Strong PAT growth masks slowing revenue; cost discipline proven, growth mechanisms untested

PAT ₹213.2 Cr delivered, 35.6% YoY growth

Advances 17.06% YoY (met floor), mortgages 10% YoY, 1% QoQ (flat/disappointing)

NIM 3.35% (+15 bps YoY), cost-of-deposit -14 bps QoQ; management now hedges expecting 7-8% future decline vs 14 bps achieved

2.42% delivered, beat guidance by 8 bps

26 bps delivered

Revenue only 9.4% YoY, 4% QoQ despite 20% deposit, 17% advance growth (significant lag)

Prior call suggested acceleration; delivered 10% YoY, 1% QoQ. Management blamed strategic shift (stopped DA), expects 22-23% if disbursal trend (35% higher than prior year) persists—but validation pending.

Management walked back deposit repricing benefit expectations. From 14 bps reduction QoQ, now guides 7-8% decline forward. Repricing tail into Q2 but shortening faster than prior guidance suggested.

Prior guidance: late Q2 or early Q3 FY27. Management now says no urgency; capital adequacy improved to 14.9% from 14.26%. Timing TBD, signaling lower capex ambitions or slower deployment.

Delivered 2.42% vs 2.5% guidance. Management says headroom remains (target 2.45% full-year) but offset by staff hiring (11,500 → ~13,000 guided). Efficiency gains being reinvested in growth.

MSME disbursals down YoY. Management stopped TReDS (low-yielding), hiring specialists, targeting Q2-Q3 inflection. Positions as investment phase, not a structural weakness—credibility TBD.

Yield at 10.75% due to gold loan mix (lower yield, lower cost, minimal credit). Expect mortgage mix to improve Q2-Q4. Cost-of-deposit down 14 bps Q4-Q1; expect 7-8% decline forward if portfolio quality held.

Cost-of-deposit fell despite CASA decline (7.18% to 6.75%), showing cost-of-fund matters more than CASA ratio. CA growth only 5% YoY is area for improvement. Focused on cost-of-fund metric, not CASA mix.

No intentional slowdown. Stopped DA sourcing (better yield, quality, cross-sell from organic). Disbursals up 35% YoY (₹1,500 vs ₹1,100 Cr), real lead indicator. Expect growth to outpace bank if momentum maintained.

Expect upward curve in yield, cost-of-deposit reduction of 7-8% (vs 14 bps Q4-Q1). If portfolio quality held, NIM will improve Q2 onwards.

Guided with clear timelines on cost, NPA, ROE for FY27 (13.5%) and FY28 (14.5%). Executing efficiency improvements from past 12-18 months. Every quarter shows calibrated growth, not hockey stick.

Guidance is co-lending ≤15% of advances. Currently 12.5%; room for 2.52% more. Prefer organic lending to grow, co-lending in 13-14% range. Will not rely on co-lending for growth.

RBI allows 85% LTV; we cap at 75% max at all branches. Growth achieved at 75% LTV proves 10% buffer is enough. Benefit of hindsight: gold was ₹17,000/gm mid-quarter, fell to ₹14,400; 85% LTV would have meant 100% LTV today and margin calls. Co-lending goes to 85%, organic stays at 75%.

Q2 also has repricing tail benefit from long-duration deposits. Guiding to stay below 2.5%, try to keep at 2.45% full-year. Denominator growing helps. Q1 has salary cost hit; future quarters should improve or maintain.

MSME is area we want to grow; stopped TReDS (low-yield). Focused on current account (5% YoY growth, opportunity), MSME OD, trade finance. Not seeing output yet, but Q3 should show benefit of investments in people, technology, new sectors.

Deposit repricing is natural, not automatic. Getting fresh deposits at lower rates now (was among highest payers earlier, that's changing). Sourcing mix change (mortgages higher yield than organic loans) will add to yield improvement. Strategy: reduce cost-of-deposit, maintain portfolio quality, change product mix. SME is ₹1,800 Cr book; ₹29,000 Cr mortgage book can alter destiny.

Expect staff count to increase from 11,500 to ~13,000 (digital talk aside, still need feet on street for sales). Some efficiency will be consumed by incremental salary. Will try to keep below 2.5%, aim for 2.45% full-year.

We don't give product-wise yields. Frontline always says there's pressure, but fact is we grow at 75% LTV vs 85% given by others. 10% LTV gap is material. Haven't seen pricing pressure in Q4-Q1 on organic book. If pressure comes, we'll revisit approach.

Maybe 20 branches this year, probably 500 by year-end. Not branch-focused for growth. Next 2-3 years, branch not central. Focus on second/third branches in existing cities (increased penetration). More people increase than branch increase, proportionally.

Too early to discuss extension; board hasn't spoken. Personal choice: been in bank 19 years, could work another 19. On fundraising: Tier 1 capital up to 14.9% from 14.26%; CRAR up to 17.03% from 16.66%. Very weird because banking is capital-guzzling. In good space, controlling RWA. Want capital to expand, not conserve. AGM passed ₹2,000 Cr enabling (₹1,500 Cr Tier 1). No urgency, open to conversations. Timing, quantum, pricing TBD by board.

Core fee is repeatable, recurring by definition. Driven by third-party distribution (Q1 usually sleepy; we changed that) and processing fees (rise with disbursals). Q1 asset disbursal usually lukewarm; expect Q2-Q3 improvement. Trade finance (tied to SME current account) is opportunity but not yet paying off. Effort is patient, 3-4 quarters before results.

Two things: stopped DA in 2024 (contributed to NPAs, still does). Mortgage book now fully organic. Disbursal today leads to growth tomorrow. 35% increase in disbursal won't show 35% growth, but sustained 30-35% disbursal growth Q1-Q4 will lead to 22-23% growth vs 9% current. Premature closures/takeovers: Q4 was aggressive, Q1 better. AI-driven retention system in place. Confident on mortgage growth.

MSMEs are service-focused, not manufacturing. Services not impacted by tariffs/inflation so far. Moved up ticket size (bad DA in 2024 taught us). Slightly more resilient customer base. Credit bureaus show no big problems in our segments. But petrol price up ₹15 in 2 months should ripple. Corner-cutting visible everywhere (cup height, diameter reducing).

Answer lies in inefficiency. We were giving higher rates than required for growth for a decade (putting more money on market than needed). Delta between our rate and others decreasing—that's improving cost-of-funds. 45 bps over what others give is still good, don't need 65-120 bps. Movement from 120 to 70 helping. Theme of last 3 years: efficiency in productivity, cost-of-funds, capital utilization, output per person. We were generous; now leaner, meaner, fitter.

Management focused on asset growth 18-20% (delivered 17% advances), not revenue. Implied ~15-18% revenue CAGR from prior years, but Q1 at 9.4% YoY suggests caution

Reduced from prior quarter's optimism (was 14 bps QoQ decline). Repricing tail into Q2 but shortening. Offset by rising fixed deposit rates (25-30 bps hike recent months)

Branch-light strategy; focus on second/third branch in existing cities. More people increase than branch increase

Revenue 9.4% YoY vs advances 17% YoY reveals earning asset yield challenge. Asset base growing fast but translating to revenue at 55% the growth rate. Secured-heavy portfolio (gold 22%, mortgages 29k Cr) carries lower inherent yields.

Cost-of-deposit came down 14 bps Q4-Q1 due to repricing, driving much of NIM expansion. Management now guides 7-8% decline forward, implying repricing benefit substantially diminished by Q2. Fixed deposit rates raised 25-30 bps recent months; liquidity tightening could reverse cost momentum.

Gold loans grew 100% YoY, now 20-22% of portfolio (₹7-7.5k Cr). Management caps LTV at 75% vs RBI's 85%, defending against competitive pressure and price volatility. If LTV constraints loosen (competition) or gold prices fall further (collateral erosion), credit risk or margin pressure could follow.

MSME disbursals down YoY for multiple quarters. Management stopped TReDS, invested in new sectors/staff. Benefits expected Q2-Q3 remain unproven. If turnaround delays, growth profile weakens further and trade finance (tied to SME current account) lags.

Mortgages at 10% YoY, 1% QoQ (flat/disappointing) despite prior guidance of acceleration. Disbursal momentum (₹1,500 Cr vs ₹1,100 Cr YoY, +35%) a leading indicator, but lag between disbursal and stock growth suggests retention/churn headwinds or timing mismatch.