Release Date: February 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Global business increased by 9.6% year-over-year, reaching INR12,72,000 crore in December 2023.
- Global advances grew by 11.29% year-over-year, with an incremental growth of INR57,000 crore.
- Domestic CASA increased by 5.92% year-over-year, with a CASA ratio of 43.88%.
- Net profit for Q3 FY24 improved both sequentially and year-over-year, increasing from INR1458 crore in Q2 FY24 to INR1870 crore in Q3 FY24.
- Improvement in asset quality with the reduction in gross NPA ratio to 5.35% and net NPA ratio to 1.41% in December 2023.
Negative Points
- Net interest income decreased by 2% year-over-year for Q3 FY24.
- Non-interest income fell by 17% in Q3 FY24 compared to Q3 FY23.
- Operating profit for Q3 FY24 decreased by 18% due to increased provisions for wage revision and depreciation on investments.
- There was a compression in margins due to an increase in the cost of deposits.
- Fresh slippages and aging provisions have impacted the overall financial performance.
Q & A Highlights
Q: We are disappointed with the results as compared to other PSU banks. Can you explain the decline in NII, NIM, and operating profit? What measures are being taken to improve these metrics in Q4?
A: (Rajneesh Karnatak, CEO) The decline in NII is due to increased interest expenses, which rose by 37% YoY. However, on a nine-month basis, NII improved by 16%. The compression in NIM is due to tight liquidity and increased deposit costs. We expect to maintain a global NIM of around 3% for Q4. The operating profit decline is due to one-off provisions for wage revision (INR 448 crore) and depreciation on investments (INR 383 crore). We anticipate a return to a run rate of INR 3,600-3,700 crore in Q4.
Q: Do you expect similar one-off provisions in Q4?
A: (Rajneesh Karnatak, CEO) No, we do not foresee similar one-off provisions in Q4. The wage revision provision of INR 219 crore will be the only additional provision expected.
Q: What steps are being taken to increase CASA deposits?
A: (Rajneesh Karnatak, CEO) We have a strong retail deposit franchise with 5,200 branches and 19,000 BCs. We opened 1.3 million new savings accounts this fiscal year. We are also entering into organizational tie-ups to attract current and savings accounts. Our cost of deposits remains competitive at 4.44% on a nine-month basis.
Q: Can you explain the impact of wage provisions on the P&L?
A: (Rajneesh Karnatak, CEO) The wage provisions are currently under the provision head and not debited to the wage establishment costs. We have provided INR 1,091 crore till December for wage settlement. This will not impact the P&L further.
Q: What is the outlook for margins in Q4 and FY25?
A: (Rajneesh Karnatak, CEO) Most term deposits have already been repriced. We expect the margin pressure to remain at the same level in Q4. However, we anticipate a softening of interest rates and an improvement in margins in FY25 as liquidity tightness eases and RBI potentially reduces repo rates.
Q: What is the guidance for ROA?
A: (Rajneesh Karnatak, CEO) We aim to achieve a consistent ROA of 1% by FY26. For FY24, we expect an ROA of 0.85% on an annualized basis.
Q: What is the target CD ratio for the bank?
A: (Rajneesh Karnatak, CEO) Our CD ratio was 79% in December. We aim to maintain it around 79% for Q4, below the regulatory guideline of 77.5%. We have an excess SLR of INR 30,000 crore to support incremental loan growth.
Q: What is the anticipated credit growth pipeline for Q4?
A: (Rajneesh Karnatak, CEO) We have a pipeline of INR 10,000 crore in retail and MSME segments and INR 50,000 crore in corporate segments. This healthy pipeline supports our credit growth guidance of 11-12% for FY24.
Q: Can you provide a breakup of the employee base between old and new pension schemes?
A: (Ashok Kumar Pathak, CGM HR) Out of 52,000 employees, 8,500 are under the old pension scheme, and the rest are under the new pension scheme.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
