Asset quality concerns recede

Slippages stood at R5.4bn (annualised slippage ratio of 1.25%). Additions to stressed assets were well spread out across the sectors/accounts. The management maintained that additions to stressed assets (fresh slippages and new restructuring) were likely to remain at R10 bn on quarterly basis. There are no surprises in the pipeline of stress assets since the last 2/3 quarters. The management continued to guide credit cost at 85-90 bps for FY13/14 (annualised credit cost in Q3FY13 was at 80bps).

CASA ratio bottoming out: Daily average CASA (current account and savings account) balance has steadily declined from a peak of 41% in Dec 2010 to 36% as of March 2012. Since the last three quarters, average CASA has remained in the range of 35-36%. The decline in CASA in FY11/12 was a function of the poor economic situation which has impacted the current account balances. Savings deposit growth has remained healthy in the last two quarters (20% y-o-y growth) and the trend is expected to continue. Management stated the CASA ratio is almost at the bottom and unlikely to decline further as a pick-up in investment activity should provide support to low-cost deposits, particularly current account balances.

Aggressive growth in retail advances: Retail loans grew by 45% y-o-y driven largely by mortgage loans. Retail loans constitute 27% of overall loan book vs 20% in FY11. Retail loan growth is

... contd.