Detailed Narrative
Q1 FY27 Performance Overview
Bank of Maharashtra reported a strong Q1 FY27, with total business growing 19% YoY, adding INR1,04,000 crores. Total advances grew 27% YoY, adding INR65,000 crores. Net profit increased by 27% YoY to INR2,020 crores, and ROE improved significantly by 165 bps YoY to 24.65%. The bank maintained its asset quality, with Gross NPA at 1.45% and NNPA at 0.13%, both within guidance.
Credit Growth and Asset Quality
The bank achieved robust credit growth across all segments: Retail grew 25%, Agri 30%, MSME 23%, and Corporate 30% YoY. The RAM to Corporate book ratio was maintained at 63:37. Asset quality remained strong with PCR at 98.55% and overall stress percentage improving by 140 bps YoY to 3.18%. Recovery performance was good, with INR709 crores recovered in Q1, including INR305 crores from the write-off book.
Net Interest Margin (NIM) and Profitability
While NIM saw a 10 bps reduction QoQ to 3.85%, it remained above the bank's guidance of 3.75%. Operating profit grew 21% YoY to INR3,117 crores. Management attributed NIM compression to MCLR resets from past rate cuts but expects potential improvement from future MCLR hikes and a focus on profitable growth at the branch level. ROA improved by 10 bps YoY to 1.9%.
Deposit Franchise and Funding Strategy
Total deposits grew 13% YoY, with CASA growing 9% YoY and adding INR14,000 crores. The bank consciously avoided fresh CD issuances in Q1, instead relying on refinance (INR19,000 crores taken last year at 6-6.5% blended cost) and core deposits. INR21,000 crores of deposits were raised from outside Maharashtra last year, demonstrating expanding reach. Cost of funds and deposits improved by 25 bps and 22 bps YoY respectively, though cost of deposits increased 5 bps QoQ due to strategic retail deposit retention.
Capital Adequacy and Equity Raising
The bank is well-capitalized with CET1 at 15.56% and CRAR at 18.64%. It has Board and shareholder approval for an equity raising plan of INR5,000 crores, with RBI approval obtained and a request sent to the government. This capital infusion will support continued high credit growth. The LCR was maintained within the prudent band of 115-120%, averaging 118%.
Branch Expansion and Operational Efficiency
Bank of Maharashtra continues its aggressive branch expansion strategy, opening 200 new branches annually in potential growth centers. This expansion contributes to stable retail deposit growth and new customer acquisition. Management emphasized adequate staffing for new branches to prevent operational risk, while maintaining a cost-to-income ratio below 40%, with many new branches breaking even quickly.
Debt Waiver Scheme and ECL Provisions
The bank has identified INR3,500 crores as eligible for the debt waiver scheme, with INR2,750 crores expected from the government and INR260 crores from farmers. A maximum haircut of INR450-500 crores is anticipated, but INR1,700 crores in provisions are already held, and INR1,100 crores in TWO recovery is expected. For ECL, the bank has provisioned INR255 crores and plans to make quarterly provisions of INR125 crores, with new RBI guidelines impacting net worth rather than P&L.
FCNR Deposit Scheme
The bank has launched an FCNR deposit scheme, offering a competitive rate of 6.60% for a 5-year tenure. While currently in its initial stages, management expects significant traction in the coming months⏳ (August and September) as part of its strategy to diversify funding sources and capitalize on new opportunities.