Punjab & Sind Bank aims growth of 27.5% in FY11

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Punjab & Sind Bank aims growth of 27.5% in FY11

Punjab & Sind Bank is feeling the pinch of maintaining a healthy net interest margin (NIM). In an interview to CNBC-TV18, PK Anand, Executive Director of the bank said that currently there is pressure on NIMs.

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Punjab & Sind Bank is feeling the pinch of maintaining a healthy net interest margin (NIM). In an interview to CNBC-TV18, PK Anand, Executive Director of the bank said that currently there is pressure on NIMs.

He added that the bank may look at implementing new base rates.

Going forward, the bank will focus on improving current accounts and savings accounts (CASA) percentage and is aiming growth target of 27.5% by end of FY11.

Below is a verbatim transcript of PK Anand's exclusive interview with CNBC-TV18's managing editor Udayan Mukherjee. Also watch the accompanying video for more.

Q: Could you first put the valuations in perspective for us. What is your book value at the end of FY10 and if you could tell us what it could be at the end of FY11?

A: The issue opens today and the valuation at the lower end is Rs 113 and at the upper end is Rs 120. Going forward FY11, the adjusted book value would be in the vicinity of Rs 130. It's a slight discount to FY11 book value. As on FY10, H1 that is September 30, our book value is Rs 119. It is one time the book at September 30.

Q: What is your NPA profile like compared to some of the other public sector banks?

A: As on March 31, the gross NPA of Punjab and Sindh Bank was 0.63% which was amongst the lowest in the public sector bank domain. The net NPA was 0.36%. Going forward, FY10 the gross NPA is 0.92% and the net NPA is 0.44%

Q: The one concern which some people have on your bank seems to be that in a fairly liquidity tight scenario and with deposit rates going up, your CASA ratio is not very high, just about 24-25%. Any targets that you have or do you think you can manage with this kind of CASA ratio in the current environment?

A: No, CASA is a challenge. In the last five years, the bank has grown at a very rapid rate. The compounded annual growth business rate of the bank for the last five-years was over 32%. Credit grew at over 36% CAGR and the deposit growth was about 29% per year. So CASA has been one of the casualties.

Now the strategy is to improve on the efficiency parameters and CASA is one of them where we are presently around 25.14% as on FY10. The strategy and focus is on improving the CASA percentage. The strategies would be that we are opening branches aggressively in the hinterland where we still think there is rural wealth available and we are on an expansion mode.

We have plans to open about 100 branches this fiscal. Then we have other schemes like performance base incentives for employees, where CASA comes in and we reward our employees. We are sure by the end of the year we put up better performance and we will have something more on CASA for the bank, we are targeting 27.5% at the end of this fiscal

Q: Your NIM have also been coming off over the last many years, its been a steady decline, do you see yourself arresting that particular given the kind of CASA profile you have or do you see further pressures on your NIMs?

A: We were at 2.67% as on March 31 FY10. Going forward, for this half year our NIM is at 1.50% so if you annualize it, it works out to 3%. There is no doubt that there is pressure on the NIM but we are confident of maintaining and improving our NIM because a good amount of loans have been re-priced, good amount of assets have been re-priced recently and we have another chance to look at our base rate. On the drawing board we are working on the new base rate that we would like to implement going forward.