United Bank of India put up a poor show in its Q4 earnings. Thanks to the rise in bad loans. However, the bank CMD Archana Bhargava is confident of bringing stress assets down in the coming quarters.
United Bank of India's (UBI) net profit tanked 79 percent year-on-year to Rs 31 crore. However, the bank is unlikely to see any big loan account slipping into bad loan category in the coming quarters.
"Some slippages do happen even after restructuring because of various reasons, but I do not expect it to be more than 30 percent of what we did in the last quarter," Archana Bhargava - chairman and managing director of the bank told CNBC-TV18 in an interview.
Bhargava is hopeful that the slippages in the April - June quarter will be lesser than Rs 1057 crore, recorded in January - March quarter.
During the fourth quarter, the bank has restructured loans in the agriculture and micro, small and medium enterprise (MSME) sectors and in some select large accounts.
Below is the verbatim transcript of Archana Bhargava’s interview on CNBC-TV18
Q: What are your profits as well as your net interest income (NII)?
A: Our total business has grown to Rs 1,70,359 crore registering a year on year (YoY) growth of 11.35 percent. The total deposits have increased to Rs 1,00,651 crore reflecting a growth of 12.94 percent. The total advances have risen to Rs 69,708 crore, again a YoY growth of 9.14 percent.
The current account savings account (CASA) ratio has been maintained at 40 percent of our total deposits. The core retail deposits as a percentage of our total deposits has increased to 85 percent which is up from 81 percent. Resultantly, our bulk deposits at preferential rates including certificate of deposits (CDs) have come down substantially to 11.91 percent from last year’s 18.32 percent level.
Our priority sector advances continue to be 40 percent of our total advances with an increase of 15 percent YoY to reach Rs 25,604 crore.
Our CD ratio is healthy. Net income increased to Rs 9251 crore with a YoY growth of 16.21 percent. Our non-interest income has risen to Rs 1067 crore which reflects a YoY growth of 45 percent. Yield on investments has improved to 7.91 percent. Yield on advances has increased to 11.31 percent. Interest expenditure has increased to 23.39 percent to reach Rs 6764 crore.
Our operating expenditure increased to Rs 1504 crore with a YoY growth of 8.72 percent and operating profit has recorded a YoY growth of 12 percent to reach Rs 2050 crore.
Our net profit is down. It is Rs 392 crore and has come down from Rs 632 crore last year. It translates to a 38 percent reduction due to higher provisioning for the year which stands at Rs 1658 crore.
The non-performing assets (NPA) provisions are Rs 1010 crore. The provisions for restructured accounts stand at Rs 180 crore and there is a provision for Rs 490 crore that has been made for pension, gratuity and wages.
Net interest margin (NIM) still stands at 2.67 percent for the full year.
Q: Your aggregate non performing loan (NPL) has gone up from Rs 2901 crore in the December quarter to Rs 2963 crore. It is a marginal Rs 60 crore increase in NPL quarter-on-quarter (QoQ) but the percentage of the book has gone down from 4.4 percent in December to 4.25 percent. The overall gross NPL percentage has gone down but your net NPL has gone up QoQ from 2.2 to 2.87. Can you give us more details on your NPL – what were the fresh slippages in Q4 and are there any restructured assets?
A: The gross non performing assets (NPAs) appear to go down from QoQ because there has been a write-off. We had three large accounts written down during the whole year. The write-off was Rs 1097 crore. There were accounts of Kingfisher, there was an IT and a steel account in it. So, the write-off during the year has been Rs 1097 crore and there has been a lot of recovery. We did cash recovery of Rs 375 crore, there were upgradations of another Rs 300 crore that happened. Though the gross NPA figure indicated an increase on a year-on-year (YoY) basis from Rs 1900 crore to Rs 2900 crore, the net addition after the recovery figures set off was only Rs 7788 crore. We still have a good provision coverage ratio at 62.50 percent.
Q: In Q3 you reported slippages of Rs 680 crore, how much was it in Q4? Also, restructured assets which were Rs 600 crore in Q3, how much was that in Q4?
A: I could give you the top 10 restructured accounts that have happened. These are Air India, Hindustan Construction Company, Bharati Shipyard, Jodhpur Vidyut Vitran Nigam (JDVVNL), Karaikal Port, GTL Infrastructure and also Alaknanda Hydro. Top 10 NPA accounts that have been restructured in the NPA category include hospitality, paper, energy and toll ways.
Q: Have your Q4 provisioning at Rs 759 crore taken away all the profits that you made and without the tax write-back?
A: There has been a huge slippage in Q4 at around Rs 1057 crore. Also, in our provisioning we have provided Rs 490 crore for our pension gratuity and wage payments. This is totally in conformity with the Indian Banks' Association (IBA) guidelines. So, there is a huge provision that has been locked up in staff benefits.
Q: Do you expect the asset quality to worsen because your slippages have gone up? Could you provide us any guidance on what the Q1 slippages, restructured assets, pipeline is looking like? What can we expect in the next three months?
A: The total restructured book stands at Rs 4555 crore. We have made provisions of Rs 180 crore for the restructured book. The restructuring has happened in the agriculture and micro, small and medium enterprise (MSME) sectors and the other large accounts. We do not expect any large scale accounts to slide in the coming quarters. All the weak accounts have been fully provided for.
Q: Is Rs 1057 crore of fresh slippages in Q4 likely to be repeated in the current quarter? Do you think the fresh slippages in April-June quarter would be less?
A: Definitely lesser than what we have witnessed during this quarter. Some slippages do happen even after restructuring because of various reasons, but I do not expect it to be more than 30 percent of what we did in the last quarter.
Q: How much more would you need to provide because even in Q3 your net profits have gone down by 80 percent because of increased provisions? This time around as well, you are seeing similar performance, profits down about 80 percent because of higher provisions. Any guidance, how much more would you provide to account for your bad assets?
A: As on date, we have fully provided for the bad assets appearing on March 31 2013. We do not anticipate any major slides during the current quarter and there is no shortfall in the provisions. Everything is fully provided for, but there have been some slippages from April 1 till May 15 and we will take care that either restructuring or upgradation happens. If it needs then we would of course provide, but the silver lining is that all other provisions are taken care of and so if slippages do happen we should be able to address them.