Kotak Mahindra Bank Limited (500247) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Kotak Mahindra Bank Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashok Vaswani, Managing Director and CEO of Kotak Mahindra Bank Limited. Thank you, and over to you, sir.

Thank you, Sagar. Thank you so much, and good afternoon, everyone, and thank you for joining us this afternoon. I will, as usual, begin with some opening remarks before handing over to Devang, who will take you through the financial performance. Anup and Paritosh will cover the retail and institutional businesses, respectively. Jaideep will provide an update on our subsidiary performance. Let me first -- for the quarter, the group delivered INR 5,480 crores in profit after tax, which is a growth of In profit after tax, which is a 23% on a year-on-year basis. Let me first talk about the bank and then the subsidiaries. The bank delivered profit after tax of INR 4,123 crores, up 26% year-on-year. I've always said we seek responsible and profitable growth and not just growth for growth's sake. In the current environment, we have prioritized stability, profitability and efficiency without any compromise to our overarching strategy around the 4 focused customer segments. We've calibrated growth in the low ROE businesses and businesses potentially affected by the geopolitical crisis. At the same time, we have taken advantage of better spreads in the corporate segment and volatility in the treasury markets. Our focus on the 4 customer segments, independent product businesses and driving automation and digitization continues to drive strong results. Customer asset growth of 16% on a year-on-year basis was driven primarily by our focus segments, SME and institutional banking. We continue to grow in absolute terms in the unsecured retail segment with encouraging sequential flow growth now also seen in credit cards and MFI. Total average deposits grew by 14% on a year-on-year basis. Within this, our car and fixed rate SA book grew by 15% and 16% on a Y-o-Y basis, respectively. This is despite car growth being affected by moderation in capital market deals. We continue to focus on increasing the granularity and stability of our deposit franchise, and this is reflected in our cost of funds which went up Q-on-Q by only 1 basis points. The discipline on quality of both deposits and advances helped us deliver steady NIMs at 4.53%. The I had mentioned earlier that driving efficiencies through automation and digitization will be a key priority for this year. In Q1, our costs grew by 8% on a year-on-year basis, further reducing cost to total assets from 2.83% to 2.66% year-on-year. We will continue to drive this effort on an ongoing basis. Our operating profit, thus grew by 10% on a year-on-year basis. Credit costs remained well under control at 46 basis points. As you know, we entered into a definitive agreement to acquire Deutsche Bank's retail banking, private banking and wealth management businesses in India for INR 281 crores. The businesses comprised of 150,000 customers with INR 29,000 crores of advances, INR 16,000 crores in deposits and INR 10,500 crores of wealth AUM. The transaction has a strong strategic fit with Kotak's affluent and SME franchise and is expected to be ROE accretive and creates incremental cross-sell opportunities. This is very much in line with our inorganic philosophy. While the transaction is expected to close in September '27, this will help us deliver above system growth rates. These inorganic opportunities continue to form an integral part of our strategy. Coming to the subsidiaries. Profit after tax grew by 20% year-on-year, with standout performances from Kotak AMC, Kotak Prime, Kotak Securities and our alternative asset businesses. Kotak life also had a very good quarter. Geopolitical tensions impacted the capital market businesses, particularly Investment Banking. However, we have a very robust pipeline going forward. With this, the subsidiaries contributed to 33% of consolidated profit after tax. The consolidated book value per share increased by 14% Y-o-Y. The operating environment remains extremely dynamic, and there are several significant factors which will play out, such as FCNRB and ECLGS. This requires us to be extremely nimble and agile while maintaining our focus on the relentless execution of our strategy. With that, let me hand it over to Devang take you through the financials in greater detail.

Thank you, Ashok, and good afternoon, everyone. Let me take you through the key highlights of bank standalone and consolidated performance for Q1 of 5%. Let me start with the extended member from us. our end-of-period customer assets, including the credit substitute grew 16% Y-o-Y and 5% Q-o-Q business. Q1 growth was largely driven by corporate and Asansegment, and in retail unsecured user segment by MFI and credit card inputs. Our total deposit grew 12% Y-o-Y on a Q-o-Q basis by average deposits grew 14% Y-o-Y and 4% Q-o-Q, within which the average current account balances grew 15% Y-o-Y. Average fixed rate saving account balance grew 16% Y-o-Y and average strong deposit grew 14% Y-o-Y. Bank delivered a profit before tax of INR 5,463 crores, which grew at 25% Y-o-Y with operating profit growth of 10% of INR 6,131 crores. The key contributor to profitabilitinia, NII growth of 9% fee income growth consistent improvement in cost to asset, which reduced from 2.83% to 2.66%, reduction in credit costs from 93 bps in quarter 1 last year to 46 bps in this quarter. All of the above resulted in increase in return on assets by 20 bps from 1.94 to 2.14. On a sequential basis, PBT grew 2% in while operating profit increased by 5%. Net interest margin for the quarter, 4.53% remained consistent with quarter 3 FY '26 and adjusted Q4 margin. As you would recall, we have reported 4.67% NIM margin for Q4. But as it happens at every quarter 4 because of the anomalityin the number of days, the adjusted margin for Q4 was 4.54% and therefore, the margin for the quarter 1 and the last 3 quarters, that means Q3, Q4 and Q1 remains at 4.53%, 4.54%. Cost of funds was stable at 4.46%, similar to the previous quarter. Noninterest income for Q1 included dividend from subsidiaries and FX higher gains. In comparison, as you know, Q4 includes higher income from distribution of insurance product. Trading gain on fixed income book, net of OIS Infra accounted during Q4 26 got reversed in Q1 FY '27 with market movement. The staff cost increase in this quarter reflects impact of annual salary increment and reversal of Q4 benefit and retirement costs arising from movement in the discount rates. Coming to the operating cost, Bank continues to invest in technology, which continues to be around 13% of our total costs. Q4 operating cost included elevated marketing and brand awareness spending. Coming to the asset quality. The gross NPA reduced to 1.18% vis-a-vis 1.2% on a sequential quarter basis. Net NPA of 0.27% as against 0.25%, and the provision coverage ratio continued to remain over 78%. Credit costs for the quarter stood at 46 bps compared to 39 bps in quarter 4. Repair has increased to INR 1,321 crores from INR 1,018 crores in the previous quarter. While the unsecured portfolio continues to show improvement, the increase in credit cost and slippages was largely driven by commercial vehicle and tractor finance portfolio, reflecting seasonal trends on expected lines. As of June 30, the bank's network stood at INR 1,40,924 crores, which includes INR 9,701 crores of mark-to-market gains on strategic investments. Of this, INR 1,592 crore gain accrued during Q1 itself. These gains, as you know, have been recognized directly in the results have not been routed through the profit and loss account. ROE for the bank is 11.98% for the quarter at with CP of 22.2%. If were to adjust the mark-to-market gain on the equity investment we tried, the ROE actually improves to 12.8%. Overall, capital adequacy ratio of the bank is 22.8%. To sum up the quarter performance reflects stable margin, continuing improvement in the operating efficiency and normalization of credit costs. Moving to the consolidated business. Customer assets stood at INR 6,812 crores, growing 16% Y-o-Y. The group investment in AUM increased to INR 5,531 crores, an increase of 8% on a Y-o-Y basis. The consolidated net worth stood at INR 188,214 crores at 30th June, while the book value per share increased to INR 189 with a 6-year per year of 17%. Consolidated PAT is at INR 5,480 crores, it grew at 23% Y-o-Y and 5% on a Q-o-Q era. This is, of course, excluding the gains on Infina divestment, which we had. Q4 FY '26 subsidiaries performance was impacted by adverse market movements, which were largely reversed during the quarter 1 FY '27. Jaideep, of course, will take you through the performance of key subsidiaries in later detail. With that, I hand over to Anup to discuss the highlights of our retail businesses.

Thank you, Devang. I'll take you through the retail business commentary. Our strategy remains anchored on 2 focused customer segments, high net worth individuals and core India. The HNI franchise comprises of private banking and solitaire is a relationship-led business focused on deepening customer experience, relationship and increasing wallet share. Solitaire's premium proposition continues to deliver strong outcomes. As of 31 March 2026, the bank managed a combined relationship value of approximately INR 12.78 lakh crore contributed by 78,200 families. OTA 811, the core India strategy continues to be scalable digital-first platform for customer acquisition, life cycle engagement across brands, sales and our corporate salary channels. Engagement has strengthened through differentiated offerings such as metal debit card, SuperX and 4-in-1 bundled propositions. Kotak 811, the core India strategy delivered a 32% Y-o-Y growth in savings balances now contribute to 12.7% of bank's total savings book. These 2 segment strategy is reflected in the continued momentum of our liability franchise. For quarter ending June 2026, CASA grew 13% Y-o-Y, average total deposits grew 13.6% Y-o-Y. Moving on to the asset side, mortgage, home loans and loan against property remains central to building long-term relationships particularly among affluent and self-employed customers while enhancing value through associated deposit buildup. Supported by improved distribution, faster turnaround times and enhanced digital journey, the mortgage portfolio grew at 15% Y-o-Y. Gold Loan, which remains a small business, but is a significant important focus area for us has continued to gain traction, supported by distribution buildup at the branches and significant process improvements. The bank's unsecured retail lending portfolio, comprising personal loan, business loan, credit card and micro credit continues to drive engagement portfolio yields while maintaining disciplined risk management. the unsecured retail portfolio grew INR 707 crores in absolute terms this quarter. Personal loan, business loan and consumer durables grew 5%. It still has some impact of rundown of the standard charter portfolio. Otherwise, the growth has started in double digit. Excluding this portfolio, PL growth remained double die spoke about. The credit cost has come down significantly in our unsecured. Traction is expected to improve, supported by distribution initiative, offerings such as PL overdraft to our Solitaire and HNI customer in addition to personal loan term loans. The credit card portfolio has been strategically restacked around right product to right customers philosophy. While Solitaire continues to scale among affluent HNI and private banking, AirPlus, Cashback plus are gaining traction in emerging and mass market segments. Rising incremental acquisition and healthy spend trend supported by 4% quarter-on-quarter growth on spend versus flat to negative trends seen after the environment. Retail micro credit grew 10% Y-o-Y and 5% Q-on-Q, following 8% Q-on-Q growth in March 2026 with credit costs declining due to risk-based underwriting within our appetite and coverage under full CG FMU scheme. This scheme is important in setting our future risk cost. In tractor finance, which we run like a nonbank model in a way, the bank retained its position as the second largest tractor finance in India with 11% Y-o-Y portfolio growth. However, we remain watchful of any adverse weather condition impacted by men. Our digital strategy is built on 2 focused app platform quota mobile banking for affluent NRI and business and quota 811 for core India's everyday banking needs. This dwell app strategy enables tailored experience stronger customer relevance and deeper digital engagement across segments. Investments in technology across retail business are delivering lower acquisition, servicing costs reduced brands condition and improve service levels, strengthening the scalable growth and improved customer experience. I would now hand it over to Paritosh to take you through the wholesale and the SME bank

Thank you, Anup. I will now take you through the performance of the institutional businesses. Our SME and institutional propositions continue to drive growth while leveraging the group's diversified financial services platform. The SME franchise, which accounted for 24% of the bank's advances, tendons primary banking relationships and delivered diversified balance sheet growth. The institutional business complement this with a capital efficient fee-based model that generates higher ROE. During the quarter, fee income from Corporate Bank grew 27% Y-o-Y and contributed 20% of the bank's total fee income. Cross-selling investment banking and institutional brokerage products added about 85 basis points to corporate banking ROE during this quarter. We continue Corporate Banking delivered healthy growth this quarter with the loan book growing 15.5% Y-o-Y and 4.8% quarter-on-quarter. Credit substitutes to grew at a strong pace of 27.2% Y-o-Y and 37.6% quarter-on-quarter. We continue to focus on granular expansion mid-market business continued its momentum this quarter with strong customer acquisitions. Growth was driven primarily by granular working capital lending, while maintaining prudent risk selection. In large corporates, we continue to focus on profitability through higher cross-sell, flow-based business and deeper transaction banking penetration. Our trade book grew strongly driven by domestic trade, supply chain finance and continued digitization. Get City continued to scale both trade and nontrade loans and grew strongly this quarter. Asset quality across customer segments continues to be resilient. Now let me move to Beyond balance sheet. In the institutional business, we continue to stand on feed businesses fee lines, including FX, grew strongly this quarter, while debt capital market maintained a strong momentum with a healthy pipeline. Our collections and payment franchise continued to expand through technology investments and deeper client engagement. Capital Markets businesses, including investment banking, institutional equities and custody were relatively muted during this quarter due to FIA outflows and geopolitical uncertainties. However, we continue to maintain leadership position across these businesses and have a robust pipeline. Through our SME franchise, we continue to build a relationship-led business model. The franchise delivered healthy growth during the quarter with advances growing at 20.5% Y-o-Y and 2.6% quarter-on-quarter. -- to about INR 126 crores. Growth was driven by healthy working capital demand, new customer acquisitions and deeper wallet share with existing customers. Asset quality remained resilient through disciplined underwriting. The bank has also been an active participant in the government's ECLGS program, supporting MSME and businesses by extending close to INR 3,000 crores of ECLGS credit till 30th of June. 2026. Turning to the commercial vehicle and construction equipment business. The business is managed as an independent product business within the bank and accounts for about 9% of advances. -- with a portfolio of approximately INR 45,000 crores. In the commercial vehicle space, the first quarter is seasonally weaker than the preceding quarter. We maintained a cautious stance amid heightened geopolitical uncertainty, while continuing our disciplined risk selection. In Construction Equipment, industry conditions remain soft, though actively improved towards the later part of the quarter. Recovery will depend on improved drop availability and a pickup in government standing. Finally, we continue to invest in enhancing our digital capabilities. Our fin platform continues to witness strong traction with active users increasing 37% Y-o-Y. We further standed our digital merchant and collection capabilities, while digital loan disbursement and the proportion of customers servicing requests on a DIY journey continue to increase substantially. I'll now hand over to Jaideep to take us through the subsidiary performance.

Thank you, Paritosh. Good afternoon, everyone. Let me talk about our subsidiaries now -- in Q1 FY '27, our subsidiaries reported profit of INR 2,022 crores, up 20% Y-o-Y, contributing to 33% of our consolidated profits. This reflects strength of our diversified and fully integrated financial conglomerate structure. With 100% ownership in subs, the group retains the entire profit and embedded value. The unique strength of this model lies and quotes ability to both manufacture and distribute every major financial product within a single platform. The PAT growth for the quarter was partially aided by reversal of the MTM losses that signed towards the end of March 26, on capital market linked equity investments and movement in Ed during the quarter. I'll start with the lending subsidiary Kotak prime. PAT for Q1 stood at INR 354 crores, up 30% Y-o-Y. The business continues to benefit from healthy growth of 11% new customer assets will be INR 45,960 crores, while maintaining a disciplined approach towards portfolio quality. On the capital markets side, Kotak Securities delivered a strong quarter with PAT of INR 533 crores, up 14% Y-o-Y. The cash market share improved to 10.4% from 9.8% sequentially while derivative market share increased to 15.9% from 15.3% with the overall market share rising to 13.8%. Interest income also benefited from growth in the MTF book with market share of about 14%. Q1 FY '27 was relatively muted for our institutional capital markets businesses that is coded Institutional Equities and the investment banking business, KMCC due to subdued primary market activity. However, we continue to maintain our leadership position in these businesses. On the asset management business, the quota BMC and use company's PAT for Q1 2020 stood at INR 399 crores, up 22% Y-o-Y. This is on the back of average AUM growth of 16% Y-o-Y in stood at INR 6,499 crores. The scale of this business continues to translate into strong cost efficiency and operating leverage. -- supporting healthy margins and steady profitability through the cycle. On the alternate asset business, Kotak alternate assets continues to be 1 of the leading domestic ordinate asset managers in India. Q1 FY '27 PAT stood at INR 126 crores up 112% Y-o-Y, largely driven by gains from exits during the quarter. On the insurance side, codedlifeInsurance shareholders PAT stood at INR 336 crores, up 3% Y-o-Y. The gross written premium grew 28% Y-o-Y, reflecting good momentum in the franchise. The retail forest grew 57% Y-o-Y reinforcing our focus on protection led growth and long-term value creation. I'll now request the operator to begin the Q&A session.

[Operator Instructions] Your first question comes from the line of Piran Engineer with CLSA. .

Congrats on the quarter -- just firstly, can you talk a bit about trends in the CV segment, more importantly in terms of collections? And what are you waiting for in this space to start to kick start growth again?

This is Paritosh. See, the CV segment, we have been consistently seeing improvement in our collections. The -- while -- as I had mentioned during my commentary that Q1 is a little slower compared to -- so the growth has been muted, but we expect that with the right selection between different segments, we should start looking -- we should look at it going forward.

Can we hit like 10%, 12% growth this year, at least in this segment? .

Y-o-Y? We don't really give a forward guidance on the growth, but we -- I would say we will maintain the market share. Understood.

And just -- sorry, if I may follow up on your point, when you're saying you see improvement in collections. Are you -- is it at a level where it used to be 1.5 years back back? Or is it still above steady state levels?

Our slippage is still above steady state levels. I think I would say that our slippages are reducing, and we have been maintaining the pace of improvement quarter-on-quarter.

Understood. Okay. Secondly, on personal loans, again, your the book was flattish quarter-on-quarter. And this is when we called out 2 quarters back that person loans is now fine. So how do we really read into this?

Piran, this is Anup here. When you look at the personal loan that comprises our personal loan, unsecured business loan and consumer durable all in together -- on the personal loan side, last year, we had a standard chartered portfolio bought in. So that is, of course, is running down faster -- if you net that the growth on the organic personal loan growth is quite strong now. That is the first. On the unsecured business loan, this quarter, we have been a little more cautious because of whatever issues we are seeing on the assembly side because of 3 months back, things were looking very bad. But at the aggregate level, we have started growing on APL. You'll start seeing numbers improving from here because the organic growth is now on double-digit plus. So that's my point. Okay. Organic loan book growth is double digit plus. Yes, on the PL side. And consumer durables, obviously, is a business we now don't focus on.

So -- got it. And just lastly, your customer count has been declining for the last few quarters. It was 54 million a year back, 50 million today. Is it just simply an MFI thing sort of clean up? Or is there something to read into this?

Yes. So a couple of reasons for that. One is there is an MFI cleanup and two also some amount of government and active customers, which we are just kind of closing out. And in fact, that's a protective measure to make sure we don't get into that miles kind of problem. So it's more of a cleanup of the book.

Next question comes from the line of Kunal Shah with Citi Group.

Yes, all good. Yes. So sir, particularly on the deposit side. So across the board, if we just compare amongst the private banks, -- there has been the step-up on the deposit growth, be it on end of period as well as the average deposit growth has been quite strong across the board. For us, maybe we had seen the -- some moderation out there. So maybe what would be the strategy highlighted, we touched upon a lot in terms of the different initiatives on the deposit side. but it appears that amongst the top 4 banks. In fact, we still seem to be relatively lower in terms of the growth. So how do we tend to address that, both on the average as well as -- and on that basis, maybe what is the LCR for the quarter, it appears maybe we would have seen some decline in the LCR. .

Yes. Anup here. On the deposit strategy, for us continue to remain driven through 4 focus segments, which we spoke about, and it continues to yield results. As a brand, we place greater emphasis on average balances rather than end-of-period balances. Overall, average deposits grew 13.6% Y-o-Y, while average term deposit grew at 14% Y-o-Y. Our average car balances grew 15.2% Y-o-Y. Trade and transaction balances continue to witness good traction which during Q1 FY '27. However, this quarter, growth in CAR was impacted due to moderation in capital market activity, which resulted in lower deal flow related balances. . Moving to average fixed deposit SA balances grew 16.4% Y-o-Y, again, very granular reflecting strength of our focused customer segment strategy, as seen in our granular low-cost deposit mobilization. As I already spoke about the 811 SA, who grew 32% Y-o-Y again, fully granular, which now accounts for 12.7% of total SA. Similarly, we continue to see good traction on the HNI and Solidor segment. However, this quarter, we saw some moderation in balances, primarily driven by flow movement from private banking segment of reallocation of funds from savings to investments. So to that extent, these are one-offs, but we continue to remain focused on granular, focus on average rather than EOP. That to continue to remain our strategy because that close into straightaway to optimize the cost of fund rather than a template number of UP.

And Kunal, like last time you checked you've kind of asked the question on increase in deposit rates in longer tenure bucket. And will that have better impact on our cost of funds, you can see that our cost of funds has only gone up by 1 basis point, and it has had no such impact. Exactly as we had mentioned.

Yes. So that's commendable that margins are sustained Yes. So that's good enough compared to the guidance, which was there in the last call or maybe the trend -- so that's good enough. And secondly, when we look at it now, credit cost, even in a seasonally slower quarter, we had seen it settling much at a lower level. So now being comfortable on the asset quality on the delinquency trend, would we look at stepping up on the advanced growth as well. We have seen some uptick in say, corporate, SME, some of the unsecured segment MFI and all. But all around, when we look at it, it's been still like 15%, 16%-odd for quite a while, while we had seen like other banks stepping it up beyond the industry average -- so when do we see that because there is a lot of comfort on asset quality? .

Yes. So no, I think you should look at it as multiple kind of perspective, right? The first thing, yes, we are very comfortable with where we are from a credit perspective. right A lot of the hard work over the last 2 years. So careouthe credit card portfolio PL portfolio is now behind us. We are very comfortable with within our guardrails. It's all working quite well, okay? Like we said, unsecured, we will continue to grow in rupee terms. We continue to kind of do that. As Anup mentioned, business loans, we were a little cautious this quarter because of all the stuff that happens that's happening because of the supply chain disruption and impacts of that. We will continue to grow where we get opportunities and think about growth, don't think about growth only in 1 quarter, right? Think about growth over a certain period of time. Both organic growth and inorganic growth and between the organic growth and inorganic growth, we will deliver over the system nicely over the system kind of growth rates on advances, both secured and unsecured.

Okay. So including the inorganic one. .

Yes, including no.

Your next question comes from the line of Ankit Bihani with Nomura. .

So my question is first on margins. So if we look at the reported margin decline of 14% Q-o-Q. So I think last quarter, there could be some day count impact. So if you could share if you normalize the day count in backlog would be the decline? And the second question does margin commentary now changed given that we have seen the wholesale funding rates also come down. So the funding environment is set to improve from here out. So any comment on that?

Devang here. So as I had indicated during Q4, the adjusted NIM as against 4.67%, if you were to adjust for the day count, it would have been 4.54%. And therefore, if you see, in fact, my colleague is reminding me, in fact, since if you see Q2 was also 4.54%, Q3, which is December quarter was 4.54%-- if you look at the March quarter, which is equivalent of 4.67% it's 4.54%. And for this quarter, it is also 4.53%. So the margin has remained actually consistent. In terms of the future part, I think there are very, very multiple variables, which are governing the outcome of this and which are constantly changing. So we would not like to provide any specific guidance on the NIM going forward.

But this doesn't change your guidance basically which you have provided in Q4. Anything on that? So you did provide some guidance in Q4, right?

Yes. So the guidance was at that point of time. But as you know, after that, so many things have changed, right, in terms of whether effect. -- season second.

We didn't provide guidance. Yes. We basically said where there's an industry commentary and there was a quota specific commentary. And I think some of it got mixed up. We said on an in touch-free basis, on an industry basis, we will see some margin decline. By the way, we were absolutely right for Q4 and Q1. We said as far as quota is concerned, because we've got multiple horses in the race on the deposit side, and we will manage the asset side in a nimble fashion, we will be fine. And that's exactly how it's played out in Q4 and Q1. The commentary about margin decline, I repeat, was an industry issue, not a quote specific issue.

Okay. That's very clear. And I missed out on the LCR part. So what is the average LP for the quarter?

On that? We report the group LCR, which has actually increased from 134 in the Q4 to 143. The reason if you know that we were, of course, having significant liquidity at March end itself. And from first April, as you know, there are norms on LCR have changed. -- which has effectively added approximately 9% to 10% incremental LCR. So while -- and on an average basis, depending on the advance and deposit mix up, actually, it is showing an increase. But I think for the month of June and going forward, it will obviously start utilizing as we efficiently utilize this LCR amount to fund our balance sheet growth.

And on the stand-alone from last quarter, you had highlighted it was 125%. This quarter, any number on that for the stand-alone bank? .

Stand-alone, I think -- again, the advantage for this increase in this thing came only in the stand-alone. So the out standalone Q4 average will be around 125. And sorry. Q1, I'm sorry, when I meant this Q1 is yes. 125.

Your next question comes from the line of Rikin Shah with IIFL Capital. .

Just had 2 questions. The first 1 Kotak loan and deposit growth is now about 350 and 150 basis points below the system, respectively. Despite having excess capital and lower scale -- why is there a bit more unwillingness to accelerate it without diluting the ROIs when some larger peers are able to deliver this. So that's the first one. And second question is on Deutsche's portfolio acquisition. Could you talk a bit more about the profitability of the business acquired in terms of ROA, et cetera, you did provide all the other details. Just was curious to know that the comment on ROE being accretive for quarter -- was it because of the excess capital being put to use? Or if you could just provide some colors on ROEs as well. That's it.

Yes. So see, look, as far as the asset growth is concerned, our focus always has been secure profitable and responsible growth. Responsible and profitable growth and not just growth for the sake of growth. right? So we focus on growth in high ROE kind of businesses and businesses which from a credit perspective are good, right? And like I said, I don't think you should look at advanced growth just for 1 quarter. Look at it for a longer period of time. And between organic and inorganic, we will comfortably drive overall system level kind of growth, right? I think deposit side, Anup took you through a lot of detail about how we are thinking about it and how we are driving. We continue to be very, very focused on the 4 customer segments. It's worked really well for us, it's granular. It's low cost. You can see that we've maintained margins, and therefore, we are driving both growth on the asset side and on the deposit side in a sensible and a profitable and responsible kind of manner. As far as Deutsche is concerned, I mean these are opportunities that come along. Like I've always maintained, we look at every single inorganic opportunity there is. The first question we ask ourselves, does this strategically make sense. Deutsche has 150,000 customers, affluent and SME customers. So 2 other customer segment focus areas which we are very, very focused on. So strategically, it makes a lot of sense. It's a pretty sizable transaction, INR 29,000 crores of advances and INR 16,000 crores of deposits INR 7,500 crores of wealth AUM. So it will add meaningfully to the quota kind of transaction. And yes, we definitely believe that the price at which we paid at INR 281 crores, this will be ROE accretive to us. Now the transaction actually closes in September of 2027. So the full control of the transaction will only be got to know there. So I'm not going to hazard a guess as to what the RO will be -- and obviously, this will -- as we grow the balance sheet to this extent, it will consume some of our excess capital.

And also, as you look at the Deutsche portfolio that goes into our core focus segment philosophy of solitaire HNI. That strengthen that franchise. So it's a great fit for us from a customer segment point of view. 150,000 customers, 150,000 HNI solider customers will come a SME solid me.