In an interview to CNBC-TV18, Upendra Kamath, chief managing director, Vijaya Bank gives his views on the bank's Q3 performance. The bank's net profit rose marginally to Rs 127 crore in the third quarter of financial year 2012-13 from Rs 124 crore in a year ago period.
Kamath says, despite the Q3's net interest margins (NIMs) at 2.08%, he expects a better NIM and net interest income (NII) in Q4.
On Q3's slippages of Rs 304 crore, Kamath says, "We have already recovered, upgraded and written off little more than Rs 304 crore and therefore resultantly the gross NPA numbers have come down to Rs 1,889 crore compared to the opening stock of Rs 1,897 crore."
Below is the edited transcript of Kamath's interview to CNBC-TV18.
Q: Asset quality pressure as far as the gross Non-Performing Asset (NPA) level goes seems to have eased significantly. Give us the details of the slippages this quarter. You have reported around Rs 343 crore of slippages this quarter.
A: The total slippages this quarter is of the order of Rs 304 crore in Q3, but we have already recovered, upgraded and written off little more than Rs 304 crore and therefore resultantly the gross NPA numbers have come down to Rs 1,889 crore compared to the opening stock of Rs 1,897 crore. In terms of percentage, the gross NPA has come down from 3.17 percent to 2.91 percent and the net NPA has come down from Rs 1,116 crore in September to Rs 1,098 crore in December 2012. In percentage terms net NPA has come down from 1.90 percent to 1.71 percent.
Q: What was the fresh restructuring done this quarter? You were seeing some pressure from discoms and infrastructure sector. So, what really is the pipeline of restructuring going ahead as well?
A: The number of restructured accounts were 19,280, aggregating to Rs 6,101 crore. After accounting for repayments, upgradations, closures etc, the current outstanding restructured loan book is 11,584 accounts consisting of Rs 4,352 crore of which total slippage out of Rs 6,101 crore is Rs 385 crore. For the restructured loan book, we are holding a provision of Rs 137 crore. From April to December we have restructured accounts aggregating to Rs 1,394 crore. As of now, there are requests from two more discoms for restructuring which is under process at various levels. In addition to this, there are four or five Corporate Debt Restructuring (CDR) cases amounting to about Rs 170 crore for which reports are filed. The CDR Empowered Group is looking at that.
Q: What is your guidance for gross NPA and net NPA for FY13?
A: You will see that there is tight control on NPA portfolio of the bank. It is only in Q2 that the numbers got little bit distorted, otherwise in Q1 as well as Q3, we have managed to bring down the NPAs both on gross and net NPA front, both in absolute amount as well as in percentage terms. Therefore, I am enthused to believe that in Q4 also we will be able to continue a similar performance. We will be in a position to keep the NPAs under tight leash.
Q: If you look at Net Interest Income (NII) on a QoQ basis, there seems to be a downward trajectory. Nothing major, but how are you placed on the core lending business? What will your guidance be on the NII then going ahead?
A: With regard to NII, there is a legacy issue in Vijaya Bank. There is traditionally over-dependence on bulk resources in the form of certificate or deposits and bulk deposit at differential higher interest rate. As of June, it had reached a high of 47 percent. From there, as of December we have brought it down to 29.9 percent. The interest rates on these bulk resources are at a higher level on an average from 110-120 bps compared to the retail term deposits. This was the case in all the quarters earlier as a result of which the interest payout on deposit was much higher when compared to the interest income advances. Hence, the NII was showing a downward trend and when NII shows a downward trend it naturally translates into a lower NIM. However, in next two quarters, when we are able to flush out these Certificate of Deposits and bulk deposits from the system to the maximum extent, both NII as well as NIM will start to improve.
Q: Could you tell us which discoms have asked for restructuring? Are you exposed to the troubled State Electricity Boards (SEBs) and discoms? What is the amount of your exposure?
A: I don’t think proper for me to disclose the names, but two discoms where we have an exposure of about Rs 1,400 crore have sought restructuring. With that this whole episode of restructuring of discoms in our bank will be through.