MAHABANK — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Questions and answers

Bank of Maharashtra Q4 & FY24 - Investor & Analyst Meet April 26, 2024 Management participants Shri.

Nidhu Saxena Managing Director & Chief Executive Officer Shri.

Rohit Rishi - Executive Director Shri.

Asheesh Pandey – Executive Director Shri.

Vijay Srivastava – Chief Financial Officer Bank of Maharashtra – 26th April, 2024

Moderator · Conference Operator

Good evening to all.

So, we welcome all of you for this Investor and Analyst Meet.

And we heartily welcome all of you for this meet.

Let me introduce the management team, our top management team here.

Our MD & CEO, Shri.

Nidhu Saxena here; our ED – Shri.

Rohit Rishi, our ED – Shri.

Asheesh Pandey.

I am CFO – Vijay Srivastava, Bank of Maharashtra, together with me our GMs are there.

I’m Prashant Khatavkar, I’m General Manager, Recovery.

Arun Kabade

Yes.

Good afternoon, myself Arun Kabade, General Manager, handling DBZ and CIO.

Dinkar Sankpal

Yes.

Good evening.

Dinkar Sankpal, GM Credit Monitoring.

Suryakant Sawant

Good evening, one and all present here.

I’m Suryakant Sawant, General Manager, Retail Credit.

Aparna Joglekar

Good evening, all.

I’m Aparna Joglekar, General Manager, Recovery and Legal.

Devdatta Rokade

Good evening, all.

This is Devdatta Rokade.

I’m General Manager, Operations.

Dinesh Tambat

A very warm welcome to all of you.

My name is Dinesh Tambat.

I’m General Manager, Inspection and Audit.

Chitra Datar: · Good evening, all. I’m Chitra Datar, General Manager, Agri, FL & SLBC.

Good evening, all.

I’m Chitra Datar, General Manager, Agri, FL & SLBC.

Divesh Dinkar: · Good evening, everyone. I am Divesh Dinkar, General Manager and Chief Compliance Officer.

Good evening, everyone.

I am Divesh Dinkar, General Manager and Chief Compliance Officer.

Manoj Kare: · Good evening, all. I’m Manoj Kare, I’m GM, Mumbai South.

Good evening, all.

I’m Manoj Kare, I’m GM, Mumbai South.

Rajesh Singh: · Good evening, all. I’m Rajesh Singh, General Manager, Transaction Monitoring Unit.

Good evening, all.

I’m Rajesh Singh, General Manager, Transaction Monitoring Unit.

Good evening, all.

I’m K.

Rajesh Kumar, I’m General Manager, HR.

Amit Sharma: · Good evening to all. I’m Amit Sharma, General Manager, Pune City Zone.

Good evening to all.

I’m Amit Sharma, General Manager, Pune City Zone.

Mukeshchandra Upadhyay

Good evening to all.

I’m Mukeshchandra Upadhyay, General Manager, MSME, Credit.

Good evening, all.

I’m Dr. Javed Q Mohnavi, General Manager, Corporate Credit.

Good evening, all.

I’m Pradeep Srivastava, Chief Technology Officer.

Good evening to all.

I’m Subhasish Roy, Chief Risk Officer.

Bank of Maharashtra – 26th April, 2024

We have been showing a very good results for the last 15 quarters if you see.

And this time that we have shown an excellent performance.

So, I request our MD sir to address you, what are the milestones we have achieved.

Nidhu Saxena

Thank you.

So, good evening, ladies and gentlemen.

First of all, I really express my sincere thanks for you all to have gathered here in such large number.

This is not the first and last engagement, we will definitely be in due course always trying to get connected.

We being a Pune headquartered will not be a constraint.

We will come down here to talk to you.

As and when by quarterly performances we would like to showcase even between that we will be requesting you to come down to listen to us, and to maybe review us and report on Bank of Maharashtra is what our request is going to be.

I would have loved to have a one-to-one introduction, but this is such a large group.

Maybe we will get those opportunities and we will with more interaction, know each other as well.

So, let me just start now and just present before you the performance, and I’m happy that I’m getting this opportunity indeed my privilege to present this financial performance in-person.

So, I’m pleased to announce that our bank has demonstrated its resilience and agility and has delivered once again a strong set of financial numbers.

I’m happy to share that we continue to lead in many of the growth parameters, profitability and efficiency ratios.

This lead among the scheduled commercial banks includes banks both in the public and the private sector because consistently, you would have seen that Bank of Maharashtra, maybe at a scale is a little bit so this thing but in the industry, we are consistently performing and leading in many of the parameters so this consistent performance is now maintained for more than three years to be precise for the past 15 quarters.

Going forward, we are confident that it would not only be continued, but also improved.

Our net profit has shown significant growth and is surpassing our projections and reflecting the dedication and hard work of our entire team.

Our commitment to prudent risk management and strategic decision making has enabled us to navigate through challenging times, while capitalizing on the opportunities for growth.

We have maintained a robust balance sheet and healthy capital adequacy ratios, which positions us well for sustainable expansion and innovation in the years to come.

While by this time, I trust you would have seen the detailed presentation and the various parameters, which are of your interest, you would have seen how the bank has done.

But let me just quickly share the few highlights of these financial results.

So, our total business has grown by 15.94% and we closed March at Rs.

4.74 lakh crore.

Total deposits increased by 15.66% and we closed at Rs.2.7 lakh crore.

Gross advances increased by 16.3% to Rs.2,03,000 crore.

CD ratio has reached to a comfortable level of 75%, there is always a scope for another four, five basis points.

Gross NPA has actually declined sharply, and we are happy to share, it is now below that number 2%, we are at 1.88%.

Net NPA has reduced to 0.2%.

Our provision coverage ratio has improved to 98.34%.

The the operating profit has grown by 31% to Rs.8,005 crore for the full year.

The net profit has grown by 56% Y-o-Y, and we have clocked the figure of Rs.4,055 crore.

The net interest income has increased by 27% to Rs.9,822 Bank of Maharashtra – 26th April, 2024 crore for the full year.

The NIM has improved to 3.92% as against 3.56% for the previous year.

The cost-to-income ratio has also improved to 37.55% as against 39.14% for the previous year.

ROA has improved to 1.5% as against 1.1% for the previous year.

ROE has improved to 24% as against 20.38% for the previous year.

CRAR as on 31st March stands at 17.38%, of which tier one is 13.72%.

Our bank has taken several initiatives to build the quality loan portfolio through improved underwriting, we have stipulated minimum benchmark, credit scores below which we do not underwrite it alone and many such criteria have been put in place with an aim to build a healthy loan book.

We are also taking steps to manage the stress in the loan book through a robust collection, recovery and follow-up mechanism.

For the accounts that would slip to delinquent category despite my close monitoring, we are moving our upgradation efforts the recovery efforts are initiated immediately.

For the underwriting fees to improve the credit underwriting happening in the bank for the large and the mid-corporate category, we have set up a cell in head office, which is assessing all greenfield and brownfield projects.

We are also ensuring a quick turnaround time for all such proposals that are in the mid and the large corporate category.

Likewise, for the RAM segment, there are CPSs, Central Processing Sales at each of our zonal offices for all the three verticals, the retail, the MSME and the agriculture segment loans are getting underwritten in the centralized sales and although we have set up the 100% coverage is yet to be achieved, but bank is steadily expanding this coverage to ensure that our share of sanctions in the RAM segment from these centralized verticals go on improving as we go forward so, more and more branches are getting mapped to these centralized verticals for this purpose.

Through the centralized processing, what we have seen, and we are able to maintain a standardized processing across the bank.

We are able to also ensure a quick turnaround.

We are also able to improve our underwriting through better due diligence that happens in these centralized verticals, vis-à-vis by general branch.

Further, we have also a setup of specialized branches, like housing finance branches, mid- corporate branches, corporate finance branches so, to say about them, the specialized branches in the mid-corporate segment cater to proposals ranging from Rs.25 crore to Rs.100 crore, which typically are the MSME borrowers, whereas the corporate finance branches deals proposals of Rs.100 crore and above.

These centralized verticals, these focus branches I have talked about have the required number of manpower and the required skill sets provided to them and so they are ensuring me, better monitoring, improved turnaround time and better customer experience for our mid and large corporate customers.

Likewise, for the important task of recovery of our bad assets, so we have specialized recovery branches, the asset recovery branches, which are 13 in number, deal with NPAs ranging from Rs.20 lakhs to Rs.5 crore o, there is a clear SOP in place, according to which if the account has slipped and if within some set time, it is not upgraded, the account moves to the asset recovery Bank of Maharashtra – 26th April, 2024 branches, where we have, again put specialized skill sets, law officers, which are effective tool, whatever effective tools for recovery, the step for recovery are initiated without any delay.

So, likewise, we have the semi branches, which take care of NPAs above Rs.5 crore and all the NCLT cases are dealt by the semi branches.

Out of our total NPA around 70% of our bad assets are housed in these just 17 branches of the bank.

So, I’m able to give the required skill sets, manpower, legal expertise in these 17 branches, and that’s how my recovery also, you would see that we are doing well in recovery.

The focused approach is giving me the desired results.

The bank is well poised for growth in size and significance and move forward to become an important player in the industry.

For this purpose, we are opening new branches to improve our presence across the country.

Our current network has now reached to 46 zonal offices, 2,500 branches and 2,300 ATMs, currently, our VC network is low we have 3,300 VCs, but we understand the importance of the VC channel so we are in the process of putting in place and by September 2024, this 3,300 will be ramped up to almost touching 10,000 VCs working for us.

The bank is also implementing several digital initiatives such as the CRM platform and lifestyle banking application.

This will enable personalized service to our customers across all channels.

Launch of the AI-based video assistant will provide instant personalized assistance around the clock.

Further, the launch of digital insurance platform and integration with the online share trading platform will offer a one-stop solution to help customers manage their finances.

The bank is implementing several Straight.

Through Process journeys, STP journeys, such as the Maha GST scheme, digital vehicle loan, digital education loan, renewing the KCC loans, Kisan Tatkal loan and so on.

We are also shortly implementing the EBG module, which will help provide faster processing and convenience will be there for the customer to do that part of banking anytime and anywhere.

We will also have proper risk mitigation and better customer service cost reduction from the bank through this simple EBG module.

These measures will raise overall customer experience, make the interactions these customers have with our bank more efficient.

The bank is also going to implement an end-to-end credit monitoring platform, which will enable to track credit performance across the entire life cycle of a loan, and thus strengthened my collection mechanism, and I will be able to monitor my assets more efficiently.

As far as my capital is concerned, currently we feel we are well capitalized, but we shall raise capital as and when required and whenever the time is opportune for us to do that.

This year 2024, we have a milestone.

We will be celebrating our 90th foundation day of our bank on the 16th September.

We will definitely keep some aspirational objectives for ourselves.

Some newer products, some newer services, some newer initiatives will be all lined up for launch during this milestone when we touch 90 years.

We feel that after displaying a good financial performance and that too consistently, we now aspire to become a bank of greater significance, but while we grow, we will remain mindful that growth in our top line Bank of Maharashtra – 26th April, 2024 should be commensurate with our bottom line growth.

Recently, as a strategic move, bank has gone for creation of a new vertical, and we are calling it as the new business and customer acquisition vertical.

This has been established with a view to increase customer engagement, deepening of existing relationships and to acquire new businesses beyond the simple credit and deposit relationship that branches are typically known off, this initiative will drive the bank into newer areas of payment and collection services that we can offer to our clients, channel finance, both dealer and vendor finance, payroll business and so on.

This vertical, giving it the due importance will be headed by a general manager ranked executive at the corporate office, and there will be a support of two DGMs at the corporate office.

They will have an extended arm in the each of the zonal offices where there are business development officers already existing up to the level of Chief Manager.

We will align this structure is already decided, and this structure will start functioning very shortly.

We also have a subsidiary, which specializes in offering trusteeship services to both individual and corporate clients.

Our analysis tells us that there is an inherent need for this product, and there shall be many takers from among the institutional and individual category of clients. , No other PSB or even any private bank currently offers this service.

This is also one of the services that differentiates us from any other bank and our newly created vertical, which I just spoke about, would reach out to all clients, corporates and individuals in the government sector, PSU or the private sector and they will ensure a complete offerings made to our clients. this will create as a differentiation for the bank and it will help us acquire more and more clients to grow, improve the BPC and also improve the customers’ stickiness with us so, when my vertical will approach for new business, so while we will improve the product for customer, we will also improve the profitability for customers, and we also will ensure a better customer retention with us.

I’m happy to inform that Board has proposed to declare a dividend of 14%, which is higher than what we did for our shareholders in the previous year.

Few parameters I will just share my guidance, the main ones.

Advances, we grew by 16%.

We have a guidance of 16% to 20% for the FY24-25.

Deposits, we grew 16%, we are keeping our guidance for ourselves 12% to 15%.

CASA, anything above 50% is the guidance we are keeping.

For RAM, we are currently 61:39 RAM versus corporate, in the favor of RAM so, this will be maintained at 60:40, one, two basis points here there.

And the NII is 27%, we are going to keep around 20%.

NIM, we have already clocked 3.92% near to the 4% mark, but knowing the concerns around in the system, when the interest rate cycle may see a reversal in the second half, that’s what is talked about.

If that happens, so we are keeping a conservative guidance of 3.7% to 3.9%.

Cost to income, we already have achieved less than 38%.

We will keep our cost to income below 40%.

ROA is already achieved at 1.5%.

My guidance for the next year would be 1.5% to 1.6%.

GNPA already we have come down below 2%, we will maintain that level.

We will remain below 2%.

NNPA between 0.2% to 0.25%, and slippage ratio anything around 0.75% to 1%.

My credit cost currently we achieved 1.07%, we will keep at 1%.

PCR already achieved 98% we will Bank of Maharashtra – 26th April, 2024 maintain around that level.

CRAR, 17.38% is my March number, I will be having a guidance of 16% to 17%.

So, these are the broad numbers.

I understand you would have already gone through my detailed presentation and aware of what the various highlights, other than the highlights of the bank’s performance, we will take your questions.

I have my EDs, my entire general managers, top executives are here in front of you.

We will take your questions.

Some part of it, if we are not able to immediately come back to you with data, we will definitely come back to you.

So, I think Srivastava, we can.

Thank you, sir.

Now, I request that my analysts’ friends or investors they may ask questions about the bank’s performance.

Analyst

Sir, you announced a Rs.7,500 crore of some fundraising.

So, can you elaborate when it’s, going and how it’s going to happen?

Sir, my name is Prasad So, my question was on yield on advances.

So, we have been seeing improvement in yield on advances.

So, if we take, it’s given in the presentation.

So, from March of 22, it has risen all the way from 7% to 9.14%.

So, sir, can you give some granularity on what are the levers behind this improvement and since we have seen the increase in RAM share, so that has been largely the driver or there are some other factors, let’s say majority of branches that you were saying or are there any more factors.

And can we see peaking of these rates post Bank of Maharashtra – 26th April, 2024 interest rate cut announced by the government maybe in this year or the next year.

So, this is my first question.

And sir, my second question was on cost to income.

So, in your initial remarks you were talking about continue your geographical expansion even this year also there were nearly 300 branches added.

Despite that, we have seen improvement in the cost-to-income ratio down to 37%.

So, this year, in FY25 though you have given guidance of maintaining below 40% of cost to income ratio, do you see headroom further fall in?