Release Date: April 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bank of Maharashtra (BOM:532525, Financial) reported a significant growth in total business by 15.94%, closing March at INR4.74 lakh crores.
- The bank's gross NPA has declined sharply to 1.88%, and net NPA has reduced to 0.2%, indicating improved asset quality.
- Net profit has grown by 56% YoY, reaching INR4,055 crores, showcasing strong profitability.
- The bank has maintained a robust balance sheet with a capital adequacy ratio (CRAR) of 17.38%, positioning it well for sustainable expansion.
- Bank of Maharashtra has implemented several digital initiatives, including a CRM platform and AI-based video assistant, enhancing customer experience and operational efficiency.
Negative Points
- Despite the strong financial performance, the bank faces potential headwinds from global geopolitical tensions and oil crises, which could impact future growth.
- The bank's operating expenses have increased, partly due to wage revisions, which could pressure profitability if not managed effectively.
- There is a significant amount of written-off accounts, totaling INR19,555 crores, which may impact future recoveries and financial stability.
- The bank's guidance for NIM (Net Interest Margin) is conservative at 3.7% to 3.9%, reflecting caution amid potential interest rate reversals.
- The bank's reliance on CASA (Current Account Savings Account) deposits, while a strength, also poses a challenge in maintaining and growing this ratio in a competitive market.
Q & A Highlights
Q: Sir, you announced a 7,500 crore fundraising plan. Can you elaborate on when and how this will happen?
A: (Aerathu Rajeev, CEO) Yes, we have a capital raise plan to bring down the Government of India's holding below 75% to comply with SEBI regulations. This may require 2 to 3 tranches. We aim to maintain a CRAR of 16% to 17% and will raise funds for credit growth and compliance.
Q: Do you see any stress or weakness in any segment of the economy or industry from your bank's perspective?
A: (Aerathu Rajeev, CEO) The economy is poised for growth, and banks will benefit. While there are global headwinds, domestically, we don't see major challenges. Our loan book is healthy, and we have stringent underwriting norms to ensure strong growth.
Q: How are you planning to sustain your CASA ratio over the next three to five years?
A: (Aerathu Rajeev, CEO) We aim to maintain our CASA ratio above 50% by deepening relationships with existing clients and exploring new areas. We will offer customized products and services to retain and grow our CASA base.
Q: What is the future outlook for your digital and technology spending?
A: (Asheesh Pandey, Executive Director) Our IT budget has increased to over INR 1,000 crore. We are focusing on converting IT spend into business growth, enhancing cybersecurity, and implementing digital initiatives to improve efficiency and customer experience.
Q: How do you plan to manage your cost-to-income ratio while expanding geographically?
A: (Vijay Srivastava, CFO) Digitization is a key lever for reducing costs. Centralization and verticalization of processes also help. Despite opening new branches, we aim to keep our cost-to-income ratio below 40% by leveraging technology and efficient resource allocation.
Q: Can you provide more details on the improvement in yield on advances?
A: (Aerathu Rajeev, CEO) The increase in RAM share and restricted slippages have contributed to the improvement in yield on advances. We focus on quality underwriting and monitoring to maintain higher yields.
Q: What is your strategy for lending to corporate clients versus RAM segments?
A: (Vijay Srivastava, CFO) Our focus is on bottom-line growth. We prefer RAM segments for better risk diversification and yield. However, we are open to corporate lending where we see viable opportunities and good returns.
Q: How do you plan to handle the potential decrease in interest rates and its impact on NIM?
A: (Aerathu Rajeev, CEO) We are taking a conservative approach with a guidance range of 3.7% to 3.9% for NIM. If interest rates decrease, we will adjust our strategies accordingly to maintain or improve our NIM.
Q: What is the rationale behind the reduction in AAA-rated borrowers and the increase in AA-rated borrowers?
A: (Vijay Srivastava, CFO) The shift is due to rating migrations. We focus on maintaining a high percentage of investment-grade borrowers. Our strategy is to lend to clients with good credit quality while achieving better yields.
Q: What is your effective tax rate for the coming years?
A: (Vijay Srivastava, CFO) We have switched to the new tax regime with a 25% rate. Due to carryforward losses, our actual tax liability will be negligible for the next two years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
