Highlights:

India continues to be a relatively high growth country with exchange rate stability and high forex reserves as part of the overall financial stability.

Banking industry witnessed a comparatively lower deposit growth of 9.20% and higher advances growth of 16.40%. This reflects a continued increase in credit creation and business activities despite monetary tightening and high inflation.

Incremental CD ratio for banking system has gone up to 130% corroborating and need to garner more deposits to fund this advances growth.

Deposit growth has been muted due to tight liquidity situation in the market. The bank is reinforcing connect with the liability customers to improve CASA as well as retail deposits.

RAM segment continues to be area of focus following the strategy of increasing RAM share in total advances.

SMA management and slippage containment remains high priority areas on the Bank's agenda with continuing measures for improving the collection efficiency and NPA recovery.

NIM stood at 3.04% improving by 62 basis points YoY. Net Interest Income stood at Rs 5083 crore up by 44.28% YoY.

Asset quality further improved with reduction in gross NPAs, both amount wise and percentage wise. The gross NPA ratio was brought down to 8.51% and net NPA to 1.92%.

Slippage ratio for Q2 FY23 was at 0.30% as compared to 0.69% in the 1st Quarter. Similarly, credit cost improved from 1.21% in Q1 FY23 to 0.60% in Q2 FY23.

Cost to Income Ratio also improved to 48.10% from 58.20% in the 1st Quarter of the year.

During this quarter, the Bank expanded its global credit growth to 17.89% YoY, with increase in RAM advances share to 54.25% as compared to 52.51% in Q2 of FY22.

However, domestic advances growth was relatively less at 12%.

During current year, with ongoing IT initiatives, credit offtake is expected to improve further from current levels. The bank expects credit growth of 11% to 12% during the current year.

For augmenting yield on advances and NIM, the Bank is continuing with its strategic focus on RAM advances.

Along with increasing size and yield of credit portfolio, managing asset quality is also of paramount importance.

The bank expect gross NPA ratio to be contained below 8% and credit cost at less than 1% going forward. The bank aims to reduce net NPA ratio to below 1.5%.

The bank aims to maintain NIM at around 3% thus ensuring sustainable growth in profits.

NIM, credit cost, NPA ratios and cost to income ratio have shown significant improvement in Q2 and the bank is committed to sustain and improve upon the levels in the quarters ahead.

There has been provision divergence. The bank has made a provision of Rs 473 crore which is again going to be the same amount of provision coming in Q3 and Q4 totaling to Rs 1419 crore. These account swing between regular and default and bank would be able reverse provisions if they continue to be in regular for 180 days.

There is no undue worry about that pressure on SMA book.

Cost to Income ratio can be maintained at 47-48% and the bank is focusing on reducing it going forward.

The bank is comfortably placed on investment book. Total exposure in AFS is approximately to the tune of Rs 29000 crore out of which Rs 14000 crore is FRBs and close to Rs 8000 crore is T-bills. So, there is not much of worry and the bank is well protected against the fluctuations of the rate of interest.

The margins in the overseas book have improved and will be further increasing if the Fed increases the rates. However, the forex income that the bank used to get because of the high premiums that has narrowed down.

The bank expect about 65 bps RoA for FY2023

The interest rate on around 54% to 55% of loan book is in the range of 10% to 12% after the rate hike supporting higher margins. Around Rs 134000 crore of advances book is in the range of 9% to 10%.

About 47% of the loan book is external benchmark linked and remaining is MCLR linked and small portion is fixed rate.

Going forward, there may be some good margin expansion the bank may get in the international book also. So, the margins are sustainable and 40 to 50 bps margin expansion will continue to be retained.

The spread will be maintained at 3.40-3.50% and NIMs will be at 3% to 3.50%.

Deferred Tax Asset is now Rs 8200 crore and since the bank have the MAT credit available and unless the MAT credit decision comes from High Court, the bank would not take any decision of shifting to new tax regime. There is no outside deadline also within which the bank needs to shift to the new regime.

Liquidity coverage ratio is 190%

The restructured loan book stands at Rs 14000 crore end September 2022. The slippage run rate in the restructured book so far is 6% of COVID Framework-2 and 16% in resolution Framework-1.

The securities receipt book stands at Rs 3300 crore and it is fully provided.

SMA-1 and SMA-2 portfolio has declined from Rs 2415 crore end June 2022 to Rs 1672 crore end September 2022 with decline in the retail segment at 26%, MSME 1% and Corporate 23%.

As far as NARCL is concerned now, binding bids have been received in three accounts where the bank have exposure and the bank is not the leader in those accounts. And in two of the accounts already the JLM has accepted the offer and in the third account some negotiations are pending, which comes to around nearly Rs 280 crore on book outstanding.

Apart from that in three big accounts, where the bank is the leader one retail chain of accounts and another account based at Calcutta, where the JLM has already decided to give the consent for transfer of account to NARCL, the due diligence process by the NARCL is in progress. There, the total outstanding will come to around Rs. 1,600 crore. And of course, that may not happen in Q3, maybe in Q4. For this quarter, the bank is planning only around Rs 280 crore.

The bank is having nearly 24 accounts where the voting by the COC is already over and NCLT orders are expected, which includes some big accounts also. So, anytime any order is coming that will be a upside on the expected recovery for the quarter. Banks exposure maybe around Rs 600 crore for 24 accounts. Expected recovery. outstanding maybe around Rs. 1,600 crore.

All inclusive SMA is Rs 74,000 crore out of which SMA-0 is as high as Rs 56000 crore or 11.39%, SMA-1 is Rs 8300 crore, SMA-2 is Rs 9400 crore. So, SMA-1 and 2 constitutes about 3.5%.

The bank is anticipating a cash recovery of Rs 1500 crore and upgradation of Rs 500 crore for Q3, similar performance will be repeated for Q4 as well.