IDBI Bank sees slowdown in loan growth in coming qtrs

Excerpts from CNBC-TV18’s exclusive interview with RK Bansal:

Q: What led to a flat bottom line performance?

A: We had to take some hit on the shifting of AFS portfolio due to the interest rate rising scenario and we also had to take some hit on corporate bonds.

Q: How much was the hit?

A: We have shifted our entire government security AFS portfolio and there we took a hit of about Rs 31 crore. In the corporate bond portfolio, we had to make a provision of about Rs 17 crore. We had to take a total Rs 48 crore of a hit in total.

Q: What were your advances growth this quarter and what have you done in terms of Net interest margins (NIM)?

A: The NIM in the first quarter is usually low, it is actually 0.32 only which is quite low as compared to our own but it is better than June 2007, where it was only 0.28.

Q: What was your advances growth this quarter?

A: Year on Year, the advances growth is about 31% but if you compare with the March 2008, the advances have slightly come down.

Q: Have you seen any major increase on yield on advances currently and is the trend shifting more towards retail and SME lending continuing?

A: We want to shift to retail and SME and that trend is actually quite visible. We have been intentionally removing and allowing some of your corporate advances when the yield was low to call off. In fact the yield on the earning assets is about 9% totals on an average including investments.

Q: You expect this to rise going forward and to what levels??

A: Our yield on advances is already above 10.2% and the yield on total asset is about 9%. We expect  an increase of about half a percent this year.

Q: What is your current capital adequacy ratio and are you looking any fund infusion going forward this year?

A: Our current capital adequacy ratio is quite comfortable at 12.02%, which includes a tier one of 7.48%. So immediately, we don’t feel the need during the current year and we have quite substantial headroom for the tier one and tier two bonds.

Q: What are your NPA levels this quarter and as we are given to understand your provision have actually come down from Rs 85 crore to about 19.5 crore, what is the outlook in the kind of recoveries that you are looking at targeting to make for the entire financial year?

A: Our growth NPA ratio is 1.98 and net NPA is 1.36, these have slightly gone up as compared to March 2008 though they have come down to June 2007. They have gone up as compared to March 2008 mainly because the advances portfolio slightly came down and in absolute numbers, both are almost same as March 2008.

The total provisioning has come down because in the last quarter, we had provision on preference shares and some of the loans. We completed that exercise during March FY08, so we had made full provision against most of those cases.

Q: Tell us about your expansion plan particularly into international markets Singapore, Bahrain, UK? Are they as per course and what will be the kind of money you would require to set yourself up there?

A: This year we have already got approvals from Bahrain and Dubai. Those two branches should be up in the current year. In Singapore, we are still talking to the monetary authorities and opening a branch does not require so much capital, it requires liquidity.

Q: Are you sensing any slowdown currently in credit offtake or is loan growth still healthy? This year would you be looking at any bit of value unlocking from your stakes in NSE, IDFC and IFCI?

A: Some slowdown is visible especially in some of the corporates, which were putting up new projects. They are reviewing those new projects and most of the bigger corporates are going ahead with the listing plans. Some slowdown may happen in Q2 or Q3.

We keep on selling some shares of IDFC, IFCI and NSE  has already reached FDI and FII limits. So immediately that may not be possible but we are open to divert a stake in any of the corporates where we can get some better value and do not feel strategic nature of investment.