Bank of Maharashtra eyes 25-30% jump in net profit in FY23 with NII growth

State-run Bank of Maharashtra is eyeing a 25-30 per cent growth in its net profit in the current financial year, aided by a healthy growth in net interest income (NII) and fall in provisions for bad assets.

In the fiscal ended March 31, 2022, the Pune-based lender reported an over two-fold jump in its profit after tax (PAT) at Rs 1,152 crore, as against Rs 550 crore for the year ended March 2021.

"Our net profit will increase further this fiscal. Last year we had made more provisioning from our operating profit to improve our asset quality. So we have reached the bottom, with net NPA below one per cent and gross NPA lower than 4 per cent.

"Now, more provisioning (for bad loans) may not be required, which will automatically improve our net profit... I think a 25-30 per cent growth in net profit over the previous year's will be there this fiscal," its Managing Director and Chief Executive Officer A S Rajeev told PTI in an interview.

Higher profitability will also be driven by a 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 to depositors.

"We are optimistic to scale up NII (in FY2023) on account of strong business growth and good asset quality with a target of more than 20 per cent rise over FY2022 to around Rs 7,500 crore," he said.

NII grew by 23.42 per cent on a year-on-year basis to Rs 6,044 crore in FY2022, as against Rs 4,897 crore in FY2021.

Besides, the bank will also focus on other avenues such as more issuances of Priority Sector Lending Certificates (PSLCs) to boost its profitability. Last year, the lender was able to increase its operating profit by Rs 250 crore because of issuance of PSLCs, he said.

Net Interest Margin (NIM) during the year is expected to be above 3 per cent.

In the previous fiscal, the bank's gross NPA declined to 3.94 per cent from 7.23 per cent. Net NPA reduced to 0.97 per cent, as against 2.48 per cent in FY2021.

It is targeting net NPA to be below 1 per cent and gross NPA to be less than 3 per cent in the ongoing fiscal, Rajeev added.

Recoveries and upgradation is expected to double to Rs 3,000 crore in FY2023, as against Rs 1,517 crore last fiscal.

Fresh slippages will be around Rs 2,000 crore this year. However, slippages will not be from any large ticket loans but mainly from the micro, small and medium enterprises (MSME) segment, he said.

Speaking on the credit growth, Rajeev said a lot of traction has been witnessed in the corporate loan segment.

"This year, we are looking at a credit growth of around 17 to 18 per cent and deposit growth of 13-15 per cent," he said.

In the previous fiscal, growth was seen in sectors like pharma, infrastructure, textile, cement and iron ore, which is likely to continue this year as well, Rajeev said.

The lender has a sanctioned pipeline of Rs 20,000-23,000 crore in the corporate loans, spread over 2-3 years. This pipeline is from various sectors, including infrastructure, road projects, manufacturing and pharma.

Its retail loan segment grew at 24 per cent in FY2022 due to growth in housing, vehicle, personal and gold loans, driven by low-interest rates and higher discounts.

"We are expecting to grow at a pace of around 20 per cent in FY 2022-23 in the retail loan portfolio," he said.

Rajeev said the bank is also pushing credit and deposit growth through opening branches in new geographies.

Over the last 2-2.5 years, it has opened 300 branches in 300 new districts and these branches have contributed around 3-4 per cent growth in business.

The bank is planning to increase its number of branches to 2,100 by March 2023, from 2,030 branches currently, Rajeev said.