Bank of Maharashtra has witnessed a year-on-year (YoY) increase in deposit costs by 37 basis points (bps) due to significant growth in CASA (Current and Savings) deposits or low-cost deposit accounts. This was announced after the bank reported a positive profit for the second quarter of FY25.
Nidhu Saxena, MD and CEO, said on CNBC-TV18 that the bank has maintained prudent net interest margin (NIM) guidance of 3.75-3.90% while delivering strong year-on-year growth of 22%. He said he is doing so.
Saxena explained that higher deposit costs across the banking system will have a marginal impact on NIM, perhaps 2-5 bps. However, the bank has successfully managed these cost increases.
“The cost of deposits has increased by 37 basis points, but the cost of funds has increased by only 27 basis points,” Saxena said. He added that the bank has availed refinancing options through institutions such as SIDBI and Mudra, which has helped. The bank also saw a significant increase in CASA deposits.
Overall, deposits grew 15% year over year and CASA deposits grew 12%. Additionally, the prepayment yield has improved to 9.21%. Due to these factors, the bank maintained stable NIM, improving slightly by 1 bps year-on-year and 9 bps quarter-on-quarter.
Also read: Bank of Maharashtra Q2 results: Net profit up 44%, asset quality stable
Saxena also said that if the interest rate is cut, banks’ outstanding loans, 37% of which are linked to the repo rate, will be immediately reset. However, deposits will be repriced with a slight delay. As such, we are sticking to our conservative NIM guidance of 3.75-3.90%, even though our performance in recent quarters has been above this range.
Bank of Maharashtra reported a 15% year-on-year increase in net interest income (NII) to Rs 2,806.8 crore from Rs 2,432 crore in the year-ago period in its Q2 FY25 results. The bank also recorded a net profit of Rs 1,326 crore, up 44% from Rs 919 crore in the year-ago period.
Earlier this month, it was announced that Life Insurance Corporation of India (LIC) has increased its stake in Bank of Maharashtra from 4.05% to 7.10%. This was done after the bank allotted 25.96 billion equity shares to LIC through Qualified Institutional Placement (QIP).
Also read: LIC increases stake in Bank of Maharashtra to 7.10% through QIP
As of October 5, 2024, LIC’s shareholding ratio is over 5%. The shares were issued at ₹57.36 per share, contributing an additional 3.376% to LIC’s equity.
Bank of Maharashtra has a market capitalization of around Rs 42,072.81 crore and its stock price has increased nearly 16 per cent in the past one year.
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