Ladies and gentlemen, good day, welcome to the Q4 FY 2023 earnings conference call of The Federal Bank Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Souvik Roy, Head, Investor Relations. Thank you, over to you, sir. Thank you, Ryan, and good evening, everyone. On behalf of Federal Bank, I welcome you all to our Q4 earnings conference call. I hope you all had the opportunity to go through the investor deck, which is available on the exchanges and also on our website. The last year's performance has ensured that we are on a strong footing and ready to leap forward to the next level of our growth journey. Coming to the quarter that went by, happy to share that we are on track and in line with the guidance that we have given in the previous quarters. A quick snapshot of Q4, we have recorded the highest ever quarterly net profit. We have seen broad-based asset growth. Our asset quality remains stable. The progress made on our strategic priorities is noteworthy. Also, I'm glad to mention that we have seen the best recovery numbers ever. All of this has resulted in robust improvements in our key return ratios, which are at multi-quarter high. I have the entire top management here on the call with me. Without much ado, I would request our MD to take it over from here. Over to you, sir. Thanks, Souvik. Good evening, everybody. Like Souvik pointed out, we are encouraged with the performance of Q4 and the financial year five. Nothing is ever a straight line. There are good stuff, and there are areas that we need to work and improve upon, and certainly, that is the focus of the bank. Those of you who had the chance to attend our session in late February or gone through our deck, we had talked about the things that have gone well, the things that are on focus of the bank, and how do we continuously focus on improving our return outcomes. Happy that what we had mentioned in February 20 as the likely exit rate for February in March 23, we have come in better on that. We did mention that in the following period, which is 24, FY 2024 and FY 2025, we'll be looking to improve on this performance. I'm encouraged that the 1.28 full year, the last exit rate of about 1.45 ROA, we are on course to improving and ensuring that the full year ROA for FY 2024 is along guided lines. Not to miss the point, I did get a few calls after the results, and there were some concerns expressed around, has the NIM plateaued out? Why has it fallen as much as it did? We can try and talk about it, and I will address that and, you know, mention both the yield on advances, how did it grow, and the cost of deposits, how did it grow, and therefore, you know, is the deposit pricing increase fully in the book or are there residual? I think there is some residual, but a large part of it has been repriced. Different banks may have different deposit profile and different timing. We believe for Federal Bank, Q4 saw the brunt of it. Therefore, we did see the cost of deposits go up by about 55 basis points, where the yield on advances went up about 36 odd basis points. That's the difference that we saw, which did have an impact on the margin sequentially. We exited last financial year at 3.20. We exited this financial year at 3.31, and the average for the year was 3.31 NIMS, which is along the expected or guided lines. I believe, with the focus on the businesses that we are giving more fillip to and the mix of business and the repricing opportunities. I've been talking about NIMS for FY 2024 being in the region of about 3.30-3.35, and the ROA of the business being around 1.3-1.35. Both of which are very much within our guiding range, and we think we have both the capability and the machinery to make sure that happens. Importantly, for long periods of time, our credit quality has been, I would say, exemplar. This credit costs have been in Q4, particularly flashing at about 19 basis points. Full year credit costs about 40 basis points is in the range that we've been guiding for between 40 and 50 basis points. Thankfully, it's at the lower end of the range. This combination of fairly balanced credit quality, credit, the cost of credit being best in class, the NIMS being because we write better quality business, NIMS are not going to be you know, they're exaggeratedly high. The risk-adjusted margin being around this three is what we are working on, working towards. Improvement in fee income, improvement in efficiency are all helping us grow our return ratios quite significantly. In fact, I thought I'd just begin the call by just talking about an area that most people, you know, sort of queued in or asked us. I didn't want to go around the bend and not talk about it, so I just thought I'll just upfront this point around our business model, which I think is important for everybody to understand. We don't take exaggerated risk. Within our risk framework, we ensure that the business mix is appropriate. Our within retail and wholesale, we've said 55/45. Within retail, we have given accent now in the more recent past to businesses like credit card, personal loan, Commercial Vehicles and microfinance. On the corporate side, between corporate and commercial banking, we are seeing good progress. You know, if you've seen our numbers, you'll notice the fee income from our corporate relationships have been growing at about, you know, quite significantly, 35% odd kind of growth rate. We're able to get the client relationship and, you know, at a, at a client level, we're getting a larger share of the client wallet. Another area that often is asked about is the nature of your business has been the strength of Federal Bank has been a good deposit franchise and a retail deposit franchise. Happy even through FY 2023, which is arguably one of the toughest years for deposit acquisition. We saw reasonable growth. There were areas that, in a term, we had to make sure that we are not outpriced, but we are competitively priced, and we saw retail term growing about 14% and the overall deposits, growing about 17%. We also continuously check to see how our market share is in terms of domestic savings and NR savings. Our share of NR deposits has increased from about 6.5%-6.8% across the country. Our share of domestic overall savings has been hovering between 0.94%-0.97% or sometimes around 1%. We, we are, without paying, much higher rates, continuing to hold share. Our next focus is gaining share in domestic savings, which, through the branch expansions that we've had through our fintech partnerships that we have, beginning to see traction. Last year, last financial year, we opened 75 branches, which thankfully are holding out well and maturing quickly. This financial year, we are looking at about 100 branches. Our fintech relationships, which is about a year and a half old, is graduating into the accounts that we have booked are graduating into its year two, so we are seeing balance build. On balance, FY 2024, I just wanna point out our focus continues to be not exaggerated risk, credit quality being in and around the guided range of about 40 basis points to 50 basis points, more like 40. The NIM will be around 3.35% or so. Our commitment, our focus is to make sure that the ROE expansion is well on course and on track. We believe the foundation of the bank is in a good place. Credit quality is holding quite well. We've addressed some of the issues that needs to be addressed from a point of view of ensuring deposit growth remains priority for the bank. Let me just pause here and open it for questions. Like Souvik mentioned, the entire senior team is here. We'll be happy to take questions and clarify. Thank you very much. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Mahrukh Adajania from Nuvama. Please go ahead. Hello, sir. You already touched upon margins. If you go by your guidance, we are talking about some margin expansion from Q4 levels. I mean, what will really drive that? I know share of new businesses or new products would. Does that take into account the possible deposit competition which could happen because now everyone will change deposit, everyone has the excess liquidity? How does it pan out on margin? My second question is even on cost to income, where do you see that settling? The third is on loan growth. Is the guidance of high-teen still, do you still maintain the guidance of high-teen? Yeah. That's a lot of questions. Let me try. Yes, we mentioned that we are looking at the credit growth in that zone. It looks possible at this juncture. Even this financial year has begun reasonably, encouragingly well. We are not yet altering our outlook on that count. We are poised for that kind of growth. The mix of business, I think you pointed out, there is a fair degree of traction in all these new businesses, and we believe that should give us some kind of fillip. I think this was a question that was asked of us even when we made our presentation in end February, and we did talk about what kind of mix and how that should help. In terms of deposit pricing, it's our belief that probably the peak of the pricing is already factored in. Now it's only the play through of whatever you've already priced in. It's unlikely there may be a material increase in rates at this point in time. We've factored in all this in terms of cost income ratio. We are, in the, you know, around 49 or so. We did talk about it, and we said we believe that each year we should see some progress on that count. This year, even if you take out the one-off expense that we had to carry in the last quarter of last year, last year's full year cost income was around 52, 53. We've come down to about 49, and we believe we will see another 100 basis point improvement in FY 2024. Okay. Thank you, sir. Thanks. Welcome. Thank you. Our next question comes from the line of Deepanshu from Riddhi Capital. Please go ahead. Hi, sir. Thanks for taking my question. I wanted to understand the Credit-Deposit Ratio. In the last quarter, we have grown our deposits, but we were controlled on our credit output. How do we see this? This is the first question. Yeah, go ahead. What is the second question? Second thing, on link to that, sir, our capital adequacy ratio is around, let's say, 13%. Is it something that we are trying to be little bit conservative on our advances growth? I think our CD ratio between 81 and 83, it hovers around. It's just in Q4, we decided to be a little more focused on generating deposits, we saw that come through. We have not let go or not intending to let go of credit growth opportunities. It is in the full year credit growth is at about 20%. Last quarter, we saw higher rate of growth in deposits over credit, that was conscious. We, you know, wherever we have good credit, we picked it up. Wherever pricing was less than attractive, we decided not to pick that up. Our outlook for FY 2024, I've already said. If that happens, the credit ratio, CD ratio will be in the around 82-84. Okay. Sir, any linkage with the, with the capital adequacy ratio? Are we looking to raise any funds in FY 2024 or are we comfortable on that count? I mentioned when we did our call in the January results. We have a shareholder approval. We are considering options, but we have not narrowed down to anything as yet. But there is a likelihood of a capital raise, for growth, at an appropriate time, but we don't have any finite date or time as yet. Okay. Our last question on our credit quality. How comfortable are we on the credit quality on the retail side? With the new Fintech partnerships and all, we are trying to increase more from the guys who are at a higher rate. How confident we are and what kind of rating mechanism we follow? Any color on that? I don't know what the question is, but, I think our multi-year track record speaks to the fact that we are quite both disciplined and conservative on the overall underwriting across product streams. We don't intend growth coming through flexing or letting go of credit standards. Credit standards on top of that growth, we believe that's possible. Okay, sir. Thank you. Thank you. Our next question comes from the line of Renish from ICICI. Please go ahead. Yeah. Hi, sir, and congrats on a great set of numbers. Just two question. One, is on the retail deposit share, you know, which has been actually steadily coming down from almost 92% in March 2022 to 85% in March 2023. Especially, in second half, you know, our CD Ratio is also coming down, which essentially means that we are sort of maintaining the highly liquid balance sheet. Just not able to understand then why we are increasing the bulk deposit share, and in which ways our CD Ratio is coming down. I think, Renish, the first point, you know, that it is 85. These are point in time. These are certainly not the trend. I wouldn't make a trend of it. Okay. quickly set back to 90. I don't believe these are... Like I said, we were ensuring that we had a good deposit pipeline in the quarter that went by, and we were, you know, we did not shy away from taking those deposits. That doesn't suggest that it needs to be the trend line. We are keen to make sure that our deposit growth is able to match up to our credit expansion. With the combination of that in mind, between term, savings, current account, we will ensure that we meet the tri-dilemma of ensuring CD ratios, ensuring mix between deposits and continues to be retail in nature. Got it. Got it. I would not read much into it. At least not as yet. We haven't seen any reason to view it differently. Perfect, sir. Haven't gone out and bought deposits. Even the term deposits that we have are clients' individual deposits. Got it. It is a fact that the NR customers have moved a large part of their savings to term. Whenever the rate differential is significant, that is bound to happen. Got it. It's not unique to Federal Bank. I think it's a market phenomenon. We would be foolish to let go of balances to somebody else. Got it. Sir, you know, just a follow on that. Maybe it is fair to assume that though, you know, the retail deposit definition says, you know, anything less than INR 2 crore is retail, but maybe, the large part of NRI would have been individual, but maybe having a ticket size of more than INR 2 crore, and hence, you know, that ratio is looking like this. Is that the fair assumption? It's a fair assumption. It's a fair assumption. Got it. sir, secondly, again, on the margin side. you know, so incrementally when we are saying that the high-yielding books like CVC, MFI, PL, et cetera, will grow, you know, at a faster clip, plus, you know, the strategic focus on gaining market share on the star side. why not we are yet aiming for higher NIMs, you know, than 3.3%, which is currently standing at? It's not that we are not aiming at Ramesh. We're certainly aiming at a higher number. When we speak to the market and give a guidance, we have to be honest about it and believe that those are the bare minimum we should deliver. We think at this juncture, given the pricing play out of deposits in one more quarter and we don't wanna take disproportionate risk in growing any of these new businesses and then have a problem a year or two down. The blend looks like. I constantly remind ourselves that we are not looking at NIM in isolation. We look at NIM adjusted for credit costs. I still argue that a long period of time, a franchise should look at risk-adjusted NIM, a risk-adjusted margin. You are all seasoned analysts. Please look at our bank versus many others. You'll find that we are not disproportionately off. No, no. Absolutely, sir. Just a clarification. In your opening remarks, you did mention that a large part of our deposit base is already repriced. Would you like to quantify, I mean, what% of deposit has already repriced at a revised TD rate? I would think about 80% is repriced. Got it. Okay, cool. Thank you, sir. That's it, and rest all the best. Thank you. Thank you. Our next question comes from the line of Simranjeet Singh from Master Trust. Please go ahead. Yeah. Thank you for, you know, taking my question. Sir, first of all, congrats for the great set of numbers to you and to your all Federal team. Sir, I have, you know, next couple of questions. Sir, first of all, can you brief something about the slippage part in the Q4, where, you know, we are seeing that the slippage having quarter? Sorry, did you say? What do you want the commentary on? Sir, on slippage part. On slippage part. Slippage in Q4. Slippage. Yes. You want the numbers? No, sorry, I didn't get the question. No, no. Numbers are there with me. You know, how you see the trend going forward in terms of slippages? Because this quarter, in Q4, we have seen that, you know, it has increased quarter-on-quarter. How you know, see, in the upcoming quarters, slippages, if you can give some guidance or something, you know, comment on that. Sure. I think the sequential or long period average has been between INR 350 and INR 400. This quarter is a tad higher. That's because of some actions we took on the retail, you know, on the agri portfolio in certain products. Retail has trended down. You know, commercial banking has come down. Some part of minor uptick in business banking. It's not out of range. We think our guidance, if I remember right, when we began the financial year, I said it will be around INR 1,800 crore, and thankfully it came at about INR 1,600 crore, full year slippages. Equally, recovery upgrade even, it did even better. This trend line should and continue. We are about a 1% slippage back, which probably is amongst the best in the market. Great. sir, my second question is on the gold loan front, how are you, means, what is your, you know, maximum cap in terms of loans you are looking at this point of time? Because, you know, gold is already at an all-time high. how you think the gold demand in your bank, means, at this present juncture? You're saying what share of gold will be our overall, as part of our overall business? Is that the question? Yes. you know, my first question is, you know, what will be the% going forward? Second, how you see the gold asset quality, going forward? Gold asset quality, means in terms of the gross NPA. Gold, unless there is a fraud or any wrong practice, gold as a business continues to be attractive, and we will continue to grow that. The rate of growth depends on, I think, both the opportunity and the timing. If the other businesses are growing rapidly, gold usually tends to grow slower. We believe between 20%-25% growth in FY 2024 is very possible in gold, and we will do. As a percentage of gold, as a percentage of the overall portfolio, today it's about, so it's about 10% or 11% of our overall outstanding. We have an internal cap that it should never cross 15, but we are a distance away from that. You could believe that we will grow about 20 odd% in gold. Portfolio will be okay. Yes, there are some practices that needs to be corrected, but gold as a category continues to be profitable and growing and continues to be an opportunity to grow. Sir, my last question is there any acquisition target, you know, Federal Bank is looking for in the upcoming time? Certainly, if there was one, I would not be just casually speaking in a call like this. I have to go through a process. No. Suffice to say, we are, you know, organically focused. If there's anything that's useful, relevant, accretive, and at an affordable price, we will consider. All four of them makes it a very rare opportunity that something will show up, but if it does, we will consider and appropriately announce. Right now, nothing. Yeah? Thank you. Our next question comes from the line of Pranav from Red. Please go ahead. Sir, thanks a lot for the opportunity. Sir, just have one query. In terms of CD Ratio has actually reduced, but if we consider C plus I, that is credit plus investment, to deposit plus borrowing, that ratio is almost constant. That, that should not have actually, you know, suppressed the NIM so much. That is one part. Congruous to that part, can you just, you know, elaborate how much% of advances are yet to reprice and how much% of deposits are yet to reprice and by what amount so that we can have a stable outlook for NIM for next coming quarters? Thanks. For now, I think, for now I think the answer to the question goes back to where I had guided. We are, we think 330, 335 is the outlook that we are visualizing at this point in time. Certainly in the quarters ahead, we will look at revisiting that guidance. At this point in time, suffice to say that, taking into consideration all the points you pointed out, which are valid points, we think we are poised for, rate, you know, margin range of 330 to 335. This is just because of the mismatch between the timing, right, of repricing. Yes. yeah. Largely, yes. Okay. Okay. That is one question. Second is, in terms of employee expenses, can we assume now this is as a stable base, or are there any one-offs in this current quarter, INR 597 crore of employee expense? One-off in this quarter? Nothing. Okay. I think in the last year, last quarter had the upfronting of the entire family pension. Right. That didn't, that was not there this year. To that extent, yeah, if pension requirements go up because yields fall, that can change. At this point in time, this is the run rate. Venkat, would I be right? Yes, Shyam. That's right. There are no one-off in this quarter's number. Perfect, sir. Thanks a lot. Thank you. Our next question comes from the line of M. B. Mahesh from Kotak Securities. Please go ahead. Hi, Shyam. Just two questions on my side. If you could just quantify what is the current cost of term deposits that you are carrying today, as well as the savings deposits. Current cost of? Term deposits. You mean the cost of deposits or cost of term deposits? Cost of term. If I look at your website, you currently have, let's say the one-year book is at about, 6.8%- 7%. Just trying to see where is the term deposit rate in your book as well. Venkat or Damodaran, would you have it, some of your ads? The blended would be currently for deposits around 6.2. I think he's looking at term. Yeah, I'm talking about term. Yeah. Okay. You have cost of deposits, which you have reported is 5.1%. You have... If you work backwards, it can't be at this number, right? It appears to be a bit low. Mahesh, can you come again? 5.1% you said is the cost of deposit. Yeah. Total. Yeah, for your CASA ratio that you have, just trying to work backwards as to what would be the implied term deposit book interest rate that you're carrying today. Mahesh- Shyam, I'm just trying to work through this statement that you made that we are closer to the peak of cost of deposit repricing. Just trying to understand when we compare it with the headline rates that you report as to whether we are there or not. Just trying to reconcile these numbers. Maybe you should pick that with Venkat. He'll probably offline give you the detail. Okay. Again, on the other side, when you look at the yields are up about, let's say about a little over 120 basis points since the start of this rate cycle. Your repo book is approximately about a little over 50%. This by itself should have created a 120 basis points delta favorable. If I look at the other parts of the book, which also would have repriced during the course of the last 9 months, where is it that we are missing here in terms of numbers? Anybody wants to do? Ashutosh or Venkat, do you have anything that you can offer or we should give that as a clarification later? Let me just rephrase it then. How much of room is still available for the yields to move up in your portfolio given the current interest rates? So- Yeah, go. Can I just... Okay, sure. I think, there are two parts. In MCLR, there is a room in MCLR-linked loans because that, you know, grows with the, you know, lag. It's more to do with the proportion of the stock for a particular bucket and all. The computation of MCLR is like that. On repo side, the repricing has been happening at the same time when the, you know, when the repo rate hike was happening, except in those cases where the reset period is monthly or quarterly or annual. Where, like in case of, you know, I mean, majority of these are T plus one itself. In some cases where the reset would be for a longer frequency, that would be remaining, but that should not be material. MCLR-linked loans, definitely there is a room to grow unless the repo rate itself goes up further. If assuming that's the pivot, that's the, you know, maximum and all that, then I think, it would only be the spread on which, you know, when the yield would go up. I can just- Okay. Add a bit over here. 50% of our loans are repo-linked, which have been completely repriced. Thirteen to 14% of MCLR base, which I would see half of it would have got repriced and half of it still to be getting repriced. Some are fixed rate loans, both shorter tenor and longer tenor. Those also will get repriced. So about 15% of our portfolio in advances, I think still has scope for improvement and repricing. Okay. Okay. Thanks a lot. Thanks a lot. Thank you. Our next question comes from the line of Anand Dama from Emkay Global. Please go ahead. Sir, thank you. First, we have seen some decline in the gold loan portfolio. That basically is primarily with the issue that we had with the rupee earlier on or, is there something else? No, I think you're partly right. It's not the issue, it's just that digital lending criteria required them to readjust. They did pick up, but unfortunately there were more work to do. To that extent, that slowed down. The organic branch lead is continuing to grow. Some of that gold being a short tenor product did run off. Okay. Okay. Next quarter onward, we should see a quarter-on-quarter growth coming. We expect growth back again. Also because it's growing off a smaller base, a lower base. Sure. Sure. Secondly, if you look at the risk-weighted assets growth, that seems to be far higher than somewhere about 20 odd% versus the loan growth. Is it primarily because of the growth that we have seen in the PL microfinance book and so on? Or is there anything else in terms of, you know, risk-weighted adjustment that we have done? I think it's the latter. You may all be aware there's a regulatory requirement for clients who are unrated to carry a higher risk weight. If there's an unrated. Unrated as in they are not declared. We looked at our portfolio. If the client had not given their ratings, then it would be a higher risk weight. That's a one-time activity and should not be of any significant impact. Okay. Okay. Got it. Basically it is to align with the regulatory requirement. We have classified some of those rated accounts also as unrated because our amount is not reflected there in that rating. Because of that, you know, some part has had to be classified and that process is on to get our amounts included in the, you know, rating process. Sure. That's very helpful. Sir lastly- I hope you understood that explanation. That's important, Anand. Yeah. Yeah. Sir, lastly, if you can help with the LCR ratio that we have for the current quarter. Around 120. 120. INR 120. How much was that last quarter? Around the same. 124 or 125. Namodren, are you there? Around that number? Namodren? Yeah, he's not there, but roughly 124, 125. Sure. Sir, we have done any working on the ECL provisions, and if there is any shortfall or like we already carry excess provisions over there? Venkat. We have worked on it. At this stage, we don't disclose in terms of the workings at all. We have done the calculations. We are confident of meeting once the regulations come in play. Okay. We don't have to do any additional provisions, right? We are comfortably placed. We will come back, say, when we have a better data on that, a better timing for that. I don't know if we can properly talk about it now. Sure. No issues, sir. Thanks a lot. Thank you. Our next question comes from the line of Kunal Shah from Citigroup. Please go ahead. Hi, Shyam. Firstly on wholesale, I missed the comment, there was a significant increase in the wholesale portfolio on a quarter-on-quarter basis. Maybe at what cost are we raising and how much was that impact in this particular quarter in cost of deposits? Given that it would be towards the end of March, do we see maybe a further impact in Q1 of a relatively higher deposit cost because then that will have a full quarter impact. Did we, Ashutosh, which was that one? Ashwan or Ashutosh? Sorry, please come again. Wholesale deposits. Wholesale deposits, when we see there is a significant rise, on a quarter-on-quarter basis, if we just look at the calculated numbers, given from the CD issuance. CD issuance for short term. CD issuance for short term. three months, two months CDs. Okay. We'll not see that full impact coming through in Q1 as well and keeping the deposit cost elevated. It will mature, you know what I mean, April also part of it has already matured. I mean, April it has, that, you know, I mean, part of that, book has already matured. May also it would be matured. It's widely spread. I think if you compare the CD issuance number, March 2022 versus March 2023, there was an increase, and which is showing in a higher% of wholesale. Yeah. Yeah. even on a quarter-on-quarter, I would say, yeah. Yeah. I think that would not be material. CD rates have, you know, greatly, cooled down. It has already come down by about, 30, 40 basis points. Thank you. Our next question comes from the line of Zhao Ziran. Please go ahead. Hey, am I audible? Yes, you are. Yeah. Thanks, sir, for the opportunity. Just some quick follow-up questions on the margins. First of all, do you mind sharing, you know, what's our exit margin for our Q4, i.e., you know, what's the margin for month of March? For the month of March? I don't know if I would have that ready-made. The full quarter is 331. Can't be very different in March. March may have been a slightly higher month also. It's got 31 days. Right. I mean, adjusting for days, is it higher or lower than the average quarterly margin? March would be higher, though. I would think you should, the blended number is a better number for your calculation, because I'm guessing you wanna do that for your extrapolation on what is the exit rate. I think 331 is the number you should pick. Got it, sir. On deposits, what's the average maturity of our fixed deposits? Grand average. Large part is in twelve-month bucket. Right. Also on the, on our guidance of, you know, margin FY 2024 to be, 300-335 basis points. How much of, mix impact uplift to margins are we assuming? How much of? You know, how much of, you know, increase in margin due to mix are we assuming in that forecast? No, the 330, 335 is quite reflective of where we are, right, at the exit rate. That's the bank. Yeah. I mean, we are increasing, you know, those higher yielding. Play through, right? There is a play through because like Ashutosh and others pointed out, some deposit cost accretion happens, so some new business that grows at a higher margin. The blended outcome will be 3.30%-3.35%. Just want to understand, you know, how much, how many basis points roughly, increase in margins are we assuming in FY 2024 is due to the improvement in mix towards higher yield products? No, you could do that. Take the businesses that are relatively higher yielding, and they are growing at about, some of them are growing at, you know, well north of 30, 40 base, 30, 40%. That should give some kind of indication. Businesses, credit card, personal loans, Commercial Vehicles, microfinance, and to some extent, gold. These businesses are growing at, barring gold, others are growing at well north of 40%. I'll wait on a small base. Got it. Got it. That's all. Thank you so much. Welcome. Thank you. Our next question comes from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead. Hi, good evening, everyone. Interesting to see that profits for Q4 of FY 2023 have been INR 600 crore, INR 700 crore, INR 800 crore, and INR 900 crore. I hope this trend sustains. I have three questions. First, while you indicated that deposit repricing was higher in Q4, and you are guiding for slightly higher margins now for FY 2024, can first half margins be lower versus second half, as the deposit repricing will continue and benefits from improving mix of high yielding loans will take time to play out? That's question one. Second is on the restructured book, wherein we still have 1.6% of restructured loans. If I compare this to, like, most other large private banks, the restructured book has been fairly dissolved, and most of them are, like, fairly below one now. How do you see the dissolution of this restructured book going forward? The third question is on core fee income, which has grown on a year-over-year basis but still broadly the same for past Q3 now. How do you see the trend here? Yeah. Let me take the fee income piece first, and we come back to all your questions. I think the number you mentioned about INR 540 odd crores, but do see the mix on that. I think processing fees is broadly consistent. It's linked to volume and it's trending quite well. The fee related to the third party products and others have moved quite even sequentially moved quite well. The one that is a little moving back and forth is the profit on FX, which tends to be choppy only because it depends on the environment. In Q4 it was lower. Q3, Q4, Q2 was higher. We believe that should come back. The fee income piece, what is important is the exchange, commission, brokerage, other fee income, you've seen good progress and that should continue. The overall fee income, non-treasury related, is tracking well. FX continues to be opportunistic. Sometimes the environment is not conducive. We believe that should continue to grow. The other two questions, remind me the other. Sorry, I skipped. The second question, the order of the first question. Yeah. One on the restructured book. Yeah. One on the restructured book. How do you see the dissolution of that? This is, and third one, the margins. Can first half margins be lower than the second half? Yeah. Your assumption would be probably right. I do think it will be consistently the same. The blended number is what we are talking of, about 330-335. It could have a slightly more softer start and then catch up. Yes, that could be a fair assumption. On restructured, Raj, Ashutosh, you wanna give the clarity on that? Yeah. I think there are two ways of, you know, I mean, having the restructured book, measured and one. One is, you know, when you have restructured as per new terms and conditions, and once the moratorium is over and you have three installments or six installments coming in time or so, you take it out of restructured book and treat it as like any other standard asset. The other way is the, you know, I mean, the tag continues as a restructured book, and you have a longer time period given to that to, you know, really assess, so those which have either it gets reduced by repayment. If you have housing loan, like with the composition of our book and all, these are the loans for say, 15, 20 years or so. There the repayment would be gradual and all that. We have not removed any of the account from restructured group as long as it is standard and meeting its I mean, new terms and conditions. That's the basic difference. If you have a short-term, restructured for two, three, two years or three years, by now, you know, part of it would have a good chunk of it would have been repaid, and therefore it would have come down some other months or so. They would have taken it out on account of satisfactory performance as per the revised terms and conditions. I hope the composition is the one wherein, you know, I mean, we have not removed any account from that book, as long as... I mean, even if it is, meeting its, you know, so-called new or revised terms and conditions. Right. Just to add to that, Nitin, I think the performance on the restructured book, not just one, I think across all the Q4 of FY 2024, 2023, in the quarter that the demand comes up, they've been consistently good and haven't shown any adverse behavior. They're not the tag in itself doesn't mean that they are under any significant risk, as evidenced by Q4 of performance, post-COVID also. Right. Thanks a lot, sir. This helps very much. Thanks so much. You are welcome. Thank you. Our next question comes from the line of Gaurav Jani from Prabhudas Lilladher. Please go ahead. Thank you. Just some clarifications on the, you know, yield and cost dynamics. Now, basis the numbers that you guys have disclosed, total the cost of deposits have gone up by about 90 basis points over the last Q3, right? Systemically, what we understand is cost of incremental deposits is, or cost of incremental TD has gone up by about 200 basis points. So, you know, is it a case that we have taken a lower increase in cost of TDs versus the system? I mean, try to assume that. And, going forward, do you see the run rate of increase in cost of deposits coming down? Yeah, I think I mentioned it earlier also, Gaurav, that, we believe that most of the increases of deposits are in the, in the price. I don't believe it should go up materially at this point in time. There may be some bucket, some tenor for a shorter period it may be, but not significantly. Sure. Secondly, on the yield side, you know, there seems to be a bit of a negative surprise out here. You know, the last part of the portfolio, which is corporate and housing, did we see some bit of competition coming there, which is why you would have taken a cut on yields or something of that sort? A bit of competition. I mean, you know, if we pursue the better credits, which we do, and quite uncompromisingly so, we have to be thoughtful about pricing. We may not have all the pricing power we want. This reflects that. We haven't taken any undue risk. I go back to originally where the business model of the bank is. We will not be in the camp that takes disproportionate risk for growth. Understood. Sure. Can you repeat, you know, your clarification on the RWA versus loan growth? A sub-question to that is, you know, how do we look at hence capital raise if RWA growth would exceed loan growth in FY 2024? Ashok, you wanna re-clarify that? Yeah. Actually, there is a requirement, regulatory requirement, that if your loan amount is not included in the rating exercise specifically by name, then you cannot take it as a rated loan for your book, and therefore it would go into unrated and would require 150% of, you know, risk weight and all. Even if it is, you know, triple A or double A or A. What is required is to go back to client as well as to rating agency and say that why my name is not there. This process was done. It has been, you know, resolved in majority of the cases. There are still some remaining cases where it is in process, work in progress. On 31st March, we straightaway have taken it as an unrated one, and therefore a higher credit risk-weighted assets are coming in disproportionately higher vis-à-vis the previous quarter because this phenomenon is a Q4, so you see the difference between December and March. Though the loan book has not grown by that much as the CRW has grown. Understood. They would have not been registered with the rating agency. There would be a release of capital. Understood. Understood. Right. just a clarification on, you know, from Ashutosh on the higher treasury income, please. I mean, the reason for that. Higher treasury income? Yeah. I don't think. Higher. It is just on cost. Commission was higher. It's the I mean, it is something which is, you know, independent of the interest rate cycle. Whatever is coming through, you know, Forex side, it's more of, you know, customer derivatives transactions or, you know, Forex-related, sale of, I mean, sale to retail through our exchange bureaus and all other things. As far as interest rate products are concerned, it's more or less the bare minimum which we earn in any quarter by recharge. It could be, you know, in one particular quarter last year, Q4, it may not have been there. Whatever is appearing is without any benefit of interest rate cycle at a segment yield basis. Sure. Sure. Can I squeeze one more question, please? Yeah, go ahead. Just one, you know, sort of guidance on the fee. Like, the fee is to assets has done fairly well in FY 2023, has increased to about 75 basis points versus 60 odd in the previous year on a full year basis. You know, what would explain this? That's one. Secondly, do we see this healthy clip coming to in FY 2024 and FY 2025? Yeah, I think if you track back, many quarters, maybe many years, the conversation has been how is the Federal Bank's capability to originate fee income and fee as a percentage of assets. I think we've demonstrated for long periods of time that's focus and it's beginning to reflect a full range of products, disciplined origination capability, cross-sell to existing customers. I think I mentioned the corporate, when we get good corporate credits, we are looking at the client wallet. I think fee income on corporate has gone up 37%. I think that's a design and there's a distribution capability for that design. The rates you're seeing grow should continue. Wonderful. Thank you so much. That's it from my end. All the best. Thank you. Our next question comes from the line of Sanket Kapoor from Kapoor and Company. Please go ahead. Namaskar, sir. Thank you for the opportunity. First is a clarification, sir, on the treasury income part. It has not been affected by the softening of the G-Sec yield. This is what you were trying to narrate, and it's a core, it's a... It is independent of that or could it come again on the same? Yes, you're right. Your assumption is right. Your assumption is right. Basically, some provision release has happened for the trading book and all. With a movement in that, because the opportunity to see, I'll just give you some comparison. You know, in a falling yield scenario or even if the yields are lower and all that, the profit on sale of investment, which basically is the profit on the interest rate products, is always, I mean, for our bank, is in three digits. It could be INR 200 crores, INR 300 crores, INR 400 crores. As against that in this year, you would see it in a lower double digit. That's what, you know, the difference is. Otherwise, other than that, you have an HFT book, which is up to 90 days and all that. The traders keep trading in that and make, you know, whenever the opportunities are there, they make amount. The larger amount comes from the investment portfolio when the yields fall and all. That opportunity has not been there for last almost one and a half year or so. No, what we have seen currently is the softening of yield and just at the teleports. Probably if this continues, we'll see that in FY 2024. Can I just add, bulk of the softening of the yield has happened in the last... After March. After March. After March. Yes. Yes. Through the last quarter, the yields have been fairly range bound. As has been clarified, the income that we are seeing on the treasury side is essentially the HFT trading activity on various asset classes, and that is what is showing over here. A write back of provision owing to softening of yields relatively compared to the Q3. Okay. this line item will move significantly if the softening remains the way it is today. That is a good, fair assumption. Let me clarify. I think this is a trader's call and, when the fruit is ripened, is left to the trading desk and all that. Right. If it falls from 730 to 7%, is it the time to book the profit or wait for expecting that it would go to 670? This is something, you know, which you cannot project or you cannot extrapolate or give a guidance on. That opportunity should be left to the trading desk. Sometimes you find such opportunities coming in a particular quarter where you see because of some measure, sharp fall has happened. Trader moves the profit and buys again when it goes up and all. I think this is something which you cannot predict as to in Q1 how much would be there and all. Right. Right, sir. Just to happen on it again, sir, it will mark to market at least. even if you don't book the book should be priced at, yeah. That effect will always show. It will be to profit. If you have a positive mark to market as per current instructions, as per current, Indian GAAP, you cannot take it to your profit book. Okay. Okay. You show it on your book that it's a positive NPA. Correct. The second point was, when the board decided on the dividend payout, what worked out for loading the dividend from last year level when the profitability. Shyam will respond to that, please. Yeah, I think, if, I'll respond to it. There was a question that was earlier asked about capital adequacy and capital raising. We considered, the board considered multiple options and we said if you're going to be in the market for raising capital this year, we should be more thoughtful about how we use our capital. Having said that, we did believe that the reward for our shareholders should be there. We also considered the fact that in the last 12 months or last four to 18 months, Federal Bank stock has delivered the best returns amongst all stocks. We, I think, had 46, 50% growth. On balance, the board considered 50% as an appropriate number. sir, I didn't get your point. I mean, stock performance how will the stock performance determine the dividend payout? Dividend payout is towards what the earnings have been. A INR 15 DPS. we are declaring INR 1 dividend. The shareholder looks at combination of things. Dividend is one stream. If they have, how does the stock perform? In the past period, if the stock had not performed, there was a concern that, you know, this stock is not good. You know, it's giving me returns. It's a balancing act. We will be into the capital raising exercise going ahead. Yeah. What is the thought process? I don't have any timeline. I mentioned there is nothing that I can confirm at this point in time. The bank is considering. We think in the course of FY 2024, we will. I don't have any commitment as yet. We are working on it. Yes. Thank you. Operator, I think it's coming up to six. If there are no other questions, is there anything? Maybe. Yes. We can start the Q&A maybe. I just wanted to mention one thing. Most of you know, probably all of you do know that Mr. Ashutosh Khajuria completed his term as the Executive Director of the bank at the end of April and has accepted to continue with us for one more year as a Chief Mentor and be focusing on a certain bunch of areas of his expertise and helping the bank for another year. To the market, you know, we made the announcement at the end of April, that he is retiring, but we've the board has reappointed him to be with us for one more year. I want to, A, thank Ashutosh in this platform and also advise all of you that Ashutosh will be with us for another year and share his expertise and guide us through for FY 2024 as well. Ashutosh, thank you. Thank you. Thank you very much. If there are no other questions, we'll bring this to a close. Souvik, operator. Okay. Thank you, sir, and thank you all again for your participation on a late Friday evening. We appreciate the ongoing support of our stakeholders like yourself, and we remain committed to delivering value to all of you. Look forward to updating you on our progress in the future. Best wishes for Buddha Purnima, and goodbye till we meet next with our next quarter results as well. Thank you. Thank you. Thank you. On behalf of The Federal Bank Limited- Thank you. This concludes this conference. Bye, everybody. Thank you for joining us. You may now disconnect your lines. Thank you, Ryan. Bye-bye. Bye.