On business front, the bank as has posted 14% growth in business with strong 19% surge in loan book. Bank has substantially improved the credit to deposit ratio to 78.5% at end September 2018 from 72.6% at end September 2017. However, the bank has exhibited pressure on asset quality in Q2FY2019. The CASA ratio of the bank has declined to 36.1% at end September 2018 from 37.2% at end September 2017.

Asset quality deteriorates: The bank has exhibited surge in fresh slippages of loans and surge in net NPA ratio in Q2FY2019.

• The fresh slippages of loans jumped to Rs 2250 crore in Q2FY2019 from Rs 1442 crore in the previous quarter and Rs 356 crore in the corresponding quarter last year.
• The recovery, upgradations and write-off together were healthy at Rs 1533 crore, while the bank has sold assets worth of Rs 211 crore to ARCs in Q2FY2019.
• The restructured advances book has declined to Rs 1482 crore at end September 2018.
• The stressed assets (NNPA and Standard restructured asset) of the bank stood at 4.96% of advances at end September 2018 from 6.31% end September 2017.

Healthy business growth: The business of the bank has increased 14% YoY to Rs 391845 crore end September 2018, driven by 19% surge in advances to Rs 172322 crore. Deposits rose 10% to Rs 219523 crore at end September 2018.

CASA deposits ratio declines: The CASA deposits of the bank declined 7% YoY to Rs 77048 crore at end September 2018. The CASA ratio declined to 36.1% at end September 2018 from 37.9% end June 2018 and 37.2% at end September 2017.

Strong loan growth: Advances growth was driven by retail loans rising 26% YoY to Rs 30686 crore at end September 2018, while credit to agriculture increased 28% to Rs 35442 crore and MSME 20% to Rs 30774 crore at end September 2018. The share of retail, agriculture and MSME loans increased to 58.68% end September 2018 from 57.7% a quarter ago and 56.4% a year ago. The corporate loan book of the bank has also increased 13% to Rs 68236 crore end September 2018 over September 2017.

Investment book of the bank declined 1% YoY to Rs 68023 crore at end September 2018. The AFS book dipped 13% to Rs 25782 crore, while HTM book rose 9% to Rs 42220 crore at end September 2018. The duration of the overall investment portfolio stood at 3.26 years end September 2018 compared with 4.31 years at end September 2017.

Margins improve: The bank has showed sharp 10 bps YoY decline in cost of deposits to 5.24%, while yield on advances declined 20 bps YoY to 8.40% in Q2FY2019. NIM has improved 12 bps YoY to 2.97%. However, the NIM has declined from a high of 3.09% in Q1FY2019.

Branch expansion: The bank has added 8 branches, 198 ATMs and 549 staff in Q2FY2019, taking overall tally to 2830 branches and 3579 ATM's and 20047 employees end September 2018.

Book value of the bank stood at Rs 337.0 per share at end September 2018, while the adjusted book value (net of NNPA and 10% of restructured advances) was Rs 182.3 per share at end September 2018.

NII rises as NIM improves: Bank has recorded 13% increase in the interest earned at Rs 4700.85 crore, while interest expenses also increased 14% to Rs 2969.91 crore in Q2FY2019. NII improved 12% to Rs 1730.94 crore in the quarter ended September 2018.

Stable growth in the core fee income: Bank has posted strong 6% growth in core fee income to Rs 293 crore in Q2FY2019. However, the treasury income plunged 98% to Rs 4.97 crore and the recoveries in written off accounts dipped 56% to Rs 29.01 crore and forex income slipped 33% to Rs 45.19, causing 40% dip in the overall non-interest income to Rs 428.32 crore in the quarter ended September 2018.

Expenses ratio rises: The operating expenses of the bank increased 10% to Rs 968.21 crore, as other expenses moved up 17% to Rs 436.18 crore, while employee expenses rose 4% to Rs 532.03 crore in Q2FY2019. Cost to income ratio increased to 44.8% in Q2FY2019 compared with 39.1% in Q2FY2018, causing 13% decline in the Operating Profit to Rs 1191.05 crore.

Provisions jump: The bank has showed 35% surge in provisions to Rs 1004.34 crore in Q2FY2019. The provisions for bad debt surged 19% to Rs 752.48 crore, while investment depreciation related provisions zoomed eight-and-half times to Rs 326 crore in Q2FY2019.

With the jump in provisions, the profit before tax dipped 70% to Rs 186.71 crore in Q2FY2019.

Effective tax rate declined to 19.6% in Q2FY2019 from 28.4% in Q2FY2018. Net Profit fell 67% YoY to Rs 150.14 crore during quarter ended September 2018.

Half Yearly Financial Performance:

Bank has posted 56% dip in net profit to Rs 359.46 crore in the half year ended September 2018. The net interest income increased 18% to Rs 3537.92 crore, but non-interest income dipped 36% to Rs 868.12 crore. Net total income rose 1% to Rs 4406.04 crore in H1FY2019. The operating expenses increased 10% to Rs 1917.45 crore, while provision and contingencies galloped 39% to Rs 2033.90 crore, causing 61% dip in the profit before tax to Rs 454.71 crore in H1FY2019. The cost-to-income ratio increased to 43.5% in H1FY2019 compared to 39.9% in H1FY2018. An effective tax rate declined to 20.9% in H1FY2019 compared to 29.4% in H1FY2018. The net profit has declined 56% to Rs 359.46 crore in H1FY2019.