Bank of Maharashtra Q1 FY26 Results: PAT up 23%, FY26 Guidance on Track
Solid start to FY26 with ROA and NIM above guidance. Deposit & advance growth trails run-rate, but strong execution leaves room for re-rating if targets are met.
Confused about analyzing bank stocks? Most investors get confused about NIM’s and CASA. Here’s how to actually do it right.
1. Public Sector Bank
bankofmaharashtra.in | NSE: MAHABANK
Products & Services
2. FY21-25: PAT CAGR of 96% & Net Interest Income CAGR of 24%
3. FY25: PAT up 36% & Net Interest Income up 19% YoY
4. Q1-26: PAT up 23% & Net Interest Income up 18% YoY
Strong sequential and annual growth across all major profitability metrics.
Profitability momentum driven by robust credit growth and margin resilience.
Net Interest Margin held above 4% despite declining interest rate environment.
Cost efficiency improved, with Cost-to-Income ratio down YoY and QoQ.
Asset quality stable: Net NPA at 0.18%; provision coverage ratio above 98%.
Retail credit grew 35.4% YoY, led by strong performance in housing and vehicle segments.
CASA ratio at a healthy 50.07%, supporting low-cost funding.
Healthy ROA progression to 1.80%, indicating quality earnings.
5. Business metrics: Strong Return ratios
ROE consistently above 20% — rare for PSU banks
Margins stable at peak: NIM edged up to 4.01%, sustaining best-in-class levels among PSU banks.
ROA at all-time high: 1.80% in Q1 FY26 — a sharp contrast to sub-1% levels just 2 years ago, driven by improved asset quality and cost discipline.
Cost discipline visible: Cost-to-income ratio improved to 37.57%, down 1% sequentially, signaling better operating leverage.
6. Guidance vs. Performance: Q1 FY26 Check-In
Key Wins in Q1 FY26
Margins held strong despite rate cuts: NIM of 4.01% > guided 3.75%.
ROA continues upward trajectory, beating target in Q1 itself.
Asset quality stable with Net NPA at 0.18% and GNPA at 1.74%.
Cost efficiency improved: Cost-to-income better than FY25 exit level.
Areas to Watch
Growth pacing (advances and deposits) is slightly below full-year targets, but may normalize with seasonal uptick expected in Q3–Q4.
Management had indicated that Q4 tends to be heavier due to institutional flows and one-off effects (e.g., Maharashtra govt GR releases), so Q1 softness may be seasonal.
Bank of Maharashtra has started FY26 strongly, beating conservative guidance on profitability metrics (NIM, ROA), and maintaining solid control over cost and asset quality. While growth is slightly below guided run-rate, execution discipline and strong Q1 profitability suggest room for upward revisions later in the year.
7. Valuation Analysis
7.1 Valuation Snapshot — Bank of Maharashtra
Supporting Assumptions:
FY26E PAT based on 1.75% ROA × avg assets for FY26
FY26E Net Worth = FY25 NW + FY26E PAT – FY26E Dividend
Valuation Below Intrinsic Strength
With ROA of 1.75% and ROE above 20%, BoM is priced more like a mid-tier PSU bank than one delivering top-quartile returns.
P/E of 6.3× and P/B of 1.39× appear conservative, especially given:
Stable margins
Low credit costs (Net NPA 0.18%)
Growing high-quality loan book (RAM >62%)
Earnings Yield Signals Undervaluation
15.8% forward earnings yield significantly exceeds bond yields (~7%) and cost of equity (~11–12%).
Implies the stock offers a strong margin of safety, assuming FY26 earnings are delivered.
Re-Rating Opportunity
If Bank of Maharashtra sustains:
ROA >1.7%
Credit growth ~17%
GNPA <2% and credit cost <1%
Then:
Forward P/E could re-rate to 8–9×, implying 25–40% upside
P/B could expand to 1.6–1.7×, in line with peers with similar return profiles
At current levels, BoM offers a rare mix of PSU discount + private bank metrics.
The stock is not priced for execution — but for doubt.
If delivery continues, valuation re-rating is not just possible — it’s rational.
7.2 Opportunity at Current Valuation
Consistent Execution at Scale
Track record matters: BoM has consistently delivered ROA of ~1.75% and ROE >20% over multiple quarters — exceptional for a PSU bank.
TTM PAT growth >20%, and FY26 PAT is projected to grow another 20%, driven by:
High-quality credit growth in RAM segment (+17% guided)
Low credit costs (<1%) and stable NIMs (~4%)
Balance Sheet Efficiency + Conservative Leverage
Net NPA is just 0.18%, among the lowest in the PSU pack — reflects underwriting discipline and effective recovery.
Cost-to-income at 37.6% compares favorably even with private sector peers.
CASA >50% continues to support low-cost liabilities — rare among peers.
Valuation Compression vs. Return Profile
Despite sustained return ratios (ROE 20%+, ROA 1.75%), BoM trades at just:
6.33× FY26E P/E
1.39× FY26E P/B
Earnings yield ~15.8% far exceeds cost of equity and risk-free rate — market is not pricing in the consistency yet.
If BoM sustains these metrics in FY26, current valuation offers optionality on a re-rating without requiring any structural transformation.
Optionality from Sectoral Re-rating
PSU banks are still trading at a discount to intrinsic profitability.
BoM could emerge as the first PSU bank to trade like a private bank, if it maintains:
Best-in-class return ratios
Low risk profile
Self-funded growth
7.3 Risk at Current Valuation
Execution Risk in Growth Composition
BoM’s 17% credit growth guidance is ambitious and will require:
Continued momentum in RAM (Retail, Agri, MSME)
Stable macro and transmission of rate cuts
Any moderation in loan demand or CASA ratio compression could pressure NIMs.
Valuation Not Demanding — But Leaves Less Room for Error
At 1.39× P/B and 6.3× P/E, the valuation is not stretched — but assumes earnings will be delivered without major volatility.
Any slip in asset quality, NIM compression, or spike in opex (e.g. branch expansion or hiring) could limit upside.
Capital-raising Uncertainty (Not Risk, But a Watchlist Item)
While CET-1 is comfortable (~16%), BoM has board approval for capital raise via QIP/bonds.
Dilution risk is not immediate, but timing and terms will influence return metrics and P/B.
Conclusion:
Valuation reflects confidence in BoM’s execution — not euphoria.
The market is pricing in consistency, not breakout upside.
If BoM simply delivers what it has guided, there is still room for multiple expansion without requiring aggressive forecasts.
Previous coverage of MAHABANK
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