Credit growth to slow; see pressure on margins: Karur Vysya

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Credit growth to slow; see pressure on margins: Karur Vysya

K Venkatraman foresees additional pressure coming in on the bank's net interest margin post 50bps interest rate hike announced by the central bank on July 26. However, the bank would protect its margins to the possible extent.

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Excerpts from After the Bell on CNBC-TV18 Watch the full show » ALSO READ See latest News about Karur Vysya See previous management interviews See what other Experts & Brokerages are saying about Karur Vysya Karur Vysya BSE | NSE 30/05/12 Are Mutual Funds betting on Karur Vysya?

K Venkatraman, managing director and chief executive officer, Karur Vysya Bank in an interview with CNBC-TV18 spoke about the quarterly performance of the bank.

He foresees additional pressure coming in on the bank's net interest margin post 50bps interest rate hike announced by the central bank on July 26. However, the bank would protect its margins to the possible extent. He also expects the credit growth to slowdown post monetary policy.

Karur Vysya Bank's Q1 net profit was up at Rs 117 crore versus Rs 84.5 crore, year-on-year (YoY). Its net interest income for the quarter was at Rs 205 crore.

Also Read: Karur Vysya Bank expects to maintain 30% loan growth ahead

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

Q: If you could first take us through what your margins are this time around?

A: We have delivered a net profit growth of 38.14% year-on-year and gross profit growth is 27% (Y-o-Y). Deposits growth is 24% and advances 30.55% (Y-o-Y).

Q: What about your net interest margin?

A: As you are aware almost all the banks were under pressure, we were also under pressure but it has not impacted much, our net interest margin (NIM) is 3.18%.

Q: What would be your outlook for net interest margins going ahead especially after the credit policy yesterday? Do you see additional pressure coming in?

A: We do see additional pressure coming in definitely. We would like to protect our margins to the extent possible.

Q: What is your outlook on asset quality, do you see any issues regarding asset quality going forward?

A: Going forward asset quality is likely to create concern for us. We may have to keep a closer watch and most of the companies who are little interest sensitive have being avoiding major investments right now. So I don't think there is going to be any big issue as of now.

Q: Provisioning this time around has jumped quite a bit, if you could take us through the breakup of your provisioning? What is the reason for the jump up?

A: There are couple of major reasons for that, there is an increase in our standard asset provision and our sub-standard assets increased from 10 to 15%. Our NPA provisions have gone up by Rs 5 crore. We have also made some provisions for our employee cost.

Q: What would be your outlook with respect to credit growth for FY12, where do you see that headed?

A: Credit growth is likely to slowdown in my opinion because that is the intention of monetary policy tightening.

Q: With regards to interest rate hikes are you likely to pass on the interest rate hikes and by what quantum do you see that happening?

A: You may wait for some time, we are curiously debating on that. Many banks have passed on this hike in interest rate, not the present one the earlier one sometime back but we have not done. Now we have got another interest rate hike that has come yesterday, so we will need to take a look at that.