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.