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LDR discussion refuses to abate

Our view – Management plans to reduce LDR faster Loan to Deposit Ratio - Management stated that it is in the bank’s interest to bring down the loan to deposit ratio "faster than anticipated": The bank would be growing advances slower than deposits. However, it was not clarified what the differential would be. Management stated that there is no prescription that the bank is adhering to as far as the LDR is concerned. They reiterated that the focus is on profitable growth.

Balance sheet growth – A differential in the advances and deposits growth is already playing out as we speak: Excluding the impact of the merger, the underlying gross advances growth was 14.9% YoY compared with deposits growth of 16.5% YoY. Management highlighted that there has been an organic rise of 50-60 bps per year in deposits market share for the bank over the past 4 years. Further, the bank’s distribution share is 6%, the implication being that its market share is 1.8x of its distribution share. Asset Quality - Slippages for the quarter amounted to Rs 79bn, indicating a moderate sequential rise in slippages: Slippages had amounted to Rs 73bn in 4Q. For 1QFY25, the annualised slippage ratio was 1.3%. Provisions were Rs 26.0bn, down by -80.7% QoQ and -9.0% YoY, translating to calculated annualised all-inclusive credit cost of 42bps. During 4QFY24, the bank had an AIF provision write-back of Rs 1.85bn but had made a floating provision of Rs 109bn.

Net Interest Margin - Margin remains within a relatively tight range since the merger: NIM was at 3.47%, up 3bps QoQ but down -63bps YoY. Management stated that rates are not going to be the predominant driver for customer engagement. Unsecured loans have grown at a slower pace than peers, which is a conscious call. We maintain a recently-assigned cautious ADD rating with a revised price target of Rs 1925: We value the standalone bank at 2.3x FY26 P/BV for an FY25E/26E RoE profile of 14.5/15.9%. We assign a value of Rs 216 per share to the subsidiaries, on SOTP. (See Comprehensive con call takeaways on page 2 for significant incremental colour.) Result Highlights (See “Our View” above for elaboration and insight)

* Opex control (QoQ Comparable): Total opex fell/rose -7.5%/18.2% QoQ/YoY, employee exp. fell/rose -15.7%/22.3% QoQ/YoY and other exp. fell/rose - 2.4%/16.1% QoQ/YoY

* Fee income: Fees and commissions were up -11.8% QoQ, where retail fee income constitutes 93% of the total fee income

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