Highlights:

The bank has exhibited one of the best retail deposit mobilisation in Q3FY2024 with moderate increase in cost of deposits.

The loan growth was broad based across retail segments. The key profitability metrics like NIMs, PPOP margin, RoA etc were healthy.

The bank saw slippages on the higher side than expected and its working towards normalisation in this quarter.

The retail loan growth was strong at 24% yoy which drove the overall loan growth of 20% for the Bank.

Retail saw healthy momentum across vehicle, microfinance & consumer segments.

The bank is selective in corporate loan growth at 15% focusing on mid and small corporates.

The bank saw one of the sharpest sequential improvement in the share of Retail Deposits as per LCR of around 1% in one quarter.

Retail deposits grew 5% qoq despite the challenging liquidity environment. The bank is now touching the PC-6 ambition of 45%-50% retail as per LCR with still couple of years to go.

The increase in Cost of Deposits was also moderate at 9bps qoq.

Gross NPA remained steady at 1.92% and net NPA at 0.57% end December 2023.

Gross slippages were at Rs 1765 crore, as the slippages in vehicle book were impacted by adverse weather conditions towards the end of last quarter and since then have already started showing improvement.

The restructured book continues to run down to 0.48% compared to 0.54% a quarter ago.

Net Interest Margin remained stable at 4.29% sequentially.

Other income grew by 15% yoy driven by granular retail businesses.

The bank continues to invest in human capital, physical and digital infrastructure as well as marketing initiatives

Capital Adequacy Ratio remains healthy with CET1 of 16.07% and overall CRAR at 17.86%.

Vehicle Finance:

Vehicle finance business continued robust growth momentum with highest ever disbursements in history of Rs 13700 crore growing at 7% qoq. Vehicle loan growth remained healthy at 20% yoy and 5% qoq with demand picking up on the back on improving rural sentiments & festive season.

The bank has doubled auto loan book in last 2 years with market share now close to 4%.

The gross slippages in vehicle finance were at 0.73% vs 0.93% yoy and 0.64% qoq.

The restructured book in vehicle finance reduced to Rs 705 crore from Rs 910 crore qoq with majority of the reduction due to upgrades and recoveries.

Bharat Financial Inclusion

BFIL distribution is now running at its potential capacity with outstanding loan book originated of Rs 40544 crore growing 24% yoy. The growth was robust in both the microfinance as well as merchant acquiring segments at 20% and 55% yoy respectively.

Active loan clients stand at 9.4 million reflecting a growth of 17% yoy and 4% qoq.

Microfinance

Microfinance business continued momentum with yoy growth improving to 20% from 16% over last quarter.

Average loan outstanding per customer reduced by 1% qoq as the bank were cautious with elections in a few large states last quarter.

Net slippages improved to 0.55% vs 1.24% yoy and 0.57% qoq.

MFI standard book net collection efficiency for Q3 was at 98.6% and early delinquency buckets are better than the industry.

Merchant loan book stood at Rs 4783 crore with 55% yoy growth. The standard book net collection efficiency from this client base stood at 99.1%.

The kirana shop model has around 61000 Active Bharat Money Stores providing banking at the doorstep in remote areas.

The bank is well placed to participate in the large rural opportunity with deep distribution network while transitioning from micro finance to micro banking.

Global Diamond & Jewellery Business

The business continued to maintain its global leadership position. The growth however has been an issue for several quarters due to global macro challenges. The portfolio has degrown by 8% qoq and now contributes 3% of overall loan book.

The asset quality nevertheless remains healthy with no SMA1, SMA2 or restructured accounts.

Corporate Bank:

The bank continues to grow corporate book in calibrated manner with focus on areas of competitive advantage rather than chasing headline growth numbers.

The overall corporate growth of 15% yoy continues to be led by mid and small corporates growing at 17% yoy and 3% qoq.

Growth in large corporates was 2% qoq and 14% yoy in line with expectations.

The proportion of A and above rated customers has improved to 77% vs 74% yoy.

The Net Slippages in corporate book were at Rs 155 crore vs Rs 158 crore qoq. The slippage was mainly due to one stressed account of Rs 140 crore.

The bank remain comfortable with the overall asset quality trends in corporate segment considering the improvement made in risk profile & granularity of portfolio.

Other Retail Assets

Share of unsecured loans remains around 5%-5.5% and the bank aim to maintain it rangebound around current levels.

Credit card growth was driven by new cards acquisitions & strong spends.

Overall, the bank is focused on growing consumer assets while improving the balance towards secured mix with scale-up of home loans.

Liabilities

The bank remains on track and committed to add around 1000 branches during this 3 year period. The bank has also opened 97 branches in Q3 vs 25 branches in H1FY24.

Share of borrowings in total liabilities was at 8%. The borrowings continue to be oriented towards long term sources of funds.

The bank continue to believe in phygital & segmental strategy and with constant investment in traditional, digital and new initiatives

The bank remains comfortable of achieving deposit growth ambitions.

Financial performance

Net Interest Margin was stable at 4.29% sequentially while improving by 2bps vs 4.27% yoy, supported by moderate 9bps increase in Cost of Deposits against 15 bps jump in yield on advances.

The bank employee base grew by 5% qoq.

The Net Security Receipts have further reduced to 37 bps from 39 bps in previous quarter. The bank made additional provisions of Rs 165 crore towards the SR book during the quarter.

The bank used contingent provisions during the quarter as the bank expect reduction in stressed book including that of a telco exposure.

SMA1 and SMA2 book collectively is now only 19 bps.

Total loan related provisions are at 2.2% of loans or 114% of the GNPAs.

CRAR including profits remains healthy at 17.86%.

The bank is in sight of PC6 target of retailisation and aim towards achieving upper end of the 45-50% retail deposit ambition over next couple of years.

The Net Interest Margins have been stable throughout the challenging times and the bank expects support once the interest rate cycle turns.

The RoA and RoE profile thus has potential for improvement as the bank see benefit from NIMs, Cost to Income as well as Credit Costs coming through over the next few quarters.