Bank of Maharashtra Ltd Q4 FY24 Earnings Conference Call Insights

Key highlights from Bank of Maharashtra Ltd (MAHABANK) Q4 FY24 Earnings Concall

• Credit Underwriting
  • Implemented minimum benchmark credit scores for loan underwriting.
  • Established criteria to build a healthy loan book.
  • Set up a centralized underwriting cell at the head office for large and mid-corporate projects.
  • Ensured quick turnaround time for mid and large corporate proposals.
  • Established Central Processing Centers (CPCs) at zonal offices for retail, MSME, and agriculture loans.
  • Steadily expanding centralized underwriting coverage for RAM (Retail, Agriculture, and MSME) segment.
• Financial Performance
  • Net profit grew by 56% year-over-year (YoY), reaching Rs. 4,055 crores.
  • Total business grew by 15.94%, closing at Rs. 4.74 lakh crores.
  • Total deposits increased by 15.66%, reaching Rs. 2.7 lakh crores.
  • Gross advances grew by 16.3% to Rs. 2.03 lakh crores.
  • Gross NPA declined sharply, now below 2% at 1.88%.
  • NIM improved to 3.92% from 3.56%.
• Specialized Branches
  • Established specialized branches for housing finance, mid-corporate, and corporate finance.
  • Mid-corporate branches cater to proposals ranging from Rs. 25 to 100 crores MSME borrowers.
  • Corporate finance branches handle proposals above Rs. 100 crores.
  • Specialized branches have dedicated manpower and required skill sets.
  • Ensuring better monitoring, improved turnaround time, and better customer experience.
• Recovery Efforts
  • Implemented a robust collection, recovery, and follow-up mechanism.
  • Initiated recovery efforts immediately for delinquent accounts.
  • Set up specialized recovery branches for bad asset recovery.
  • 13 asset recovery branches handle NPAs from Rs. 20 lakhs to Rs. 5 crores.
  • 17 Stressed Assets Management Branch branches handle NPAs above Rs. 5 crores and NCLT cases.
  • 70% of the bank’s bad assets housed in these 17 branches.
• Branch Network Expansion
  • Current network: 46 zonal offices, 2,500 branches, and 2,300 ATMs.
  • Low Business Correspondent (BC) network currently at 3,300.
  • Plan to ramp up BC network to around 10,000 by September 2024.
  • Opening new branches to improve presence across the country.
• Digital Initiatives
  • Implementing CRM platform and lifestyle banking application for personalized service.
  • Launching AI-based video assistant for instant personalized assistance round the clock.
  • Introducing digital insurance platform and integration with online share trading platform.
  • Implementing Straight Through Processing (STP) journeys for various products and services.
• New Business Vertical
  • Established a new vertical for customer acquisition and engagement.
  • Aimed at deepening existing relationships and acquiring new businesses beyond credit and deposits.
  • Offering services like payment and collection, channel finance, payroll business, etc.
  • Headed by a General Manager-rank executive at the corporate office, with support from DGMs.
  • Extended arm in each zonal office through existing Business Development Offices.
• FY24-25 Guidance
  • Advances growth: 16-20%.
  • Deposit growth: 12-15%.
  • CASA ratio: Above 50%.
  • RAM to Corporate ratio: 60:40.
  • Net Interest Income (NII) growth: Around 20%.
  • Net Interest Margin (NIM): 3.7-3.9%
  • Cost-to-Income ratio: Below 40%
  • Provision Coverage Ratio (PCR): Around 98%
  • Capital Adequacy Ratio (CRAR): 16-17%
• Capital Raising Plans
  • Plan to raise around Rs. 7,500 crores of capital over the next two years.
  • Aimed at reducing government shareholding below 75% to comply with SEBI’s minimum public shareholding norms.
  • Capital raise may happen in 2-3 tranches due to the large amount.
  • Capital to be used for credit growth and maintaining CRAR guidance of 16-17%.
• Data Sharing and Consortium Lending
  • Data sharing platforms like Credit Information Companies (CICs) and NESL (Information Utility) provide borrower details.
  • Data aggregators also provide insights into borrowers’ financial health and defaults.
  • Consortium lending facilitates continuous interaction and information sharing among lenders.
  • Drawing power determined by the lead bank in consortium lending.
  • Improved data availability and utilization enable better risk assessment and prevention of past mistakes.
• Growth Drivers
  • Branch expansion (750 new branches in last 3 years, reaching 2,500+ branches currently).
  • On average, Rs. 30 crores of business added by each new branch within one year.
  • Further plans to open 220-250 new branches in the coming year.
  • Presence in areas with banking activities and growth potential.
  • Focus on four pillars: people (training and reskilling), processes (35 RPAs implemented), technology, and data cleanliness.
• Focus Areas
  • Building competitive advantages through various modes and initiatives.
  • Compliance with regulatory expectations for all new initiatives and businesses.
  • Identifying and exploring new areas for improvement and growth opportunities.
• CASA Strategy
  • Maintaining and strengthening CASA (Current Account Savings Account) share, currently around 48-49%.
  • Guidance to keep CASA ratio above 50%.
  • Ring-fencing existing CASA relationships and exploring new areas.
  • New vertical established to deepen relationships with top clients and offer bouquet of services.
• Technology Expenditure
  • IT spending budget increased from Rs. 800 crores to Rs. 1,200 crores this year.
  • Aim to increase share of digital business from 5% to 20% in the next 2-3 years.
  • Upgrades to data centers, switches (EFT, UPI, FI), and cyber security measures.
  • Expenditure aligned with the bank’s aspiration for progress and digitalization.
• Capital Raising Plans
  • Plans to raise equity capital to reduce government stake below 75% (SEBI norms).
  • No immediate pressing need, but capital required for growth objectives and maintaining CRAR guidance (16-17%).
  • Internal approvals and regulatory permissions to be obtained shortly.
  • Equity raise to happen at an opportune time, potentially through multiple tranches.