Highlights:

The bank has accelerated loan growth to 19% end December 2022 driven by retail segments rising 5% qoq and corporate grew 4% qoq. Within retail, vehicle finance growth was robust at 7% qoq with another quarter of record disbursements. Microfinance and merchant loans grew by 2% qoq. Non vehicle retail maintained steady growth of 6% qoq.

The bank has achieved 3% qoq and 14% yoy growth in deposits during the quarter.

The gross slippages reduced to 1467 crore in Q3FY2023 from 1572 crore qoq.

Restructured book too reduced to 1.25% qoq from 1.5%. GNPA is down to 2.06% and PCR remains healthy at 71% with NNPA at 0.62%.

The credit cost has reduced to 40bps qoq from 44bps.

The contingent provisions are at Rs 2192 crore with total loan related provisions at 130% of GNPAs.

Core Operating Profits grew by 20% yoy driven by improved NIMs as well as strong client fees.

Net Interest Margin was at 4.27% up from 4.24% qoq. Client fee income grew by 28% yoy driven by retail fees.

Cost to Income was steady at 43.9% and operating profit margin remained healthy at 5.7%.

Return on Assets improved to 1.87% and Return on Equity crossed 15% mark in Q3 for the first time in 3 years.

Vehicle Finance

The vehicle business continues to achieve record disbursements every quarter and third quarter has been the best ever by a significant margin.

Disbursements during the quarter were at Rs 12713 crore up by 19% qoq and 44% yoy.

The vehicle finance loan growth accelerated with a robust 7% qoq growth and yoy growth improving from 13% to 18% during the quarter.

Two and three-wheeler segments are seeding demand coming back.

Vehicle asset quality remains steady with gross slippages at 0.9% vs 1.0% qoq.

The restructured book in vehicle finance reduced by 400 crore to 1868 crore from 2270 crore qoq.

Bank expects to maintain disbursement momentum in current quarter supported by new year purchases and income tax benefits.

Microfinance

The microfinance and merchant acquiring loans originated through BFIL grew by 16% yoy and 2% qoq.

The microfinance business disbursements were at Rs 8928 crore growing 27% yoy.

The member additions were strong at 593000 for Q3 up by 20% qoq of which December was the best month of the year so far. The disbursements to these members would gather pace from current quarter onwards.

MFI standard book net collection efficiency for Q3 was strong at 99%. The gross slippages during the quarter were down at Rs 409 crore as compared to Rs 435 crore during the previous quarter.

The 30-90 DPD book including restructured customers rose to 2.4% end December 2022 compared to 2.0% end September 2022 contributed by the eastern states. Bank has slowed down on disbursements in those geographies with increased focus on collections.

The merchant acquiring business has grown 16% sequentially to Rs 3094 crore with 4.9 Lakh active borrowers.

Overall, the bank continues to cautiously pivot towards growth on the microfinance business.

Global Diamond & Jewellery Business

The business continued to maintain its global leadership position of being the largest lender to this industry. diamond portfolio saw growth of 20% yoy.

Asset quality remains pristine with no restructuring and SMA1 or SMA2 customers.

Corporate Bank

The corporate business delivered another quarter of healthy growth and no asset quality concerns. The bank has achieved a growth of 20% yoy during the quarter with no net slippages.

The growth was broadbased across segments with Large corporate growing 3% qoq, mid corporates 4% qoq and small corporates 11% qoq resulting in overall growth of 4% qoq.

The yield in corporate book improved by 37bps during the quarter.

The proportion of A and above rated customers is now 74% compared to 72% yoy.

The overall weighted average rating too improved to 2.64 from 2.67 on yoy basis.

Exposure to stressed telco was stable at Rs 1713 crore.

Other Retail Assets

The other retail loan book saw growth momentum accelerating during the quarter to 23% yoy and 6% qoq, driven by credit cards, personal loans as well as steady momentum in business banking.

Credit Cards loan book grew by 9% qoq. new acquisitions remain robust with around 88000 acquisitions in December 2022.

Bank had done a pilot launch of home loans in September and recorded disbursements of over Rs 200 crore in Q3FY2023 and aim to scale it up meaningfully in coming quarters.

The share of consumer banking loans has increased to 16% of overall loans. Bank expects this to continue to increase as it scales up the home loans, merchant acquisition and maintain traction on credit cards and personal loans.

Liabilities

The deposits grew by 3% qoq and 14% yoy with healthy acceleration in the retail deposit mobilization.

The share of Retail Deposits as a result increased from 41.2% to 42.4% during the quarter.

CASA ratio was at 41.9% vs 42.1% yoy. The bank has not taken SA rate hikes in October.

The share of Top-20 customers in overall deposits has also come down from 17% to 15% qoq.

The bank opened 64 branches during the quarter taking the total branch count to 2384 and aiming towards closing the year between 2450 to 2500 branches.

Contribution of Certificate of Deposits remains low at 3.6% of deposits.

The bank has continues to maintain healthy average surplus liquidity of around Rs 44000 crore during the quarter with Liquidity Coverage Ratio at 117%.

Asset quality and provisioning

The provisions further reduced to 1065 crore in Q3FY23 and credit cost was low at 39 bps.

The bank utilized Rs 461 crore from contingent provisions during the quarter with residual contingent provisions of Rs 2192 crore or 0.8% of loans. Cumulatively for 9MFY23, the bank had Rs 1833 crore of slippages from restructured book. It has utilized Rs 1136 crore of contingent provisions so far. As the incremental slippages from the restructured pool continue to be range bound, bank is comfortable with the contingent provisions.

The Net Security Receipts have reduced to 56 bps from 67bps qoq and bank carries provisions in line with extant regulatory requirements.

Total loan related provisions are at 2.7% of loans or 130% of the GNPAs.

SMA1 and SMA2 book was at 8 bps and 24 bps respectively. Total SMA1 and SMA2 are down to 32 bps from 58 bps qoq.

CRAR including profits remains healthy at 18.01%.

The bank is coming towards end of planning cycle 5 strategy and outcomes so far have been consistent with objectives outlined in earlier communications.

Bank will be formulating Planning Cycle 6 strategy in the current quarter and will present its contours in the next quarter

Deposit Retailisation will continue to be cornerstone of PC-6 too. It will add new growth boosters for increasing customer acquisitions including Digital 2.0 offerings.

Loan momentum should accelerate in PC-6 with stable macro environment. The acceleration would be driven by retail segments.

The bank will continue to invest in franchise through distribution, technology, employees, adding and scaling new initiatives to diversify revenue pools.

The bank has maintained operating profit margins in most turbulent times and aim is to achieve that in PC-6 too.

The return ratios should continue to improve with normalisation of provisions in PC-6.