Next 12 months become pretty crucial in terms of how much book value accretion can happen.
Right now the book value is ~22,000 Cr with funded assets at 1.45 lakh Cr
If bank wants to be 20% credit growth, it will need to lend out ~29,000 Cr over the next 12 months. A part of that will be pulled from the excess SLR as of Sep 30, 2022 but the accretion to net worth will need to be much sharper than the current rate of ~600 Cr per quarter.
The last thing shareholders will want to see is equity dilution to fund the growth aspirations of 20%+
ROE at 10% is good but it will need to conclusively cross 15% and stay there for some time to enable the advances to grow at 20% over the next few years. Management indicates that the incremental ROE has been higher than 20% but the market cares about absolute ROE to derive comfort.
Would love to see the management accelerate their cost optimization plan and show faster than projected improvement in Cost to Income ratio. Retail book is granular and will have higher costs but we need a fine balance from here till the street derives comfort that the accretion to net worth can fund the growth aspirations without needing equity dilution.
Overall good results but more hunger on optimizing cost to income would be welcome.
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