State-owned Vijaya Bank on Monday reported more than two-fold (or 235%) jump in its fourth quarter (Jan-March) net profit, bolstered by lower provisioning and administrative costs. Net interest income or the difference between interest earned and paid out, inched up 3% to Rs 493 crore.
During the three month period, provisions (other than tax) and contingencies dropped from Rs 162 to Rs 89 crore, a sharp fall of 82% y-o-y. Similarly, operating expenses fell nearly 40% to Rs 367 crore in the same period.
The bank's asset quality has improved. Gross non-performing asset ratio fell from 2.98% to 2.93% sequentially while net NPA ratio decreased from 1.81% to 1.72%. The lender expanded its loan book by 19% y-o-y (at about Rs 58,000 crore), which is higher than the industry average of 16% in FY12. However, deposits grew at slower pace by 13% to Rs 83,000 crore
Vijaya Bank has proposed to pay a dividend of Rs 2.50 per share. At 15.15 hours, its shares were trading at Rs 58.70, up 3.50% on the NSE.
Below is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video.
Q: What contributed to the big difference in net profit on a year-on-year term?
A: The bank’s net profit in the last quarter of 2010-11 was Rs 54 crore, because of one time debit of Rs 181 crore to the P&L on account of the retiree’s.
Overall, interest income has also increased in the Q4 of 2011-12, and this explains the reason for the increased net profit from Rs 54 crore to Rs 180 crore. Banks annual profits have grown at the rate of 11% from Rs 524 crore to Rs 581 crore.
Q: How your margins have been in Q4 and for the whole year?
A: The Q4 net margin was 2.41% and full year margin is 2.47%.
Q: What was the level of margin a year ago?’
A: A year ago, full year level was 2.8%.
Q: Do you see margins narrowing a bit even in the current quarter?
A: Margins will continue to be under pressure. The economy is not doing well, the references that take place to CDR and the provision for standard assets in current year will contribute to pressure on margins. It will be our endeavor to strengthen and streamline the monitoring and recovery mechanism like last year, where cash recoveries and up-gradations have been very robust.
Q: What are your total recoveries and up-gradations?
A: Cash recoveries for the full year 2011-12 was Rs 486 crore vis-à-vis Rs 440 crore last year and up-gradations were Rs 925 crore vis-à-vis only Rs 330 crore last year.
Q: Can you throw some light on NPAs and restructuring portfolio?
A: From December to March quarter, the addition to gross NPA was Rs 51 crore. We had kept a very tight hold on NPA portfolio and recovery performance in Q4 has been far very good. The total gross NPA at the end of the year was Rs 1,718 crore. In percentage terms, gross NPA stands at 2.93% compared to 2.98% in December.
On restructured portfolio, the total gross restructured value is Rs 4,707 crore. The current outstanding is Rs 2,939 crore. In 2011-12, accounts of Rs 2,000 crore have been restructured, out of which DISCOMS and infrastructure accounted for Rs 1,900 crore.
Q: Lower CASA and higher reliance on bulk deposits weighing on your margins. Are you looking to improve your CASA ratio? Would you manage to do that somewhat in FY13?
A: The bank’s CASA did not improve much last year despite all the efforts. The savings bank portfolio improved marginally, but the current account portfolio declined. CASA constitutes 22% of the total resource book.
There has been some flight of savings bank deposit to other banks as we have not increased our interest rate on saving account from 4% to 6-7% as provide by our competitors.
As of now, we do not propose to tinker with the interest rate on savings bank account asset. We will launch a 100-day campaign for CASA from mid May and plan to add 100 branches in the current year to the existing 100 branches. These efforts should stand the bank in good state in days to come.
Q: How much were the slippages in the previous quarter? Can you give us some idea of how slippages will perform in the current quarter?
A: As of now, we do not see any major slippages in the Q1 of current financial year. The total slippages of the bank for the full year was Rs 2057 crore.
Q: Any number as to the slippages in Q4?
A: I don’t have any numbers.
Q: You have given us a provisional coverage of 62%, is that lower than what it was on December 31?
A: December the provisioning coverage ratio was 61.3% and for the full year it is now 62.4%.