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.