Yes we must be conservative and cautious.
To correct you, management says 65% by FY 27, not on a long-term basis. They have never said it will not go below 65%. In fact, the deposit franchise which is loss making of about Rs. 2000 cr as per their concall, will eventually come down to zero and become profitable. While at set up stage, on the expense side there will be opex, depreciation of capital expenditure etc. On the income side, there will be only a low income as deposits will be low. so with scale, it will turn the corner. We can check with the management on this quarter concall, on what the terminal cost to income ratii for the bank will be. All banks eventually reach 50% of so, or lower.
Re cost of deposits, lets check with management in the upcoming concall if they plan to drop rates. Earlier they have said “we dont commit, we could increase, we could reduce, VV quoted a cricket analogy and said we can go backfoot we can go frontfoot, we dont take a fixed position. Depending on need of funds.” For now they reduced it for below 5 lac to 3%, and increased rate for balances >5 lac. So you are right, we cant plan for rate reduction in the modeling, better to be conservative.
Can they raise capital at 1x p to b? Well hopefully they dont. They have always raised at premium, say 1.7x to 1.9X even when their ROE is only 10%.
hopefully (wishfully) stick may do better if and when ROE increase. We cant be sure though, markets are markets.
| Subscribe To Our Free Newsletter |
