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HDFC Bank Limited  (NYSE:HDB)
Q3 2020 Earnings Call
Jan. 18, 2020, 6:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, good evening, and welcome to HDFC Bank Earnings Conference Call on the Financial Eesults for the Quarter Ended 31 December 2019, presented by Mr. Srinivasan Vaidyanathan, Chief Financial Officer.

We also have with us Mr. Sashi Jagdishan, Group Head and Change Agent of the bank; Mr. Jimmy Tata, Chief Risk Officer; and Mr. Rahul Shyam Shukla, Group Head, Wholesale and Business Banking, on this call. [Operator Instructions]

I now hand the conference over to Mr. Srinivasan Vaidyanathan. Thank you, and over to you, sir.

Srinivasan Vaidyanathan -- Chief Financial Officer

Okay. Thank you, Aman. Good evening to all. Appreciate the participants calling in today. We'll get to the results relating for the quarter and also for the nine months ended December 31, 2019.

Let's start with net revenues. Net revenues grew by 19.1%, broadly driven by an advances growth of 19.9%, deposits growth of 25.2% and other income growth of 35.5%. Net interest income for the quarter was INR14,173 crores, and the net interest margin remained at 4.2%.

The bank's average liquidity coverage ratio increased to 140% in Q3 from 133% in Q2, in line with the strategy to continue to build on deposits, thereby strengthening the liquidity position further. While the excess liquidity positions the bank to get into potential loan demand in the future, it impacts current NIM by around 10 basis points to 20 basis points. Again, as we have mentioned in the last quarter, this drag was offset by monetizing some of the investments in the form of trading gains, which essentially makes the year-on-year NII growth at about 18% or so.

Moving on to the details of other income. Fees and commission income, constituting roughly two-thirds of other income, grew by 24% over the previous year to reach INR4,527 crores. Of this, retail constitutes approximately 93% and wholesale constitutes 7%. FX and derivatives income grew by 32.1% over previous year to reach INR526 crores. The growth was granular in nature, being driven by retail customers who contributed about two-thirds of the total.

Trading income was INR677 crores. As mentioned earlier, this represents the current ALCO strategy of monetizing some of the gains from the excess liquidity investments. Other miscellaneous income of INR940 crores, includes certain one-off recoveries arising from the resolution of NCLT matter, which is approximately INR200 crores, and dividend from subsidiaries.

Operating expenses for the quarter were INR7,897 crores, an increase of 17.5% over the previous year. We had the Facilities Program running through the quarter. This program was, for most part, a consolidation of several disparate and localized programs that we ran in the previous years. The one bank satellite approach brought in dealers, retailers, merchants, manufacturers partnership, leading to efficient execution of the programs, and it entailed some marginal incremental costs.

Year-on-year, we added 382 banking outlets, 70 added in the quarter, 242 added year-to-date. 1,126 ATM, cash deposits and withdrawal machines were added. And we also added 3,421 business correspondents, BCs, managed by Common Service Centres. The staff count increased by 2,773 during the quarter and 17,556 during the last 12 months.

Cost-to-income ratio was at 38% and has remained in a stable rate compared to the prior-year and prior-quarter after absorbing the investment in branches, people and technology.

Moving on to PPOP. The pre-provision operating profit grew by 20.1% to INR12,945 crores from INR10,778 crores in the prior year.

Getting to asset quality, GNPA ratio was at 1.42% of gross advances, as compared to 1.38% in the prior quarter and prior year. GNPA ratio, excluding NPAs in the agricultural segment was at 1.2% in the current as well as prior quarter and 1.1% in the prior year. Net NPA ratio was at 0.48% of net advances, as compared to 0.42% in the preceding quarter and previous year.

Annualized core slippage ratio was at 1.7% in the current quarter as well as prior year and prior quarter here. The current quarter slippage includes one-off large-ticket amounts. This as well as agri have been excluded in the core slippage ratio. The coverage ratio was at 67%, as against coverage ratio of 70% in the prior year. Including contingent provisions, the coverage ratio is about 78%. There are no technical write-offs included anywhere. Our head office and branch books [Phonetic] are fully integrated.

At the end of current quarter, contingent provisions toward loans were at INR1,457 crores. The bank's floating provisions remained at INR1,451 crores as of December 31, 2019. And general provisions were at INR4,131 crores. Total provisions comprising specific, floating, contingent and general were 119% of the gross non-performing loans as on December 31, 2019, in addition to the security held as collateral in several of of the cases.

Now getting to provisions. The total provisions were INR3,044 crores, as against INR2,701 crores during the prior quarter and INR2,212 crores on the prior year. Total provisions in the current quarter included one-offs of approximately INR700 crores primarily relating to certain corporate accounts as well as accelerated portions of some accounts, including those accounts in the resolution plan process -- some of you -- and it includes some agri. Some of you may want to know the names of these large and other -- and one-off names. As has been our policy and practice, we will not talk about the names now or even in the Q&A section.

Core specific loan loss provision, i.e., excluding these one-offs were INR2,174 crores, as against INR2,038 crore during the prior quarter and INR1,735 crores of the prior year.

Now coming to credit cost ratios. The core credit cost ratio, i.e., specific loan loss ratio excluding one-offs as mentioned earlier, was stable at 0.92% of the advances, as against 0.90% for the prior quarter and 0.88% for the prior year. As you are aware, recoveries are recorded as miscellaneous income. Therefore, the core credit cost ratios net of recoveries and excluding one-offs were stable at 0.66%, as compared to 0.68% in the prior quarter and 0.69% in the prior year.

PAT and PBT, the reported profit before tax was at INR9,902 crore. Adjusted for one-off credit items, the core profit before tax at INR10,402 crore grew by approximately 21.4%. As you are aware, the tax rates were lower during the year. This change was already implemented by us in prior quarter. Net profits for the quarter grew by 32.8% to INR7,416 crore. Net profit for the nine months ended December 31, 2019, was at INR19,330 crore, up by 27.2% over the corresponding nine months of the previous year.

Now getting on to some balance sheet items. The bank's balance sheet size as of December 31, 2019, was INR1,395,336 crore, an increase of 19.4% over prior year. Total deposits amounted to INR1,067,433 crores, an increase of 25.2% over prior year and up 4.5% over prior quarter. Retail constituted 78% of total deposits.

As a result of our focus on granular deposits, CASA deposits grew by 21.5%, ending the quarter at INR421,827 crores, with savings account deposits at INR277,928 crores and current account deposits at INR143,900 crore. Time deposits at INR645,606 crores grew by 27.7% over previous year. CASA deposits comprised 39.5% of total deposits as on December 31, 2019.

Credit-deposit ratio was 88% for the current quarter, as against 92% in the prior year. Total advances were INR936,030 crores, an increase of 19.9% over prior year and 4.4% over prior quarter. Advances ex vehicle segment grew by 24.4% over prior year. Retail advances, Basel method [Phonetic] grew by 14.3% year-on-year and 4.6% sequentially. And wholesale advances grew by 26.2% year-on-year and 4.1% sequentially.

Let's hear a few comments on the wholesale advances from our corporate and business banking head, Rahul Shukla.

Rahul Shukla -- Group Head-Corporate Banking & Business Banking

Thank you, Srini. Good evening, all. Both our corporate banking and business banking businesses had an above-trend performance during the quarter. While yields have been impacted in the marketplace, more so in large corporates, NIMs have continued to hold up, helped also by reduction in funding costs. Both businesses have seen greater customer liability that accretes [Phonetic] to us for very different reasons, in comparison to the marketplace.

In our business banking vertical, we saw a pickup in credit demand from existing customers since the last week of November. During the prior period, existing customer accounts have seen a drop in overdrafts due to release of GST cash flows by the government or lack of requirement owing to softer growth. However, there is now a pickup in credit demand. The broad pickup was seen in Punjab, in Southern India, Central India and Eastern India. Trends in Gujarat and some adjoining regions have remained soft. We expect that to pick up in this particular quarter.

We also saw accelerated new-to-bank acquisitions last quarter on the bank of our -- on the back of our digital offering, especially in semi-urban and rural locations, helped also by our district expansion initiatives, with record disbursements in November and December. Our business did well on customer liabilities, as we now have a near-term line of sight to a fully funded, self-funded business.

Delinquencies to-date were within internally budgeted levels and below comparable period last year, more than majority of this book classified as being PSL compliant for us. Our corporate banking business benefited from strong client support. We saw broad-based growth in this quarter across our public sector client base, and also across sectors such as material, energy, agriculture and allied activities, including fertilizer, power, discretionary consumer, etc.

Our focus on up-tiering smaller clients continued to show positive momentum and helping us with diversification. We continue to support our corporate-backed, MNC-backed, PS-backed and FI and bank-backed NBFC clients. This lending also supported our PSL effort,given the change in RBI guidelines, which was very helpful.

Our drive toward measuring and increasing our penetration showed positive results, with digital host-to-host integration with our clients continuing to be very helpful on the liability side. Working capital cycles have remained normal in this quarter for our clients, while overall capex has increased somewhat.

Thank you, Srini, and handing back to you.

Srinivasan Vaidyanathan -- Chief Financial Officer

Okay. Thank you, Rahul. Now let's move on to capex. With regards to capital adequacy, total CAR as per Basel III guidelines stood at 18.5%, as against the regulatory requirement of 11.075%. In December 2018, capital adequacy was at 17.3%. Tier 1 CAR was 17.1% in the current quarter as compared to 16.2% in the prior quarter and 15.8% in prior year. CET1 capital stood at 16.2% in the current quarter compared to 14.9% in the previous year.

Now some business update. During the year, we added 242 banking outlets, as I mentioned before, taking our total network to 5,345 banking outlets. Including the banking correspondents, i.e., 3,421 BCs managed by the CSCs, the total banking outlets were at 8,766, 66% of these outlets are in semi-urban and rural areas.

As of this quarter end, we have signed approximately 1.3 lakh Common Service Centres village-level entrepreneurs, of which 86,000 are onboarded as business facilitators. Of these, around 41% are actively sourcing. The monthly run rate of products sourced by CSCs have progressed to approximately 70,000 units.

Festive Treats that we spoke of earlier was also run in partnership with CSCs, taking our festive offers to the remotest parts of the country. From a small businessman looking to avail a loan, to a family booking -- looking to purchase a new television, the three-month long Festive Treats campaign enabled it all.

Year-to-date, we have acquired 4.9 million new liability relationships, an increase of 50% over the acquisition in the corresponding period of the previous year. This was driven through various strategies that we adopted and have articulated in the past. As on December 31, 2019, we had 13.9 million credit card base and 1.5 million merchant acceptance points.

Now in summary, we are proud of our start, while effectively executed our strategy resulting in, advances growth of 20%, deposit growth of 25%, card spending increased by 28%, retail loan disbursals increased by 21%, operating profit growth of 20%, and profit after-tax increased by 33%.

With that, may I request the operator, Aman, to open up the line for questions.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Mahrukh Adajania from IDFC. Please go ahead.

Mahrukh Adajania -- IDFC -- Analyst

Yeah, hi. I just had a few questions. Firstly, in your slippage, what is the total amount of slippage? And how much of that is lumpy? And how much of that is agri?

Srinivasan Vaidyanathan -- Chief Financial Officer

Okay, the core slippage that we referred to 1.7%, represents slippage of INR3,839 crores, 3-8-3-9. The total, which includes that lumpy one-offs, agri and all of them, let me see, that's between them, roughly, approximately INR1,500 crores.

Mahrukh Adajania -- IDFC -- Analyst

And how much is agri of that?

Srinivasan Vaidyanathan -- Chief Financial Officer

Roughly half -- a little more than half, 60% or so, agri. Yeah, 60% -- maybe 60%, 65% agri.

Mahrukh Adajania -- IDFC -- Analyst

Okay. And just in terms of the additional provision that you've need on a few corporate accounts, could you tell us the sectors?

Srinivasan Vaidyanathan -- Chief Financial Officer

No, we said we don't want to talk about sectors. You can, I mean it will be -- I don't want to get into individual names and individual types of what that is.

Mahrukh Adajania -- IDFC -- Analyst

Okay. And just in terms of HDB, the GNPAs have improved. So is that because of recoveries or better outlook in the geographies or any other reason?

Srinivasan Vaidyanathan -- Chief Financial Officer

No, HDB, you would have seen -- I read the number, stage 3 Ind AS -- stage 3 method of Ind AS slippage that I see is 3.01%. And the corresponding number for prior quarter is 2.72%.

Mahrukh Adajania -- IDFC -- Analyst

Okay, sorry. I was comparing it to GNPA. So why has it gone up?

Srinivasan Vaidyanathan -- Chief Financial Officer

This is more commercial transportation related, yes.

Rahul Shukla -- Group Head-Corporate Banking & Business Banking

Yes, absolutely.

Mahrukh Adajania -- IDFC -- Analyst

Sorry. So it's basically CVs.

Srinivasan Vaidyanathan -- Chief Financial Officer

Correct.

Mahrukh Adajania -- IDFC -- Analyst

Okay. And there has been no change in accounting. Like last time, there was some alignment to HDFC Bank's accounting. So all that is done with. This is just the cycle.

Srinivasan Vaidyanathan -- Chief Financial Officer

Correct. It was consistent with the last, or is it the -- there's no change. Yeah.

Mahrukh Adajania -- IDFC -- Analyst

Okay, thank you.

Operator

Next question is from the line of Manish Ostwal from Nirmal Bang. Please go ahead.

Manish Ostwal -- Nirmal Bang -- Analyst

Thank you for the opportunity, sir. My question, on our risk-weighted asset-to-total asset ratio during the quarter. There's a sharp reduction of 400-odd basis points during the quarter. So can you explain the reason for the same? And secondly, on the slippage side, you gave the slippage number. Any recovery in the upgradation [Phonetic] in write-off during the quarter, can you share that number -- those numbers?

Srinivasan Vaidyanathan -- Chief Financial Officer

Okay. See, normally if you look at our capital ratios. We normally -- our earnings offset the consumption, approximately, right. But this time around, we did have a benefit in RWA, the RWA-to-asset is currently at about 68% or so. I think prior quarter was more than 70%, 72%, 73%. There has been an improvement, couple of things. We have some initiatives driving this efficiency as well as impact from mix of assets. Better market risk is one thing. Assessment of better market risk is one that improved. If you recollect, if you have any investments in mutual funds, they're considered equity mutual funds whereas these investments are actually debt mutual funds. So there is a different risk weight. And we don't have any at this stage on that. So there was some optimization done there. We reduced investments in that mix, right. So better mix there.

We also got some ratings improved. There were certain things that moved up on the ratings, that brought the risk weight down. And also, some favorable lending mix at -- to low-rated public sector like power or transport and things like that, that also contributed to better RWAs.

Manish Ostwal -- Nirmal Bang -- Analyst

So, recovery upgradation write-off number, sir?

Srinivasan Vaidyanathan -- Chief Financial Officer

I'd -- do you have the sheet here? No. We'll get Ajit to get you that number. I don't have that sheet in front of me.

Manish Ostwal -- Nirmal Bang -- Analyst

And the second question, on the retail book, so in this period, compared to quarter two to quarter three, are you seeing any incremental stress buildup in the any category of retail loans or mid-corporate or SME portfolio? Qualitative comments will be very helpful.

Srinivasan Vaidyanathan -- Chief Financial Officer

Jimmy?

Jimmy Tata -- Head, Credit and Market Risk

Hi, good evening, everyone. This is Jimmy. So in the retail book, I think the buildup there is very strong from product to product. We have over the last year put in filters across all products that may have showed somewhat of an uptrend. These filters now have had some vintage and maturity that allows us to measure the recent book. And in all these cases, the recent book is showing a considerably improved performance, and that would therefore be the trend in these books going forward. I'll come to specific names in a minute. When it comes to the residual historical book, we are relatively a well-provided bank, so there is not a concern in terms of any adverse expectation on that front either.

So I think most retail products have actually shown a slightly beneficial trend over recent times, which is to say the, even automobiles, credit cards, personal loans, etc. The only growing concern would be in terms of commercial vehicles and, to some extent, commercial equipment. So it is the commercial products that are continuing to be some level of concern. And you might see the trend continue in that direction. This is not to say that we have not filtered those portfolios. It is not to say that there is no improvement on new acquisitions, but these do tend to have longer maturities, so the weightage in the portfolio as a whole would be a little less and therefore not visible immediately at a portfolio level, this would take some more time to resolve. And one has to also take into consideration that these products are a function of the economic climate and situation.

So we continue our policies across the board of no dilution in the face of facing difficulty in generating business. If certain products do not generate the required business, we would not generate that level of business. We manage our growth on geographic expansion, putting out a very wide product range across our extensive branch network, looking at the relatively unbanked and underbanked demographics in these areas as well as our existing areas. To some extent a new variant of a product being introduced into these segments. And of course, this gives you the ability in such demographics and segments to price appropriately for the incremental risk that could manifest.

So this is not to construe that we are expecting it to happen. But even should there be a 10 basis point, 15 basis point increase in delinquency, the calculations for us internally based on probabilities, based on our expectations and our wide experience and analytics of all these products, we don't think it is advisable to forgo such growth given the probability of this small incremental delinquency. So that's effectively the trend across all retail products. As I said, just to answer your question in one line, CV, commercial vehicles, and to some extent, commercial equipment might be the only concern areas.

Manish Ostwal -- Nirmal Bang -- Analyst

Thank you for the qualitative assessment. And the only, one small data point. YTD basis, what is the increase in the NBFC portfolio for HDFC Bank? That's it. Thank you.

Srinivasan Vaidyanathan -- Chief Financial Officer

YTD would mean from...

Manish Ostwal -- Nirmal Bang -- Analyst

Year-to-date, sir, 31st March 2019 to 31st December 2019, what is the increase in the NBFC portfolio, percentage increase in the NBFC portfolio?

Srinivasan Vaidyanathan -- Chief Financial Officer

We will have the Pillar 3 disclosure. You should see it soon, I think. If it's not already there, we will put it out.

Manish Ostwal -- Nirmal Bang -- Analyst

Sure, thank you.

Operator

The next question is from the line of Suresh Ganapathy from Macquarie Capital. Please go ahead.

Suresh Ganapathy -- Macquarie Capital -- Analyst

Yeah, I have three qualitative questions for Sashi. First, Sashi, can you just take us through the CSC business, how exactly it is shaping up, and what are the trends? If you can quantify, it would be great. Second is what is the status on the CEO selection, where we are and what have been done so far? That's the second one. And the third is, there has been a repeated breakdown of online banking for the banks time and again. So what are the steps which are being undertaken by the bank to ensure that this system downtime is corrected?

Sashidhar Jagdishan -- Executive Director

Okay. Thanks, Suresh. On the first one, in terms of the CSC. We have about 1.3 lakh CSC accounts that we've opened. About roughly 80,000-plus have been initiated as business facilitators. What that would mean is that the systems have been integrated. They have been sort of handheld and trained so that they can distribute our products digitally. Out of that 80,000 plus, I think roughly about 40%-odd are -- have become active in various stages of activation, which means that they now can start sourcing products. I guess, as Srini was mentioning, on a combined basis, I think we have touched about that 40% of that 80,000 have contributed to roughly 70,000-plus products in a month, which translates to two products per active CSC. So that's not a bad job for a start. And we believe that this is -- this will increase with better engagement by the hub branches going forward. So it's a lot of hard work. And this is something that we will continue to do CSC by CSC, which is mapped to the adjoining branches.

In addition to that, I think one of the things that Srini did mention is that, the better CSCs, we would also like to make them as business correspondents, because you could do a lot more transactions at these centers. We have thus far, appointed about 3,400-odd BCs. As we have mentioned in prior calls, I think over a period of next six to 12 months, we would like to add or at least take the BC total to about 25,000. So that would sort of really give us a better penetration into these -- into the semi-urban and rural areas, as we had envisaged. So that's part one.

I think the, one of the things that we -- the learnings from this particular experiment or the kind of initiatives that we -- is that, when you engage with these CSCs on a constant and ongoing basis, which is the key, I think you would see a fair amount of activation and product distribution that is happening. So it's on track. It's as in line with the expectations that we had for this particular initiative.

The second one, to your second question, on CEO search process. I think, in the Board meeting, I think we have sort of agreed upon the search firm who is going to help in the search process. We -- I think we do have kind of a road map or a glide path as to when the long list of candidates, the short list of candidates, whether both globally, both external and internal, will happen, when the interviews will be slated. I think that kind of a fine, the granular details have all been sort of agreed upon at the Board meeting today. I think, as probably we may have mentioned in the past, normally we would expect the bunging in the applications for the -- to the regulator for approval somewhere around July, August. I think that's the time that we should see -- we would have finalized, we would have had picked and shortlisted number one, number two, number three for RBI to approve. I think we are on track. I think the specifications that the Board has -- and told, of course, we have to recuse ourselves. So there have been a fair amount of deliberations today on that particular account.

Suresh Ganapathy -- Macquarie Capital -- Analyst

Can you disclose the search firm, Sashi?

Sashidhar Jagdishan -- Executive Director

Not exact. I think let it be officially come out, probably in the next couple of days, but I think it's be -- there are some small, minor cost negotiations or commercial negotiations that needs to be inked out the in next couple of days. So once that is done, I'm sure we will let you know that.

The second -- the third part is on the technology issues. I think one of the things that we realized as a company is that we -- this is -- we have been victims of our own success. What we did not realize is with the kind of increase in businesses across liability, across assets, across payment products, and within payment products, multiple channels that we have been patronizing, whether it is the cards, whether it's the UPI volumes, I think we underestimated the growth in these volumes. I mean what one would have normally envisaged is that from a base level you normally size up for about four to five times the capacity. We realized the volumes have gone even beyond five times -- the five times capacity that we had originally sized up. So it's more a kind of capacity issue.

But having said that, we are -- we have post the December 2nd incident, I think we have been able to sort of segregate the parts. We have been trying. We have derisked the parts so that we can sort of have a lot more redundancies. We've been adding capacities. We will, we hope to add more capacities. We will be rationalizing volumes. We realize that sometimes it doesn't make sense to acquire some of the marginal volumes. So we should be in a much better state. We are in a good state at this juncture. We are far more comfortable. We've diverted a lot of traffic into multiple other channels. And we hope to sort of be even more comfortable over the next three to five months with lots more capacity is being added.

So thus far, I think things are very stable. We hope to sort of -- I wouldn't like to say it too loud. We would like to keep our fingers crossed and we would like -- we are monitoring this practically every minute now, so that the monitoring mechanism has only heightened thus far. So this is where we stand. It's -- lot of questions are being asked whether there was a cyber attack, etc. I can categorically say, and we have said it to the regulator as well, that there was no such cyber attack or incident on the 2nd of December.

Suresh Ganapathy -- Macquarie Capital -- Analyst

Thank you, Sashi.

Sashidhar Jagdishan -- Executive Director

Thank you.

Operator

Next question is from the line of Kunal Shah from Edelweiss. Please go ahead.

Kunal Shah -- Edelweiss -- Analyst

Yeah, hi. So firstly, in terms of this entire INR200 crores of recoveries pertaining to the resolution of the NCLT matter. So that's the P&L impact, but if I have to look at it in terms of the flow of NPLs in terms of the recoveries, how would that number be? So in terms of the principal component. And anything in the interest income effect as well?

Srinivasan Vaidyanathan -- Chief Financial Officer

There was no book value, when we had. It is a full recovery that came into P&L.

Kunal Shah -- Edelweiss -- Analyst

Okay. So no impact at all in terms of the flow of NPLs and all.

Sashidhar Jagdishan -- Executive Director

Yes, no.

Kunal Shah -- Edelweiss -- Analyst

Yeah. Then second, in terms of the branch expansions, so, I think, earlier during the Analyst Day, also we highlighted that the plan is now to move toward 600 to 700 branches a year. So, are we looking at it maybe when we look at it, 240-odd [Phonetic] over last the last three-odd quarters? So are we very much on track in terms of going in for the branch expansion? And should we see it coming over the next one or two quarters, which will have some impact on the OpEx as well?

Srinivasan Vaidyanathan -- Chief Financial Officer

Yes, our strategy to expand branches will continue. So we are on track for those. The branches that we are planning are of different sizes depending on location. So the cost per branch is not identical to what we have on books, or one branch versus another. There will be a good level of differentiation. It will also have a good mix of semi-urban and rural and metro. As we said, we -- this financial year, we targeted 600 new branches, say plus minus a few on timing depending on local approvals, equipment [Phoentic] and staffing. But we do expect, as usual, seasonally, quite a number of branch openings in this quarter, in our fourth quarter. And we anticipate that it will continue and we should be there.

Kunal Shah -- Edelweiss -- Analyst

Okay. And in terms of the behavior of the commercial vehicle and unsecured portfolio, are we seeing maybe in the early -- early day buckets as well some kind of a rise of debt in both these portfolio?

Jimmy Tata -- Head, Credit and Market Risk

Taking them both separately. The unsecured exposures are holding up rather well. Unsecured exposures, if you look at their essential nature, will primarily involve personal loans which are almost entirely toward salaried segments. Our segments are also not merely just the salaried segments but public sector, government and the higher-rated entities among the private sector, and that's where it is predominantly situated. The volatility of income in these segments continues to be extremely low, and therefore the serviceability of the loans is holding up very well. And in terms of credit cards, there has actually been an improvement seen over a period of time in the various delinquency parameters, and this may be due to the customer selection, once again, a fair amount of cross-sell to our own internal customers where we have the new accounts, see the fund flows, see the behavior, etc. But that is, once again, holding up rather well.

Commercial vehicles, I did cover briefly some while ago in -- as part of another question, but commercial vehicles, due to the various economic factors as well as some of the auto sector factor, is something that needs to be looked at, monitored very carefully. Naturally, that is what we do. Have filters been applied into our policy? Do we have absolute micro management of the same? The answer is yes. Have we seen the recent book once again behaving better as a result of this, as per the historic book? Once again the answer there is yes, but given that these loans are of a longer maturity compared to personal loans and other such transactions on an average, there will be a larger component of the historic base in the portfolio as it stays. And we might need a little more time to see a complete change or reversal. And not to say that the environment, once again, is difficult for these operators. Trade rates have come down. Trade movement has come down. The efficiencies in the systems created by octroi abolition and GST and the other matters have really increased the productivity of vehicles, once again resulting in lower deployment. So these factors continue to affect, and we naturally watch these closely. And I hope that answers what you wanted to ask.

Kunal Shah -- Edelweiss -- Analyst

Sure. And lastly, just a clarification. Was there any contingency provisioning made when we are saying this INR1,457 crores of contingency provisioning at end of this quarter? So there was some INR660 crores which was made last quarter and INR150 crores in the -- in Q1, but besides that, was other anything created this quarter?

Srinivasan Vaidyanathan -- Chief Financial Officer

Some minor amount, less than INR100 crores, I would say.

Kunal Shah -- Edelweiss -- Analyst

Okay. And this INR700 crores is entirely specific.

Srinivasan Vaidyanathan -- Chief Financial Officer

Yes, that is correct.

Kunal Shah -- Edelweiss -- Analyst

Okay, thank you.

Operator

Thank you. The next question is from the line of Deepak Agrawal from Axis Mutual Fund. Please go ahead.

Deepak Agrawal -- Axis Mutual Funds -- Analyst

Yeah, hello, sir. Sir, wanted to understand from a growth perspective for the bank. How much of that will be new loans versus acquisition from other banks and NBFCs for us, sir?

Srinivasan Vaidyanathan -- Chief Financial Officer

Other banks and NBFCs, no.

Sashidhar Jagdishan -- Executive Director

It will be very difficult to sort of really, we don't sort of track that at an overall level. But having said that, a large part of our SME business could be takeover of loans from other banks. In terms of corporate side, which I think you did hear Rahul say that, we have not only looked at new customers who could be banking somewhere, we've also sort of deepened our penetration into our existing customers, so there is a fair amount of deepening of relationship which has given us a bit of a help [Phonetic] to our credit growth.

On the retail side, it will be very difficult to conjecture as to where they're coming in from, but largely as a philosophy, Jimmy is here. I think he is far more comfortable to sort of provide credit to people who are not necessarily new to the system, but new to bank credit.

Jimmy Tata -- Head, Credit and Market Risk

Yes, I would understand your question two ways. If you're referring to assets actually acquired from banks, that's not a very significant number at all. If you're talking to facilities that are taken over from other banks, depending on which segment, and I think, as Sashi articulated, it's correct, as you look more toward the SME and MSME segments, they do look at our new products. Rahul alluded to them. So when we do offer our stores integration and create facilities across [Indecipherable] corrections, etc., customers do seem to appreciate this. And that does encourage movement. Our cash management facilities, trade finance, all these are definitely attractive to such customers. Our 5,300-branch network definitely also follows up these customers on a regular basis, so there will be movement from one bank to another in such facilities. It varies from segment to segment.

Deepak Agrawal -- Axis Mutual Funds -- Analyst

Okay, OK. And sir, my second question is related to the Festive Treats, any numbers we can share in terms of, say, what will be the kind of income? And what would be the expense related to this campaign, sir?

Sashidhar Jagdishan -- Executive Director

Sorry. Did you mention Festive Treats?

Deepak Agrawal -- Axis Mutual Funds -- Analyst

Yes, yes, sir, related to the Festive Treats.

Srinivasan Vaidyanathan -- Chief Financial Officer

Festive Treats is not one type of an activity that runs for one product. It is a bankwide program that runs across all product segments, geography segments, customer segments. It is kind of -- we can think about it like both digital as well as a typical offering where, closed user group where we bring the dealers, manufacturers and the like, retailers and the like, to our customer base for a better shopping experience, for a better asset purchase experience. And we are intermediaries, where we finance where we should. So this is not something that's targeted to x volume of assets or x number of customers and where we have. It's all pervasive across everything. This is, as we said, we run through the quarter. And it's called Festive Treats, but in this quarter, it will be called something else, and it's an ongoing effort and it was an event where we brought in several partnerships together, and we continue with the partnerships as we go.

Deepak Agrawal -- Axis Mutual Funds -- Analyst

Okay, OK.

Sashidhar Jagdishan -- Executive Director

So I think Srini did mention the business growth rates arising out of -- during the period of October, November and December. I think we've had a substantial lift in both asset disbursals and also in terms of payment costs spend. We wouldn't like to sort of put the income arising out of the same, neither do we want to even disclose the kind of expenditure. Of course, there was a bit of a lift in expenditure because of Festive Treats, which is completely baked into the 17.5% growth in this quarter's expenses, but it would not be appropriate for us to peel the numbers of the Festive Treats program.

Deepak Agrawal -- Axis Mutual Funds -- Analyst

Okay, got it. Yeah. Thank you.

Operator

The next question is from the line of Rahul Jain from Goldman Sachs. Please go ahead.

Rahul Jain -- Goldman Sachs -- Analyst

Yeah, hi, everyone. The first question, I actually, I've got two, three questions. The first question is around slippages. So you've talked about the core and agri stroke [Phonetic] any specific corporate account. Is it possible to get a similar number for last quarter as well as last year, either the core slippages or the bifurcation that you provided this quarter?

Srinivasan Vaidyanathan -- Chief Financial Officer

The core slippage last quarter was same level, right, 3-4 -- 3-7-1-4, at 1.7%, that was last quarter. Last year, the core slippage was INR3,300 crores [Phonetic], 3-2-9-0 is what I have, again at 1.7%.

Rahul Jain -- Goldman Sachs -- Analyst

Okay. So last year, the gross was about INR4,000 crores, of which the core was 3-2-9-0.

Sashidhar Jagdishan -- Executive Director

Yes, that's right.

Rahul Jain -- Goldman Sachs -- Analyst

Okay, got it, got it. Thanks. The second question is, so in the latest FSR report, the RBI talked about increasing SMA-2 loans for the whole banking industry, which saw a jump from 4% to 7.5% in the month of September. [Indecipherable] Sorry, about that. Have you seen a similar trend in the SMA-2 portfolio as well in your books? Or it is much lower than what the RBI reported in terms of the delta?

Sashidhar Jagdishan -- Executive Director

No. It's been pretty much stable for quite some time now. We've not seen -- and in fact, even on an absolute level, it's pretty low compared to what we see in other banks. And even from a growth perspective also, we've not seen too much of a growth in the SMA-2 numbers.

Rahul Jain -- Goldman Sachs -- Analyst

Got it, got it. Just one last question, Sashi. So the fee income growth, which has again come out quite impressive. The retail loan growth, though, was tepid. So what explains this fee income growth? Was there any specific items there that may not continue? Or this is a result of a sustained pickup in the corporate book as well which is where we are benefiting by deepening relationships, etc.?

Sashidhar Jagdishan -- Executive Director

No, I think we have been mentioning this. Sometimes, we -- it's sort of we, ourselves, are surprised with the kind of certain runs that we've had in both in the third-party distribution and also in the payment products. We have seen a decent amount of sustained growth rates in the spends, the corporate cards and the debit card spend that's upwards of about 20%, 25%, which is sort of leading to this kind of a growth. You're right. I mean we, ourselves, sometimes are wondering when that will sort of really [Indecipherable] down, etc. But that is one of the reasons why we have seen a reasonably strong growth.

The other one is on the third-party distribution, where while the volumes have been in the mid teens, but the yields on the products that we have been distributing, -- these have been reasonably better for the kind of new products that they have been launching. So that has also sort of helped us in this quarter. So, but if you really look at it, as we have been mentioning that in the past as well, we were, we normally expect about 13% to 15% of core growth in fees. Maybe, we have internally revised ourselves to somewhere between the 15% to 17% as the core growth that we can sustain over a medium to long term. So this is a bonus that we have got, and let's enjoy when it comes.

Rahul Jain -- Goldman Sachs -- Analyst

Yeah, is it possible to get the composition of credit cards in our total fees?

Srinivasan Vaidyanathan -- Chief Financial Officer

Credit card, which is the payment...

Rahul Jain -- Goldman Sachs -- Analyst

Or maybe, payment [Indecipherable] etc.

Sashidhar Jagdishan -- Executive Director

We have a conglomerate, I mean a holistic thing including all products. I think somewhere around the 30% to 35% would be the payment products. The retail, the core retail assets and liabilities will be another 35-odd percent. The third-party distribution will be somewhere between the 15% and 20%, and wholesale will be the balance, 15% to 20%.

Rahul Jain -- Goldman Sachs -- Analyst

Got it, perfect. Maybe, Sashi, just one last question, if I can squeeze in. In the, on the Common Service Centre, you've talked about 70,000 products have been originated. Is it possible to also know the average ticket size there?

Sashidhar Jagdishan -- Executive Director

So this is a combination of both assets and liabilities. When you say they are not third-party distribution products, they are accounts that they have brought in and in new customers, and the balances are as per our programs. We need to wait and watch how these balances or these customers behave over a period of time, but roughly I'm saying about 60% to 70% would be liabilities. About 30%, as we speak, would be the asset distribution. Maybe these things will change. With stabilization, maybe we'll have a 50-50 going forward.

Rahul Jain -- Goldman Sachs -- Analyst

Got it. Perfect. Thank you so much. Thank you so much. Great.

Operator

Thank you. The next question is from the line of Sri Karthik from Investec. Please go ahead. Sorry, it seems that we have lost the line for the current participant. We'll move to the next question. That is from the line of Aman Ahluwalia from Laburnum Capital. Please go ahead.

Aman Ahluwalia -- Laburnum Capital -- Analyst

Thank you very much. Two questions. First, on the corporate lending side, it appears, at least from the market, that it's really you and SBI who are aggressively out there trying to grow in on the corporate side. Most of the other large banks are not doing this even if they have a sort of deep history, vintage, etc. in terms of corporate lending. So if you could give us some color on what it is that you're seeing and able to do that your large private sector competitors are not able to do, that would be helpful, because I assume that a lot of them have a similar kind of diverse products that they can offer a range of services, a good technology, etc.

And secondly and relatedly, post the Altico issue, there was some harsh language used by SBI for HDFC. And at least anecdotal evidence seems to suggest that SBI has been very aggressive, even with clients, trying to keep HDFC out of clients where they are present. Any thoughts on, is this sort of minor issue that you think would blow over? Long term, could we see two of the country's largest banks just being involved in that sort of corporate war? I would just be interested to get your real thoughts on that.

Rahul Shukla -- Group Head-Corporate Banking & Business Banking

H, this is Rahul Shukla. So you're correct. SBI is a competitor which is very active, and we respect them a lot for their judgment and the marketplace presence. And we continuously go out and learn from them. In my travels throughout the country, I always make it a point to go out and also call on the seniors at SBI, because I think they are a very large bank, compared to us, with a rich history. And we continue to believe that we have lots to learn from them.

Secondly, on the corporate book growth, I will not be able to comment as to what the other banks don't speak. What we see is there is still ability to go out and grow. The only thing that we always constantly balance is that growth should not come at the cost of credit, quality, and growth should not come by dilution of my margins on the transaction. So those are two tenets. So I have to balance growth with margins, and with credit quality, which is what we have done, which is what we have tabled for all of you as well as the shareholders, as a result, in this quarter.

Aman Ahluwalia -- Laburnum Capital -- Analyst

Thank you. And just to understand that better. Is it fair to say that most of the business you're gaining on the corporate side is from PSUs who are less likely to have, say, non-SBI PSUs or less likely to have the full suite of products, as opposed to places where...

Rahul Shukla -- Group Head-Corporate Banking & Business Banking

Yeah, actually, that is not a correct characterization, because for the bank, we believe that we might be the second largest corporate lender in the marketplace. When you grow, you have to have a broad-based growth. Otherwise, you are going to creep up on your concentration of your lending portfolio. So as we see that, I mean we comment that in this particular quarter, yes, we did go out and see a little bit more on the public sector, because that is a segment of the marketplace which continues to create capital expenditure at this particular point of time. So we have benefited by being proactive with our solutions in front of clients.

Aman Ahluwalia -- Laburnum Capital -- Analyst

Okay, thank you.

Rahul Shukla -- Group Head-Corporate Banking & Business Banking

Thank you.

Operator

The next question is from the line of Shreya Shivani from CLSA. That's the last question. Please go ahead.

Mohit -- CLSA -- Analyst

Hi, this is Mohit. Good afternoon, gentlemen. Thanks for taking my question. Sir, you mentioned that INR700 crores of, one-off provisions are on account of some corporate accounts. And then there is some additional agri credit costs. Would it be possible to quantify that?

Srinivasan Vaidyanathan -- Chief Financial Officer

No, not in addition, it includes, could be about [Indecipherable], how much it is. It's a small amount, primarily corporate-related. There is a small piece of other.

Mohit -- CLSA -- Analyst

Okay, got it. And on the third-party search firm being appointed, does it in any way mean that the search committee will look at external candidates? Or both internal and external candidates will be considered.

Sashidhar Jagdishan -- Executive Director

I did mention that the they -- the philosophy is to look at both external and internal candidates.

Mohit -- CLSA -- Analyst

Okay. And lastly, in terms of this new launch of myApps, could you throw some light on what this product, and how it will benefit the bank? Thank you.

Sashidhar Jagdishan -- Executive Director

Yeah. One of the USPs of the bank has been that we have a very broad-based customer segmentation, and one of that segmentation are institutions, the institutions could be in various activities and services. The bank has been at the forefront of sort of providing solutions to these kind of institutions, whether it is religious bodies, or whether it is education institutions, whether it's hospitals, class advocating [Phonetic], it's just, we have multiple such segmentations. So it is just to provide value-added services to these institutions so that we can tap into the supply chain of these institutions both from their customers and the suppliers and the service providers to these institutions so that we have a far more integrated value offering to these kind of customer segments.

Mohit -- CLSA -- Analyst

Okay, thank you.

Operator

Thank you. Ladies and gentlemen, due to paucity of time, that will be the last question for today. I now hand the conference over to Mr. Vaidyanathan for closing comments. Thank you. And over to you, sir.

Srinivasan Vaidyanathan -- Chief Financial Officer

Thank you, Aman. I again appreciate our calling in and...

Sashidhar Jagdishan -- Executive Director

On a Saturday.

Srinivasan Vaidyanathan -- Chief Financial Officer

On a Saturday. And if you have any more questions or need more clarifications, please contact Investor Relations, Ajit Shetty, would be able to come back to you and get you what you need. Thank you.

Operator

[Operator Closing Remarks]

Duration: 61 minutes

Call participants:

Srinivasan Vaidyanathan -- Chief Financial Officer

Rahul Shukla -- Group Head-Corporate Banking & Business Banking

Mahrukh Adajania -- IDFC -- Analyst

Manish Ostwal -- Nirmal Bang -- Analyst

Jimmy Tata -- Head, Credit and Market Risk

Suresh Ganapathy -- Macquarie Capital -- Analyst

Sashidhar Jagdishan -- Executive Director

Kunal Shah -- Edelweiss -- Analyst

Deepak Agrawal -- Axis Mutual Funds -- Analyst

Rahul Jain -- Goldman Sachs -- Analyst

Aman Ahluwalia -- Laburnum Capital -- Analyst

Mohit -- CLSA -- Analyst

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