The fresh slippages of loans were higher in Q1FY2020, while the bank has also improved reductions of NPAs helping to maintain stable asset quality in absolute terms. The asset quality of the bank has deteriorated marginally in percentage on account of sequential decline in loan book after the bank has exited some low yielding corporate loans in Q1FY2020.

Bank has witnessed slight moderation in business growth due to sequential decline in loan book. The CASA ratio was also flat at end June 2019. On advance front, the share of retail loans improved 45.3% at end June 2019. However, margins of the bank witnessed some pressure in Q1FY2020.

Asset quality stable in absolute terms: Bank has maintained stable asset quality in absolute terms in the quarter ended June 2019 with the strong reductions in NPAs.

• The fresh slippages of loans were higher at Rs 526 crore, while the bank has recorded higher NPA reductions of Rs 545 crore in Q1FY2020.
• Outstanding standard restructured advances of the bank increased to Rs 361.81 crore (0.68% of advances) at end June 2019 compared to Rs 298.69 crore (0.54% of advances) at end March 2019.
• Stressed assets (NNPA and restructured advances) stood at 4.02% of advances at end June 2019.

Business growth ease on lower loan growth: Business of the bank increased at slower pace of 10% yoy to Rs 121340 crore at end June 2019. Deposits increased 9% to Rs 68521 crore, while advances moved up 11% to Rs 52819 crore at end June 2019. Credit-deposit ratio eased to 77.1% at end June 2019 from 80.1% at end March 2019, while improved from 76.1% end June 2018.

Stable CASA ratio: CASA deposits increased 9% to Rs 18775 crore. CASA ratio was stable at 27.4% at end June 2019 compared 27.4% at end June 2018. Meanwhile, bank has sharply reduced bulk deposits by 88% yoy to mere Rs 260 crore at end June 2019.

Retail loans driving advances growth, corporate loan book dips on sequential basis: Advances rose 11% at Rs 52819 crore at end June 2019. The corporate advance rose 10% to Rs 28903 crore, while the retail advance moved up 11% to Rs 23916 crore at end June 2019.

* Retail advances gained share to 45.3% at end June 2019 from 45.1% at end June 2018.

* Break-up of advances shows housing at 14.4% of the advances, agriculture 11.2%, SME 18.9%, medium enterprises 2.8%, large enterprises 13.2%, other personal loans 6.3% and other 5.2% at end June 2019.

* Priority sector loans (PSL) of the bank stood at 43.6% of advances at end June 2019, while consistently exceeding the regulatory PSL target of 40%, while declined from 44.2% at end March 2019 and 51.4% at end June 2018.

Investment book of the bank increased 8% to Rs 17141 crore at end June 2019. The yield on investment improved to 6.82% in Q1FY2020 from 6.76% in FY2019 and 6.62% in Q1FY2019. The modified duration of AFS book declined to 1.91 years, while that of overall investment book also fell to 4.29 years at end June 2019.

Network expansion: Bank has opened 3 branches, while reduced 19 ATMs in the quarter ended June 2019. Bank has the network of 839 branches and 1191 ATMs at end June 2019.

Book value stood at Rs 196.3 per share at end June 2019. Adjusted Book value (excluding NNPA and 10% of restructured assets) was at Rs 132.8 per share at end June 2019.

Subdued NII growth on lower NIMs: For the quarter ended June 2019, the bank has posted 13% growth in interest income to Rs 1584.37 crore, while interest expenses increased 16% to Rs 1089.78 crore. NII rose at slower pace of 6% to Rs 494.59 crore, as net interest margin (NIM) declined to 2.81% in Q1FY2020 from 3.00% in Q1FY2019.

Non-interest income growth improves: The non-interest income of the bank increased 17% to Rs 244.79 crore in Q1FY2020. The core fee income of the bank increased 9% to Rs 221 crore, while trading income surged 300% to Rs 24 crore in Q1FY2020 over Q1FY2019.

Net Total income rose 9% to Rs 739.38 crore in quarter under review.

Expense ratio jumps on higher employee expenses: Operating expenses increased 26% to Rs 389.37 crore. The employee cost jumped 60% to Rs 176.93 crore in Q1FY2020, while the other operating expenses increased 7% to Rs 212.44 crore. Expense ratio jumped to 52.7% in Q1FY2020 compared with 45.5% in Q1FY2019.

With the jump in expense ratio, the operating profit fell 5% to Rs 350.01 crore in the quarter ended June 2019.

Provisions decline: Bank has witnessed decline in provisions and contingencies to Rs 201.14 crore in Q1FY2020 as against Rs 222.06 crore in the corresponding quarter last year. Thus, the Profit before tax (PBT) improved 1% to Rs 148.87 crore in Q1FY2020 over Q1FY2019.

Bank has written back tax provisions amounting Rs 26.55 crore in Q1FY2020 in addition to write-back of Rs 16.42 crore in Q1FY2019. Net profit improved 7% to Rs 175.42 crore in Q1FY2020.

Annual Financial Performance:

For the year ended March 2019 (FY2019), the bank has posted 47% increase in net profit to Rs 477.24 crore. The net interest income improved 3% to Rs 1905.12 crore, while non-interest income rose 5% to Rs 1001.96 crore in FY2019. The expense ratio increased by 252 bps to 50.1% in FY2019 compared to 47.6% in FY2018. The operating expenses increased 9% to Rs 1457.27 crore, while provision and contingencies fell 28% to Rs 842.00 crore. The profit before tax increased 96% to Rs 607.81 crore in FY2019. After considering 21% of effective tax rate, the net profit increased 47% to Rs 477.24 crore in FY2019.