Highlights

The bank has continued to post strong performance, while recorded highest ever quarterly net interest income (Rs 1957 crore), core fee income (Rs 543 crore), operating profit (Rs 1274 crore) and net profit (Rs 804 crore) in Q3FY2023. The bank aims to continue to improve performance ahead.

The credit cost has improved further on the back of continued strong asset quality. Credit cost declined to 0.38% in Q3FY23.

The net interest margin of the bank has further improved to 3.49% in Q3FY2023, which is highest in last 35 quarters, rising 22 bps yoy and 19 bps qoq. The bank has raised the NIM guidance for longer term to 3.35-3.4% from earlier guidance of 3.25%. However, the bank expects some correction in margins in Q4FY23 on account of full impact of deposits repricing.

The bank has maintained strong momentum in credit growth at 19% end December 2022. The growth is strong across all segments, while the new segments such as cards, microfinance, business banking, personal loans, commercial vehicle, gold etc are showing strong growth. The bank is well positioned to support strong growth ahead and it aims to grow faster than industry in high teens.

The formalization of economy is providing strong credit opportunities.

The bank expects commercial vehicle and microfinance loan book to double in next 3 years

The deposits base of the bank has crossed milestone of Rs 2 lakh crore in Q3FY2023. The deposits growth has surged to 15% end December 2022 and would aid in maintaining CD ratio at 84-85%.

The bank has reduced GNPA 2.43% and NNPA to 0.73%, while improved PCR to 69.19% end December 2022.

The bank has posted strong ROA of 1.33% in Q3FY23, while it expects full year FY2023 ROA to be better than guidance of 1.25%. Further, the bank aims to improve ROA by 10 bps in FY2024.

The gold loan book of the bank was nearly flat in Q3FY23 on account of some adjustment with fintech partners. The bank expects the growth to return in Q4 and expects 25% growth in the gold loan book. About 10-12% of gold loan book is originated through fintech.

The credit card business has touched a size of Rs 1000 crore. Its adding material fee income. The bank is looking at meaningful growth ahead.

The bank may needs capital raising in 2023 depending on growth requirement

The remittances business is improving, but deposit conversion is low due to behavior change

The bank aims to improve cost to income ratio by 100 bps every year, while targets to reduce cost to income ratio to 47.5-48% in FY2024.

The bank has created additional investment provisions of Rs 47.61 crore for Securities Receipts (SR) in Q3FY2023, pursuant to amended RBI guidelines. Consequently, net book value of SR portfolio has become nil at end December 2022. As these provisions were created though treasury income segment, the net treasury income was negative as provisions were higher than income.

The bank has started to create additional wage hike provision from November 2022 at the rate of Rs 20 crore per months and would continue add to cost ahead. The higher yield will provide some benefit on pension benefit provisioning.

The loan book linked to external benchmark lending rate stands at 50.4%, while the fixed rate loan book is at 24.8% and MCLR at 14.5%.

The bank had targeted to add 50-75 branches in FY23, while its close to add 75 branches in FY23. It aims to add 80-90 branches each year during next two years.

The subsidiary of the bank Federal Operations and Services providing operational and technological services to the bank has 900 employees and bank has ambitious plans for it.