Strong revenue growth masks margin pressure; capital overhang unresolved

Net Profit ₹1084.1 Cr, +63.2% YoY delivered

Reported advances growth 23.7% YoY aligns; normalisation credible given ₹15k Cr FCNR mobilization

NIM compression documented; attributed to FCNR & lower deposit yields; roadmap for recovery provided

Asset quality metrics stable & improving; slippages 1.3% of advances unchanged Q-o-Q

Delivered 17.1% YoY growth, at upper band of guidance; exceeding expectation

Q1 aspiration 15-17% average; Q2 delivered 17.1% YoY, hitting upper band. Retail +35%, CB +20.2%, Corporate +31.4% YoY.

Q1 warned of NIM toward 3% over 2 years; Q2 now 2.6% with 12-14bps compression. Roadmap for recovery (RIDF, repo) clarified but timeline uncertain.

Supreme Court upheld write-down (INR 8.4k Cr), reducing CET-1 pro forma ~240bps. New overhang not in prior call; capital raise deferred pending assessment.

NPA Gross improved to 1.2% (vs 1.3% prior), Net improved to 0.2%. Slippages stable 1.3% of advances—confirms stabilization trend.

Management now highlighting post-November repricing benefit (repo decision Oct 2026). Not discussed in Q1; part of new margin recovery narrative.

One Bank concept (cross-selling synergies), Credit growth & scale, SMBC ecosystem value. Seeing optimism in cross-referrals and improved traction.

Credit costs improving via NPA decline; deposit costs rising—margin headwind near-term; competitive pricing persistent. Managing via scale & granular deposits.

CET-1 pro forma 11.4% on reinstatement, Overall Tier 1 13.7% pro forma. Comfortable level for growth; capital raise deferred pending assessment.

Floating-rate book ~65% (repo/T-bill linked); fixed ~35%. 25bps repo increase yields single-digit margin increase; spread dynamics matter more than rate alone.

Deployment Q3/Q4; Credit Risk offers upside, but MDR rules mean sizing premature. Bilateral arrangements & 3rd-party providers will determine spread realization.

P&L impact taken via P&L entry (reversible); coupon payment status under assessment per terms & information memorandum. No pre-decision on timing or amount.

Q3 ₹4500 Cr, Q4 ₹3500 Cr redemption expected. NIM benefit 25-50 bps potential via margin widening & deposit repricing. Conservative on timing; market forces drive actual benefit.

FY27 ROA target 1% (core ROA improving, currently H1 ~90bps vs guidance). Non-core items (Security Receipts, DTA) will play out; confident on core ROA delivery.

DTA (₹8000 Cr potential) + stored capital (Security Receipts ₹15 Bn FV) provide levers. Growth capital not urgent; comfortable at 11.4% CET-1 pro forma but mindful of stakeholder comfort.

Slippages holding at 1.2-1.3% of advances; book growing well. Normalized level reasonable; basis point improvements expected, not wholesale decline.

Under assessment; information memorandum terms guide decision. Future coupons will be evaluated per IM; no pre-announcement intended.

Agencies marked it credit-neutral; two domestic, one international. No material rating impact. Regulatory CET-1 unchanged; re-evaluation ongoing.

Three separate workstreams: (1) assess judgment implications, (2) legal remedies evaluation, (3) capital solutions. No pre-emption; decisions deferred pending assessment completion.

Q2 large increase in short-term (investments, Nostro). Corporate & Institutional flat Q-o-Q but growth on Y-o-Y. Channelization Q3 expected; timing gradual.

Q2 delivered 17.1% YoY (ex-FCTN 17.6%). On track; upper band achieved. Retail, CB, Corporate all contributing.

Q2 NIM 2.6% (12-14bps compression); RIDF rundown ₹8000 Cr H2, repo hike 25bps, deposit repricing Nov onwards. Market forces will ultimately drive spreads.

Management cautious on mechanical benefit; floating-rate book ~65%, fixed ~35%. Competitive intensity & deposit pricing offsetting factors.

Supreme Court upheld AT-1 write-down (₹8.4k Cr), reducing CET-1 pro forma 240bps. Capital raise timing deferred. Regulatory pressure likely if growth stays >15% & capital stays <12%.

Q2 NIM 2.6%, down 12-14bps from Q1, attributed to FCNR(B) mobilization (₹18.5k Cr) & higher liquidity costs. Repo rate hike benefit may offset only partially if spreads compress further.

Ex-FCNR, loan growth ~17.6% vs deposit growth ~15% ex-special deposits. Credit-Deposit Ratio 83.1% (normalized). Further growth without deposit acceleration risks ratio compression & capital pressure.

Sequential PAT ₹1084 Cr vs ₹1072 Cr prior Q (1.1% growth) vs revenue +7.4% suggests margin compression outpacing growth. Q3/Q4 dependent on FCNR deployment & margin recovery.

Management acknowledged competitive intensity in deposit franchise (retail up 20.9% YoY suggests rate-driven growth). Premium on short-term deposits & certificates rising. Loan repricing power constrained.