Bank of Maharashtra eyes 25-30% increase in net profit in FY23 with NII growth
The state-run Bank of Maharashtra is aiming for 25-30% growth in net profit in the current financial year, helped by healthy growth in net interest income (NII) and lower interest rates. provisions for bad assets.
In the fiscal year ended March 31, 2022, the Pune-based lender reported a two-fold increase in profit after tax (PAT) to Rs 1,152 crore from Rs 550 crore in the fiscal year ended March 2021.
“Our net profit will increase further this financial year. Last year, we made more provisions from our operating profit to improve the quality of our assets. So we have bottomed out, with a net NPA of less than 1 % and a gross NPA below 4%.
“Now, more provisioning (for bad debts) may not be necessary, which will automatically improve our net profit… I think a 25-30% growth in net profit over the previous year will be there this exercise,” its Director and CEO, AS Rajeev, told PTI in an interview.
Higher profitability will also be driven by healthy growth in its net interest income (NII), which is the difference between the income a bank earns from its lending activities and the interest it pays out to depositors.
“We are optimistic to increase NII (in fiscal year 2023) due to strong business growth and good asset quality with a target to increase more than 20% in fiscal year 2022 for reach around Rs 7,500 crore,” he said.
The NII increased by 23.42% on an annual basis to reach Rs 6,044 crore in FY 2022 from Rs 4,897 crore in FY 2021.
In addition, the bank will also focus on other avenues such as more issuance of Priority Sector Lending Certificates (PSLC) to increase its profitability. Last year, the lender was able to boost its operating profit by Rs 250 crore from issuing PSLC, he said.
The net interest margin (NIM) during the year should be above 3%.
In the prior year, the bank’s gross NPA fell from 7.23% to 3.94%. Net NPA reduced to 0.97% from 2.48% in FY21.
It aims for net NPA to be below 1% and gross NPA below 3% in the current fiscal year, Rajeev added.
Retrievals and upgrading are expected to double to Rs 3,000 crore in FY 2023 from Rs 1,517 crore in the previous financial year.
New slippages will be around Rs 2,000 crore this year. However, the slippages will not come from large loans but mainly from the micro, small and medium enterprise (MSME) segment, he said.
Speaking on credit growth, Rajeev said strong traction was seen in the corporate lending segment.
“This year, we’re looking at credit growth of around 17-18% and deposit growth of 13-15%,” he said.
In the previous financial year, growth was seen in sectors such as pharmaceuticals, infrastructure, textiles, cement and iron ore, which is also expected to continue this year, Rajeev said.
The lender has a sanctioned pipeline of Rs 20,000-23,000 crore in business loans, spread over 2-3 years. This pipeline comes from various sectors including infrastructure, road projects, manufacturing and pharmaceutical industry.
Its retail lending segment grew 24% in fiscal 2022 due to growth in home, vehicle, personal and gold loans, driven by low interest rates and discounts higher.
“We expect growth of around 20% in fiscal year 2022-23 in the retail loan portfolio,” he said.
Rajeev said the bank is also boosting credit and deposit growth by opening branches in new geographies.
Over the past 2-2.5 years, it has opened 300 branches in 300 new districts and these branches have contributed to approximately 3-4% growth in business.
The bank plans to increase its number of branches to 2,100 by March 2023 from the current 2,030 branches, Rajeev said.
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