# 1. Financial Performance ## A. Key Figures * **Net Profit:** ₹351 Cr Q2 FY26 (+8%) * **Operating Profit:** ₹535 Cr Q2 FY26 * Net Interest Margin (NIM): 2.8% Q2 FY26 * Return on Assets (RoA): 1.02% Q2 FY26 * Return on Equity (RoE): 13.11% Q2 FY26 * Capital Adequacy Ratio (CAR): 17.70% as of Sep-30, 2025 * Tier-1 Capital Ratio: 16.79% as of Sep-30 * Gross NPA: 2.93% Q2 FY26 (–147 bps YoY) * Provision Coverage Ratio: 90.25% including write-offs * **Slippage Ratio:** 21 bps Q2 FY26 * **Recoveries:** ₹352 Cr Q2 FY26 * Book Value per Share: ₹40.8 as of Sep-30 ## B. Revenue & Profit * **Profit Growth with Margin Pressure:** Net profit rose at a low-single-digit pace despite stable other income, where **recurring components** now dominate after excluding a minor one-off. * **Operating Leverage Target Intact:** No positive operating leverage in the quarter, but achieved in H1 FY26; management remains focused on sustaining **year-on-year improvement** through revenue expansion and cost discipline. ## C. Net Interest Margin * **NIM at Cyclical Low:** Current 8% NIM reflects full impact of RBI’s 100 bps rate cut, with rapid transmission and **disproportionate pressure from short-duration corporate assets**. * **Faster Repricing Advantage:** Yield curve positioning—peak rates at one-year maturity—enables quicker asset re-pricing than peers, offering a **path to margin recovery** as rates stabilize or rise. * **Treasury-Inclusive Yield Metric:** The reported **13% yield on funds** includes treasury-lent funds in the denominator, providing a comprehensive view of funding efficiency. ## D. Asset Quality * **Strong Credit Discipline:** Slippages remain contained at **21 bps** in Q2, with SMA1+2 well under 100 bps, signaling portfolio resilience and **no expected material deterioration** for FY26. * **Elevated Recoveries Driving Improvement:** Sharp reduction in Gross NPA driven by **₹352 Cr in recoveries**, including significant GNPA reversals, supporting a rising provision coverage ratio. * **Conservative Provisioning Stance:** Coverage ratios remain robust—**over 80% excluding write-offs**—enhancing loss-absorption capacity amid rate-sensitive asset pressures. ## E. Capital & Leverage * **Capital Ratios Slightly Lowered by Structural Shifts:** CAR and Tier-1 declined due to **₹7,000 Cr investment book expansion**, Tier-2 bond repayments, and **reclassification of reserves**, though impact was marginal. * **AFS Reserve Impact Contained:** Despite a **₹10 Cr debit balance** in AFS reserves, Tier-1 capital was affected by only **~25 bps**, reflecting limited sensitivity to AOCI fluctuations. --- # 2. Loan Book & Growth ## A. Key Figures * **Loan Disbursements:** **127% YoY** MSME (+6% QoQ, +8% adj.) · **51% YoY** retail * **Total Advances:** **₹92,286 Cr** (+9% YoY, ₹84,714 Cr prior) * **Retail Loan Book:** **₹26,000 Cr** (+22% YoY) * **Gold Loan Book:** **₹18,845 Cr** (+13% YoY) * **Corporate Loan Share:** **40%** of total advances (↓ from 42%) ## B. Retail & MSME Growth * **Dominant Growth Engine:** MSME and retail segments driving disbursement momentum, with MSME volumes doubling and retail growing over 50% YoY. * **MSME Recovery & Targets:** Both MBG and ECG sub-segments now growing at ~9%, with confidence in achieving **17–18% full-year organic growth** after stabilization. * **Organic-Led Expansion:** Growth primarily organic; portfolio buyouts totaled **₹670 Cr YTD**, with exact split not disclosed. ## C. Corporate Loan Strategy * **Strategic De-emphasis:** Corporate loan growth slowed to **3% YTD** despite 11% YoY disbursals, reflecting deliberate shift toward higher-yielding retail/MSME assets. * **Portfolio Optimization:** Corporate book maintained at 40% of advances, with focus on upgrading quality and yield; new mid-corporate group created to revive selective growth. ## D. Gold Loan Expansion * **Moderate Growth, Strategic Reassessment:** Gold loan book expanded 13% YoY but trails peers’ QoQ growth; future scaling constrained by **4% balance sheet cap**. * **Yield & Positioning Opportunity:** Bank exploring repositioning gold loans as retail/SME product to unlock **higher pricing power** and disbursal speed. ## E. Disbursement Trends * **Rate-Arbitrage Strategy:** Balance sheet growth reflects proactive expansion of HTM and AFS books amid expectations of **softer interest rates**. * **Treasury Leverage:** Excess SLR deployed to fund borrowing and treasury lending, targeting **arbitrage gains** in favorable rate environment. --- # 3. Deposit & Funding Mix ## A. Key Figures * **CASA Balances:** **₹36,841 Cr** (+10% YoY) * **Total Deposits:** **₹115,635 Cr** (+10% YoY) * **Retail Term Deposits:** **+11%** YoY · **Savings Account Balances:** **+10%** YoY · **Current Account Balances:** **+11%** YoY ## B. CASA Growth * **Strong Liability Base:** CASA growth contributed to higher average balances and enhanced deposit stability, reflecting improved customer engagement. ## C. Retail Deposit Focus * **Strategic Liability Management:** Emphasis on relationship-based retail and MSME deposits over bulk funding, with active avoidance of very short-tenor deposits to extend liability duration. ## D. Funding Cost Stability * **Stable Rate Outlook:** Cost of funds expected to remain flat near-term, supported by disciplined pricing and a peak fixed deposit rate below major private peers. * **Margin Trajectory:** Full benefit of lower interest rates not yet realized; faster decline in funding costs anticipated through the year, though room for further cuts is limited by SBI-aligned pricing. --- # 4. Segment & Product Performance ## A. Key Figures * **Home Loan Book:** **₹8,849 Cr** (25% YoY) · **Auto Loan Book:** **₹2,288 Cr** (25% YoY) * **Personal Loan Book:** **₹2,209 Cr** * **Co-Lending Assets:** **₹1,500 Cr+** (target: ~₹3,000 Cr by year-end) ## B. Home & Auto Loans * **Balanced Segment Growth:** Home and auto loan portfolios recorded strong double-digit expansion, reflecting sustained demand and effective market positioning. * **Auto Market Rebound:** GST cuts and regulatory easing expected to lift lower-end auto demand, with robust loan flows despite **only 10 days of transaction activity** in September. * **Seasonal Momentum:** Strong auto loan uptake signals positive sentiment ahead of Diwali, indicating recovery in consumer confidence. ## C. Personal Loan Book * **Yield Differentiation:** MSME personal loans show strategic segmentation, with **blended yield of 10%** and larger-ticket loans yielding **north of 9%**. ## D. Co-Lending Partnerships * **Digital Asset Expansion:** Co-lending platform scaling rapidly via partnerships with **Amazon Checkout Finance, Godrej Housing Finance, FEDFINA, IIFL, Rupeek, MoneyView, and Muthoot FinCorp**. * **Regulatory Advantage:** New RBI-permitted income-generating product enhances product suite and strengthens competitive positioning. * **Growth Trajectory:** Co-lending book on track to potentially double by year-end, driven by diversified partner ecosystem and digital scalability. --- # 5. Credit & Regulatory Risks ## A. Key Figures * **ECL Reserve Increase:** **40 bps → 500 bps** for Stage-II assets (**+460 bps**) applied to **<100 bps** of total assets ## B. ECL Norm Impact * **Contained Credit Costs:** Cost of credit expected to remain stable near current levels, supported by strong portfolio quality and low stress indicators. * **Regulatory Impact Limited:** Despite the significant reserve hike for Stage-II assets, financial impact is **not expected to be material** due to the very small size of the affected portfolio. ## C. Corporate Book Exposure * **No Current Stress:** Management observes no signs of portfolio deterioration, though event risk in the large corporate book remains a structural consideration. * **Rate Sensitivity:** Corporate book earnings are under pressure from declining interest rates, driven by re-pricing linked to **EBLR movements**. --- # 6. Guidance & Outlook ## A. Key Figures * NIM: 2.8% (viewed as trough) · Target >3% (pending rate stability) * **MSME Loan Growth Target:** **15%-18%** (current fiscal) · **Ambition: 20%+** annually thereafter * **Corporate Loan Book:** **Target reduction to ~1/3 of portfolio** within 18 months ## B. NIM Recovery View * **NIM at Cyclical Low:** Management views **8% NIM as the trough**, with expansion expected as balance sheet composition improves and yields recover. * **Rate Sensitivity Risk:** NIM recovery is contingent on **no further RBI rate cuts**, given full transmission of prior cuts and high sensitivity to reference rates. * **CFO Endorsement:** CFO confirms outlook for **rising yields and improving NIMs in coming quarters**, aligning with MD’s guidance. ## C. Growth Targets * **Strategic Growth Inflection:** Bank transitioning from historical underperformance to **peer-par growth**, with MSME segment as key growth engine. * **Ambitious Trajectory:** Targeting **20%+ annual MSME loan growth** beyond current fiscal, signaling aggressive market capture plans. ## D. Balance Sheet Shift * **Structural Reallocation:** Secular shift underway—**growing retail and MSME books** while **corporate loans decline** as a share of portfolio. * **Margin Optimization:** Corporate book reduction or better funding under review to **alleviate margin pressure**, with strategic preference for asset mix over balance sheet expansion.