BoM Q2 profit up 13% on higher interest income, lower provisioning

Bank of Maharashtra (BoM) on Monday reported 13.44% year-on-year (y-o-y) growth in net profit for the quarter ended September to Rs 130.07 crore on the back of a 4.38% y-o-y rise in net interest income (NII) to Rs 1,120.42 crore, reversal of provisions of Rs 300 crore and a reduction in operational expenses by Rs 75 crore during the quarter.

BoM MD & CEO A S Rajeev said there was 34.42% increase in retail loans and 32.75% growth in MSME advances. “As asset quality improved, there was also a reduction in provisioning, which led to higher net profit,” he said. BoM’s net interest margin stood at 2.62% for the second quarter of the current fiscal year against 2.43% for the quarter ended June. The bank’s net revenues in the quarter under review grew 6.98% on a y-o-y basis to `1,572 crore.

The bank’s gross NPA ratio declined to 8.81% during the quarter, compared to 16.86% in Q2FY20. The net NPA ratio declined to 3.30% from 5.48% in the comparable quarter last year. The bank did not classify accounts as NPA till August 31, following the Supreme Court orders, but took into consideration average slippages of around Rs 500-600 crore per quarter and had provided Rs 120 crore for those accounts, Rajeev said.

In addition, Rs 500 crore of additional Covid-19 provisions had been made and the total cushion available to the bank was around Rs 1,000 crore, he said. If these loans were to be recognised as bad loans, NPA might have been 10 to 15 or maximum 20 basis points more. So, gross NPA would go up to 8.93 or 8.95% maximum, he said. The days of double -digit gross NPA for BoM has almost gone, the MD said.

On capital raising plans in the current financial year, the MD said the bank’s board had approved Rs 3,000 crore in capital raising plans, of which Rs 2,000 crore would be raised through the bond market. Of the Rs 2,000-crore bonds, Rs 1,000 crore will be for Tier I and Rs 1,000 crore for Tier II, he said. “During Q3 or Q4 we may raise capital through bonds and next year, after seeing the situation, we may go for equity because at present we have our Tier I capital adequacy ratio of 10.31% and by March, when we include the net profit, the capital adequacy ratio may further improve,” Rajeev said.

Total advances as on September 30 were Rs 1,03,408 crore — up 13.13% over September 30, 2019, while total deposits grew 12.15% to Rs 1,58,626 crore. BoM is maintaining a CASA ratio of 50.51% as on Sptember 30. CASA increased by 17.46% YoY to Rs 80,125 crore.

The bank has expanded its gold loan portfolio and launched its credit card with a target to reach 50,000 cards this fiscal and five lakh cards over the next five years by tapping its existing customer base. The has also got into a tie-up with fintech companies and is planning to lend Rs 700 crore to agriculture, MSME and retail sector through these platforms. The bank’s focus would be on Tier 2 and Tier 3 cities has it had 50% of its branches in rural and semi urban areas where businesses had resumed operations and had fewer COVID-19 affected cases across the population.