BANKINDIA - Bank of India Share Price

In the Q1 FY26 earnings call, Bank of India management provided a positive outlook amidst a challenging global economic environment. They highlighted that despite global growth slowing due to trade tariffs and conflicts, India's domestic growth remains robust, supported by easing inflation, strong foreign exchange reserves, and government spending. The bank's focus will be on enhancing customer experience, acquiring new customers, and fortifying low-cost deposits, particularly CASA and retail term deposits, to sustain credit growth.

Key forward-looking points include:

1. Advances and Deposits Growth: The bank expects global advances to grow by 12% to 13% and global deposits to increase by 10% to 11% in FY26.

2. Net Interest Margin (NIM): Current global NIM stands at 2.55%. Management indicated it has bottomed out and will range between 2.50% to 2.60% for FY26, anticipating improvements from eased deposit rates in Q3 and Q4.

3. Asset Quality Improvements: The bank reported a decline in gross NPA ratio to 2.92% and net NPA ratio to 0.75% in Q1 FY26. The management intends to keep net NPA at around 0.70% for FY26.

4. Operating Profit & Profitability: Operating profit increased by 9% year-on-year to Rs.4,009 crores, and net profit rose by 32% to Rs.2,252 crores. The guidance for ROA is set at 0.90% for FY26.

5. Strategic Initiatives: New initiatives include a Repo-linked Export Credit facility for corporate borrowers and enhancements in digital banking.

6. CASA Ratio Target: Management targets maintaining CASA at approximately 40% for FY26, leveraging new branches and digital initiatives to sustain growth.

These strategic initiatives and projections reflect the bank's commitment to navigating economic challenges while focusing on growth and profitability.

Major Questions and Answers from the Q&A Section of the Earnings Transcript

1. Question: "As our net NPA is down to 0.75%, how far do we go to reduce this further? Any target for this year and credit cost guidance?"

Answer: We have improved our net NPA to 0.75% from 0.99% in Q1 of FY25. For credit cost, we reported 0.68% and are guiding around 0.70% for FY26. These improvements are a result of our proactive management and recovery strategies.

2. Question: "What has been the interest on Income Tax refunds this quarter versus last quarter?"

Answer: This quarter, we did not have any Income Tax refunds. In the previous quarter, we had some, but this time the figure is zero, which impacts our non-interest income.

3. Question: "The recovery from written off accounts was quite muted this quarter. Any guidance for the full year?"

Answer: The muted recovery was influenced by fewer large recoveries compared to Q4FY25. For FY26, we're targeting a gross cash recovery of around Rs.9,500 crores, similar to last year, although Q1 numbers were lower.

4. Question: "Can you provide guidance for ROA for the full year and when we are expected to reach at least 1% ROA?"

Answer: We are guiding ROA at around 0.90% for FY26, improved from 0.82% this quarter. Achieving 1% ROA will depend on stabilized interest rates and improved net interest income as we progress through the year.

5. Question: "What are the reasons for the increase in the cost-to-income ratio?"

Answer: The cost-to-income ratio has risen partly due to muted income in Q1. Historically, Q1 is challenging, and we expect it to stabilize around 51% as credit flow improves in coming quarters.

6. Question: "What is the visibility on RAM growth?"

Answer: We've seen 18% YoY growth in RAM advances, accounting for 58% of our portfolio. We maintain a healthy pipeline of Rs.80,000 crores, with Rs.10,000 crores in RAM, indicating strong growth prospects.

7. Question: "Do you see accelerated performance in CASA?"

Answer: We are targeting a CASA ratio of 40% for FY26. Despite recent pressures, we achieved YoY growth in CASA, and our strategies, including enhanced digital initiatives, should enable sustained growth.

8. Question: "How do you view treasury and yield on advances under expected rate cuts?"

Answer: We anticipate stability in NIMs with potential for improvement in Q3 when deposit rates are expected to fall following earlier cuts to the repo rate. Interest spreads are currently around 2.80%.

9. Question: "What measures are being implemented to prevent recurrence of fraud?"

Answer: The recent reporting of Rs.1,500 crores in fraud primarily stems from prior declarations reaffirmed by the Supreme Court. We continue to enhance our credit risk management to mitigate future occurrences.

10. Question: "Could the Management clarify the current status of the Rs.20,000 crore fundraising program?"

Answer: We received Board approval for raising Rs.20,000 crores in bonds this fiscal. While we haven't finalized timings, we anticipate issuing in tranches throughout Q2, Q3, and Q4 of FY26.

This summary captures key inquiries and responses, outlining the bank's performance and strategic outlook while adhering to the requested character limits.