Bank of Maharashtra Ltd Q1 FY25 Earnings Conference Call Insights

Key highlights from Bank of Maharashtra Ltd (MAHABANK) Q1 FY25 Earnings Concall

• Business Growth
  • Total business saw 13.5% year-over-year growth, reaching INR4.76 lakh crores.
  • Advances grew by 19%, standing at INR2.09 lakh crores.
  • Total deposits increased by 9% year-over-year, reaching INR2.67 lakh crores.
  • CASA deposits experienced growth, with current accounts up 10% and savings accounts up 6%.
  • Term deposits showed a 12% year-over-year increase.
  • CASA share stood at 50% of total deposits.
  • Different loan segments showed strong growth: retail, 25%; agriculture, 15%; MSME, 20%; and corporate, 39%.
• Deposit Initiatives
  • Created a new business acquisition vertical headed by a general manager to target government departments and entities.
  • Implemented special deposit schemes with competitive interest rates to retain existing deposits and attract new customers.
  • Focused on adding new KYC IDs (Know Your Customer Identification) through these schemes.
  • Established a dedicated cell to address integration requirements for bulk transactions and API connections with client ERPs.
  • Aiming to deepen existing relationships and establish new ones through targeted outreach.
• Digital Enhancements
  • Upgrading the mobile banking app with new features.
  • Planning to revamp the entire mobile application to offer a lifestyle banking solution.
  • Using digital channels to ease customer onboarding and increase engagement.
  • Bank has a technology budget of approximately INR1000 crores for the current year.
  • Upgraded data center, disaster recovery, and near-DR facilities.
  • Implementing new solutions for CRM, lifestyle banking, and Microsoft suite.
  • Enhancing audit capabilities with 19 modules to be implemented in the next six months.
• Loan Portfolio Expansion
  • Exploring co-lending partnerships with high-rated NBFCs to strengthen the portfolio.
  • Seeking partnerships with term lending institutions for infrastructure funding, particularly in renewable energy projects.
  • Creating centralized verticals for loan processing, underwriting, and monitoring to improve oversight and asset quality.
  • Revamping retail loan schemes to make them more market-friendly while addressing risks.
• Recovery Efforts
  • Set a target of INR1,250-1,500 crores for recovery from the write-off book this year.
  • Implemented an NDND (Non-Discretionary Non-Discriminatory) scheme for one-time settlements of NPAs up to INR1 crore.
  • INR8000 crore portfolio eligible under the NDND scheme, covering 6.18 lakh NPA accounts.
  • Planning a mega auction of over 500 properties acquired through physical possession.
  • Expecting a 20-25% success rate in property auctions from physical possessions.
• Business Growth Guidance
  • Total business expected to grow by 16% for the current year.
  • Advances projected to increase by 18-20%.
  • Deposits targeted to grow by 12-15%.
  • CASA ratio to be maintained around 50%.
  • Retail, Agriculture, MSME to Corporate ratio aimed at 60:40 with a ±2% variation.
  • Interest income growth projected at 18-20%.
  • NIM guidance set at 3.75-3.9%.
  • Cost to income ratio to be maintained below 40%.
• Investment Portfolio Changes
  • Market risk-weighted assets decreased from 7,500 crores to 426 crores due to regulatory changes.
  • New investment guidelines prevent shifting securities from Held to Maturity to Available for Sale.
  • Banks can no longer sell high-yielding securities from HTM to AFS for trading profits.
  • Interest income from treasury has increased while trading profit has decreased.
• Yield on Advances
  • Slight decline in yield on advances observed quarter-on-quarter.
  • Decline primarily attributed to regulatory changes regarding penal interest.
  • Penal interest now classified as charges rather than interest income.
  • Overall impact on yield described as minor with no other specific reasons for the decline.
• Agri Portfolio
  • Agriculture advances showed 35% growth.
  • Sector experiences high stress levels and NPAs, but on a reducing trend.
  • Current NPA level in agriculture portfolio at 7.88%.
  • Bank shifting focus from farm credit to investment credit.
  • New focus areas include cold storages and food processing units.
  • Aiming for a balanced approach to control stress while maintaining growth in the sector.
• Infrastructure Provisioning
  • New RBI circular on infrastructure provisioning to be implemented from 2025 to 2027.
  • Estimated additional provisioning of INR490 crores required over three years.
  • Bank considering options to pass on costs to customers through interest rate increases.
  • Potential interest rate increase of 0.4% to 0.5% for loans in under-construction phase.
• Business Growth Strategy
  • Q1 performance considered muted but not a cause for concern.
  • Year-on-year credit growth at 19% despite challenges.
  • Bank aims to become more significant by exploring new opportunities and sectors.
  • Focus on retail advances and infrastructure sectors like renewables.
  • Recent recruitment of 195 specialist officers to strengthen risk management, treasury, and technology.
• Capital Adequacy
  • Capital Adequacy Ratio stands at 17.04%, above regulatory requirements.
  • Recent capital raise of INR1000 crores on July 4th boosted CAR to 17.7%.
  • Increase in credit and operational risk weighted assets observed.
  • Market risk weighted assets decreased significantly due to new investment guidelines.
  • Bank maintains a comfortable capital position despite not raising capital in the reported quarter.