Aiming a NIM of 3% next quarter: Corp Bank

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Ajai Kumar, chairman and managing director of Corporation Bank tells CNBC-TV18 that the bank is on projected growth track. NIM came in at 2.66% for the third quarter and the bank is maiming to make it to the 3% mark by the next quarter.

"It was purely on the basis of Kingfisher account being classified as NPA that led to the marginal expansion in the non-performing book of Corporation Bank," Kumar justifies NPA increasing to Rs 855 crore from Rs 745 crore last quarter.

Below is the edited transcript of the interview. Also watch the accompanying video.

Q: Can you take us through the margin picture in the current quarter - in Q3. How things will pan out in Q4 NIMs?

A: As Corporation Bank we have shown all-round increase on the operating profit as well as the net profit. The net interest margin has also improved to 2.66% as against 2.5% earlier, but then this can be substantially increased in a bank like ours, but for the fact that the CASA continues to be under pressure. So, we are actually working on expanding our network through rural and semi urban branches as well as in other part of countries like Gujarat, Rajasthan and UP to see that CASA is increased and my NIM can increase.

Q: Therefore in Q4, are you expecting your net interest margins to improve from the 2.66% you posted?

A: I am aiming at a much higher (NIM), the first level should be 3%, but then if I am not able to do that I would be doing at least 2.9%. That is my aim . Both retail and SME have shown an increase because of which the yields are increasing.

Q: The hot topic right now is what's happened with the 2G licenses and banks exposure to the companies whose license have got canceled. What's your exposure both fund based and non-fund based to these companies?

A: Our exposure is not very high. I have to look at to what is next way forward, but certainly we will like to see that the asset quality is maintained and we are concerned about the recent developments. We will take appropriate steps.

Q: What is the amount of exposure, fund based and non-fund based?

A: Number is not very high, it is below Rs 200 crore.

Q: Your NPLs have gone up slightly in the quarter from Rs 745 crore as of September 30th to Rs 885 crore at the end of December 31, how do you see it panning out at the end of the current quarter?

A: NPAs have actually not gone up very high in general. It is only because of an account - Kingfisher which has been treated as an NPA - that has contributed to this increase in NPA. Otherwise the slippages have been kept to the minimal and we are able to control them.

Q: What is the fresh slippage in the Q3 and can you compare it to the previous quarter? Is it more than the Q2?

A: In this quarter, they are around Rs 374 crore. Previous quarter was Rs 540 crore. In this Rs 374 crore too, a major component goes to aviation sector.

Q: How much did you restructured in the Q3 and how does it compare with the 9-month restructured amount?

A: Rs 741 crore is the restructured amount, that also is on the regular side.

Q: Was that more than previous quarters?

A: No, it was not more.

Q: Your total restructured book stood at Rs 15,000 crore?

A: No, not at all. Total restructured accounts are Rs 4,539 crore. That is not such a big number.

Q: What do you expect you will do by the end of the current quarter in terms of restructured book as well as NPLs, you will have had some visibility by now? By how much?

A: Against the total Rs 4,539 crore which is about 4.90% of the total advances; it was Rs 741 crore in last quarter. As far as we are concerned, we would not like to have control, we will like to keep it at the minimum, I cannot give you an exact number.

Q: You say that CASA continues to be under pressure what are you planning to do in order to prop this up? The other thing also was that in this quarter you had a lot of these bonds being auctioned and lot of demand for that, so that would have helped a lot of the bank's CASA ratio this time around. With that base going away, do you think CASA could further deteriorate in Q4?

A: CASA is certainly under pressure in our bank. But then, I am addressing it by many methods. Number one, CASA is also related to having a larger number clientele who avail retail and SME facilities. So we are increasing CASA not only through opening of branches and new campaigns, we are also reaching out to larger community of customers who need loans for which I can also have CASA supplemented by that. So in fact it is relationship building which we are looking into.