Whalesbook
Earnings Highlights
The lender reported a 6% year-on-year growth in net interest income (NII) for the December quarter, meeting expectations. Pre-provision operating profit (PPOP) also rose by a healthy 8% from the previous year. Profit after tax ultimately climbed 11% year-on-year, surpassing analyst forecasts. This strong bottom-line performance was significantly aided by lower-than-expected provisions.
Margin Expansion and Asset Quality
A key positive was the expansion in net interest margins (NIMs), which rose to 3.51% from 3.4% in the September quarter, marking an 11 basis point improvement that exceeded the projected 6 basis points. Credit costs eased to approximately 41 basis points, down from 51 basis points sequentially, driven in part by the release of ₹1,040 crore in contingent provisions. Asset quality remained a stalwart, with management confirming no specific portfolio segments showing early signs of stress.
Management Outlook and Strategy
Looking ahead, management reiterated its target of achieving a loan-to-deposit ratio (LDR) of around 95% by the end of FY26, with a slight moderation expected by FY27. The bank anticipates system credit growth of 12-13% in FY27 and aims to outpace the market. Clear visibility for margin improvement over the next two to three years was also projected. However, the bank did report approximately ₹500 crore in additional provisions following a regulatory inspection, though this was clarified as fully absorbed. Executive Director Bhavesh Zaveri also requested that his re-appointment not be considered.
Analyst Consensus and Price Targets
Brokerages largely maintained a constructive stance. CLSA and Bernstein kept 'Outperform' ratings with target prices of ₹1,200. Jefferies reiterated its 'Buy' rating at ₹1,240, while Kotak Institutional Equities maintained an 'Add' rating at ₹1,050. Out of 48 analysts covering the bank, 46 recommend a 'Buy' and two suggest 'Hold'. Shares closed 0.55% higher at ₹930.55 on Friday ahead of the earnings announcement.