Highlights:

The bank has reported a consistent improvement in performance during all four quarters of financial FY22 in terms of growth, profitability and asset quality.

The trend continues in Q1FY2023 also and the bank is confident that the same will continue and even aims for further improvement of the performance in the ensuing quarters.

The bank has raised the target for deposit and advances to higher than 15% for FY2023 from estimate of 12% at the beginning of the year, considering the current trends for credit demand in certain specific sectors.

Bank continues to hold the target of NIM above 3.75% with NIM at 3.82% for Q1FY2023.

The margins have been supported by consistent efforts to keep the cost on lower side coupled with improvement in yields on investments and advances.

During the quarter, the bank has increased deposit rates for select maturity buckets by 50 bps, which is likely to impact cost of funds going ahead. Nevertheless, the bank expects that yields also will proportionately move up enabling to manage NIM at 3.75% levels.

Net interest income has gone up by 17% yoy and sequentially by 5% on account of lower cost of funds and increase in yield on funds and further supported by growth.

Yield on investment has moved up from 5.36% in Q1FY2022 to 5.64% in Q1FY2023, while rising 11 bps over a quarter ago.

Bank had taken a conscious call to keep the duration of AFS investments at a shorter level for quite some time. The securities now maturing are replaced by those with higher yield, as per current market trends.

About 30% of loan book carries pricing linked to EBLR, so policy rate changes have been transmitted to working capital accounts concurrently and term loan accounts are repriced.

MCLR has not been revised during the quarter. Factoring the deposit and other costs, it will be reviewed based on the market trends.

The bank does not expect any significant depreciation on AFS/SLR portfolio considering the low duration. Investment portfolio includes interest earning non-SLR bonds and debentures of Rs 1,507 crore, in tandem with the yield movement, there is likely to be some MTM losses in case of further hardening of interest rates.

The bank continues to focus on and aim to keep cost to income ratio at around 50% levels.

Provision for NPA for the quarter was at Rs 140 crore, while net slippages were negative. Credit cost for the NPA is at 0.95% and the bank expects credit cost will be at about 1% for FY23.

ROA is at 1.09% for Q1FY23 and bank expects ROA will gradually move up to 1.15-1.2% by Q4FY23 and it would be around 1.1% for FY2023.

CRAR continues to be robust and is at 19.21% providing comfortable headroom for growth.

Liquidity is comfortable, and the bank continues to maintain LCR at around 200% levels.

Gross slippages were at Rs 139 crore or to less than 1% of the loan book on an annualized basis in Q1FY2023.

The bank has been showing net negative slippages without taking write-off into account during the past four quarters.

Technical write-off of Rs 303 crore in Q1FY2023. There was no sale on SR basis in Q1FY2023.

Bank expects gross slippages will be in the range of 1% to 1.5% for FY2023. The bank aims to achieve negative net slippages in the coming quarter also.

SMA 30 plus balances at the end of quarter stood at Rs 579 crore, which is less than 1% of the loan book. SMA book includes Jewel loan book balance of Rs 48 crore.

Gross NPA has come down to 5.1% and bank aims to reduce it below 5% level by March 2023. Net NPA level has further reduced to 1.91% and it is endeavor to keep this at below 1% levels.

Restructured book, overall standard restructured book stood at Rs 1525 crore, which is 2.56% of loan book. This book consists of Rs 215 crore of working capital and Rs 1310 crore of term loan portfolio. The bank holds a provision of Rs 166 crore towards the standard restructured book.

Bank has recorded 14% yoy growth in CASA and 11% in total deposits. About 92% of the term deposits are from the retail segment that is Rs 5 crore and below.

Considering the need for building up deposits to meet asset growth and to be competitive in the market, the bank has raised interest rates and term deposits on certain buckets and operating team is activated for aggressive mobilization of retail term deposits.

The bank aims to continue to keep focus on building good CASA base to reach 40%.

The bank made a fresh loan disbursement of Rs 4200 crore in Q1FY2023, as against Rs 1,662 crore in Q1FY2022, excluding jewel loan disbursements.

Loan growth of the bank has improved to 14% and the bank is working towards achieving a minimum growth of 15% in FY2023.

Retail loans under personal segment have grown by 11% yoy, driven by residential mortgages. The bank has made certain significant changes in structure and expects to build a sound retail book in the ensuing quarters.

Agri loan book, which consists mainly of jewel loans grew by 15% yoy and sequentially by 4%, and the bank expect that this trend will continue. Overall jewel loan book has grown by 13% and constitutes 25% of loan book, LTV stands at 71%.

Commercial loan book has grown by 16% yoy and sequentially by 3%. The bank is focusing on this segment very closely to maintain the trend and to make use of the opportunities.

Corporate banking book has achieved a sequential growth of 4% and yoy growth of 13%, driven by availments in existing working capital accounts supported by fresh disbursements to existing and new customers. The bank is planning for a growth of 12% in this segment during the quarter.

The performance is in line with expectations and business plans. The qualitative changes and transformation processes brought in during the past few years is helping to scale up business, improve asset quality and aid increased profitability.

There is a multi-pronged approach the bank want to take for the deposits, one is, branch addition. The bank is planning to open 15 branches in FY2023. The main focus of these branches would be mobilizing the deposits.

Rs 61 crore of slippages came from restructured loan book in Q1FY2023 out of slippages of Rs 139 crore.

About 85% of loan book is under floating rate with 30% under EBLR and rest 55% is under MCLR.

About 33% of EBLR book is towards working capital, which has already passed on lending rate hike. For the remaining 67% term loan portion, reset is already done for 56% and only 44% is pending. So expect in another four-five months, all these things will be repriced.

The bank expects slippages rate of 20% in its restructured loan book.