Settlement closes legacy; core strong, but PAT crushed by ₹5,000Cr NMC hit

Revenue growth only 6.8% YoY, modest for a ₹30.5L-crore bank; advance growth strong but doesn't translate to top-line

YoY YoY improvement (GNPA 1.99%, down 29 bps) offset by sequential uptick; write-off conservatism (625 Cr vs 2,200 Cr) masks underlying deterioration

NII growth 9.5% real but compressed by NMC ₹5,250 Cr settlement; net profit ₹1,278 Cr (₹1,572.6 Cr reported) vs ₹5,528 Cr ex-NMC; PAT -53% YoY

CRAR improved QoQ but ECL impact of 110 bps (~₹12,000 Cr) looming from April 2027; per-year amortization 20–22 bps on CRAR drag

Guidance unchanged at 10–12% despite outperformance; mgmt cited geopolitical headwinds and deposit flow to capital markets, indicating caution on sustainability

USD 600M (~₹5,250 Cr) out-of-court settlement finalized July 1, 2026. Not flagged in annual report; case advanced to trial post-March; settlement deemed "commercially prudent" to avoid prolonged litigation.

Prior guidance: ROA >1% maintained 17–18 quarters. Q1 delivered 0.25% (1.10% ex-NMC). FY27 full-year guidance deferred; mgmt expects Q2–Q4 ROA >1% but cautious on annual average.

Maintained 12–14% despite outperformance. Mgmt cited geopolitical headwinds, deposit uncertainty, and need to be cautious on FY-wide sustainability.

Prior estimate 125 bps; revised down due to project-loan guideline pullback (50 bps → 15–20 bps). Holdback: ₹2,500 Cr floating provision. Balance spread over 4–5 years.

Equity raise ₹8,500 Cr (medium-term, by Mar 2028); Tier-2 raise ₹6,000 Cr in FY27 (dependent on pricing). Current CRAR 16.3% deemed healthy; no immediate requirement.

Settlement based on advanced trial stage, legal advice. Stage of trial material. Settlement amount far below oral claims against all parties. No admission of liability. Terms confidential.

Mgmt rejected characterization. Credit growth 17.4% YoY, deposits 13.8%, both "strongest in many quarters." Noted YoY comparison more relevant than QoQ seasonal variance. Asset quality GNPA down YoY; sequential rise due to lower write-offs (conservative) and denominator effect.

Write-offs are technical, not economic (100% provisioned). Conservative write-off protects PCR; slight sequential GNPA/NPA rise acceptable. SMA CRILC fell 18 bps → 7 bps, collection efficiency 99.2%. Slippage, recovery better than LY.

Can't discuss due to confidentiality. International operations significantly reformed since 2021 (governance, CRO/CCO oversight, AML framework strengthened). Domestic book insulated. RBI has strong oversight; Bank compliant with all regs. Case now full and final in ADGM and UK courts.

ECL impact evolving on fresh flows post-April 1, 2027. Retail loan repricing subject to RBI guidelines (3-year lock norms, creditworthiness trigger). Can reprice back-book under conditions. Industry-wide repricing needed; timing uncertain.

Non-MCLR corporate book repricing upward (shifting to MCLR). Bulk deposit cost declined post-FCNR(B) announcement. Asset growth 16–17% will continue margin pressure. Domestic NIM at 2.93%, top-quartile. Guidance 2.75–2.95% maintained.

CRILC data (>₹5 Cr) improved 0.18% → 0.07%. Slippage lower YoY. Recovery stronger. MSME protected by ECLGS. No stress observed; caution precautionary. Will revisit guidance in Q2 if upside growth continues.

Q1 delivered 17.4% YoY but not raising guidance. Mgmt cited geopolitical headwinds and deposit volatility. Likely implies H2 slowdown expected or deliberate under-guidance.

Q1 at 2.77% (domestic 2.93%); in-line. Asset growth 16–17% will pressure margin; offset by repricing and deposit cost normalization. Guidance band wide (20 bps), suggesting uncertainty.

On AI integration (Aditi, Adi tools); branch expansion; tech platform. No specific capex guidance issued for quarter/year.

NMC settlement ₹5,250 Cr resolves trade-finance exposure in Abu Dhabi/UK. Case was sub-judice; settlement without admission. RBI scrutiny ongoing; bank reformed international operations post-2021. Confidentiality clause prevents disclosure of underlying cause. Reputational and regulatory overhang if new details emerge.

GNPA/NPA rose QoQ despite YoY improvement; mgmt attributes to conservative write-off (625 Cr vs 2,200 Cr LY) and denominator effect, but masks underlying deterioration. ECL migration (Apr 27) will add 110 bps CRAR drag (~₹12k Cr) and 15–20 bps annual credit cost. Geopolitical stress could accelerate slippage in MSME/mid-market segments.

NIM compressed 6 bps QoQ (from 2.83% Mar → 2.77% Jun) despite 9.5% NII growth. Asset growth 16–17% exceeds deposit growth 10–12%, pressuring margin. Bulk deposits (₹2.11L Cr) + CD (₹1.06L Cr) = ₹3.17L Cr of funding at risk if wholesale rates rise or sentiment shifts. Deposit cost at 4.66%, still elevated; geopolitical uncertainty could delay cost decline.

Fee income fell 47% YoY (commission/exchange/brokerage); other income fell sharply due to treasury revaluation losses (G-sec yield spike 6.10% → 6.78%). Operating profit flat YoY (₹8,127 Cr) despite 9.5% NII growth. Indicates that profitability gains from NII are being offset by income volatility and operational pressures.

Mgmt cited geopolitical uncertainty as reason for NOT raising credit/deposit guidance despite strong Q1 outperformance. Prolonged trade tensions could dampen MSME/mid-market demand, increase credit cost, and shift depositor preference from bank deposits to capital market investments. RWA expansion may also be impacted.