State-owned Bank of Maharashtra reported a 103% year on year rise in net profit to Rs 535 crore for the quarter ended September on the back of an improvement in its net interest margin (NIM).

The Pune-based bank had posted a net profit of Rs 264 crore in the year-ago period.

The lender's net interest income (NII) was up 25.84% YoY in Q2FY23 to Rs 1,887 crore. Its net interest margin (NIM) improved to 3.55% in Q2FY23 from 3.27% a year ago.

 The margins will remain steady and be around 3.5% for FY23, said Bank of Maharashtra managing director and CEO A S Rajeev.

Non-interest income fell 40% YoY to Rs 502 crore in the fiscal second quarter ended 30 September 2022.

The bank’s asset quality improved with gross non-performing assets (NPAs) at 3.4% till September 2022, compared with 5.56% a year ago. Net NPAs declined to 0.68% from 1.73%.

 The bank said it expects to transfer 2-3 of its loans to National Asset Reconstruction Company Ltd (NARCL) in the current quarter and recover about Rs 170 crore.

The provision coverage ratio rose to 96.06% in the September quarter from 92.38% in the earlier-year quarter.

The bank’s loan book grew 28.65% YoY, higher than the banking system’s credit growth at 16.4%. Outstanding advances stood at Rs 1.48 trillion as of September 2022.

The bank expects the loan book to expand by about 25% in FY23. The growth is sustainable with sound asset quality and prudent borrower selection, the bank said.

Deposits grew 7.86% YoY to Rs 1.95 trillion in September 2022. This was lower than the banking sector deposit growth of 9.2%. Sequentially, Bank of Maharashtra’s deposit growth moderated from 12.35% YoY in June 2022. It will monetise excess Statutory Liquidity Ratio (SLR) investments in government bonds to make funds available for lending.

The credit-to-deposit ratio was 75.69% as of 30 September 2022, up from 63.47% a year ago. Sequentially, CD ratio rose from 71.75% in June.

The bank’s total capital adequacy ratio (CAR) stood at 16.71%, up from 14.67% a year ago.

 The present capital level is comfortable to support loan growth and the bank may look at raising equity capital towards the last quarter of FY23 or early next financial year to reduce government stake which is at 91%, Rajeev said.