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Key Highlights of Q2FY23 Results

On the P&L front, NII grew by 18.9%/7.9% yoy/qoq, highest in the last 12 quarters, to Rs.21,021 cr, while Net interest margin (NIM) improved marginally by 11 bps on qoq basis to 4.0%. We expect improvement in NIM in coming quarters. An increase in yield on advances would be faster than the increase in the cost of funds, as deposits would take more to reprice than the advances. Fees and commission income constituting 76% of other income was at Rs.5,803 cr and grew by 17% over the prior year, due to a low base in the last year. Retail constitutes approximately 93% of fees. Cost-to-income (C-I) ratio excl treasury for the quarter was at 38.9%. With stepped-up investments in the technology and retail segment continuing to pick up and going forward, the bank anticipates the spend levels to increase, leading to an increase in C-I ratio in the medium term. Trading and mark-to-market losses were Rs. 253 cr, primarily owing to a spike in benchmark bond yields witnessed during the quarter.

Loan book grew by 23%/6% yoy/qoq basis, with corporate advances growing by 27% yoy and commercial and rural book growing at 32%. In the wholesale segment, due to lower yields, the bank let go of assets aggregating from Rs.25,000 cr to Rs.30,000 cr. The credit card portfolio is seeing improvement in credit growth as spends are increasing and line utilization is improving, however revolving credit is yet to pick pace. Deposits witnessed 19% yoy growth, with term deposits growing faster at 22% yoy and retail deposits witnessed a healthy pick-up. The bank plans to open 1500-2000 new branches every year, which should support strong deposit growth going ahead.

Asset quality improved with GNPA ratio at 1.23% as compared to 1.28% on qoq basis. Gross NPA includes a standard account of 19 basis points, as one of the other facility of the borrower is NPA. Annualized slippage ratio was at 1.5% for the quarter compared to 2.1% in 1QFY23 and 1.8% in 2QFY22. Specific loan loss provision is healthy and stands at 73%. The total annualized credit cost for the quarter was 86 basis points as compared to 131 basis points in the previous year and 91 basis points in the previous quarter. The restructuring under the RBI resolution framework for COVID-19 as of September-end stands at 53 basis points as compared to 76 basis points in the last quarter, as ~25% of the restructured pool slipped into NPA. Total provisions as % to Gross NPA stand at 171%, with no provision buffers created in the current quarter

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