Release Date: July 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bandhan Bank Ltd (BOM:541153, Financial) reported a profit after tax of INR1,063 crore, up 47.4% year-on-year.
- Net interest margin (NIM) stood at 7.6% in Q1 FY25, showing a 22 basis points expansion year-on-year.
- The bank's gross advances grew by 22% year-on-year to INR126,000 crores.
- Deposits increased by 23% year-on-year to INR133,000 crores, with a stable share of retail deposits at 69%.
- The bank's operating expenses reduced by 7.5% quarter-on-quarter, indicating improved cost management.
Negative Points
- Gross NPA increased to 4.2% in Q1 FY25 from 3.8% in Q4 FY24.
- The CASA ratio dropped by 400 basis points quarter-on-quarter, indicating a decline in low-cost deposits.
- The bank increased the risk weightage of its EEB portfolio from 75% to 125%, impacting its capital adequacy ratio.
- Collection efficiency for the EEB book declined to 98.5% in June from 99.1% in March.
- The SMA-0 book saw an increase of 30 basis points quarter-on-quarter to 0.9%, indicating some stress in collections.
Q & A Highlights
Q: Congrats on a great set of numbers. I just have one very small data keeping question. So in your results this time, you have not mentioned the net worth amount. So if you could just let me know what the amount is?
A: The total net worth as on June 30, 2024, was INR21,883 crores.
Q: My first question was on margins. Was there any one-off in other interest income?
A: No, there were no one-offs in the other income. This represents the underlying growth that we've seen in the business, buoyed by increase in processing fee as well as the other elements of other income.
Q: How do you think about CASA ratio has dropped by 400 basis points? How do you think about cost of funds going ahead?
A: Whilst the CASA ratio saw a decline on a quarter-on-quarter basis, on a year-on-year basis, it still represented a good growth. The retail deposits, overall, remain stable at about 69%. However, there is some pressure building on the cost of funds in the market, and we will continue to calibrate our strategy accordingly.
Q: How to think about margins going ahead?
A: As guided before, we will continue to maintain our NIM in the range of 7% to 7.5% depending on how the overall interest rate looks like.
Q: On this diversification, how to think about our exposure to the MFI segment because on one side, we are reducing our share of direct lending, but at the same time, we are also increasing our lending to NBFC MFIs?
A: There is a clear focus on driving product diversification as well as geographic diversification. We are looking to improve the share of our secured assets portfolio. Growth in the MFI book will continue, albeit lower than the growth in the secured assets portfolio.
Q: Is this a new normal wherein you have managed to curb the seasonality in Q1?
A: This is the normal growth as part of our strategy to grow the secured book. We believe that this is a new normal, and while quarter three and quarter four will still be better than quarter one and two, the degrowth as a subject should be protected.
Q: On CET1 Tier 1 reduction, is that the final decision by the bank?
A: We have discussed, deliberated, and interpreted the regulatory guidelines, and with approval from the Board, we have taken a conservative approach. As of now, this is the finality to our decision.
Q: On SMA0, 1, plus 2 book, the number in absolute amount has gone up. Do you believe that this number should start reducing?
A: Our DPD pool has been coming down consistently over the last four quarters. We are optimistic that our recovery efficiency and the guardrails we put in place should hold good for us going forward.
Q: Any update on the CEO succession?
A: The process is very much on track as expected. We will continue to update you on any fresh development. As of now, I am not in a position to communicate whether we have sent any names to RBI.
Q: On the capital adequacy front, given that you have a nomination from RBI at the Board, has there been any conversation on this topic?
A: The decision was taken before the decision of RBI to put an Independent Director. Our decision is independent of that. We have taken a prudent and conservative approach.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
