios in retail have largely remained around the 0.6% mark, similar to where they have been for most of the last 2 years.

Net slippages in retail are higher than in the first quarter FY '19. This is mostly driven by the exceptionally low new net slippages number you saw in Q1 FY '19. If you go back, you'll find that net slippages in Q1 FY '20 are practically the same level in absolute rupee terms as in Q1 FY '18 on a book that is 47% larger. Net slippages in Agri was at around the same level as last year and the same level as the year before in absolute rupee growth terms.

I draw your attention now to Slide 56, and the table in the lower half of this slide. You see on the bottom right, that the total provisions and contingencies for the quarter were INR 3,815 crores compared to INR 3,338 crores in the first quarter of last year. You will also notice that, in the last 2 quarters, the bank has been setting aside significantly higher levels of provisions towards categories other than loan loss provisions. This is towards the balance sheet strengthening that Amitabh has been speaking of consistently. More of this in a minute.

You will also see on the slide that the bank has an accumulated Prudential written-off portfolio of INR 21,317 crores. Of this, 86% has been written off in the last 9 quarters. We want to point out that, over the last 12 months, we have recovered 9% of the opening PWO pool and this ratio has been broadly consistent quarter-on-quarter.

If you move back 1 slide to Slide 55, you can see the credit cost trajectory of the bank over the last few quarters. Credit cost for the quarter stood at 2.06% on a gross basis. This compares with 2.45% in the first quarter last year. SME 2 at the bank remains benign and around 0.4% of loans.

In our earnings call last quarter, we enumerated several steps the bank has taken towards further strengthening our provisioning process. That push continued through this quarter. The bank's provisioning coverage on nonperforming assets stands at 78% compared to the -- compared to 69% at the end of the first quarter last year and 77% at the end of Q4 FY '19.

On NPA provisioning, the bank continues to adopt conservative norms, including daily stamping of NPA across the entire portfolio and 100% provisioning for unsecured credit and retail at the 90 DPD stage itself.

The bank also increased provisioning on certain non-banking assets held on our books. The context regarding this provisioning was explained in detail during our fourth quarter earnings call in April. This was an additional provision of INR 535 crores during this quarter. You might recall that 100% provisioning on this asset has already been passed through reserves last quarter. And this incremental provision of INR 535 crores that were done in this quarter, are book value neutral in nature.

This quarter, we also started making specific provisions for non-fund-based exposures we have towards borrowers that are either already NPA or are showing weakness and are in the BB & Below pool.

As we transitioned towards this new regime in this quarter, we made an additional provision of INR 459 crores in the quarter. Overall, through various measures over the last few quarters, the bank now holds additional provisions of INR 2,358 crores towards various contingencies. This is over and above the NPA provisioning, which is included in our PCR calculations, and the 0.4% standard asset provisioning requirement on regular assets.

This INR 2,358 crores of additional provision for contingencies includes INR 510 crores for BB & Below or SME 2 accounts, INR 459 crores for non-fund-based exposures, INR 1,389 crores for various stressed sectors and other situational provisions.

Please note that the INR 1,138 crores of extra provisions made towards land in the last 2 quarters is not included as part of the INR 2,358 crores.

So that was a detailed discussion on asset quality. Let's move now to a discussion of deposits. You have observed that the bank has been disclosing deposits on a quarterly average balance basis for the last few quarters. The rationale behind publishing the QAB numbers is to highlight our focus on maintaining and tracking stable, non-volatile deposits and minimizing the amount of hot deposits during quarter end. This is another step in our journey towards building a sustainable franchise at the bank.

Please refer to Slide 6 in the presentation. On a quarterly average balance basis, CA, SA and retail term deposits together grew 24% year-on-year. Within this, SA grew 10%, CA grew 12% and retail term deposits grew by 43% year-on-year on a quarterly average base -- balance basis. CASA and retail term deposits continue to form a strong stable base of funding and stood at 80% of total deposits.

Slide 23, a little ways ahead, highlights the strong growth of our wealth management business, Burgundy. We manage one of the largest wealth management businesses in India with assets under management of INR 1,36,789 crores as of the end of June 2019. We continue to open branches steadily. We expanded our total network to 4,094 domestic branches during the quarter by opening 44 new branches.

Let me now discuss loan growth and the trends we are seeing across key business segments. Domestic loan growth for the quarter stood at 19% year-on-year. The international loan book de-grew by 34%. Retail continues to be the key growth driver, growing at 22% year-on-year. The bank's strategy on retail assets continues to be centered around existing customers of the bank. 83% of retail asset originations in Q1 was from existing customers. 98% of our credit cards and 93% of personal loan originations in the quarter were also from existing customers of the bank.

A couple of quick comments on the bank's auto loans business. Our auto loans portfolio has grown by 36% year-on-year and now stands at INR 30,900 crores. The growth is fairly evenly spread across the country. Auto loan disbursements have grown by 19% year-on-year in the first quarter. We continue to leverage our branch coverage and digital capabilities to grow our auto business without compromising on pricing or credit filters. Roughly 45% of incremental car loans are originated from our branches. 90-day delinquency ratios in our car loans business remain near 2-year lows at levels well south of 0.5%.

SME lending growth was tepid at 8% year-on-year. Term loans and working capital loans grew by 3% and 9%, respectively. 79% of our SME loan book is working capital, and 85% of our non-NPL outstanding is to clients rated SME 3 or better.

In the Corporate Bank, domestic loan growth stood at 16%, and the international book de-grew 39% year-on-year.

Moving now to the bank's profitability metrics. I request you to refer to a section starting Slide 10 in the earnings presentation. Operating profits grew 35% year-on-year, with contribution from all revenue and cost line items. NII for the quarter was INR 5,844 crores, a growth of 13% Y-o-Y.

It's important to note that in the NII number of Q1 FY '19, there was a onetime impact of INR 249 crores due to the recovery of a large IBC case during that quarter. In this quarter, we have not seen any large recovery fructify.

Noninterest income for the first quarter grew 32% year-on-year to INR 3,869 crores. This was driven by fee income, which grew 26% year-on-year to INR 2,663 crores. Fee income growth was led by a healthy 28% growth in retail fee income and some contribution from Treasury. I will note that some part of the fee income increase is seasonal, particularly in Treasury. We are seeing favorable impact of some fee repricing measures as well that we undertook in certain pockets of our business, particularly in retail liability, that part is structural.

Within retail, fees from our cards business grew strongly by 28% year-on-year. The cards business now constitutes 27% of the total bank-level fees in the first quarter of FY '20.

Investment products and other distributions grew by 5% during the year -- during the quarter. Transaction banking fee growth was at 7% and Corporate Credit-related fees were down 1% year-on-year. We had trading profits of INR 832 crores during the quarter driven primarily by G-sec gains. Miscellaneous income for the quarter stood at INR 373 crores, primarily coming from dividends from subsidiaries and recoveries from written-off accounts.

Let's take a look for a moment at Slide 15. You see here that the net interest margin for the quarter stood at 3.4%. This compares to a core net interest margin of 3.29% in the first quarter FY '19 after adjusting for the 17 basis points of one-off during that quarter. Domestic NIM during this quarter was 3.56%. For FY '20, we continue to expect margins to remain broadly flat Y-o-Y with an upward bias.

If you flip back to Slide 13, this has the story on operating expense. Operating expense growth has been a major positive during this quarter. OpEx growth stood at 3% Y-o-Y. Cost of assets came down significantly in the quarter to 2.08% as compared to 2.13% at the end of the fourth quarter.

Some key sources of the improvement during the quarter included rationalization of outsourced manpower, rationalization of security expenses through expanded use of command center and other such technologies, digital initiatives, in-sourcing, resulting in lower mid-office and back-office expenses, and some seasonal elements like lower expenses on business promotion and advertising during the first quarter.

As stated in our previous earnings calls, we intend to continue improving our cost efficiency and build cost consciousness across the bank. Much of the cost efficiency gains are likely to be front-loaded, and that is why -- what we are witnessing currently. We expect to consolidate around the current levels of cost-to-assets before restarting our downward trajectory towards our goal of 2% in the medium term.

We will also reiterate that, while improvement in our cost metrics is welcome, we expect to continue investing heavily in areas that require material capital investments, in particular, our digital strategies.

Profit after taxes stood at INR 1,370 crores during the quarter, up 95% year-on-year. I would like to draw your attention to the overall impact of this profitability on the book value per share of the bank at the end of the first quarter. Book value per share as on 31st March 2019 stood at INR 259, which increased to INR 272 as on 30th June. Two factors primarily contributed to the increase. First, INR 2,563 crores was added to the -- got added due to the full conversion of warrants issued during the preferential allotment in December 2017. And second, INR 535 crores of provisions relating to land parcels got released as we provided for the same through the P&L during the course of this quarter. And hence, your BVPS went up from INR 259 to INR 272 per share.

Let's move now to digital and payments, where our strength and leadership position continue. A quick look at Slide 33 on credit cards. The bank had nearly 6.2 million credit cards in force at the end of Q1, making us the fourth largest credit card issuer in the country with a market share of 12.6%. In the first quarter, INR 56,500 crores of card spends went through Axis Bank network across our issuing and acquiring businesses.

Slide 36 highlights the rising contribution of digital channels for business growth. 59% of all savings accounts opened up through Tab banking, 46% of personal loan disbursements in the first quarter were through digital channels compared to 31% a year ago.

The next slide, Slide 37, highlights our strong position in the UPI space. During the quarter, we saw 256 million UPI transactions, with total transaction value growing over 4x Y-o-Y to INR 40,427 crores.

We have a registered VPA base of over INR 40.6 million and a market share of 11% in terms of transaction volumes for the quarter. In Mobile Banking, we witnessed a Y-o-Y growth of 73% in transaction value. Axis Bank mobile app continues to feature one the highest ranked banking apps with a rating of 4.6 on both Apple Store and Google Play store. Last quarter, the bank's customers undertook transactions worth INR 1,23,547 crores on the Axis Bank mobile app.

Let's talk now about the bank's capital position. CET1 ratio increased by 41 basis points during the quarter. 45 basis points of capital was infused during the quarter to conversion of warrants exercised by investors. There were also 2 risk-weighted assets related to regulatory changes in this quarter. Unrated exposures to clients greater than INR 200 crores in borrowings from banks and undrawn CC/OD exposure for borrowers greater INR 150 crores from the banking system. Both of these drove a onetime use of 31 basis points of CET1.

There was also a 9 basis point consumption during the quarter due to seasonal increase in operational risk RWA, which happens in the Q1 of every year. The 2 regulatory changes also contributed to 2 percentage point increase in RWA to total assets, and ops risk contributed to another 0.6 percentage points. The bank's CET1 ratio at the end of the first quarter was 11.68%, with a Tier 1 capital adequacy ratio of 12.9%.

The bank's Board has recently approved an enabling resolution to raise equity capital of up to INR 18,000 crores. This enabling resolution, if approved by shareholders, would be valid for 1 year. Key shareholder return metrics saw stability. ROA and ROE for the first quarter were at 0.69% and 9.19%, respectively. We continue to remain focused on our GPS 2022 strategy with a goal of reaching a sustainable 18% ROE over that period.

A quick look now at our subsidiaries. Axis Finance, our NBFC, had a growth of 17% Y-o-Y and now has a loan book of INR 7,962 crores. The business continues to deliver great returns with an ROE of 18.5% and net interest margin of 4.8% for the first quarter. The growth NPA ratio of the business stands at 0.36%.

Axis Securities is one of the fastest-growing stock brokerage firms in India, currently ranking third in terms of total clients volume -- client base. The accumulative client base rose 12% year-on-year during FY '19 to 2.13 million. Axis Capital, our institutional equities and investment banking franchise, has been the leader in equity and equity-linked deals over the last decade.

During the quarter, Axis Capital executed 10 transactions across investment banking. Axis AMC, our mutual fund business continues to perform well, with a 29% Y-o-Y growth in average AUM to INR 102,221 crores for the first quarter, led by 45% Y-o-Y rise in the number of client folios. The equity and hybrid businesses comprised 57% of this AUM.

Invoicemart, the Bank's digital invoice discounting platform, continues to do exceptionally well and enjoys a market share of 41% among all TReDS platforms. We currently have more than 2,700 participants on the platform and have clocked more than INR 3,750 crores in financed throughput by E-discounting over 2.5 lakh invoices.

Freecharge, our fintech company is being positioned by the bank as an engine that generates a large base of new-to-bank customers that are young and digitally native. The quarterly active user base of Freecharge was approximately 13 million at the end of the first quarter FY '20.

Finally, a couple of comments on our outlook for the future. The bank is committed to our 3-year execution strategy, based on the pillars of growth, profitability and sustainability, with an aspiration of delivering 18% ROE sustainably. In alignment with that aspiration, we'd like to reiterate the following.

We expect domestic loan book of the bank to grow 5% to 7% faster than industry. We expect credit cards to stabilize below the long-term average over this period. Cost to assets should continue to trend down towards our stated goal of 2% by financial year '22. We expect NIMs to settle in the range of 3.5% to 3.8% over the medium term. For FY '20, we expect margins to remain broadly flat Y-o-Y with an upward bias.

As we close, allow me to resummarize the key themes of the quarter.

Overall, this was a steady, strong quarter for the bank. Growth parameters, both on deposits and loans, were steady. Operating profitability was strong. Asset quality trends progressed as per expectations and provisioning was further strengthened. That about sums up our quarter.

With that, I come to the end of our comments, we'd like -- we'll be glad to take your questions at this point.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Mahrukh Adajania from IDFC.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [2]

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Thank you for the disclosure on the 8 stressed groups, structurally and full. I just had a question that there are other companies that have downgrades -- get bad debt downgrades practically every day. So is there risks from BB to Below beyond these 8 groups? Because that's hardly any downside risk.

Have you had a tough look at the portfolio? And now, therefore, can we expect the BB portfolio to stabilize at these levels?

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Amitabh Chaudhry, Axis Bank Limited - MD, CEO & Director [3]

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So we have looked at our corporate book, entire corporate book is not definitely from the 8 groups that Jairam talked about. Obviously, it goes beyond that. But as you pointed out, that the economy is going through a bit of a stress. And to kind of do -- we do want to confirm that nothing else will go down into a BB from here. We are watching it closely. Our Risk group is assessing on a daily basis other changes likely happening in the marketplace. And on that basis, we are looking at our ratings and generally being conservative.

So I think that's the reason why we want to be transparent and want to -- we have given this data is to make everyone understand that, firstly, in our BB & Below book, there are assets which have been in that book for a -- some period of time.

And as some of the promoters run out of liquidity and have literally become stagnant in the system. Some of these assets will fall into [distressed asset] as has happened in this particular quarter. I mean, they have tried, they have not been able to raise funds. From one side, you have seen that.

On other side, you are seeing some companies falling into BB because of the stress they might be seeing at the promoter group level. At the same time, we are seeing some resolution, hopefully, with the bill being passed yesterday, some resolutions happen at a faster pace than before. So there's a combination of factors at work.

And as we said, for us, the stability is more important. And as Jairam pointed out, that we have a pretty large contingency provision, which we have already created. And this is not linked to any group. This is at a portfolio level, and we'll continue to evaluate what it will take for us to -- and split any changes and if any -- anything else which requires to be created over a period of time. That objective will not change there.

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Mahrukh Adajania, IDFC Securities Limited, Research Division - Director [4]

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Okay. And just reconfirming the corporate slippage gross is INR 2,128 crores, correct?

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [5]

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That's right. That's right.

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Operator [6]

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The next question is from the line of Kunal Shah from Edelweiss.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [7]

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Sorry, so again to touch upon...

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Amitabh Chaudhry, Axis Bank Limited - MD, CEO & Director [8]

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Can you speak a bit louder, please?

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [9]

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So apart from this 8 industry or the 8 accounts which you highlighted pertaining to these few industries. I just want to get a sense in terms of NBFCs, HFCs and real estate. So I think these 3 are not there in these 8 particular accounts, if I have not missed out on any of them?

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [10]

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Yes. So Kunal, we have not -- this is not a sectoral view. This is of specific groups. As it happens, there is an HFC group in this. So -- but we are not taking a sectoral view. We have looked at the groups that are -- that offset. We do take a look at every sector on an ongoing basis. Last quarter you might recall that we had done some specific provisions towards said sectors and some of the sectors we are mentioning were specifically called out as sectors that we had internally tagged as stressed and made additional standard asset provisions on. So we are doing that already.

As far as specific problematic accounts, our exposures are concerned, as Amitabh mentioned before, we took a good look at the entire portfolio once again given the news flow that has happened during the course of the last few months.

We looked at the entire portfolio again to get out of the sense of what else is out there that might merit a downgrade into the BB pool. Whatever merited it, whether it was because of the sectoral issues or promoter leverage issues or operating profitability issues or whatever it might be, whatever merited a downgrade into BB, we have attempted to put it down into BB during the course of Q1.

And so what you see, the INR 2,242 crores that we spoke about as incremental downgrades to the BB book that have happened during the course of this quarter, that came from across various sectors. And across -- and the reasoning was very different in each of those situations.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [11]

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Okay. And secondly, in terms of the investments in the financial companies, which is down from, say, INR 21,000 crores to INR 16,000 crores, so INR 5,000 crores of -- so this is the run down...

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Operator [12]

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Mr. Shah, sorry to interrupt you. Can you speak a little bit closer to the phone and a little louder?

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [13]

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Yes. Sorry. So this INR 5,000 crores of investment in financial companies, in particular, have been down by, say, from INR 21,000 to INR 16,000-odd crores, so this is a run down? Or this is given there is some markdown which would have had...

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [14]

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Rundown. This is all rundown. If you see our overall book itself has come down by INR 10,000 crores during the course of this quarter. And some of that just happens to be from the financial services sector. There is no -- this is not a marked effect.

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Amitabh Chaudhry, Axis Bank Limited - MD, CEO & Director [15]

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Just to add to what Jairam said, we are very clear in our minds that we do not want to be holding such a large book, investment book, as far as corporate bonds are concerned. We obviously are a very -- we have been a leader in this space in terms of debt capital markets for, I think, last 10 years, if not more. We want to maintain that leadership position, but we will turn it over much faster than what we have done in the past. So you will see a continued push towards pushing our overall book down. I -- in terms of what we hold in our books. And this is part of that strategy.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [16]

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Sure. And lastly...

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [17]

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You will notice, Kunal, that our corporate bond book was about INR 40,000 crores at the end of last quarter. It's about INR 30,000 crores now.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [18]

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Yes, it's come off, yes. And lastly, in terms of real estate, out of INR 13,000-odd crores, if you can just give the breakup in terms of how much is in NPL and how much is in BB & Below?

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [19]

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This INR 12,900 crores is all standard.

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Amitabh Chaudhry, Axis Bank Limited - MD, CEO & Director [20]

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Please understand most of our book in that is -- I mean, apart from top-notch (inaudible) in India, LRD, sorry. Our exposure to real estate side is not something -- something substantial to be worried too much about. I mean, we obviously have been monitoring this portfolio for the longest period of time.

Let me ask Rajiv to add a little bit more color there.

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Rajiv Anand Prattipati, Axis Bank Limited - Head of Corporate Banking & Executive Director [21]

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As Amitabh said, by and large, the portfolio is either NRD or loans to top-notch builders across some of the primary markets. Second is, we don't do construction finance. And third is, remember that we have a large mortgage portfolio on the retail side, so therefore, much of the exposure to the real estate side comes from that side.

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [22]

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We have mentioned this a little bit on one of the prior calls, Kunal, and nothing has much changed on that front, so I'll reiterate. Under-construction residential-project finance is, for us, very, very small. It's something like INR 1,500 crores only. It's just not a material amount. We do have a little bit of exposure to some of these in the -- yes, and even though that exposure is to the very top developers in the residential space. We have a little bit of exposure in our NBFC and the one NPA that we have had so far, in our NBFC is in the real estate space. But again, this -- the overall exposure there, as well, is very small from the larger bank context.

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Operator [23]

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The next question is from the line of Abhishek Murarka from IIFL.

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Abhishek Murarka, IIFL Research - VP [24]

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So a couple of questions. One is, if I look at your provisioning, and obviously, I'm not looking at INR 1,000 crores which you have done for specific instances. But if I look at the INR 2,800 crores odd, that works out to almost 200-plus bps of loans. So -- how much -- is there any turnkey element there? Or -- and in that context, how soon before we get to that normalized long-term level of 110-odd basis points of provisioning?

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [25]

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So Abhishek, you're right, if you look at the pure NPA provisions, that is 206 -- 206 basis points, which is -- with annualized. So -- and of course, it does tend to be a Q1 hike. If you look at last year, first quarter was 245 basis points. And we ended last year at a full year level at about 195-odd basis points. So if you are going to start the year high and the trajectory is going to be of a particular kind, Q1 is going to be the high.

So as opposed to 245 last quarter, we are at 206 this quarter. We do not have a specific guidance for credit cost for this year. So I encourage you to make your own sort of assumptions on how the seasonality would play out through the rest of this year. We have stated and we reiterate that in our FY '22 sort of plan, the GPS '22 strategy, we expect to be under our long-term average of 100 bps, and we are well on track towards that.

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Abhishek Murarka, IIFL Research - VP [26]

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Okay. And secondly, given your commentary on the corporate operating environment in the large corporate or mid-corporate space, do you think that the downgrades to BB & Below could intensify?

And therefore, do you think the BB & Below pool could sort of increase given the current operating environment?

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [27]

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Abhishek, your guess is as good as ours. We are all sort of watching the same developments as they are taking place in the environment. If the level of volatility that we have been seeing in the last few months continues, we have to keep reevaluating our portfolio, and we keep looking at it.

As of now, we have done a thorough scrub of the pool. Knowing everything we know now, we have done a thorough scrub to figure out whether any account merits going into BB and when in doubt, we have downgraded them into BB. And hence, you see a large number, INR 2,242 crores in the downgrade file. But honestly, we just can't kind of look too far out and make an assessment of whether something is going to change over the next 2 quarters.

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Amitabh Chaudhry, Axis Bank Limited - MD, CEO & Director [28]

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Just to add to what Jairam is saying, all the incremental funding which we are doing or incremental lending which we are doing on the corporate side, a lot of it is coming from single A and above. So I think what you have think though is that when you look at what our kind of historical book was and what we are adding to it gradually, slowly year after year, the portion of highly rated -- the highly rated portion is only increasing over a period of time.

So first, understand that the book itself is hopefully getting the old average -- weighted average rating of the book is changing, and that's for the positive. But yes, as Jairam said, given the economy is growing, how long will it last? One doesn't know, obviously. All of us are watching it very, very closely. We are cautious. We are being very, very careful, but if some unexpected events do happen and some of these unexpected corporates do see stress, you could see some corporates going there. But today, what we are saying is the book reflects what we see today, for sure.

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Abhishek Murarka, IIFL Research - VP [29]

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Sure. Sure. That is -- that's enough. That's it from my side. Sorry, just one quick data-keeping question. You said 79% of the net slippage in the corporate book was from BB & Below. Can you give the same number from the gross slippage? So [21,284]...

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [30]

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Yes. No, there is a specific reason why I avoided talking about the gross slippage number because there have been some accounts that have slipped and got unregularized. I mean, they slip for technical reasons and got regularized during the course of the same quarter. So looking at it as that percentage is less meaningful, and that's why we talked about from a net perspective.

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Operator [31]

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The next question is from the line of Saikiran P. from Haitong Securities.

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Saikiran Pulavarthi, Haitong International Research Limited - Research Analyst [32]

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Just moving away from the corporate asset quality challenges. What is it that you are seeing on the retail side, especially on the unsecured book? I do understand in what (technical difficulty) you said that the NPS (technical difficulty) are controlled, but looking forward (technical difficulty) because a couple of comments that you've had, I have to caution.

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Amitabh Chaudhry, Axis Bank Limited - MD, CEO & Director [33]

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So I will say a couple of lines and the real content will be given by Pralay. I just want to do -- rather reiterate what Jairam said that we have as yet not seen any sign which tells us that it is going to deteriorate. But the external factors are telling us that there is a possibility. And some other banks have been talking about it, that they are seeing signs of the portfolio deterioration. And obviously, external factors seem to indicate that there could be an impact and there could be a deterioration.

And yes, obviously, the leverage of [initials] is rising. So let me just ask Pralay to kind of pick it up from there.

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Pralay Mondal, Axis Bank Limited - Group Executive & Head of Retail Banking [34]

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So yes, in the ecosystem, people are talking about it, but I have looked at our data very hard with all kinds of possibilities, and whichever way I see the trends of -- the quality of the portfolio is only looking up, whichever way we look at it, whether it is MOB or integrating [of] 30-plus, early mortality, various factors.

So what I have announced -- but at the same time, I do understand, when the whole ecosystem has an issue, there will be marginal issues with everybody in the ecosystem. Based on that, I have told the team to do a stress testing on the portfolio based on superimposing a scenario of a -- in a slightly worse ecosystem environment and then show me how it looks, because I'm not able to find any problem. But in the ecosystem, people are talking about it.

Having said that, let me tell you why probably we are a little more safe and secure than certainly some of the other ecosystem, 2, 3 things. One is, a, we do almost 80%, 90% of the businesses, depending on which unsecured you are talking about, into our internal debt. B is our analytics engine is extremely strong not only when we are underwriting, but we also do a lot of post-underwriting around -- constant scrubbing and constant other kind of analytics to ensure that our portfolio remains strong, and we do keep changing things whenever it's required. We now are scoring our analytics model, et cetera.

Even for resolutions, for example, businesses [net debt] cards you can do limit upgrade, you can do limit reduction, also. So all of those models are available with us.

And the third important thing which sometimes [remains] is, we are only looking at growth of the book which we have. But when you look at -- even within our retail book, the unsecured book has still not touched 20%, even if I look at the business loans, even if I look at the credit cards, even if I look at the personal loans, whichever way I look at it, including the SME, unsecured, et cetera, it is well below -- not well below but reasonably below 20%.

So given that perspective, our risks are well-distributed between secured, unsecured, home loans and all other products and services. So [to the diction], I think we are in a safe zone right now, but we need to be cautious, and we will continue to be cautious at a customer level. As we are talking, we are actually raising the bar in terms of credit quality, as we are talking, when it comes to underwriting.

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Saikiran Pulavarthi, Haitong International Research Limited - Research Analyst [35]

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Got it. And the second question is on the SME side, when I look at SME 3 and above, which is at 85% of the overall loan book, compared in a year back, it was around 88%. Would you like to comment on any trends which you are seeing on the SME side?

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Rajiv Anand Prattipati, Axis Bank Limited - Head of Corporate Banking & Executive Director [36]

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I think on the SME side, there are no real worries from a book perspective. However, you have seen that growth has been a bit muted. I think, to a certain degree, that part is really the supply chain finance side of our business, which is seeing some slowdown as a result of -- with the articulated issues that we see on the auto side. But from a book perspective, at this moment, we are not worried.

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [37]

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The one thing, if I may add to what Rajiv just said, is that when growth slows, it is the higher -- or the better quality clients that are going to continue to stay away. So what we are seeing in the SME business is what was yesterday in your SME, let's say, 4, 5, 6 continues to be with you. But SMEs 1, 2 and 3, which were growing at a particular rate are growing more slowly now. And that optically just looks like a greater proportion of your book is now in worse rated.

So it's a growth story, not an asset quality deterioration story. As Rajiv mentioned, we continue to look for good risk-adjusted returns in SME. However, in recent quarters, it has been a little bit of a challenge and growth has -- growth has been hard to come by.

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Amitabh Chaudhry, Axis Bank Limited - MD, CEO & Director [38]

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But we also need to appreciate that, that reflects a bit of a cautious time which we have taken on the SME side. As we have seen, the economy is slowing down. I mean, our growth numbers itself should be telling you that we are being quite cautious here. We want to maintain the quality of our book.

And again, it cannot be at the expense of the quality. We cannot grow at the expense of quality. We are very clear entirely and the entire management team is aligned to that. So I think you need to look at both these factors when you look at our SME book.

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Operator [39]

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The next question is from the line of Adarsh P. from Nomura.

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Adarsh Parasrampuria, Nomura Securities Co. Ltd., Research Division - Executive Director [40]

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My questions are answered.

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Operator [41]

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The next question is from the line of Suresh Ganapathy from Macquarie Capital Securities.

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Suresh Ganapathy, Macquarie Research - Head of Financial Research [42]

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I have 2 questions. One is on the INR 75 billion BB & Below book, which is flat Q-o-Q, if I were to look at the moment, Jairam has said INR 22 billion got added and INR 10 billion got upgraded, right?

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [43]

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Yes, there was a INR 10 billion movement, which was either upgrade or repayment that came in. That was together INR 10 [million] and about INR 12 billion slippages.

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Suresh Ganapathy, Macquarie Research - Head of Financial Research [44]

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Correct, INR 12 billion slippage. So in that sense, if we were to look at it, the total slippage of about INR 48-odd billion, almost INR 36 billion actually came outside of this INR 12 billion number, which is the BB & Below book, right?

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [45]

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Different -- I'd frame in differently. I'd say that the base that you should look at is not INR 48 billion, the base is INR 21 billion, which is essentially the slippages in corporate because this obviously doesn't -- this is only for -- this is only for the corporate book. And in that, there were some accounts which slipped and got regularized during the course of the same quarter, and hence, they don't show up.

What shows up in this INR 1,200 crores is what slipped and stayed slipped as NPA. So INR 1,200 crores slipped from here and stayed NPA. Outside of this INR 1,200 crores in -- on the corporate side, from a net slippage perspective, there was basically around INR 100 crores more that came from outside from the BB list.

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Suresh Ganapathy, Macquarie Research - Head of Financial Research [46]

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Yes. I agree with that point, Jairam, but everybody looks on a gross number basis. On a gross number basis, if I were to compare your slippage this quarter outside of the BB & Below book, the run rate has been 3% annualized. And if I were to compare with your peers, also, who report numbers on a gross basis, the numbers are far lower.

So that's the reason I'm a bit worried because, though you might have seen that it got regularized in the same quarter, the gross numbers are not infusing at all. So that's where the worry that comes from, what happens if it doesn't get regularized next quarter, if you have something like this happening?

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [47]

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Suresh, there was exactly one account in the -- from -- in gross which was from outside BB which slipped and got regularized. So this is not a big issue. So I'm not sure about the math and what comparison sort of you're doing here, but there was exactly 1 account, which was in that kind of zone of any materiality. And so...

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Amitabh Chaudhry, Axis Bank Limited - MD, CEO & Director [48]

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I mean, if you want to, Suresh, understand, we can take it offline, the calculations, with him.

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Suresh Ganapathy, Macquarie Research - Head of Financial Research [49]

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Okay, okay. Fine. It's perfect. I think this explanation is perfect.

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Amitabh Chaudhry, Axis Bank Limited - MD, CEO & Director [50]

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But it is not what you're thinking. Yes.

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Suresh Ganapathy, Macquarie Research - Head of Financial Research [51]

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Okay, cool. The other thing I had is on your 18% ROE target. The problem, Amitabh, I have here is that your margins are just not improving. I mean, there is some reason or the other where the margins have just got stuck-up in one zone. And you are also thinking of raising $1 billion-plus capital.

Is there a way to do the math? It's a mathematical impossibility that you guys are going to have 18% ROE in the next 3 years even if I factor in a capital raising and if the margins necessarily don't improve. So I'm just wondering how realistic is your 18% ROE target?

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Amitabh Chaudhry, Axis Bank Limited - MD, CEO & Director [52]

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Suresh, obviously, the margins don't improve, it is a mathematical impossibility. You take one of the -- the most important drivers of 18% ROE out, obviously, it will not happen. So yes, you are saying margins are not improving. We are working towards it, I mean, the numbers have been quite volatile in terms of how the -- when we look at CASA, when we look at RTD, how the RTD has been priced.

On one side, you have seen a lowering of interest rates, on the other side, you're not seeing the RTD deposit rates go down. ISBI has just announced yesterday that they are lowering the deposit rates.

I think as -- when some of the transmission happens as our portfolio mix produces a change, plus I'll allow Jairam to add to it. I mean, we have a roadmap and a glide path. I mean, yes, we do believe, and we continue to maintain that our aspiration is to get to 18% ROE, which keeps us a recognized, which keeps us asking the same question and my comments to how we will get there.

We have a glide path. We are not obviously going to detail for you what the glide path is, but you will see movement in some of those areas. If you look at our jaws, if you look at what we've done with expenses, what we have done the fees. There is a movement on that. Yes, NIM has to improve. Yes, we have talked about a capital raising and we've got approval for the next 1 year.

And by the way, end of the day, the recent capital raise and fee raise, when we raise it is related to growth. So growth will also help us. And obviously, we believe that when we'll be one of the few banks as the last man standing when most of the others will suffer through this crisis. We will get the right pricing, and then you will see a positive impact on NIM.

Jairam, do you want to add?

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [53]

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Yes -- sort of just a math thing to add to what Amitabh is saying. Clearly, if you ask yourself the question, assuming a certain size of capital raise over the next little while, what does it take for us to get to 18% ROE? And sort of compare that with what we delivered in FY '19 already, what's in the book.

Clearly, net interest margin has to be at the very high end of the medium-term raise that we have spoken about. So somewhere in that -- in that [380] range as opposed to the [350, 360] range. So it needs to be there, our fee to average assets has to be a few basis points higher than what we delivered in the last year. And the cost to average assets has to go down to under 2%. And of course, credit costs have to be under 100 basis points.

With that and with the high levels of provision coverage that we are carrying with us now, the math, for us, in some versions does work. You're right, that it is not a certainty. There is -- there are many possibilities of that this might not pan out. But there is a version in which it does work out, and that's the version that's being rolled out as goals and targets internally in the organization. And we recognize the element of stretch here, but that is what -- that is the goal that we have rolled out to everybody internally, and that we are all uniformly pursuing.

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Suresh Ganapathy, Macquarie Research - Head of Financial Research [54]

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I appreciate your response.

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Operator [55]

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The next question is from the line of Nilanjan Karfa from Jefferies.

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Nilanjan Karfa, Jefferies LLC, Research Division - Equity Analyst [56]

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I just -- just 2 or 3 questions. So in this 8 group that you talked about on the investment part, I reckon we only took about INR 400 crores of provision. How confident are you on the rest of the INR 1,200 crore? So that's one.

Second is, when we look at the below investment grade book, I believe this is just the loans. Would you have a comparable number if we include all the investment book as it stands today?

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [57]

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I didn't understand the second part of your question, Nilanjan -- sorry. What is the loan you are talking about?

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Nilanjan Karfa, Jefferies LLC, Research Division - Equity Analyst [58]

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No. Below investment grade book, is that -- my guess is that's only loans, right? That's not...

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [59]

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Oh, [INR 7,500]. Yes. But there is a tax there, which talks about our -- our -- non-fund -- INR 2,500 crores is our non-fund base.

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Unidentified Company Representative [60]

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(inaudible) 52.

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Nilanjan Karfa, Jefferies LLC, Research Division - Equity Analyst [61]

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No. Not non-fund, I'm talking about, let's say, the bonds. The bond portfolio.

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [62]

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Yes. Yes. So in the -- on Slide 59, you see our bond portfolio. And you see the investment -- investment book there.

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Nilanjan Karfa, Jefferies LLC, Research Division - Equity Analyst [63]

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Okay. I see that now. Yes, right, right. Okay. And...

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [64]

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Your first question on the investment book in the stressed groups. And the fact that we have INR 2,000 crores non-NPA -- like there is INR 200 crores NPA, let's put that aside. We have INR 2,000 crores of non-NPA investments against that, we have a INR 400 crores mark. Is INR 400 crores sufficient? We'll have to keep looking at it.

We'll have to keep evaluating how this -- I'm sorry, Amitabh, do you want to add?

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Amitabh Chaudhry, Axis Bank Limited - MD, CEO & Director [65]

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So Nilanjan, you have to understand one thing which is very, very important. We have a large investment book. And we said we are running it down. But you also have to appreciate that the interest rates are declining. There are other parts of the book which are well-rated where you will get a positive MTM also.

So I understand and appreciate where you're coming from in terms of what the MTM on this could be when it's [there] in the market, and we understand -- you have to understand and appreciate that in some cases where liquidity might be limited, but you have a positive side to this also. So we obviously are evaluating it very, very closely. We do believe that, overall, if you look at our investment book, we have disclosed the numbers to you as we can. And the number, in our minds, should be broadly sufficient, that's where we are.

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Nilanjan Karfa, Jefferies LLC, Research Division - Equity Analyst [66]

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Okay. Fine, I'll probably take it off-line. One or 2 other data for data-keeping questions, Jairam. What would be the non-funded exposure on NPS? And beyond this BB & Below book, is there something on the restructured -- all the RBI restructuring schemes and is it all overlapping with that? Or there is something additional outside it? So 2 questions.

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [67]

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Yes, there is INR 2,800 crores, Nilanjan, which is NFV on NPA side. And restructuring, there is nothing over and above the BB stuff.

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Operator [68]

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Ladies and gentlemen, we take the last question for today from the line of Pankaj Agarwal from AMBIT Capital.

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Pankaj Agarwal, AMBIT Capital Private Limited, Research Division - VP of Research [69]

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What do you think are the 3 reasons behind slowing cost of growth for you as well as the industry?

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [70]

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So this is a long question to end the day, Pankaj.

But I'll do a couple, and then I'll request Pralay to jump in. So there are a couple of things happening. One is at a sectoral level, you are seeing household savings go down. So that's an important element of what drives down CASA. We are also seeing stiff competition from small savings, which are at fairly high rates compared to CASA. So that continues to take away money from the sector. And internally, within the sector, if you see, while money is not flowing as much into mutual funds, et cetera, as they were in the previous year. There is still -- within the banking industry, there are term deposits, which are very attractive instruments right now for customers to put money into.

And hence, money is flowing in there preferentially. And those 3 things at a macro level are impacting your CASA. But I'll request Pralay to jump in if there is anything else?

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Pralay Mondal, Axis Bank Limited - Group Executive & Head of Retail Banking [71]

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No, I think, Jairam has covered most of it, but just to give a flavor to this, what does CASA do? Possible kinds are 2 different kind of reasons to have those balances. So the transactions actually will come. And [start] when their activities happening in and around the consumers, our balances did. Unless of course, there are certain rate-related issues, which sometimes comes into -- as far as a portfolio. So which we are not playing that game, right? So from a net perspective, I think the systemic CASA is primarily the whole flow through the consumer accounts are going down to some extent because the activity levels are going up.

Also, some of the high-net-worth customers are moving that into some of the wealth businesses and some of the other businesses, we are seeing, but it's a function of basically what we said, savings is coming down, transactions are going -- not going as much as it was happening for EMIs or some of the other things, which generally saw in card use. And the transaction banking actually has taken away by efficiency which has created in the car accounts has taken away some of the balances from the current accounts.

Generally, overall business environment in SME as well as in some of the retail is not -- on the consumption side, is not as good as it was a year back. So I think a lot of these are combining all of this stuff. But do we have an exact fix why it is going down? I think, beyond that and beyond that the savings is going down that we were in the ecosystem. I think that's what it is.

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Pankaj Agarwal, AMBIT Capital Private Limited, Research Division - VP of Research [72]

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Okay. And sir, do you see a scenario where you might need to match SA rates offered by some of your competitors only a couple of quarter down the line?

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Pralay Mondal, Axis Bank Limited - Group Executive & Head of Retail Banking [73]

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See, what happens is that SA rates, both ways they are going. Some people have given SA rates which are higher SA rates, some people are bringing it down, et cetera.

So we have -- keeping it more or less constant where we are. So -- and if you look at people who are giving higher SA rates, [it will be 1 or 2] parts, some are not exact SA, some are SA, but how much is really moving to that? While growth of some of those banks are higher, but actually from the ecosystem, not much if you discount that as well. Overall, [cap rates] also down. So I don't think rates is an issue here. That's very tactical. That's very short term. The larger piece is that I think, as an ecosystem, transactions are moving down or reasons for keeping balances in the SA is not high. And also the savings itself is coming down in the ecosystem. I think it's a combination of 3 things. Also I've seen that capital market, when it does well, sometimes builds in balances into SA balances at times. So I think some of these things are not playing out. This is not going to make a difference in my view. That's a few percentage here in the ecosystem.

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Operator [74]

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I now hand the conference over to Mr. Jairam Sridharan for his closing comments. Over to you, sir.

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Jairam Sridharan, Axis Bank Limited - Group Executive & CFO [75]

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Thank you, Chora. Thank you, everybody, for participating in Axis Bank's quarterly earnings call, and thank you for all your questions. I wish you a very good evening.