# 1. Financial Performance ## A. Key Figures * PAT: ₹292.40 Cr Q1 FY26 (+15.8% QoQ) · ₹400.33 Cr Q1 FY25 (prior year with non-recurring ₹81.32 Cr tax refund interest) * **Net Profit:** ₹292 Cr Q1 FY26 (+15–16% QoQ, –27% YoY) * NII: ₹755.60 Cr Q1 FY26 (–16.36% YoY, –3.21% QoQ) * Cost-to-Income Ratio: 58.05% Q1 FY26 (vs. 68.98% Q4 FY25, 60.11% FY25) * Operating Expenses: ₹646.67 Cr Q1 FY26 (↓ from ₹833.89 Cr Q4 FY25) * Loan Yield: 9.28% Q1 FY26 (vs. 9.52% Q1 FY25, 9.43% Q4 FY25) ## B. Revenue & Profit * **Profitability Rebound:** Q1 PAT and net profit show strong sequential recovery, with current performance reflecting normalized earnings after prior-year distortions from **non-recurring tax refund of ₹32 Cr** and **income tax interest charge of ₹80 Cr**. * **Cost Discipline Driving Efficiency:** Sharp improvement in cost-to-income ratio to **5%** driven by sustained cost rationalization, rent renegotiations, and vendor cost control despite higher staff costs in prior quarter. * **Underlying Challenges Persist:** Despite improved cost metrics, de-growth in credit and asset quality pressures continue to constrain full-margin recovery and earnings scalability. ## C. Net Interest Income * **NII Under Pressure:** Significant YoY and QoQ decline in NII due to elevated cost of funds and deposits, despite stable gross interest income and **favorable product mix shifts**. * **Improving Funding Trends:** Early signs of QoQ improvement in cost of funds and deposits, with management expecting further relief in H2 FY26, supporting a potential NII rebound. --- # 2. Loan Book & Asset Quality ## A. Key Figures * Gross NPA Ratio: 3.46% (Jun-25) (-80 bps YoY, +380 bps QoQ) · Net NPA Ratio: 1.44% (Jun-25) (-220 bps YoY, +130 bps QoQ) * Provision Coverage Ratio (PCR): 81.11% (Jun-25) (-31 bps QoQ, +314 bps YoY) · 59.18% (ex-technical write-offs) * **IBPC:** **₹3,315 Cr** (Jun-25) (-₹700 Cr YoY) * **Gross Slippages:** **53%** (Q1 FY26) (-600 bps YoY, +1900 bps QoQ) * Credit Cost: 0.16% (Q1 FY26) (+110 bps QoQ, +50 bps YoY) ## B. Asset Quality & Risk Profile * **Deteriorating Near-Term Trends:** Sharp QoQ increase in gross and net NPAs signals renewed asset quality stress, despite significant YoY improvement. * **Adequate Disclosure Confidence:** Management asserts that current NPA levels reflect full stress with **no expected future shocks**, enhancing transparency. * **Elevated Credit Costs:** Significant jump in credit cost to a multi-quarter high reflects proactive provisioning amid rising slippages and collection challenges. ## C. Recoveries & Resolution Momentum * **Recovery Pipeline Strength:** Post-quarter-end recoveries of **₹90 Cr** from slipped accounts expected to reverse recent NPA uptick in next quarter. * **Active Recovery Focus:** Dedicated teams driving collections; **₹38–40 Cr recovery targeted in Q2** from written-off book, contributing to income. * **Improving Collections:** Geographical advantages and intensified follow-up are yielding better recovery outcomes despite short-term volatility. ## D. Restructured Book & Downward Trajectory * **Continued Reduction in Restructured Book:** Restructured advances down for **six consecutive quarters**, now at **₹888 Cr**, with target to reach **₹700 Cr by March**. * **Classification Upgrade Pathway:** **54% of restructured portfolio** requires a 30% asset classification upgrade, though timing remains unspecified. --- # 3. Deposit & Funding Mix ## A. Key Figures * Aggregate Deposits: ₹1,03,242.17 Cr (June 2025) (+3.16% YoY) · ₹1,00,079.88 Cr (June 2024) * CASA Ratio: 30.84% of total deposits (June 2025) vs. 30.51% (June 2024) · 4.28% YoY growth in absolute CASA * Bulk Deposits: 5.4% of total deposits (June 2025) vs. 6.6% (Mar 2025) * **Retail Term Deposits:** **₹65,786 Cr** (Q1 FY26) vs. **₹60,134 Cr** (June 2024) (+₹5,652 Cr YoY) * Cost of Funds: 5.77% (Q1 FY26) vs. 5.83% (Q4 FY25) · Up from 5.57% (Q1 FY25) * CD Ratio: 71.93% (Q1 FY26) vs. 74.38% (Mar 2025) * **LCR:** **107%** (June 2025) vs. **105%** (Mar 2025), well above **100%** statutory requirement ## B. CASA Growth * **Strategic CASA Shift:** Aggressive pivot toward low-cost CASA and retail deposits, driving structural improvement in funding mix and cost efficiency. * **Funding Cost Discipline:** Focus on **card-rate renewals** and avoiding high-cost bulk deposits amid liquidity surplus to protect NIM. ## C. Bulk Deposit Decline * **De-risking Liability Structure:** Continued reduction in bulk deposit reliance, now just **4% of total deposits**, reflecting tighter ALCO discipline. ## D. Retail Term Deposits * **Granular Deposit Growth:** Strong YoY accretion in retail term deposits below ₹3 Cr underscores successful retail franchise deepening. ## E. Cost of Funds * **Margin Tailwinds Ahead:** Cost of funds declined sequentially despite YoY increase, with **further improvement expected** on repo rate cut pass-through and deposit re-pricing. * **Proactive Rate Cuts:** Term deposit rate reductions already implemented and showing early impact, with more adjustments under evaluation amid sector-wide repricing. --- # 4. Segment & Portfolio Performance ## A. Key Figures * **Net Book Accretion (RAM):** **₹2,327 Cr** YoY * **Retail Advances:** **₹44,029 Cr** (of ₹74,267 Cr total) * **Target Retail Advances (FY26E):** **₹51,000 Cr** (~₹7,000 Cr increase) * Gross Advances: ₹74,267.02 Cr as of Jun-25 (-1.6% YoY) * **Gold Loan Portfolio Additions:** **₹4,000 Cr** * **Microfinance Book:** **₹1,000 Cr** (Karnataka only) ## B. Retail, Agri, MSME Growth * **Strategic Priority:** RAM (Retail, Agri, MSME) remains core to growth strategy under Bhat’s leadership, with focus on **quality over volume** and disciplined sanctioning. * **Growth Challenge:** Current RAM advance growth at **5%** is notably weak vs. peers, with **MSME segment in de-growth**, prompting active management intervention. * **Yield Dynamics:** Incremental loan yields estimated at **9–10%**, supported by Agri gold loans with PSLC benefits; overall RAM yield range seen as **constrained relative to portfolio potential**. * **Customer-Centric Expansion:** Growth to be driven by deepening relationships with existing customers, referrals, and **fresh customer acquisition** across assets and liabilities. ## C. Corporate & NBFC De-growth * **Portfolio Rebalancing:** Deliberate de-growth in low-yielding corporate and NBFC advances (-3% and -15% QoQ respectively), replaced with higher-yielding retail and direct corporate loans. * **Yield Enhancement Goal:** Strategy expected to lift portfolio yield by **20–30 bps in H2 FY26**, despite near-term headwinds from shrinking advance base. * **NPA Ratio Impact:** Shrinkage in total advances has mechanically elevated NPA ratios despite recovery efforts, complicating credit quality perception. ## D. Gold Loan & Product Expansion * **Secured Growth Engine:** Gold loans contributed significantly to retail growth, with **₹4,000 Cr added** and further expansion planned, backed by regulatory support and collateral security. * **Product Innovation Pipeline:** New supply chain financing product cleared; **platform in development** for wealth/mass affluent/HNI liability products, including third-party distribution. --- # 5. Branch & Distribution ## A. Key Figures * **Branch Network:** **953** branches nationwide * **Retail Advances Run Rate:** **₹500 Cr** monthly run rate * Per-Branch Monthly Advances: ~₹2-2.5 Cr per branch (average across ~950 branches) ## B. High-Potential Branch Strategy * **Targeted Growth Model:** Focus on **700–800 high-potential branches** expected to contribute **₹2–5 Cr each**, unlocking scalable growth with enhanced support from central offices. ## C. Per-Branch Performance * **Current Run Rate Visibility:** Retail advances operating at a robust monthly pace, reflecting strong execution across the network. --- # 6. Regulatory & Credit Risks ## A. Key Figures * NIM: 2.82% in Q1 FY'26 (vs. 3.54% in Q1 FY'25 and 2.98% in Q4 FY'25) * CRAR: 20.46% as of 30 June 2025 (vs. 19.85% on 31 March 2025) ## B. NIM Compression * **Sharp NIM Decline:** Significant compression in net interest margins driven by **repo rate stability** and **70% of loans tied to EBLR**, causing immediate asset yield resets against fixed liability costs. * **Benchmark Review Underway:** NIM pressure exacerbated by use of **G-Sec as benchmark**, leading to underperformance vs. peers; strategy under active review. * **ALCO-Led Mitigation:** Regular ALCO meetings guiding response, including recent deposit rate cuts and cost discipline, with further liability-side adjustments under evaluation. ## C. EBLR Pass-Through * **Partial Pass-Through Confirmed:** While **70% of loan book** is EBLR-linked, full 100% pass-through of benchmark cuts not yet confirmed; implementation ongoing via renewals and reset clauses. ## D. Capital Adequacy * **High CRAR Driven by Balance Sheet Contraction:** Strong capital ratio improvement primarily due to **reduction in advances**, not profit retention, signaling deliberate de-risking. * **No Near-Term Equity Raise:** Bank affirms capital adequacy is robust with **no immediate plans for capital raising**, though future needs will be assessed with portfolio growth. --- # 7. Guidance & Outlook ## A. Key Figures * **Gross Advances:** ₹75,000 Cr (Jun) → **target ₹89,000 Cr** (FY-end) | **realistic view ₹85,000–86,000 Cr** * **RAM Segment Growth:** **₹7,000–8,000 Cr** incremental expansion planned * **NIM Outlook:** **+10 bps expected by FY26-end** * **ROA:** **0.97%** in Q1 FY26 (+16 bps QoQ) | **target 1–2%** by FY-end * ROE: 9.58% in Q1 FY26 (+102 bps QoQ) * **Cost-to-Income Ratio:** **~55% projected** in coming quarters ## B. Advances & Growth Strategy * **Focused Loan Book Expansion:** Growth prioritized in **RAM segment** and CASA, aligned with AOP, though execution implies moderate upward trajectory from current base. * **Prudent Growth Discipline:** Leadership reaffirmed commitment to **no compromise on asset quality, yield, or risk standards** despite ambitious targets. * **Confidence in Delivery:** Management expressed strong conviction in delivering **visible performance improvements** without endangering financial stability. ## C. NIM & Margin Recovery * **NIM Bottoming Out:** Q1 may mark near-term low; potential further pressure in Q2 before **H2 recovery driven by higher-yielding retail/direct corporate loans** and lower funding costs. * **Growth Levers:** **Co-lending and direct assignment models** expected to accelerate advance growth while supporting margin expansion. ## D. Profitability Trajectory * **ROA/ROE Momentum Building:** Strong sequential improvement in both ROA and ROE, with further gains anticipated from **retail deposit shift**, **RAM segment accretion**, and rising NII and other income. * **Efficiency Focus:** Cost-to-income ratio on track to stabilize around **55%**, supported by scale and income growth.