MAHABANK — earnings call
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Prepared remarks
BANK OF MAHARASHTRA · Management
MR. ASHEESH PANDEY – EXECUTIVE DIRECTOR –
July 19, 2023
Moderator · Conference Operator
Ladies and gentlemen, good evening and welcome to the Bank of Maharashtra Q1 FY ‘24
BANK OF MAHARASHTRA · Management
July 19, 2023 So these were the major areas of results and then coming to question-and-answer session we will take it up but before that I will request our ED Mr. Pandeyji to brief regarding the digital transformation, what is happened during the current quarter, how the bank is planning to go for the digital transformation, so that the repetitive questions we can able to reduce that.
July 19, 2023
Jayesh Shah
Okay, would you be able to give a number for the total year for the provision?
Moderator · Conference Operator
Thank you.
We have a next question from the line of Suraj Das from B&K Securities.
Please go ahead.
Mr. Das, does that answer your question?
BANK OF MAHARASHTRA · Management
July 19, 2023 quarters nowadays.
And there is no -- not much is happening in this segment.
In at least last quarter, I can say.
July 19, 2023 cadres in the bank to sustain and give a comfort to such sort of business.
Then certainly, we foresee that, we may continue in the same range going forward.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Prashant Galphade from Whitestone Advisory.
Please go ahead.
BANK OF MAHARASHTRA · Management
July 19, 2023 So it's a part of creating ECL conversion for the next year like that.
Though we have around INR 1,250 crore provision, COVID provision we held up.
And another we, Board is of the opinion that, we have to create over a period of time at least INR 1,000 crore provision for ECL purpose.
So that is why this difference has come.
July 19, 2023 And similarly like, scale 2 and 3, so various skills, the bank is recruiting, which is also in our social media and for last, if you see one year period.
And including the CTO sort of a position, which we are taking from the market.
So both of them are going hand in hand and it is all intended to support, what the bank is trying to achieve for last say one year and going forward also.
Sushil Choksey
Sir, my last question is at any point of time to prove more from your, as your enablers are all for future, in your advances, how much is public sector and how much is private sector?
Have you ever bifurcated in terms of advances total?
BANK OF MAHARASHTRA · Management
July 19, 2023
Moderator · Conference Operator
Thank you.
We have our next question from the line of Ashok Ajmera from Ajcon Global Services.
Please go ahead.
BANK OF MAHARASHTRA · Management
July 19, 2023 So RAM also, when we talked about and the corporate, so still we are maintaining 41% plus minus one sort of.
So we are in that range only and the RAM also if see, we are continuing the same range bound group, and which is almost same, if we take quarter to quarter, which is 24.85% approximately.
Are you fine, sir.
July 19, 2023 So this is a delivered attempt to accumulate the security and of course, because of that, advances within tolerance, is below 2%, though our tolerance is 4.25%.
But some time that you have to do, and it's a good strategy, to earn the profits.
July 19, 2023
July 19, 2023
Moderator · Conference Operator
Thank you.
I would now like to hand the conference over to Shri A.
S.
Rajeev, Managing Director and Chief Executive Officer for closing comments.
Over to you, sir.
A.S.Rajeev
So thank you so much and for all your support and all those, who are joined this meeting and whatever for the past eight quarters to 10 quarter or at least the 15 quarter to 16 quarter, whatever the commitments which we have given and the direction or some kind of guidance, whatever were give, we could able to do that.
And in future also, we will try to do that.
And whatever the figures and whatever we have talked, very conservative manner only, we have talked, but we will try to improve further, whatever we have talked.
The figures may try to improve further in coming quarters.
Thank you so much.
Moderator · Conference Operator
Thank you.
On behalf of Bank of Maharashtra, that concludes this conference.
Thank you for joining us and you may now disconnect your lines.
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Questions and answers
“Bank of Maharashtra Limited
Sure, sir.
Thank you very much, sir.
And welcome to all the analysts for this meet.
As you have seen, the presentation and the figures, everything is uploaded on the NSE and BSE, and also on the website.
Now, coming to specifically on the front, because in the press meet and earlier in analyst meet as well, so there is certain times, you have a question of the sustainability and the other things.
So the bank is now putting up a lot of emphasis for almost last two years on the technology.
So on the credit side, asset side, I would say, the three pillars are very important, like the sourcing, underwriting and monitoring.
So bank has gone ahead a lot, and we have integrated model with which we have told last time also, with the Corpository, the CRISIL, the Probe42 and the CICs,
all the four CICs. · Research Analyst
So the bank has built the model on which it is working, and also similarly, on the liability side, many things the bank has already launched, including V-CIP.
Now digital zone sort of thing which bank has opened in particularly, and a general manager cadre is posted where they are having the four wings within them.
It is like, you will see in all the banks put together, there are generally one team which is looking on IT, IT infrastructure, DC network and the data center
etcetera. · Research Analyst
And another one is the digital, but the particularly what we observe that we need to understand the UI, UX, customer centricity and the emphasis that actually it is converted to business.
We have now opened a digital zone headed by general manager, under which there is a digital CPC, there is all digital STP journeys, and there is an audit, digital audit which is happening through the external experts.
There is a digital marketing team which will be doing and approximately INR 5000 crore of a business which is invested through this model.
So that is one thing.
Now if you see on the website, so all our RFPs which are happening and mostly which we are concluded.
So on the control function side, like you know, the entire audit software package we are concluding and the multi-function kiosk and various other alternative machines, you would be seeing the bank has already concluded those sort of RFPs.
Also, I would like to state that there was a press release already by our MD, sir, where it was emphasized that we have on boarded BCG for our digital transformation as our consultant, in which there are three pillars.
One is the digital journeys, second is the digital operations, and the third is the digital compliance.
So probably you will also analyze that digital compliance you would never have heard that an outside consultant that too top two is coming in for digital compliance so that the compliance is inbuilt in the journey itself.
So all the three, we have started working on that and that is taken as project Parivartan inside the bank and that is well taken off.
Now coming to the fourth thing, like the collaborations so
BANK OF MAHARASHTRA · Management
July 19, 2023 the bank is also collaborating with few.
The bank is thinking to have almost 3% to 5% business from the first year, additional business, incremental business should come from these sources, and increasing to say 25% to 30% in next three years' time.
So I think this is the brief and yes, one robotic process automation, which is actually no public sector bank as of now, is very much on it, but then we have made already live and I think by next quarter when we are back, at that time we may have more than 25 to 30 processes which would be live.
And in this year, we envisage that we will be crossing almost more than 60, and mostly on the reconciliation and the customer journey side.
So these are well bifurcated on the digital operation and journeys and on the compliance side.
So this is the brief on the digital initiatives.
And the budget which bank has taken is around INR 1,200 crore which the bank has taken on this digital initiatives total.
A. S. Rajeev
Thank you.
And another two minutes, our ED Vijayakumar will talk regarding the staffing pattern and the HR initiative what we have taken during that quarter, because that is also very important.
And that's the other aspect.
A. B. Vijayakumar
Thank you very much sir.
Friends, once again a hearty welcome to this quick analyst call of Bank of Maharashtra.
The results are before you.
You have been tracking our performance for the last four to five years and we have been number one in terms of the financial numbers, out of 22 parameters last year, year on year, 16 parameters we were number one, major parameters, another three we were number two, another three, number three, third portion.
In fact, we almost captured the first three out of 12 public sector banks.
When you compare with the private sector banks, we compared with those banks which have more than 3 lakh business they're also out of 14 parameters where very comparably compared.
Out of 16 parameters, seven parameters, we were number one.
Others also in top five position were there.
So some of the areas, we are not only benchmarking with our private banks in India, we would like to go along with the benchmarking the international in some of the areas.
This is what overall view of what we have been thinking about internally to bench ourselves, to compare with ourselves other banks.
In any industry, whether it's a manufacturing service, the man began, the human capital much more important than anything else.
In our bank, we give a lot of importance to that.
The whatever the financial results we have been, quarter after quarter we have been giving, it goes to the investment we make in the HR, and we are consciously, I mean, attending to all the issues, particularly the optimum utilization of the HR, that was the objective, which we are to the most extent we have succeeded, that will be compared with the data.
We had a number of staff around 12,532 now as on 30th June 23 is 13,344, so 812 new staff has been added and to so as to say that per-employee business, per-branch business substantially increased and when we compare with all the banks have to come out of the results only this is the second our public sector banks have come but when we compare the last quarter there also
BANK OF MAHARASHTRA · Management
July 19, 2023 in those aspects, per-employee business, per-branch business , Bank of Maharashtra has been number one.
We have taken many initiatives to give training, upskilling their skills and giving maximum opportunity available within India and to some extent now the executives also been sent to abroad for both India and abroad through the reputed management's like NIBM to get feel of what is happening the other side of the border and that also gives the input to us.
Our bank was operating within the Maharashtra predominantly.
More than 65% of our branches were operating within Maharashtra about three years before.
Now, exactly 50% only operating Maharashtra.
We are consolidating, we are improving our efficiency within the Maharashtra because it is the heart and soul of our bank.
But at the same time, our eye is on to expand our business outside the Maharashtra, where we are getting a good response.
In the last, exactly last three years, we opened more than 430 branches, out of which more than 95% is outside the state and which gives a lot of business.
In fact, 15% of the business came from those numbers.
INR 45,000 crore business come from these 430 branches opened.
Ideally, what we want to have, at least one branch in each district.
As of today in our country, 797 districts are there.
And I mean, every now and then, every state is also expanding, dividing the existing districts and making it more.
When we started this idea, it was only 680 and in a span of two years, it has come to 797.
Of course, some of the areas like northeast and northern, we have challenges to open, but we are happy to announce that along with this journey, we opened 12 new zones when we opened 430 across the country and one exclusive zone in Northeast in Guwahati with 25 plus branches out there.
Our focus is on opening up branches where we get opportunity to do business and at the same time, we are also focusing on our HR in all fronts.
We have been giving much importance to the HR matter.
Apart from that, we always say in our all-internal meeting and also through, any forum when we address business first, business first, business first, but compliance always.
The compliance is a very wide term, which includes corporate governance, risk management, and audit system.
So, these areas also we have been focusing because when there is a growth, there is always a question from all the stakeholders including analysts, whether it is sustainable, how far it will go.
So, we are aware of this and we have been giving a much importance.
I'm happy to share one or two information to you.
Like in this last quarter, 430 branches are audited, out of which 430 was due for audit and around 230 is completed I suppose.
Out of this 10%, 23 branches were spot [certification 0:15:40] second place.
It means, see there is an internal system of auditing inspection internally by our own team, inspection team.
When they go, they will make some observation.
But we are insisting that those audit compliances as far as possible should be compliant, rectified then and there.
July 19, 2023 So, the culture of rectification during the audit itself is happening in our branch.
This is the one indication which I would like to share with you.
Going forward, any specific information needed, which I would like to share with you – respond to you.
Thank you very much for listening.
A. S. Rajeev
Sir, now I think we can go for question-and-answer session.
Moderator · Conference Operator
Thank you very much.
We will now begin the question-and-answer session.
Anyone who wishes to ask a question may press star and one on the touchtone telephone.
If you wish to remove yourself from the question queue, you may press star and two.
Participants are requested to use handsets while asking a question.
Ladies and gentlemen, we will wait for a moment while the question queue assembles.
We have our first question from the line of Jayesh Shah from OHM Portfolio Equity Research.
Please go ahead.
Jayesh Shah
Congratulations, sir, for great results.
I just wanted to understand on the provisions for doubtful debts.
We thought with the level of gross NPA and the net NPA that you had, the provisioning figure should have come down and credit cost should come down.
So, however, it has not.
So, how do you expect this to pan out for the whole year?
And have you really taken some extra provisioning in view of the RBI norm which were specified last year, which are also in the draft situation.
Thanks.
Yes, hello sir, thanks for the opportunity and congratulations on a good set of numbers.
Sir, just wanted to understand your outlook on NIMS and specifically I mean this quarter you have seen increase in yield on advances.
So, what is driving that point one and if you can give a hint on your book bifurcation in terms of how much is MCLR linked, how much is Repo linked, and how much is fixed rate loans.
So, that would be my first question?
A. S. Rajeev
So this NIM, as of now it is 3.86%.
I think we may be able to range bound if I can say that 3.75% to 3.85% level.
I think we may be able to continue that as far as NIMS is concerned.
And yield on advances, of course, it is slightly improved basically because the interest rates has increased last 1.5 years.
And the same interest rate, if we continue, definitely the yield will continue to be the same level.
And at the board level decision also, we have the growth where we have envisaged only based upon the risk-based pricing is fixed.
And that was added the yield improvement as well as NIM improvement.
BANK OF MAHARASHTRA · Management
July 19, 2023 So, the assets created during the period are based upon the risk-based pricing, and which was reflected in the NII growth.
Regarding the MCLR and this, I think it is at 48% MCLR, and the remaining is coming under [RLL 0:23:22] around 50-50 will come or here by and large 5 basis point here 5%-plus or minus, yes.
Understood sir.
And sir on this 48% MCLR, I mean, where we are in the journey of reset I mean how much of that book has already been reset or how much is still pending if you can give a color on that?
A. S. Rajeev
MCLR we have a different product under MCLR.
We have majority of the MCLR under the one-year MCLR, and six months, and three months.
These are the major MCLR product which we have so three months MCLR get reset within three months, six months MCLR get reset within six months and one year within one year.
Most of the loans which were sanctioned almost one year back are already reprised.
Our book presently running with the current MCLR mostly.
Okay, understood.
The second question sir is on the asset mix on the retail credit, so I mean, if I see your other retail which is something around INR 15,000 crore that has seen good growth over the last many quarters.
If you can give some color on this book, I mean, is this largely gold loans and staff loans or I mean, what are there in this other retail credit?
Okay, so gold loan would be how much, I mean, approx. INR 10,000 crore or something like that or…?
Okay.
And sir, what are the yields here, I mean, on this retail gold loans?
BANK OF MAHARASHTRA · Management
July 19, 2023
Okay, okay understood sir.
Sir, the next question is on the ECLGS, I mean, if you can give your ECLGS figure, how much you have you disbursed and sanctioned and what are the NPA levels there and do you see any impact on the new guidelines on this ECLGS to recognize this stress accounts as NPA that would be great?
Okay, and you are recognizing all that stress accounts as NPA in line with the recent guidelines, right?
Okay, okay.
And sir one last question, if I can squeeze in is on the ECL migration, so I mean what is your preliminary reading on the ECL migration, I mean, how much, let us say, total provisioning, additional provisioning requirement would be there and if you have any contingent buffer or something like that?
Okay, understood, sir.
Great.
And sir, one last question.
So on the modified duration on the investment book, if I see that, this quarter, it has seen increase from 1.2 years to 1.8 years.
Is it
BANK OF MAHARASHTRA · Management
July 19, 2023 a one of thing or this is a conscious call taken by the ALCO or something like that?
That will be my last question.
Yes, thanks.
Yes, yes ma'am.
Thank you so much, sir.
Moderator · Conference Operator
We have our next question from the line of Akash Jain from Ajcon Global Services.
Please go ahead.
Sir, my question is regarding the deposits.
Total deposits have increased to INR 2,44,365 crore as against INR 2,34,083 crore in the last quarter.
As a result, our CASA ratio has been affected.
So I wanted to understand, how is the growth from the deposits, is it from the fixed deposit size or bulk deposit?
And my sir, second question is regarding co-lending book.
So what is the size of the co-lending book as on date or as on Q1 FY ‘24 and how many NBFCs, we have tied up?
See this is, we have a four, we have tied up.
Co-lending portfolio, March '22 was INR 147 crore.
Now we are INR 371 crore, out of which retail is INR 13 crore.
Okay.
And what is the target for increasing this book?
Okay.
Also, sir, I wanted to understand as cost to income ratio is already, around 37% in this quarter.
So with this robotic process automation, as earlier said, that 25 to 30 processes will be automated.
So to what extent, this cost-to-income ratio can go down now?
Okay.
And sir…
Moderator · Conference Operator
Mr. Jain, I request you to join back the queue, sir.
Thank you.
Moderator · Conference Operator
Thank you.
We'll take the next question from the line of Rahil Shah from Crown Capital.
Please go ahead.
Rahil Shah
Hi, sir.
Good evening.
I just have two questions on firstly, your views on AUM growth for FY ‘24 and another is ROA outlook.
So if you can just help me with these numbers?
Thank you.
A. S. Rajeev
AUM growth is we are expecting that, though the growth rate of deposits is slightly more in Q1, it will normalize during the current year around 14% to 15% deposit growth and 20% to 22% advances growth as far as growth is concerned.
And ROA is concerned, that will be the same level, it can able to 1.3% to 1.4% level range bound, ROA as it may be able to continue that.
Rahil Shah
Okay.
Did you say 20%, 22% in advances?
A.S. Rajeev
Yes.
Rahil Shah
Right.
And ROA will be in the same range.
Okay.
Got it, sir.
Thank you.
Hello.
Thank you for the opportunity.
I have two questions.
My first question is, if you see our NNPA was INR 435 crore in Q4 financial ‘23.
During Q1 we did a provision of INR 776crore of which, INR 530 crore is for NPA.
Still our NNPA did not come down in Q1. Still it is still INR 414 crore.
Can you explain why?
Okay.
Understood, sir.
And my second question is for Q1, our credit cost was 1.23%.
For rest of the quarter, let's say Q1, Q2, Q3 sorry, Q2, Q3, Q4, what will be the level?
1%.
Okay.
Okay.
Thank you, sir.
Moderator · Conference Operator
Thank you.
We have a next question from the line of Sushil Choksey from Indus Equity Advisors.
Please go ahead.
Sushil Choksey
Sir, congratulations to top management of Maharashtra and entire bank for a good performance and a successful QIP during the quarter.
My first question pertains to all the questions, which are asked.
Has the Board taken to irrespective of RBI, whether they grant you time or not to start making a buffer on ECL provision and if so, how much have you made so far?
A.S.Rajeev
Yes, just now I told that ECL, we have already COVID provision is kept there that, we may utilize for the ECL that is around INR 1,250 crore.
In addition to that, another INR 250 crore, we have already made.
So another INR 500 crore provision is already kept under restructured area, where we have not utilized it.
We have kept adequate provision kept for as and when ECL comes, we may be able to switch over that.
That is our expectation.
Sushil Choksey
Sorry to interrupt, sir, but you made a provision between buffer and this at INR 1750 crore.
Is that the bank has made some kind of a calculation that provisionally this can be a ECL number with a five year or a three-year window, whatever RBI provides with that calculation is not there?
A.S.Rajeev
This is based upon some rough estimates.
Whereas the final guidelines is yet to come and this is all based upon some kind of draft based upon that.
There may be some, definitely, there may be a good difference between the draft as well as the final guidelines.
We are expecting that.
So, based upon the draft guidelines, only we have kept it that.
But however, we know that, even if the final draft guidelines, there may not be much impact is going to happen for the band.
That is the purpose.
BANK OF MAHARASHTRA · Management
July 19, 2023
Sushil Choksey
Do you estimate your ECL provision requirement to be in approximately range of INR 3,000 crore to INR 4,000 crore or more?
Even in such cases that, they are working at very fine margin.
So last two years or three years that, we intend to keep our interest at reasonable rate.
So, we have not invested much in that such PSUs.
Instead of that, we have lent to the state-owned corporation backed by the state- owned government, where the returns are reasonable and the guarantee is available.
And it is also helping in, when we are computing the CRA.
Thanks a lot.
I've been waiting right from the beginning and my line got disconnected, three four time.
So please excuse me, if there is any repetition and give me some time to ask my question.
Sir, as the very outset, sir, compliments to you for the fantastic results and especially if you compare year-on-year, everything on and Vijay Kumar ji had already explained that the bank ranking on various parameters and even we have been writing about it.
So compliments for that sir, to all of you.
Sir, my first question is on the credit growth.
So now in this quarter, it is absolutely muted, INR 1,75,676 crore again INR 1,75,120 crore, hardly some INR 500 crore or so.
But we are still maintaining our target of 22% or so.
It means that, around INR13,000 crore to INR 14,000 crore per quarter now onwards, the credit growth has to be.
So are we think, it is achievable and are we looking in the same ratio of the corporate and the non-corporate credit or in order to accelerate it, we are going to change that norm.
So, this is my...
So, this is one of the questions, sir.
And my second observation is on, when you go on the external rating slide, there the BBN below has gone up to INR 4,391 crore from as against INR 3,742 crore.
Is it because of the revision in the credit rating?
Because it cannot be because of the extended credit given now.
So is it because of that?
Related to that is unrated also has gone up by almost about INR 1,000 crore?
So some observation, some color on that.
This is my…
Sanction already in pipeline, the sanctioned amount undrawn?
Okay, sir.
My second question is on this SMA 2 and 1, there also our figure has gone up.
SMA 2 has gone from INR 289 crore to INR 529 crore and SMA 1 from INR 504 crore to INR 743 crore, this is the quarter on quarter, sequentially.
So how are we placed today, when already 15 days have gone, whether this is because of it's going to be regular feature or there is some improvement in that, sir?
Sure sir, my next question is… All right, sir, my last question is on the investment book.
That modified duration has gone to 1.81 years, against 1.22 years.
So is that -- our little bit of INR 3,000 crore of the AFS book also has gone up.
Can you give any reason for that?
Have you gone into some -- what kind of investments?
No, definitely, you have done well on the treasury front.
Treasury operations overall income is INR 352 crore as against INR 199 crore of loss.
And even on the treasury book, the profit has been booked.
So that's good, just I just wanted to know the reason for increase in the …Anyway, thank you very much.
Thank you very much, sir.
Thank you.
Moderator · Conference Operator
Thank you.
We have our next question from the line of Jai Mundhra from ICICI Securities.
Please go ahead.
Jai Mundhra
Yes.
Hi, sir, good evening and thanks for the opportunity.
Sir, I have a question on ECL provisioning only.
So you had mentioned that the bank would need around INR 2,500 crore of ECL provisions.
So just wanted to understand the math a little bit.
Does this include the purely credit cost-related provisions?
Or it includes some of the provisions pertaining to maybe investment book in terms of HTM, etcetera.
Or this is the portion for credit provisions?