In an interaction with V. P. Srivastava Chief Financial Officer, Bank of Maharashtra

“There is enough room for growth in the banking sector” 

In Q1FY24, the net profit of the bank zoomed by 95 per cent from corresponding quarter last year to ₹ 882 Crore. What were the contributing factors for the bank’s performance?
 

The following major factors have contributed in increase in Net profit by 95% on YOY basis:-

◼ Growth in NII is 39% during June 23 on YOY basis due to increase in gross advances and containing cost of deposit / funds.
◼ Recovery in W/o is increased from ₹ 118 Crore during June 2022 to ₹ 231 Crore during June 2023
◼ The performance of treasury is considerably improved with the income of ₹ 62 Crore during June 23 as against loss of ₹ 92 Crore during June 22.
◼ The slippage ratio has come down to 1.26 in June 23 from 2.15 in June 22. Therefore, bank has to provide for lower amount of provision in respect of NPA accounts.
 

What strategies does the bank have in place to manage credit growth? Additionally, can we expect credit growth to align with deposit growth during this period?
 

Bank had achieved growth of 25% both in advances and deposits during June 2023 quarter on Y-O-Y basis due to providing competitive rates & products. Further, the reduction in TAT has also helped the bank to improve the business. With the focus to increase the MSME & Mid-Corporate portfolio, the bank has opened specialized branches for such customers in order to cater their need. This has resulted in growth of 29% and 24% in MSME and Corporate portfolio respectively. 

The industry is expected to grow by 14% to 15% in advances. However, considering our low base and various strategies adopted, we are expecting to grow between 20% to 22% during FY 2023-24. 

Presently, the CD ratio of the bank is around 70%. There is enough room available for bank to grow in advances with the CD ratio up to 80%. Therefore, bank will not foresee any problem in credit growth vis-à-vis deposit growth. 

Further, the bank is also exploring options such as borrowing against excess SLR securities, CDs and re-finance instead of taking bulk deposits at higher rates in order to contain the cost.
 

The bank has consistently achieved a reduction in its Non- Performing Assets (NPA) on a quarter-on-quarter basis, resulting in the current NPA standing at an impressive 0.24 per cent. However, given this remarkable progress, is there any potential for further improvement in the net NPA ratio?
 

As of 30th June 2023, Gross and Net NPA of the bank was 2.28% and 0.24% respectively. Bank is expecting that NNPA ratio will be around 0.20% to 0.25% during FY 2023-24.
 

The bank has raised ₹ 1000 crore through QIP in June. How long this QIP will help you to fuel your credit growth?
 

Bank was able to maintain CRAR above 18% with the infusion of capital raised through QIP. The bank may further raise capital through FPO/ QIP / ESPS / Tier-I bonds / Tier-II bonds at opportune time based on the growth in advances. For this, bank has already taken approval from the Board for raising capital up to ₹ 7500 Crore in FY 2023-24. 

Apart from above, current year profit will also be added in the capital which will help in maintaining CRAR at comfortable level i.e. between 16 to 18%.
 

What is your outlook on the Indian banking sector for the next few quarters? In your view, which key drivers will boost India’s credit growth over the next couple of years?
 

Indian Banking sector has performed exceedingly well in last 2-3 financial year and most of the banks have either made turn around or posted decent results. Assets quality in the banking sector has improved significantly in last 3 years. 

The Indian economy is poised to grow above 6 %. Therefore, DS there is enough room available for growth in banking sector also. The key drivers are infrastructure, exports, PLI linked industries, electronics, auto industries, defence products, domestic consumption (housing and other spending) and MSME segment etc.
 

With healthy trends in growth momentum expected to persist, what is your earnings outlook for the next few quarters?
 

The Indian banks has taken suitable measures to ensure the asset quality and arresting the slippages. Further, the technology driven banking is also helping the bank in improving the business, reducing TAT and improvement in bottom lines. 

It is expected that despite the pressure on margins due to hardening of interest rates, NIM would be above 3% and ROA will be around 1%.