Private sector lender Dhanlaxmi Bank will strive to maintain interest and other income at FY13 levels, says MD and CEO PG Jayakumar.
Dhanlaxmi Bank earned a net profit of Rs 2.62 crore for the fiscal ended March 2013, compared to a net loss of Rs 115.63 crore for the fiscal ended March 2012. Net interest income was Rs 276.42 crore for the fiscal under review as against Rs 27.53 crore for the previous year, recording an increase of 11.67 percent.
Jayakumar says the bank saw slippages in third and fourth quarter of FY13. He expects recovery of non-performing assets (NPAs) in the first and second quarter of FY14.
"We are lending mostly to SME and retail segments," he told CNBC-TV18.
Jayakumar aims to strengthen the bank's capital adequacy ratio (CAR) to 13 percent by raising Rs 100 crore.
Below is the verbatim transcript of PG Jayakumar's interview on CNBC-TV18
Q: You have seen gradual improvement in your numbers. You have reported more than 30 percent growth in net interest income (NII) this quarter, is it sustainable?
A: The bank has been undergoing a restructuring and major initiative was containing the cost and improving the income and we are consistently containing the cost and improving the income over the last one year. We are confident that in the next financial, we will be able to sustain our NII and other income continuously in the current year.
Q: While there has been improvement in your NII, there has been worsening on your asset quality, your gross non-performing asset (NPAs) have moved up to 4.8 percent on the net NPA front you delivered 3.36 percent, your provisions as well went much higher. What can you point in terms of asset quality and whether the bank will need to provision much more in the next few quarters?
A: What you pointed out is a fact. In the first two quarters, we did not have major slippage. The slippages happened in Q3 and Q4 of the current year and we are rigorously following up all NPAs for covering and most of these are secured. We expect the recovery to happen in Q1 and Q2 of current financial year, which will result in substantial reversal of interest income.
Q: Which specific sectors of the economy were these slippages from?
A: Most of the accounts that turned NPA were from real estate sector and also from manufacturing sector. However, now we have contained everything. We have a very rigorous follow-up mechanism and are also trying to track the account continuously. We will see that no further slippage happen in the next quarter in the serious manner as it happened in the past few quarters of the last financial years.
All these NBAs were created about 18-24 months ago and now our process is not to corporate. We are lending mostly to small and medium enterprise (SME) segment, the retail segment, the micro finance and most of these advances are secured as well.
Q: There has been consistent talk in the market of eventually aligning with a larger entity or being taken over once you stabilise operations during the course of FY14. Is it a possibility that Dhanlaxmi Bank will consider being taken over or aligning itself with either a larger entity or an entity which gets a new banking license?
A: There is no talk about any alliance or aligning or any merger or decision. This is 86-year old bank and we will continue to have our existence. In the last quarter, we roughly raised capital of about Rs 105 crore and in the current quarter also Reserve Bank of India (RBI) gave us permission to issue another Rs 100 crore capital through preferential route. We are halfway through in that respect. We are hopeful of mobilising Rs 100 crore in the current quarter itself. So, our capital adequacy is now about 12 percent and with this additional Rs 100 crore will be more than 13 percent.
These are all banks which operate in the niche market where we serve the local community particularly in South India. We have branches in Mumbai and Delhi, 24 each but the segment of the people that we serve are mostly middleclass and the ordinary citizen of this country. We are also into microfinance initiatives and financial inclusion. The most coveted projects of the RBI. So, we are hopeful that we will be able to sustain and survive and go for that strongly with the support of this kind of market.