Strong profitability beat, NIM expansion, but cautions credit growth
The verdict, the claims that held up, the sharpest analyst exchanges, and the risks — the earnings call, decoded from the transcript.
Hold
confidence 6/10
Grade B
Beat on NIM (2.74% vs 2.6-2.7% band), cost-to-income on track (50.45%, target 47-48% year-end), NPA improving. Missed recovery expectations (₹2.8Cr vs ₹3-3.5Cr) and revenue growth soft.
Cautiously Optimistic
next 1–2 quarters
Optimistic
multi-year
Q2 delivered strong profitability (+14.7% PAT) with NIM expansion above guidance, but revenue growth soft at +8.5% and recovery fell short of internal targets. Management credible but guiding cautiously on credit growth (77-78% CD ratio), signaling deposit cost discipline over aggressive expansion.
₹35267.2 Cr
Revenue · +8.5% YoY₹5561.1 Cr
Reported PAT · +14.7% YoYExpanding
Margins · vs guidance: MixedDid the claims hold up?
Advances grew 14.7% YoY to ₹13.41 lakh crores
METDelivered, with core advances ex-IBPC at 17.4% growth, beating 12-13% FY27 guidance
Domestic NIM improved 10bp sequential, now 2.74%
METConfirmed; exceeded prior 2.6-2.7% guidance band
Core operating profit grew 29.4% YoY excluding treasury/write-offs
METConsistent with Q2 operational strength, reflecting profitability focus
Recovery at ₹2,805 crores, 1.17x slippages
OVERSTATEDQ2 internal target was ₹3,000-3,500Cr; achieved only ₹2,805Cr, below expectation
Credit growth well-positioned to maintain momentum at 77-78% CD ratio
METMore conservative than original 12-13% RAM guidance; deposit-linked, disciplined approach
Earnings quality
What changed since the last call
NIM guidance beat
UpgradeDomestic NIM 2.74% vs prior 2.6-2.7% band; management expects further improvement despite deposit cost headwinds
Cost-to-income trajectory confirmed
Neutral50.45% Q2 vs 51.20% Q2 FY26; on track to 47-48% year-end target, -75bp YoY improvement
Credit growth stance cautious
DowngradeMessaging shifted from original 12-13% RAM guidance to deposit-linked 77-78% CD ratio; more disciplined, less aggressive
Recovery expectation lowered
DowngradeQ2 recovery ₹2,805Cr vs expected ₹3,000-3,500Cr; FY27 target ₹13,000Cr implies slower recovery curve
The Q&A
Analysts pressed on recovery shortfall (Bhavik Shah, Sameer Bhise), deposit cost dynamics (Jayant Kharote), emerging sector concentration (Sushil Choksey), and treasury losses (Saket Kapoor). Management held firm on profitability focus over growth, transparent on treasury headwinds, detailed on provisioning rationale; Q&A showed competence but also signaled caution.
FCNR and deposit dynamics — Kunal Shah, Citi
AnsweredUSD 2.7B raised (vs USD 2.5B target). Bulk deposits + CDs ~17% of total. CD ratio 75.5%, adequate headroom. Ready to grow 77-78% CD.
Cost of deposits and recovery — Sameer Bhise, Daiwa
PartialDomestic cost of deposit 5.18% (Sept) → 4.97% (June). Recovery ₹2,805Cr this Q2 but target was ₹3K-3.5K. Slippages declining, so recovery naturally lower.
ECL transition and NPA provisions — Jayant Kharote, Axis
AnsweredECL migration ₹8,000-10,000Cr → ₹8,000Cr now. Making ₹100-150Cr additional in Q3-Q4. Credit cost stays 0.25-0.30%.
Recovery momentum and treasury gains — Bhavik Shah, Goldman Sachs
PartialExpecting ₹900Cr-₹1,000Cr per quarter next two quarters. Recovery will come down as slippages decline. Treasury loss headwind this Q2.
Asset quality and SMA-1,2 — Jai Prakash Mundhra, ICICI Sec
AnsweredSMA-0 ₹16.9Cr, SMA-1 ₹7.5Cr, SMA-2 ₹9Cr (total 2.49%). Drought in 2-3 districts, monitoring field level. No SLBC restructuring yet.
Emerging sectors growth and corporate book — Sushil Choksey, Indus
AnsweredSanctioned ₹4Lakh Cr in emerging (infra, renewable, power, data, defense). Crossed ₹2.5Lakh Cr disbursements in 6 months. Replacing low-yield with higher-yield book.
Treasury losses and yield hardening — Saket Kapoor, Kapoor & Co
AnsweredTreasury income ₹753Cr (vs ₹2,193Cr Q1) due to yield hardening. Expecting ₹700-800Cr this Q3. MTM will recover as rates stabilize.
Guidance
Revenue growth via margin expansion and emerging sector yields
MediumNot explicitly quantified; relying on quality-mix shift and NIM expansion rather than volume
Domestic NIM 2.6-2.7% (prior); now 2.74%, expecting further improvement
HighBeating guidance; expects 7bp+ additional from repo rate hike and balance sheet rebalancing; 25bp further from credit mix shift
Risks the call surfaced
Deposit cost management
MediumDomestic deposit cost 5.18% (Sept), declining to 4.97% (June) but still elevated; targeting 8-9% incremental growth to manage mix; risk of margin compression if cost stays high
Recovery trajectory shortfall
MediumQ2 recovery ₹2.8Cr vs ₹3K-3.5K target; FY27 ₹13Cr full-year guidance may require ₹4.5-5Cr recovery in H2, challenged given seasonal patterns
Emerging sector concentration
Medium₹4Lakh Cr sanctioned in emerging sectors (infra, renewable, data center, power); ₹2.5Lakh Cr disbursed; execution/regulatory risk in these capital-intensive verticals
Treasury/interest rate sensitivity
LowTreasury income ₹753Cr Q2 vs ₹2,193Cr Q1 due to 10-year yield hardening from 7.41% to higher; MTM losses on government security holdings
Management
Score 7/10. Clear on profitability roadmap and margin expansion mechanics; detailed on provisioning rationale and ECL transition; somewhat evasive on FY27 recovery target feasibility Delivered PAT +14.7% YoY, NIM above guidance; credit growth in line but recovery miss (₹2.8Cr vs ₹3-3.5Cr Q2); cost-to-income on track
1 · Q3-Q4 FY27
Recovery acceleration as slippages trend lower; emerging sector loan disbursements accelerating
2 · H2 FY27
Credit card business targeting ₹200Cr fee income; supply chain finance ₹7.6Lakh Cr now ₹5.0Lakh Cr outstanding
3 · Jan-Mar 2027
Wealth management, trade finance verticals ramping; M&A pipeline with one foreign bank MoU in progress
Management credible but guiding cautiously on credit growth (77-78% CD ratio), signaling deposit cost discipline over aggressive expansion.
Informational and educational content only. Not investment advice.