Bank Of Maharashtra – Q3FY13 Result Review

Bank of Maharashtra (BOM) came out with its Dec 2012 quarter numbers on Jan 22, 2013 and it posted robust business and excellent topline and bottomline growth. Its asset quality showed strength, but faced serious headwinds when it came to Net Interest Margin (NIM). The stock today is trading up by 0.67 per cent to Rs 59.75 per share. The key financial parameters of the bank are as follows:

When most of the banks, especially public banks, are facing serious headwinds on the asset quality front, BOM witnessed improvement on that front as both gross and net NPA improved on sequential basis which is commendable. Gross and net NPA decreased by 29 and 22 basis points to 1.71% and 0.66% respectively. As on December 2012, Provision Coverage Ratio (PCR) stands at 82.83% which is well above the RBI guidelines of a minimum of 70%.

BOM’s robust business growth is evident from the fact that as on Dec 2012, advances of the bank grew by 48% to Rs 75078 crore while deposits grew by 42% to Rs 99276 crore. Priority sector lending (which accounts for 30% of total advances) grew by 50% to Rs 22563 crore. As per RBI requirement, every bank must give loans of around 40% of the total advances to the priority sector segment. And hence, to meet this requirement, one may further see growth in this segment in the March quarter of 2013. The credit deposit ratio currently stands at 75.63%. 

The Bank faced serious headwinds on the margin front which is not a good sign. Net Interest Margin (NIM) decreased by 10 basis points to 2.89% on sequential basis while it declined sustainably by 39 basis points on a YoY basis. This was after the cost of deposit increased sustainably by 41 basis points to 6.86% while the yield on advance decreased by 10 basis points to 11.66% on a YoY basis. We believe that with the interest rate expected to soften gradually in the coming year, the bank would see improvements in their margin. 

The segmental performance of the bank was very volatile. The retail segment performed the worst with revenue from the same decreased by 68% to Rs 196 crore while it posted a loss of Rs 81 crore against a profit of Rs 127 crore in the similar quarter last year. On the other hand, Treasury and Wholesale banking segment performed extremely well, with profits growing by 211% and 123% to Rs 84 crore and Rs 368 crore respectively. 

The bank opened 76 branches in the first nine months of FY2013 taking the total headcount to 1665. The bank, we suppose, posted good numbers except some issues that it faced on the margin front, which are expected to improve..On the valuation front, the bank is currently available at price to book value of 1x which is fairly valued and hence one can invest in the counter keeping in mind long term horizon.