The stock of Bank of Maharashtra, the 10th largest PSU bank by loan book, hit a fresh 52-week high of ₹67.8 on January 14. However, it is trading at a 11-per cent discount to highs recorded in June 2024 and at a 32-per cent discount to all-time-high price recorded in January 2008.

The bank has been consistently reporting healthy growth in balance sheet and earnings quarter after quarter. Apart from good asset-quality metrics, the bank sports class-leading CASA ratio and cost-to-income ratio.

Its stock trades at a price-to-book value (P/B) ratio of 1.5x. Compared with peer PSUs and a few private banks which trade at a similar multiple (see table), Bank of Maharashtra fares better in terms of return on assets (RoA). For instance, Indian Overseas Bank trades at a higher 1.8x P/B ratio, but has delivered an RoA of just 1.2 per cent. This suggests a possible rerating of the stock in future. Hence, long-term investors can consider accumulating the stock.

About the bank

Bank of Maharashtra is a mid-cap PSU bank, with a promoter holding of about 74 per cent. This, after the government pared a 6-per cent stake in an offer for sale in December.

The bank manages a loan book of about ₹2.75 lakh crore globally — of which, overseas advances account just for 1.3 per cent. Loans to the retail, agriculture, MSME and corporate sector constitute 31 per cent, 13 per cent, 19 per cent and 36 per cent respectively. A deeper bifurcation of the retail book can be found in the chart.

Loans linked to MCLR (marginal cost of lending rate) and RLLR (repo-linked lending rate) make about 55 per cent and 40 per cent of the overall loan book. The rest of the book (due to lack of information) may be assumed to consist of other loan types such as those based on a fixed interest rate. In the event of a rate cut, unlike RLLR loans, MCLR loans need not be repriced immediately, as they are tied to the bank’s cost of funds and not the repo rate.

In 9M-FY26, the bank earned a blended yield of 9.1 per cent on loans, paid 4.6 per cent on deposits and borrowings and netted a margin of 3.9 per cent.

Financials

Behind the bank’s strong fundamentals, today, lies a bleak past. The bank was put under the RBI’s PCA (prompt corrective action) in June 2017, when loan defaults in MSME and corporate segments spiralled out of control. Gross NPA and net NPA ratios were 18.6 per cent and 12.5 per cent then. However, the bank made quick progress to exit PCA by January 2019.

Between FY19 and FY25, while the banking system’s loans and deposits grew at a compounded 11 per cent each, those of the bank grew at CAGRs of 17 per cent and 14 per cent respectively, thus gaining market share. After three years (FY17-19) of losses, the bank turned profitable again in FY20 with a net profit of ₹389 crore. Net profit for FY25 stood at ₹5,520 crore.

In 9M-FY26, too, the bank gained market share in advances and deposits. The bank’s advances and deposits grew a higher 20 per cent and 15 per cent respectively, while those of the system grew 15 per cent and 13 per cent. Net profit touched ₹5,005 crore in the same period, growing over 24 per cent.

What works

As said earlier, the bank enjoys best-in-class CASA (current account savings account) ratio and cost-to-income ratio of 49.5 per cent and 37.3 per cent respectively, which is not even found among the larger banks. IDFC First Bank is the only other bank to have a similar CASA ratio. This helps the bank to price its loans competitively. However, the cost-to-income ratio faces an upside risk, as the bank has plans to expand its branch network by 1,000 more branches in the next five years. Currently, there are over 2,700 branches. The bank is well-capitalised with a capital adequacy ratio of 17.1 per cent.

Asset-quality metrics impart confidence. As of Q3 FY26, GNPA and NNPA ratio stand at 1.6 per cent and 0.15 per cent. The ratio of special mention accounts (SMA 1 & 2) is currently at a comfortable 0.2 per cent and has been in that range for eight quarters now. SMA 1 refers to those loans that are overdue by more than 30 days but not beyond 60 days. Similarly, SMA 2 refers to those that are overdue by more than 60 days but not beyond 90 days. Thus, the SMA ratio keeps track of early delinquencies which could become tomorrow’s NPAs.

The bank aggressively provides for bad loans with a provision coverage ratio of 90.7 per cent. Slippages (new loans that are added to NPAs), too, are contained, with a slippage ratio of 1.2 per cent. Credit cost (provisions and write-offs as a percentage of loans) for the three quarters of FY26 is at an average of 1 per cent, which should fall in the best quartile, while not being the least in the industry.

While these ratios are mere outcomes, the bank’s conservative underwriting explains them. For instance, in the last 12 months, among home loans sanctioned, 80 per cent were to borrowers with a credit score of at least 750 — of which 23 per cent were to those with a score of 800. No loan was sanctioned to a borrower with a score below 681. While conservative underwriting means lower yields, the high CASA ratio helps pad the margin.

Guidance

For FY26, the management has guided for a loan growth of 17 per cent and a NNPA ratio of 0.25 per cent. Guidance for cost-to-income ratio and RoA are at 40 per cent and 1.75 per cent.

It further expects to end FY26 with a NIM (net interest margin) of 3.75 per cent. Before the RBI started cutting rates, the average maturity of deposits then stood at 8-10 months. Per the management, 80 per cent of these have already been repriced and the rest are expected to be repriced in Q4. The effect of the recent repo cut of 25 basis points in December, too, is set to be transmitted to repo-linked loans in the upcoming quarter. However, it remains to be seen whether it also proportionately trims deposit rates, considering the competition.

Published on January 24, 2026