Axis Bank Ltd 532215
Q4 2013 Earnings Call Transcript
Transcript Call Date 04/24/2013

Operator: Ladies and gentlemen, good evening, and welcome to the Axis Bank Conference Call to discuss the Q4 and Annual Results FY ‘13. As a reminder, all participants will be in the listen only mode. Please note that this conference is being recorded. Participation in the conference call is by invitation only. Axis Bank reserves the right to block access to any person to whom an invitation is not sent. Unauthorized dissemination of the contents or the proceedings of the call is strictly prohibited, and prior explicit permission and written approval of Axis Bank is imperative.

The Axis Bank team is represented by Mr. Somnath Sengupta, Executive Director and Head Corporate Center; Mr. V. Srinivasan, Executive Director and Head, Corporate Banking; and Mr. Sanjeev Kumar Gupta, President and CFO.

There will be an opportunity for you to ask questions at the end of today’s presentation. On behalf of Axis Bank, I once again welcome all the participants to the Axis Bank conference call. I’d now like to hand the conference over to Mr. Somnath Sengupta, Executive Director and Head Corporate Center, Axis Bank to begin the presentation.

Over to you Mr. Sengupta.

Somnath Sengupta - Executive Director, Corporate Center: Thank you, and good evening, ladies and gentlemen. I welcome you to our conference call with a presentation on the Bank's performance in the fourth quarter and for the financial year ended 31 March 2013. I have with me, as you have just heard, my colleagues, Mr. V. Srinivasan and Mr. Sanjeev Gupta, and at the end of this presentation we will be glad to respond to your questions.

Growth continues to be weak and during 2012-13, India’s GDP growth fell to 5% from 6.2%, the lowest since FY 2004.

Tightening of monetary policies, slowing investments in the industrial sector, altering consumption demand, and stubbornly high inflation have not helped create conditions conducive for growth. The softening in headline and core inflation growth seen in the last month, however, has raised hopes that steps will be taken towards the easing of monetary policy.

Wide range in reforms have been announced by the government aimed at encouraging investments, both domestic and foreign, in different sectors of the economy. Fuel and LPG prices have been raised to curb fiscal deficit, and the government is also taking steps to remove bottlenecks in the implementation of projects, encouraging investments in the infrastructure sector.

These measures are expected to boost capital investments. The markets have reacted favorably to the announcements, leading to a strengthening of the rupee against the dollar on the back of increased inflows.

The reforms announced by the government underpinned by its commitment to fiscal discipline the dip in inflationary trends and softening commodity prices, reducing pressure on the current account deficit bode well for the economic health of the country in the medium to long term.

As on 22 March 2013, total deposits and advances in the banking system have both grown only at 14% y-o-y, respectively. In such a backdrop, we believe that the Bank has performed well.

Let me describe to you the highlights of the Bank’s financial results for the fourth quarter and the financial year 2012-13.

Net profit during Q4 grew 22% to INR 1,555 crores from INR 1,277 crores in Q4 last year. Net profit for the full financial year also grew 22% to INR 5,179 crores from INR 4,242 crores last year.

Net advances increased to INR 1,96,966 crores registering a y-o-y growth of 16%. This increase was largely driven by a strong growth of retail loans, which rose 44% y-o-y and now accounts for 27% of the total loan book against the level of 22% last year.

Non-retail loans on the other hand have recorded an increase of 8% y-o-y in which the SME segment had shown a healthy growth of 26%.

Total deposits stood at INR 2,52,614 crores growing 15% y-o-y, and the Bank continue to focus on low cost current and savings deposits. Total CASA grew 23% y-o-y with savings bank deposits also growing 23% year-on-year and it was INR 63,778 crores at the end of the financial year.

On a daily average basis, which is a metric that we look at very closely, total CASA grew 14% and within that savings bank deposits grew 20% y-o-y. If you were to look at the composition of deposits on a daily average basis, current and savings deposits constituted 36% of the total deposits of the Bank.

The Bank’s asset quality continues to remain healthy with its net NPA ratio at 32 basis points. We also continue to maintain a healthy provision coverage ratio at 79%.

During the quarter, the Bank raised equity capital through a QIP and preferential offering to promoters as you know, aggregating INR 5,537 crores. As a result, the Bank’s capital adequacy ratio stands at 17% at the end of the financial year against 13.66% last year. The Tier-I capital adequacy ratio was 12.23% compared to 9.45% as of the end of 2012.

Let me now take you through the business levels and the financial results of the Bank in Q4 and the financial year. We have continued to expand our network across the country. We've added 160 branches during the quarter and 325 branches during the financial year, taking the number of our branches and extension counters to 1,947 in the country, covering 1,263 centers.

In the current financial year, we proposed to open, something like 250 additional branches. We also have a network of 11,245 ATMs. We added something like 1,361 ATMs in the last financial year.

The Bank’s balance sheet grew 19% and stood at INR 3,40,561 crores as on 31 March 2013. Within that net advances grew 16% y-o-y and stood at INR 1,96,966 crores at the end of March and the growth, as I said earlier on, was driven mainly by retail loans, which has risen 44% y-o-y and now constitutes 27% of the total loan book.

Large and mid-corporate loans constituted 50%, while SME loans stood at 50% and agricultural loans accounted for 8% of the total loan book. Retail loan portfolio continues to be focused on secured products, which accounts for 87% of the total retail loans. Home loans constituted 65% of the total loans, while loans against property constituted 7%. Auto loans were 14% of the total loan book and personal loans and credit cards made up for 9% of the balance.

The Bank sources its retail loans through 120 asset sale centers, operating out of 96 cities. Retail loans are also originated from 1,183 branches, spread over 283 districts. Around a third of the incremental retail loans are now sourced through our branches, and existing liability customers contribute over 50% of the incremental business that we are booking.

The current trends indicate that retail loans and loans for working capitals and drawdowns by existing projects and their implementation in the corporate banking segment will contribute to growth of net advances in the current year.

In terms of rating distribution, 62% of the large and mid-corporate loans have been rated A and above. In the SME segment, 80% of the loans were rated between SME 1 and SME 3. SME 3 corresponds to a single A rating.

Let me now move on deposits. The Bank has grown its deposit base by 15% to reach INR 252,614 crores. The Bank's low-cost deposit franchise, as I said, grew well at 23% and savings bank deposits continue to show a healthy trend growing 23% y-o-y.

In order to broaden the table deposit base, the Bank continues to focus on increasing its share of retail term deposits. As on 31 March 2013, the retail term deposits grew 24% y-o-y and stood at INR 59,531 crores, making up for 42% of the total term deposits compared to 37% on 31 March 2012. So this an area in our deposits which has actually grown well and as on 31 March, if you take current and saving and retail term deposits together, they constituted 68% of the total deposit base compared to 63% on 31 March 2012.

Let me now turn quickly to the revenue and profitability figures for Q4 as well as for the financial year. Net profit of the Bank grew 22% to reach INR 1,555 crores in Q4 from INR 1,277 crores during the same period last year. During 2012-13, net profit of the Bank also grew 22% to reach INR 5,179 crores for the full year, rising from INR 4,242 crores one year back.

The increase in net profit was driven by growth in net interest income and other income. Our net interest income during Q4 grew 24% and stood at INR 2,665 crores, while during the year it grew 21% to reach INR 9,666 crores. In Q4, the net interest margin was 3.7% compared to 3.57% in the last quarter. For 2012-13, for the full financial year, the net interest margin was 3.53% compared to 3.59% for 2012.

Other income comprising fee, trading profit and miscellaneous income during Q4 a growth of 26% y-o-y and stood at INR 2,007 crores. During the same period, fee income grew 22% y-o-y and stood at INR 1,618 crores. The fee income from retail business for the quarter has shown robust growth of 32%, reaching a level of INR 517 crores, and also constituting 32% of the total fee income of the Bank. Fee from Treasury including debt capital markets grew 41% to reach INR 353 crores. Fee from large and mid-corporate credit stood at INR 475 crores, recording a growth of 7%. Fee income for business banking grew 19% and stood at INR 127 crores and during the quarter, the Bank also earned trading profits of around INR 238 crores registering an increase of 63% largely contributed by the fixed income portfolio.

During 2013, other income grew 21% and stood at INR 6,551 crores against INR 5,420 crores last year. During the same period, fee income grew 17% y-o-y and stood at INR 5,521 crores, while trading profit grew 109% and stood at INR 755 crores.

During the quarter, operating expenses grew 10% y-o-y lower than in previous years, while the increase in staff costs around 14%. Consequently, the cost income ratio of the Bank was 40% in the quarter against 45% in Q4 last year.

During the financial year, the operating expenses grew 15%, which is a more representative growth rate for the operating expenses and within that, the staff costs grew around 14%. The cost income ratio for the full financial year was 43% against 45% last year. The number of employees in the Bank stood at 37,901 compared to 31,738 last year.

In Q4, return on assets of the Bank stood at 1.94% compared to 1.88% in Q4 last year, while return on equity was 21.6% against 23.93% last year. The return on assets improved to 1.7% from 1.68%, while return on equity was 20.51% against 21.22% for the full financial year.

Let me now discuss asset quality. During the quarter, additions to gross NPAs were INR 398 crores, upgradations and recoveries amounted to INR 205 crores, and write-offs, including prudential write-offs, were INR 75 crores. Consequently, the net addition to gross NPAs during the quarter was INR 118 crores. Gross NPA, at the end of the quarter, cumulatively stood at INR 2,393 crores, constituting 1.06% of gross customer assets.

The net NPA ratio at the end of the quarter was 32 basis points and the provision coverage was 79% at the end of the year. The credit costs for the year stood at 70 basis points.

During the quarter, assets amounting to INR 791 crores were restructured. The cumulative restructured assets at the end of the quarter stood at INR 4,368 crores, constituting 1.94% of gross customer assets.

On a cumulative basis at the end of March 2013, the Bank recovered 15% of the total restructured assets, while 17% of total restructured assets have slipped NPAs over the period.

Provisions and contingencies other than that for the quarter was INR 595 crores of which provisions for loan losses was INR 145 crores, standard asset provisions were INR 68 crores and provisions for restructured assets were INR 70 crores. The provision for depreciation investments were INR 65 crores.

In addition to the above, we have created a contingency provision of INR 240 crores during the quarter, taking the total amount of contingency provision to INR 375 crores.

Capital adequacy ratio of the Bank and the Tier 1 ratio as on 31 March post capital raising stood at 17% and 12.23%, respectively.

To sum up, the Bank has delivered a strong and consistent performance despite a challenging environment. The key highlights of our performance in this quarter as we just described is the fact that retail liability franchise continues to grow well. Earnings in the quarter were very strong with a solid growth of operating revenue of 25% and operating profit growth of 37%, and ROE of 1.7% and a return of equity of around 21%.

Asset quality too continue stay healthy with growth in net NPA ratios broadly in the range that we have seen in the past, at 1.06% and 32 basis points respectively. And with a total capital adequacy ratio of 17% and total CAR of 12.23%, we believe that the Bank is ideally positioned to meet the objectives of addressing growth opportunities in the future.

With that, I come to the end of our presentation, and we will be glad to take your questions. Thank you.

Transcript Call Date 04/24/2013

Operator: Manish Ostwal, KR Choksey Shares and Securities.

Manish Ostwal - KR Choksey: Congratulations, good set of numbers. My question on loan book growth, during the year, the 60% contribution incrementally came from the retail book and the balance is 40% I think large corporate SME. So going forward, considering the current growth environment in the economy, how do you see the loan book growth in FY '14, given the very weak projections in the system?

Unidentified Company Speaker: I think we would still continue to follow the same path we've done over the last couple of years. In terms of making sure that the retail portfolio grows at a faster pace compared to the other segments. Our target would be to get the retail portfolio, retail assets as a percentage of overall loan book to about 30%. So, in terms of hierarchical growth rate retail assets will still continue to grow the fastest for the SME and then the corporate bank.

Manish Ostwal - KR Choksey: So, any indicative number versus 16% of growth we have reported this year loan book growth, so any indicative guidance you would like to…

Somnath Sengupta - Executive Director, Corporate Center: We will be above the sector, so it depends upon what rate the sector grows and we will probably be slightly above that.

Manish Ostwal - KR Choksey: Secondly sir, is there any one-off in SA balances during this quarter because the growth in saving bank deposit is very strong as compared to historical trend especially in quarter four number perspective?

Unidentified Company Speaker: Well, we mentioned to you that the year-end growth number for savings bank deposits was 23%. But even if you were to look at the daily average growth of savings bank deposit, it is not very low, it is 20%, so which shows that there is no special volatility or spike in the numbers. There will be some last day inflow, but it is not very high.

Manish Ostwal - KR Choksey: Lastly sir, tax rate during this quarter is low at 29.5% compared to quarter three number’s 31.8%, so any specific reason for that?

Unidentified Company Speaker: There is no specific reason. Our effective tax rate is 31.4%.

Manish Ostwal - KR Choksey: So during this quarter what mix of revenue change or something like that, what led on to this…?

Unidentified Company Speaker: This is basically, if you will see that provision, there is a growth in the provision which we have made and that's reducing our tax rate.

Operator: Kunal Shah, Edelweiss.

Nilesh - Edelweiss: This is (Nilesh) here. Congratulations on a great set of numbers. Just wanted to get your thoughts on the power exposures. At the last strategy meet last year we had highlighted that about 20% of our exposure, the nonoperational ones, are to get commissioned during the course of FY '13. Just wanted to get your thoughts qualitatively in terms of the operational performance and on the balance also how are we seeing this portfolio going ahead sir?

Somnath Sengupta - Executive Director, Corporate Center: The portfolio is behaving along expected lines. There could be marginal delays in some of these projects, but the portfolio is behaving on expected lines. And operational projects, as of now would have exceeded more than 30% as of now.

Nilesh - Edelweiss: And in terms of the for FY '14 and '15 given that the issues on the linkages, (coal) linkages site is not got resolved as per expectations. How do we see that portfolio in terms of the nonoperational ones going forward?

Somnath Sengupta - Executive Director, Corporate Center: You are seeing all the debate in terms of fuel as well as in terms of the (SAB) restructuring. I presume we'll come to some conclusion – this debate will come to some conclusion or decisions over the next few months. And hopefully the sector moves forward. But again, we'll have to take it as it comes, and as of now we are hopeful that some resolution will happen and policy initiatives will take place and the sector should sort of look up and be better off over the next year.

Nilesh - Edelweiss: So just one last question on – over the last couple of quarters, we've been creating this contingent provisions and the major one happed this quarter. So, is there a policy in terms of how do we reap this in terms of – as a percentage of stressed assets that you are seeing that will be get created over a period of time or how do we view this?

Unidentified Company Speaker: Not really. I think it is a measure of prudence. So we are creating a contingent provision for exactly the way it is described, for contingencies, but not really against – in that sense, we are not creating NPA provisions against assets which are seemed to be stressed.

Nilesh - Edelweiss: So utilization of this would happen through…

Somnath Sengupta - Executive Director, Corporate Center: Yeah. Utilization will happen as and when we think that something is slipping into non-performing assets.

Nilesh - Edelweiss: Would you count this as a part of your overall credit costs when you…?

Unidentified Company Speaker: No. it is neither part of our NPA provision nor does it count for your overall listing provision coverage.

Somnath Sengupta - Executive Director, Corporate Center: It is completely outside the provisions.

Nilesh - Edelweiss: So your guidance of – earlier guidance of about 85, 90 bps, the contingent provision will be over and above that, if at all, whenever you create that?

Somnath Sengupta - Executive Director, Corporate Center: Yes.

Operator: Manish Karwa, Deutsche Bank.

Manish Karwa - Deutsche Bank: Just wanted to check on your margins and especially on the yields and cost and during this quarter, your gross yields have actually declined very sharply. Any particular reason for this, you know, despite a very sharp growth in your balance sheet during the fourth quarter, our interest income has actually declined on a sequential basis?

Somnath Sengupta - Executive Director, Corporate Center: Interest income overall may have declined because of volumes, but I don't know, the margins of course we improved, Manish, so…

Unidentified Company Speaker: Manish, in that quarter also the yield on that assets that is we are holding at that last quarter, but it was in the last quarter, it has not declined.

Manish Karwa - Deutsche Bank: Because despite almost 10% growth, sequential growth in your balance sheet on your loan book, our interest on loans is actually marginally down or probably flattish, difficult to explain given the fact that interest rates wouldn't have also come down as much in this quarter.

Somnath Sengupta - Executive Director, Corporate Center: But there are portfolio composition changes, so the drop in overall yield is not significant. It's about 4 basis points from Q3 to Q4.

Manish Karwa - Deutsche Bank: On your margins generally we tend to see fourth quarter margins decline over third quarter given the fact that we have to build up the IT sector, and seasonally even in the first quarter there seems to be some pressure. Having said that, in this environment wherein wholesale rates are now down, and it should benefit you, you have got some benefit on capital. Should we expect that trends in this cycle should be somewhat better on our seasonal behavior of margins as in first quarter margins may look up compared to going down?

Somnath Sengupta - Executive Director, Corporate Center: I don't expect that will improve beyond 3.7 that we have reported for Q4, because inevitably the capital that we raised in the beginning of February is likely to get utilized hereafter. So, obviously, there will be some borrowing costs and cost of deposits as we go forward. So, it will trend down a bit, as we go on building the balance sheet and utilize capital.

Manish Karwa - Deutsche Bank: On your portfolio mix, we have not grown our agri book that much. Our agri book has actually not grown much during this year, actually it has declined. Does it have any implication of our priority sector requirements?

Somnath Sengupta - Executive Director, Corporate Center: Yeah, I mean we're trying to grow the agri book, and our endeavor is to meet the priority sector guidelines.

Manish Karwa - Deutsche Bank: How much shortfall would we be having as of March?

Somnath Sengupta - Executive Director, Corporate Center: That is not something that we disclose really, the priority sector numbers.

Operator: Gautam Jain, KBS India.

Gautam Jain - KBS India: Congratulations for a good set of numbers. I just wanted a number on the risk weighted assets, can you share the number?

Somnath Sengupta - Executive Director, Corporate Center: So the total risk weighted assets at the end of Q4 was INR 2,58,355 crores.

Operator: Saikiran Pulavarthi, Espirito Santo.

Saikiran Pulavarthi - Espirito Santo: Just on the restructure advances, there seems to be large upgradations during the quarter. What does it explain?

Somnath Sengupta - Executive Director, Corporate Center: Large upgradations, did you say?

Saikiran Pulavarthi - Espirito Santo: Yeah.

Somnath Sengupta - Executive Director, Corporate Center: We have actually added INR 791 crores of restructured assets in the quarter.

Saikiran Pulavarthi - Espirito Santo: Yeah, but if you look at it on the net basis, I guess there is not…

Unidentified Company Speaker: I think in that INR 458 crores worth of that restructure asset, they have completed that satisfactory track record after the moratorium, sir.

Somnath Sengupta - Executive Director, Corporate Center: So they have actually upgraded to standard performing assets, something like INR 458 crores, because they have performed well for two years as per RBI instructions.

Saikiran Pulavarthi - Espirito Santo: The second question is if I look at on the large corporate side, the BBB and then lower than BBB, the proportion if I look at on the last eight quarters basis, seeing the consistent growth, can you explain why it is so and then what are your thoughts there?

Unidentified Company Speaker: I think it's a function of the environment. I think it's clearly on an existing portfolio, if you look at corporate performance, the environment has had an impact, and therefore you have seen some downward migration of ratings. Also, if drawdowns and project finance happens, project finance typically is rated BBB, so that also is a contributor and I think both these have played a role in terms of the impact you are referring to.

Somnath Sengupta - Executive Director, Corporate Center: If you will say, in this quarter, there is improvement in that B and above at what is over the last quarter.

Saikiran Pulavarthi - Espirito Santo: Do you expect this trend to continue for the next year in terms of composition?

Unidentified Company Speaker: I think the environment continues to still be challenging, so I don't think so we should hope for much improvement. As long as it's stable, we should be happy.

Saikiran Pulavarthi - Espirito Santo: The reason why I'm asking is that because most of our projects might get completed during the next couple of years. So I'm just more curious to check. Once a project gets completed, the BBB might get upgraded, so…

Unidentified Company Speaker: Project doesn't get – I think it has to have satisfactory performance after commercial production for it to get upgraded. So I think it's still some time away.

Saikiran Pulavarthi - Espirito Santo: The last question, sir, on the employee cost side, if you look at the employee costs are not growing in commensurate with the overall employees' growth. Just thought what are your thoughts there going forward for the next year?

Somnath Sengupta - Executive Director, Corporate Center: No, the employee costs have actually grown broadly in line. So, I think we have had an increase around 14% of costs for employees and they are about, what, 34% of the total expenses, which is the normal proportion. So, there is nothing abnormal there. I think we are seeing the same trend.

Saikiran Pulavarthi - Espirito Santo: Sir, if I look at employee's growth is around 19%, while the employee cost total is approximately at 15%...?

Somnath Sengupta - Executive Director, Corporate Center: Yeah, that is because the employees have not all joined on the first day of the year, so they have been probably staggered, and lot of them have joined towards the end of the year. So, while you look at the (end-day) period and see a 19% growth of employees, the salaries which are actually paid out could be less.

Saikiran Pulavarthi - Espirito Santo: The last question sir, in terms of incremental branch additions, where there any small and micro branches are also there, or these are more like a normal braches which you have?

Somnath Sengupta - Executive Director, Corporate Center: Well, we are now mandatory to open a quarter of for branches in un-bank areas, so these are generally small branches. So, out of 325 branches about a fourth of those would have been in smaller, much smaller in size.

Saikiran Pulavarthi - Espirito Santo: Sir, on a cumulative business also, the number looks like this or whether we consider out of 1,950 key braches approximately 15% should be smaller and micro…?

Somnath Sengupta - Executive Director, Corporate Center: The total number of – I can give you the breakup of what we have in terms of rural branches in the overall. So that is, do you that breakup? So…

Unidentified Company Speaker: 27%.

Somnath Sengupta - Executive Director, Corporate Center: 27%, okay. So, about 14% of our branches are in rural areas and about 31% are in semi-urban.

Saikiran Pulavarthi - Espirito Santo: So, one can assume that this 14% is broadly the small kind of branch…?

Somnath Sengupta - Executive Director, Corporate Center: Yes, these are rural branches. So these are the smaller version of branches that we have.

Operator: (Nilanjan Karfa, Jefferies).

Nilanjan Karfa - Jefferies: The impaired asset that was added this quarter cumulatively is close to 12 billion, higher than 10 billion which you've been kind of guiding. So, what's your thought for next year odd? I know that at the moment it's tough to make a prediction, but still want to hear some guidance from you.

Unidentified Company Speaker: I think as we keep saying and as you also said, the environment continues to be challenging. So one should be prepared to - for the same sort of numbers we have seen this year, at least to start with, and then we'll see how exactly the year goes and fine tune that. So as of now, you should expect the same trend which you have seen over the last year.

Nilanjan Karfa - Jefferies: So, broadly 12 is what we should be looking at going forward?

Unidentified Company Speaker: Anywhere around 10 to 12, yes, around 10.

Nilanjan Karfa - Jefferies: Does that – is that being factored around 85 or 90 odd basis points of credit cost?

Unidentified Company Speaker: That's the way we look at it.

Nilanjan Karfa - Jefferies: I missed this point, how much was the cumulative slippage for restructured assets for this quarter?

Somnath Sengupta - Executive Director, Corporate Center: This quarter, it was INR 42 crores.

Nilanjan Karfa - Jefferies: For this quarter only, right?

Somnath Sengupta - Executive Director, Corporate Center: Yes.

Operator: (Veekesh Gandhi), Bank of America.

Veekesh Gandhi - Bank of America: Just couple of questions. One is, if I can get some idea about your restructuring that was INR 790 crores in terms of sectors, where it came from? That would be one question.

Somnath Sengupta - Executive Director, Corporate Center: Okay. So, out of the INR 791 crores – okay, so I mean, the breakup is as follows, I'll give you the percentage. Engineering accounts were about 39%. These are the sector distribution. Iron and steel 26%, infrastructure is 20%, agri is around 3%, and the others and miscellaneous around 12%.

Veekesh Gandhi - Bank of America: So this is for INR 790 crores, right?

Somnath Sengupta - Executive Director, Corporate Center: Yes.

Veekesh Gandhi - Bank of America: Would a broad breakup like this be available for your overall restructured book?

Somnath Sengupta - Executive Director, Corporate Center: I would not have it right now presently, but we can take that offline.

Operator: Adarsh Parasrampuria, Prabhudas Lilladher.

Adarsh Parasrampuria - Prabhudas Lilladher: Sir, again, this question pertaining to your OpEx obviously, we've been kind of referring to this slowdown in OpEx that we've seen now. I just wanted to get some more color on how you see this going, because after long time, we've seen OpEx growing lower than, say, balance sheet kind of growth. So, how do you see that over the next one or two years?

Somnath Sengupta - Executive Director, Corporate Center: The Q4 OpEx growth of course is much lower than normal. That is because the base was higher because of one-off expenses that we incurred in Q4 of last year. But for the whole year it is around 15%, which is still quite low. I would look at an OpEx growth at around between 17% and 20%. That seems to be the normal range of operating expenses growth in our Bank. And I would look at the cost income ratio, which is around 45% or less. So, that is the way we look at operating expenses.

Adarsh Parasrampuria - Prabhudas Lilladher: Since you did 15% this year and we are talking 18%, 20% next year, I just wanted to were there any places you will cut corner this time or how do you look at this – the 15% because these kind of added employees so had a cost associated to that, but just wanted to understand how does 15% came about and since you all aspect to get back to 18% to 20% next year?

Somnath Sengupta - Executive Director, Corporate Center: Well, the expense growth has trended down for the past year or so, if you noticed. As a result of some of the things that we have done, the range between 20%, 25% earlier on and we now come down a range of between 15% to 18%. So, it is because of various majors. As I said, the expense growth of 10% for the quarter and 15% seems a little lower than normal and given that we will expect to also grow our network in the coming year, add employees, also make investments in technology. It is fair to assume that there will be a little bit of an uptick in the operating expenses. So, therefore, we think that this could probably rise to between 17% and 20%.

Adarsh Parasrampuria - Prabhudas Lilladher: Could you just repeat the flow of NPAs, the recovery and upgrade write-offs?

Somnath Sengupta - Executive Director, Corporate Center: Yeah, sure. So, the additions to growth NPAs was INR 398 crores, and the upgradations and recoveries were INR 205 crores. We wrote off INR 75 crores, including prudential write-offs, and therefore the net addition to growth NPAs during the quarter was INR 118 crores.

Operator: Anand Laddha, HDFC Mutual Fund.

Anand Laddha - HDFC Mutual Fund: Just wanted to have two data point, just wanted to have what's the outstanding international loan in the domestic book, and what is outstanding loan on U.K. subsidiary?

Somnath Sengupta - Executive Director, Corporate Center: The U.K. subsidiary…

Unidentified Company Speaker: No, it didn't have any financial operations as of end of last year.

Anand Laddha - HDFC Mutual Fund: And what could be international loan in the domestic balance sheet?

Somnath Sengupta - Executive Director, Corporate Center: One second, we'll just give you that number. INR 30,000 crores…

Unidentified Company Speaker: At overseas banks.

Somnath Sengupta - Executive Director, Corporate Center: The overseas branches loan standard around INR 30,000 crores is that…

Unidentified Company Speaker: Total assets.

Somnath Sengupta - Executive Director, Corporate Center: Total assets was INR 30,000 crores.

Anand Laddha - HDFC Mutual Fund: Of that, how much could be the loan amount?

Unidentified Company Speaker: I'm very sorry. The loan amount is INR 30,000 crores and in terms of total assets overseas was it was $6.84 billion.

Anand Laddha - HDFC Mutual Fund: We are seeing very good growth on the retail fee income side, if you can just gear up some composition of the retail income, how much of the contribution from insurance and what are the contribution from other sources?

Somnath Sengupta - Executive Director, Corporate Center: Just hold on a second please. I'm just giving that figure. I'm sorry, do you want it for the quarter or for the....?

Anand Laddha - HDFC Mutual Fund: Sir, both for the quarter and for the year, if you can share?

Somnath Sengupta - Executive Director, Corporate Center: Well, for the year, insurance was INR 392 crores, and ATM interchange was INR 233 crores. We had card fees at around INR 403 crores.

Anand Laddha - HDFC Mutual Fund: Sir, these card fees, credit card or debit card?

Somnath Sengupta - Executive Director, Corporate Center: Both together. So these are the large components.

Anand Laddha - HDFC Mutual Fund: Sir, just last one more question. Sir, if I have to look at this quarter, the loan growth has been very strong, q-o-q basis, but if I had to look at the interest income, the same has not increased. Is it that the loan growth has happened towards the end of the quarter or the incremental yield is quite lower?

Somnath Sengupta - Executive Director, Corporate Center: The loan growth has been 16%. So it is –

Anand Laddha - HDFC Mutual Fund: Sir, if I look at q-o-q, the loan growth has been very strong, but the interest income has been almost flat.

Somnath Sengupta - Executive Director, Corporate Center: That maybe because some of the loans may have come towards the – right at the end of the quarter and the interest would not have accrued.

Anand Laddha - HDFC Mutual Fund: So has it been the same case for investment also, because the interest on investment is also very flat for the q-o-q?

Somnath Sengupta - Executive Director, Corporate Center: You mean the interest income on investments?

Anand Laddha - HDFC Mutual Fund: Yes, sir.

Somnath Sengupta - Executive Director, Corporate Center: It is possible. It is always possible that some of the investments because of inflows actually got booked in the last few days. So therefore, you would not have the full interest accrued.

Operator: Vishal Goyal, UBS Securities.

Vishal Goyal - UBS: The question actually on rating distribution large corporate and mid corporate, you have seen increase in the AAA category from 7% to 9%. Sir, what could be the reason for this?

Somnath Sengupta - Executive Director, Corporate Center: Better quality assets booked basically.

Vishal Goyal - UBS: So, basically it's not upgrade. It will be more like new AAA assets you would be adding.

Somnath Sengupta - Executive Director, Corporate Center: Yes. That's right, yeah.

Vishal Goyal - UBS: More likely that. Sir, can you also get some sense on the yield on our retail and non-retail books, probably yield on advances?

Unidentified Company Speaker: Yield on advances on the retail book is 11.45 and non-retail book is 10.55.

Operator: Umang Shah, CIMB India.

Umang Shah - CIMB India: Just one question. We hear this big number of INR 7,00,000 crores in terms of projects which are started, where the government seems to be taking incremental action. Could you give a broad sense, whether do you think that this number is actually out there and it is as big as what has been quoted by media? Secondly what type of exposure banks would have to such stalled projects?

Unidentified Company Speaker: It is difficult for us to comment on the numbers, which are system wide. I mean these are data just being collated by agencies and they’re putting it out, and it is difficult to comment on the veracity of those numbers, and what the banking system exposure for those projects are. I think it's difficult for us to comment on that.

Umang Shah - CIMB India: Could we comment about our own bank if you have any exposure to some of these projects which are stalled?

Unidentified Company Speaker: When you call a stalled project, it's not that projects are being implemented. It's a question of – there are some uncertainties whether it is in fuel any other related issues in terms of clearances. And I think some of this could be work in progress in terms of getting those things done.

Operator: Manish Chowdhary, IDFC Securities.

Manish Chowdhary - IDFC Securities: I just wanted to check in terms of your loan growth this quarter, would there be buyouts especially in the retail book? And then what would be the quantum of those portfolio buyouts?

Somnath Sengupta - Executive Director, Corporate Center: There may have been small buyouts, nothing significant, hardly an incremental growth of (booking of a) business, fresh business that we've done.

Manish Chowdhary - IDFC Securities: Because growth in auto loans actually seems to be quite high this quarter. Would it be all incremental largely?

Somnath Sengupta - Executive Director, Corporate Center: Yeah. It will be incremental, yes.

Operator: M.B. Mahesh, Kotak Securities.

M.B. Mahesh - Kotak Securities: One clarification. In the fourth quarter of last year, the average daily demand deposit was reported as INR 77,359, whereas in the current presentation, it's reported as INR 70,845. Has there been any reclassification of this number?

Unidentified Company Speaker: INR 70,845 is the average deposit for the entire year, whereas the INR 77,359 is the average deposit for the quarter.

M.B. Mahesh - Kotak Securities: So we are looking on the quarter-to-quarter basis from here onwards, is it?

Unidentified Company Speaker: Yeah, if you would see on a quarter basis, fourth quarter last year was 77,359. That is 86,138. But on a full year basis, it was 70,845 last year, which is 80,941.

M.B. Mahesh - Kotak Securities: So you had just made a comment initially that on the customers that is being originated on the retail side, you had a comment on a third being from (internal). Could you just kind of give us – just repeat that part, that comment?

Somnath Sengupta - Executive Director, Corporate Center: So what we said was that a third of the retail business that we were booking was actually being booked through our branches, the branches of the bank. So the branches of the bank have actually now have started booking retail business and they are sourcing business for the retail lending.

M.B. Mahesh - Kotak Securities: Then, one final clarification. You mentioned the retail book today earns about 11.45%, is it?

Somnath Sengupta - Executive Director, Corporate Center: Yes, in terms of yield on the retail book, yes.

Operator: Tabassum Inamdar, Goldman Sachs.

Tabassum Inamdar - Goldman Sachs: I just needed to clarify on the other income. There seem to be a big jump in the miscellaneous income. Is there some one-off or is it recoveries?

Somnath Sengupta - Executive Director, Corporate Center: Miscellaneous income is largely recoveries of written-off accounts.

Tabassum Inamdar - Goldman Sachs: So that's the reason for the big jump in the numbers q-on-q.

Somnath Sengupta - Executive Director, Corporate Center: Yes.

Tabassum Inamdar - Goldman Sachs: Can you give the provision breakup please?

Somnath Sengupta - Executive Director, Corporate Center: Yeah, sure. You wanted for the quarter?

Tabassum Inamdar - Goldman Sachs: Yeah, that's right.

Somnath Sengupta - Executive Director, Corporate Center: So, of the INR 595 crores, INR 145 crores were in account of NPAs and bad debts. Standard asset provisions were INR 68 crores, INR 70 crores went for restructured assets. We provided for INR 65 crores towards depreciation on investments. As I mentioned earlier on, we created a contingent provision of INR 240 crores, that's the breakup of the INR 595 crores.

Operator: Anish Tawakley, Barclays.

Anish Tawakley - Barclays: Congratulations on a good set of numbers. I just wanted to understand how the large and mid-corporate growth is so low, and really the context for this question is aren’t the undisbursed sanctions getting disbursed and doesn't that drive growth? Also, if I were to sort of add to that right, your offshore loan book seems to have grown about INR 5,000 crores, I presume most of that is large and mid-corporate. That means that the domestic large and mid-corporate growth has been only INR 3,000 crores during the year. So, it just seems very, very low, and I guess that's the guidance you’re giving for next year as well, so…?

Unidentified Company Speaker: I think just to clarify that’s not a guidance we are giving next year. We're not giving a guidance that the growth rates in each of the segments are going to be the same, which we had this year. (indiscernible). See, the disbursements of old projects or old sanctions will continue to there as you said. But again, there would be repayments and there would be sell downs. Clearly, that is something which we’re actually focused and clearly the churn in the portfolio is also reflected in the net number. So, in terms of disbursement, net of repayments and sell-downs is what we have right now. As far as the offshore book is concerned, some of it could also be because of rupee depreciation, meaning I think offshore book is denominated in dollars and because of the depreciation of rupee which we have seen on a year-on-year basis, you could have seen some shift in rupee terms as far as that book is concerned even though the book may not have grown that much.

Anish Tawakley - Barclays: But the residual still is the onshore book, right. So that the onshore is still – and I guess I wasn't commenting on it as absolute numbers, but if I did hear you correctly, you said, next year also retail will grow faster than SME, will grow faster than corporate, so is that…?

Unidentified Company Speaker: That doesn't mean corporate will grow at just (same way it does) this year.

Anish Tawakley - Barclays: But it's churn that's driving the growth.

Unidentified Company Speaker: Yes.

Anish Tawakley - Barclays: Because the rating profile also seems to be stabilizing which means that some of the weaker credit is being repaid or offloaded, right. (technical difficulty)

Operator: Jaiprakash Toshniwal, India First Life Insurance.

Jaiprakash Toshniwal - India First Life Insurance: Most of my questions got answered, just wanted your view on the deposit growth. We are seeing sequential drop in the term deposits. So how do you see the situations going there?

Somnath Sengupta - Executive Director, Corporate Center: Well, I mean, the only reason why you would have seen a sequential drop in the term deposits is that we did need to actually raise so much. We've raised capital in February. So, most of funding requirements were taken care of.

Jaiprakash Toshniwal - India First Life Insurance: So how do you see the deposit growth for your bank, say, for the next one year?

Somnath Sengupta - Executive Director, Corporate Center: I mean as far as term deposit is concerned, it will be need based. So as our assets grow, we'll be able to fund it through raising term deposits or growth of CASA deposits for that matter.

Operator: Hiren Dasani, Goldman Sachs.

Hiren Dasani - Goldman Sachs: Just on the investment depreciation, I thought most of the bond yields are probably lower quarter-on-quarter, so I'm wondering where it is…?

Unidentified Company Speaker: On the equity book also.

Hiren Dasani - Goldman Sachs: So it's largely on the equity book?

Unidentified Company Speaker: Yes.

Hiren Dasani - Goldman Sachs: Secondly, would you like to offer any comments initial or final results of your investigations on this Cobrapost sting?

Somnath Sengupta - Executive Director, Corporate Center: Well, so we've spoken about the Cobrapost and we have said that there has been an external agency engaged and that is KPMG. We had an RBI inspection and we are carrying out our own internal investigation. We do not think that there is any systemic money-laundering activity that has happened in course of investigations, because it has been wide-ranging across many activities in the Bank. If there are any process issues which are thrown up we will take care that these are improved, but there is no money-laundering as such that we are alarmed about post-Cobrapost.

Hiren Dasani - Goldman Sachs: But have you found any transactions which have kind of violated some of the guidelines?

Somnath Sengupta - Executive Director, Corporate Center: I mean, look, there will be some transactions or the other, but not necessarily violation of anything which can be construed to be money-laundering.

Hiren Dasani - Goldman Sachs: By what timeframe, would you have the final results of this?

Somnath Sengupta - Executive Director, Corporate Center: Difficult to say. The investigation is going on right now, so it should take a few days more.

Operator: Alpesh Mehta, Motilal Oswal.

Alpesh Mehta - Motilal Oswal: Congrats on a good set of numbers. Just three data points, what is the risk-weighted assets as of FY '13?

Unidentified Company Speaker: Risk weighted assets were INR 2,58,000.

Alpesh Mehta - Motilal Oswal: INR 2,58,000, okay, and on gross restructured loan book, is it INR 6,400 crores?

Unidentified Company Speaker: It's INR 4,367 crores.

Alpesh Mehta - Motilal Oswal: This is standard post repayment and post NPL, so what would have been the gross number?

Unidentified Company Speaker: Gross number right now I think I don't have. I will give you offline.

Alpesh Mehta - Motilal Oswal: Sure. And just last one what is the savings customer base now?

Somnath Sengupta - Executive Director, Corporate Center: It's 13 million.

Operator: Manish Agarwalla, PhillipCapital.

Manish Agarwalla - PhillipCapital: Just one data point can I get ASS proportion and also the modified duration?

Somnath Sengupta - Executive Director, Corporate Center: Can you repeat that question please?

Manish Agarwalla - PhillipCapital: Can you give me the ASS proportion in your investment book and the modified duration of the same?

Somnath Sengupta - Executive Director, Corporate Center: One second please, 34% India, the duration is around 3.5 years.

Operator: (Niraj Jalan, CRISIL).

Niraj Jalan - CRISIL: Congratulations for a good set of numbers. I just need a data point. Can you please share the data point for slippage into NPA, and back to standard in the restructured schedule for 3Q '13, as well as 4Q?

Somnath Sengupta - Executive Director, Corporate Center: For the quarter, INR 42 crores are slipped into NPAs from restructured assets and you wanted it for the year as well, is it?

Niraj Jalan - CRISIL: For the third quarter?

Somnath Sengupta - Executive Director, Corporate Center: For the third quarter, it was INR 236 crores.

Niraj Jalan - CRISIL: And back to standard?

Unidentified Company Speaker: Basically that movement in the balance sheet is INR 179 crores.

Niraj Jalan - CRISIL: INR 179 crores is for 4Q?

Unidentified Company Speaker: It's a fourth quarter, and apart from that account which have completed the two years after moratorium which has satisfactory track record of another INR 458 crores.

Niraj Jalan - CRISIL: And what’s the figure for third quarter?

Unidentified Company Speaker: Right now it's not readily available. We will give you offline.

Niraj Jalan - CRISIL: Sure. And what is the closing amount of restructured assets, it’s…?

Unidentified Company Speaker: INR 4,368 crores.

Operator: Kashyap Jhaveri, Emkay Global.

Kashyap Jhaveri - Emkay Global: I wanted one data point, if you could give break up of interest expenses for the full year? Another question on your – if I look at your retail deposits for the quarter and adjusted number, our wholesale deposit would have significantly declined by about 89,000 during this quarter. So, any particular reason why there is such a sharp swing between Q2, Q3 and Q4 in terms of wholesale deposits?

Somnath Sengupta - Executive Director, Corporate Center: I'm not getting your question. Can you repeat question?

Kashyap Jhaveri - Emkay Global: You give your retail deposit, term deposit number in the presentation and if I use that number, I get a wholesale deposit number of about INR 84,000 crores in Q2, about INR 90,000 crores in Q3 and a number of about INR 81,000 crores in Q4. So, just wanted to check any particular reason for such sharp ups and downs in that number?

Somnath Sengupta - Executive Director, Corporate Center: No, so the sharp decline in the amount of deposits, wholesale term deposits in the fourth quarter as I just explained was probably due to our capital raise, right. We didn't to raise so much by the way of term deposits. But otherwise, I mean, the way we would look at it is that we said 68% of our total deposits is retail and current account and savings accounts at the end of this year and one year back the figure was 63%, so it's grown by about 5 percentage points, mainly because we have concentrated on retail term deposits as opposed to wholesale term deposits.

Operator: Ladies and gentlemen, that was the last question. I would now like to hand over the floor back to Mr. Somnath Sengupta for final remarks.

Somnath Sengupta - Executive Director, Corporate Center: Now, I’d just to say that we've had a strong quarter. Thank you very much for being on the call.

Operator: Thank you. On behalf of Axis Bank, that concludes this conference. Thank you for joining us and you may now disconnect your lines.