The management of the second largest state-run lender exuded confidence of continuing the good show through the course of the year, especially on the asset quality front and credit cost, though it admitted that the high double-digits loan growth at 21 per cent in the reporting quarter is certain to temper down going forward.
The city-headquartered bank’s total income rose to Rs 23,080 crore in the reporting quarter from Rs 20,271 crore a year ago.
The key profitability metric net interest income, which is what the bank earned after paying interest on its funds, soared 34.5 per cent to Rs 10,714 crore, buoyed by a 48 bps expansion in margin (net interest margin in banking parlance) to 3.33 per cent.
The lender improved its asset quality, with gross non-performing assets (NPAs) coming down to 5.31 per cent or at Rs 46,374 crore in the reporting period from 8.11 per cent a year ago.
Similarly, net NPAs more than halved to 1.16 per cent at Rs 9,672 crore from 2.83 per cent or Rs 19,000 crore a year ago.
As a result, provisions for bad loans and contingencies declined to Rs 1,627.5 crore from Rs 2,753.6 crore in the year-ago period.
Attributing the robust set of numbers to overall good performance, Sanjiv Chadha, the managing director and chief executive of the bank, said there are primarily four pillars to the Q2 numbers.
For one, the quarter was exceptionally good on the credit growth front at 19 per cent; secondly, there was a record improvement in the margins, which rose to 3.33 per cent.
Thirdly, as against the normal course of cost going up when sales rise, the bank could keep overall costs under tight control (its salary cost went up by just 4 per cent); and finally in a rising interest rate regime, normally credit cost goes up but the bank’s credit cost came down, Chadha said in response to a PTI query during its earnings call.
On advances growth of 19 per cent, he said it was led by retail advances soaring 28.4 per cent, driven by home loans, which is a high focus area for the bank, expanding at 19 percent, personal loans at 172.8 per cent, auto loans at 29.2 per cent and education loans logging 23.2 per cent growth.
Of the total advances at Rs 8,73,496 crore, domestic advances increased 15 per cent to Rs 7,16,737 crore and international advances clipped at 41.7 per cent.
Total deposits rose 13.6 per cent to Rs 10,90,172 crore, of which domestic deposits rose 10.9 per cent to Rs 9,58,967 crore and international deposits grew 38.3 per cent to Rs 1,31,205 crore.
The agriculture loan portfolio grew 14.1 per cent to Rs 1,14,964 crore, while the gold loan portfolio (including retail and agri) expanded 27.8 per cent to Rs 33,502 crore. The MSME portfolio climbed 13.4 per cent to Rs 1,01,278 crore.
Domestic current account deposits rose 7.9 per cent to Rs 64,873 crore, and domestic savings deposits grew 9.4 per cent to Rs 3,45,278 crore. Overall domestic CASA grew 9.2 per cent.
Of the total income, fee-based income jumped by 12.3 per cent to Rs 1,515 crore, getting it an operating income of Rs 12,000 crore, an increase of 7.7 per cent.
The yield on its advances increased to 7.22 per cent as against 6.55 per cent a year ago, as the cost of deposits increased only marginally to 3.59 per cent from 3.52 per cent.
The swelling profit came despite the bank taking a Rs 2,000-crore hit on its book from treasury operations as against a Rs 1,300 crore profit in the year-ago period, Chadha said.
Profit was driven by recovery and write-backs of Rs 5,360 crore as against a net slippage of Rs 4,465 crore.
Chadha said the bank has not marked any accounts for transfer to the national bad bank or NARCL as it is more comfortable with the other recovery models like the NCLT.
On credit growth sustainability, he said overall it will moderate at the industry level but added that the bank will perform better than the industry average.
He said the corporate book was led mostly by roads, green energy (especially solar) and steel companies.
Capital adequacy ratio declined to 15.25 per cent from 15.55 per cent at the end of September 2021 and accordingly, the provision coverage ratio improved to 79.14 per cent, he said.
On a consolidated basis, net profit increased to Rs 3,400 crore from Rs 2,168 crore.