# 1. Financial Performance ## A. Key Figures * **Total Business:** **INR2,03,216 Cr** (QoQ +4% · YoY +15%) * **Non-Interest Income:** **INR512 Cr** (+15% QoQ) · **Recoveries:** **INR205 Cr** (INR344 Cr with interest) * **Operating Profit:** **INR1,017 Cr** (+25% YoY · +26% QoQ) * **Net Profit:** **INR574 Cr** (+10% QoQ · +17% YoY) * Cost-to-Income Ratio: 44.76% (H1) * ROA: 1.81% (vs. guided 1.55%–1.65%) * CRAR (Basel III): 16.58% (comfortable headroom) * **Operating Expenses:** **INR756 Cr** (+INR35 Cr QoQ) ## B. Revenue & Growth * **Milestone Achievement:** Reached **INR2 lakh crore** total business, with robust five-year expansion and sustained double-digit annual growth. * **Non-Interest Income Surge:** Sharp recovery-led growth in other income, with **recoveries more than doubling** QoQ, offsetting weak treasury performance. * **Fee Income Pressure:** Flat fee income despite credit growth due to **dominance of low-fee segments** like mortgages and jewel loans. * **Treasury Drag:** **Zero treasury gains** in Q2 amid rising yields, reversing Q1’s favorable conditions and limiting non-interest upside. ## C. Profit & Margins * **Strong Profit Growth:** Operating and net profit expanded at a healthy pace, driven by **exceptional recoveries** rather than core operating leverage. * **Margins Under Pressure:** Elevated cost-to-income ratio reflects **rising operational costs**, while ROA exceeded guidance due to one-time recovery inflows. ## D. Balance Sheet & Cash Flow * **Capital Strength:** CRAR remains well above requirements, providing **ample capacity for future credit expansion** without immediate capital raises. * **Cost Inflation:** Operating expenses rose solely due to **INR34 Cr increase in other operational costs**, with salaries stable—warranting monitoring for sustainability. --- # 2. Loan Book & Asset Quality ## A. Key Figures * **Advances:** **₹92,724 Cr** (+4% QoQ, +15% YoY) * **Fresh Slippages:** **₹350 Cr** (vs. ₹188 Cr prior quarter) * **Recoveries:** **₹344 Cr** total (₹205 Cr other income, ₹139 Cr interest) · **₹295 Cr** major recovery (₹157 Cr principal, ₹139 Cr interest) * **Net NPA:** **1.9%** (stable) * **Credit Cost:** **2.7%** for quarter · **0.4%** for half year * Standard Restructured Loans: 0.5% of total loans ## B. Advances Growth * **Resilient Expansion:** Loan book growth remained strong with **double-digit YoY expansion** and sequential momentum, driven by sustained demand across segments. * **Corporate Asset Quality Intact:** Excluding two identified stressed accounts, **SMA 30-plus in corporate book is zero**, with no new stress detected and prior stability in noncorporate slippages maintained. ## C. NPA & Slippages * **Proactive Recognition:** Recent spike in slippages reflects **intentional early downgrades of two corporate accounts** to accelerate recovery, not broad-based deterioration. * **Recovery Momentum:** Major **sole-lender recovery of ₹295 Cr** achieved, contributing meaningfully to the bank’s **annual recovery target of ₹500–600 Cr**. * **Stable Underlying Trends:** Despite higher gross NPAs due to reclassification, **slippage ratio expected to remain below 1%**, supported by strong upgrades and write-offs. ## D. Provisioning * **One-Time Provisioning Surge:** Elevated credit cost due to **₹250 Cr strategic allocation** for balance sheet cleanup, expected to normalize next quarter. * **Capitalized Resilience:** **Contingent provisions of ₹200 Cr**, combined with **low net NPA and high PCR**, position the bank well for ECL transition with **no material additional provisioning anticipated**. * **Flexible Framework:** Provisions reversed on restructured assets due to performance, confirming **dynamic management of risk buffers** amid stable retail trends. --- # 3. Deposit & Funding Mix ## A. Key Figures * **Deposits:** **INR1,10,492 Cr** (+15% YoY, +4% QoQ) * **CASA Balances:** **>INR30,000 Cr** at quarter-end * **Cost of Deposits:** **↓17 bps QoQ** * Term Deposit Rate Hike: +20 bps to 6.8% ## B. CASA & Term Deposits * **CASA Strength Persists:** CASA balances crossed **INR30,000 Cr** amid robust liability growth, with demand and savings deposits each showing strong momentum. * **Growth Normalization:** Retail deposit growth slowed to 2% in Q2 due to **front-loaded Q1 inflows** from special schemes, signaling a return to sustainable trends. * **Liquidity Discipline:** Post-pandemic deposit surges have normalized, prompting selective lending and cautious deployment amid tight liquidity and **corporate loan yields as low as 5%–8%**. ## C. Cost of Funds * **Funding Cost Optimization:** Sequential decline in deposit cost driven by **rate cuts across retail term buckets** and discontinuation of high-cost schemes. * **Competitive Rate Adjustments:** Despite cost reduction, bank raised term deposit rates by **20 bps** to defend franchise, prioritizing relationship-based retention over yield. * **Forward Guidance:** Deposit cost expected to decline **another 10 bps** in Q3 due to ongoing repricing of legacy high-cost liabilities. ## D. Deposit Repricing * **Repricing Momentum Underway:** Retail time deposit repricing initiated in September and set to continue through Q3, supporting margin resilience. * **Balancing Act:** Rate hike implemented to counter **tepid term deposit growth**, reflecting strategic trade-off between cost control and volume retention. --- # 4. Segment & Portfolio Mix ## A. Key Figures * **RAM Verticals:** **86%** of total business (+4% QoQ, +19% YoY) * **Corporate Banking:** **14%** of total business * **Retail Portfolio:** **26%** of total portfolio (+7% QoQ) * Agri Loans: +4% QoQ (91% from agri-jewel loans, LTV 57.72%) * **Mortgage Loans:** +13% QoQ * **ABG:** **24%** of portfolio * **Loan Portfolio Mix:** 54% EBLR, 29% MCLR, 15% fixed-rate * **BNPL Program Reach:** **~90 lakh customers** (via Axio, Amazon) ## B. Retail & Agri Loans * **Resilient Retail Demand:** Strong QoQ growth in retail advances driven by jewel, mortgage, and BNPL uptake during festive season, despite rate hikes. * **Agri-Jewel Momentum:** Agriculture loan growth supported by favorable monsoon outlook and dedicated sales team, with high collateral coverage via **72% LTV**. * **Strategic Customer Monetization:** BNPL platform provides low-cost access to **~90 lakh customers**, enabling targeted, lower-risk personal lending via analytics and co-lending. * **Vehicle Loan Caution:** No near-term shift in retail mix expected due to high risk weights, delinquency, and LGD in vehicle loans—funds prioritized to higher-return products. ## C. Corporate & Commercial * **Selective Corporate Deployment:** Corporate advances grew modestly (+5% QoQ), with growth driven by credit substitutes as part of a yield-locking strategy amid dynamic ALCO-driven allocation. * **Textile Export Resilience:** U.S. tariffs absorbed via cost-sharing across supply chain; long-term buyer relationships and product differentiation (cotton-based) insulate demand, with **no funding stress reported**. * **Commercial Rebound in Progress:** Small business disbursements surged **35%**, though working capital utilization lags for mid-tier borrowers; improvement expected with GST rationalization. * **Asset Repositioning Underway:** Shift toward EBLR-linked and fixed-rate assets continues, reducing interest rate risk and supporting stable yield capture. ## D. Gold & Mortgage Loans * **Gold Loan Strength Persists:** Portfolio growing robustly despite rate increases, supported by disciplined pricing and **system-wide rate uniformity**, with select branches maintaining **LTV below 50%**. * **Mortgage Growth via Channel Synergy:** 13% QoQ rise attributed to effective coordination between branch and open market channels, enabling early booking and steady income. * **Fee Income Constraint:** Dominant RAM growth limits fee income expansion, which remains below **1%** of total income despite higher-fee corporate advances. --- # 5. Branch & Distribution ## A. Key Figures * **Branch Openings:** **7** H1 FY26 (5 lite, 2 regular) · **21** planned for full year * **NTB Growth:** **23%** YoY in savings accounts · **20%** YoY in current accounts ## B. Branch Expansion * **Accelerated Footprint Buildout:** Expansion strategy progressing with focus on **lite branches** to optimize cost-efficient reach; bulk of annual target planned in second half. ## C. NTB Growth * **Strong Liability Franchise Momentum:** Robust double-digit growth in NTB across both savings and current accounts, driven by targeted acquisition of **higher-balance customers** through branch and sales channels. --- # 6. Credit & Margin Risks ## A. Key Figures * NIM: **3.77%** Q2 FY25 (↓9 bps QoQ) · above guided range of 3.7–3.75% * **Yield on Advances:** ↓24 bps QoQ * **EBLR-Linked Book Repricing:** **37%** completed ## B. NIM Pressure * **Stabilizing Margins:** NIM decline narrowed significantly QoQ (9 vs. 19 bps), with early signals suggesting a potential bottom, supporting full-year guidance despite headwinds. * **Rate Pass-Through Lags:** Another ~37% of EBLR book expected to reprice in Q3, though impact on yields likely **limited** due to diminishing repricing base. * **Treasury Caution:** Absence of treasury gains attributed to **volatile rates**, as management maintained a defensive stance in portfolio positioning. * **Dynamic Pricing Discipline:** Gold loan pricing reset every **15 days** with conservative buffers to protect margins amid volatility. ## C. Asset Quality * **Selective Credit Approach:** Continued avoidance of housing and vehicle loans due to **low yields and intense competition**, preserving risk-adjusted returns. * **Corporate Stability:** No material asset quality deterioration expected in corporate book in H2, reflecting resilient underwriting and exposure management. * **Low U.S. Risk Exposure:** **Miniscule** exposure to U.S.-linked sectors (e.g., transport, rice), insulating portfolio from tariff-related shocks. --- # 7. Guidance & Outlook ## A. Key Figures * NIM Guidance: 3.7–3.75% for FY '25/'26 * ROA Guidance: 1.5–1.65% (vs. 1.81% in current quarter) * Credit Growth: 15.8–16% achieved in first half; expected to stabilize * **Asset Quality:** Gross NPA **<5%**, Net NPA **<1%**, Slippages **<1%** of loan book * **Recoveries Target:** **₹600 Cr** for full year (uneven quarterly distribution) * **Cost-to-Income Ratio:** **50%** guided for full year ## B. NIM Forecast * **Cautious Stability:** NIM guidance held at **7.0–7.5%** despite yield tailwinds and cost reductions, reflecting uncertainty on timing of margin drivers. * **Portfolio Discipline:** Margin resilience supported by active exits from low-yielding corporate, retail, and commercial loans. * **ROA Moderation Expected:** Despite current quarter’s strong **8.1% ROA**, full-year outlook remains conservative at **5.0–6.5%**. ## C. Credit Growth * **Balanced Expansion:** Credit growth in line with targets, with **Q1 acceleration** ensuring even pacing; momentum expected to stabilize in second half. * **Cost Pressure Ahead:** Cost-to-income ratio guidance of **50%** amid **21 new branch openings** and hiring for strategic initiatives. * **Resilient Asset Quality:** Strong control on credit metrics with **slippages under 1%** and stable NPAs, supporting confidence in outlook. ## D. Recovery Target * **On-Track Recoveries:** Full-year **₹600 Cr recovery target** reaffirmed, though quarterly flows remain lumpy. * **Ancillary Income:** **₹5 Cr** earned from PSLC certificate sales in the quarter, adding to recovery-related income.