Indian Overseas Bank's (IOB) net profit rose by 7.4 percent year-on-year to Rs 116 crore in the third quarter of financial year 2012-13, impacted by higher provisions. Net interest income increased 13 percent to Rs 1,381.5 crore from Rs 1,221 crore during the same period.
Gross non-performing asset (NPA) went up by 26 basis points QoQ to 4.13 percent and net NPA moved up by 8 basis points QoQ to 2.33 percent in October-December quarter.
Answering a query on slippages, M Narendra, chairman, IOB told CNBC-Tv18 that going forward our slippage will be moderated. "Overall, we will ensure that the slippage will be brought down to the minimum in this immediate quarter and next quarter," he asserted.
He further added, ideally we would like to step up our recovery efforts. "All together the cash recovery has been Rs 750 crore up to now, other than the upgradation," he said.
With focus continuing on recovery, we will be able to reduce our Gross non-performing asset (NPA) around 4.25 percent.
Below is the edited transcript of his interview on CNBC-TV18
Q: Asset quality pressure this time as per the numbers that you have released. Your gross NPAs increasing to 4.13 percent. Could you tell us from which quarters you are seeing pressure and also how are your slippages at this point then?
A: The incremental slippage has been reasonably controlled from Q1 to Q3 and it is not in the bigger account. Bigger account we had only one account in aviation which as per the current date, it has got into slippage. We also had one in the Hyderabad based paper industry. One more was in infrastructure, in Kolkata which is again a consortium account where we had some over dues beyond the 90 days. These three accounts are near to Rs 75-100 crore. Beyond that there are other all smaller accounts and they are not from the restructured category. Restructured category our slippage has been lower in this quarter also.
Going forward our slippage will be moderated and definitely as we had anticipated in the full year also that we will have some slippage, but we will have to focus more on recovery. In the recovery area we have been able to perform. So, the NPA percentage is 4.13 percent from 3.87 of the last quarter but one must take a note that we were able to maintain the provision coverage at 59 percent. That is how the net NPA has just moved from 2.25 to 2.33 percent from the last quarter to this quarter.
Asset quality concerns which are generally seen, it is in line with the industry because sometimes the time lag is there. Supposing, we did not have much NPA in the last year, there may be some NPA this year, so, we have to take that into account.
Overall, as a guidance I can say that we will be working on that. We will ensure that the slippage will be brought down to the minimum in this immediate quarter and next quarter.
Q: You said incremental slippages have been controlled but you also mentioned three big accounts aviation, infrastructure sectors could you share with us what these accounts are and what your exposure is to them at this point?
A: It normally not prudent but there is one account which you are all aware where we earlier had the payment regularly coming but in the current quarter, it is from the Mumbai and Bangalore based airline, the same airline which now we had to take it as a NPA. As far as the paper there is one from a very leading paper in Hyderabad. It is better not give out names. In infrastructure, there is one in Kolkata they are in construction and all and that is a local account.
Q: Going on guidance as far as asset quality goes, your guidance for gross NPA and net NPA for the fiscal then could you share that with us?
A: Ideally, we would like to now step up the recovery efforts. This quarter also from our cash recovery, we were able to make Rs 199 crore recovery and upgradation of Rs 163 crore which is better than Q2. All together the cash recovery has been Rs 750 crore up to now, other than the upgradation.
So with the recovery focus continuing, which is showing growth, we will be able to reduce our gross NPA around 4.25. It may not be beyond that so which means that slippage should not be more than Rs 800 crore, and that is what we are looking at. We are hopeful that we will be able to work in this quarter.
Q: As far as your margins go, we don't have your Net interest margins (NIMs) figure, how has NIMs fared this quarter and also guidance on that front?
A: We have been moderating the bulk deposit pickup. That has resulted, our bulk deposits coming from 34 percent to 21 percent, which resulted in improving the cost of funds from 7.36 to 7.27 percent. Our yield on funds also moved from 9.56 to 9.68 percent that resulted in the net interest margin moving from 2.33 to 2.51 percent. So, we are coming back to normalcy as far as the net interest margin is concerned.
Q: Post the Reserve Bank of India (RBI) policy yesterday, any rate movement from your end as well?
A: Immediately, for our housing loan we had given 10.50 percent up to Rs 30 lakh, which we are now giving up to Rs 75 lakh. But as far as the base rate, we have to meet and decide. It is a very tough decision in the sense it will have immediate impact. So we have to cover it up by the other income and by further moderation of deposit rates; aligning to the cost we have to do that.