Expect FY12 NIMs to be at 3.5%: Indian Bank

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Reporting a net profit of Rs 407 crore versus Rs 368 crore, its first quarter results for FY12 , chairman and managing director of Indian Bank , TM Bhasin says the bank is all set to grow at 21% to 22% for the whole of the current financial year. 

"For the year as a whole, we expect the NIMs to be around 3.5%," says Bhasin in an exclusive interview to CNBC-TV18. While the bank is yet to decide on passing the rate hike, Bhasin says despite high interest rates the bank sees good business potential in its area of operations.

Below is an edited transcript of TM Bhasin's interview to CNBC-TV18. Also watch the accompanying video.

Q: Can you take us through your performance this year? What do you expect the year end growth to be like?

A: We have registered a total growth of 21.4% and total business of the bank has gone up to Rs 1,92,000 crore. We have deliberately avoided concentrating on high cost deposit and low yielding advances. It is core growth of 21.4% and we plan to go about same tempo of about 21-22% for the current year.

The net profit has gone up by 10.5% and we did better than the prudential norms provision. We have provided 25% growth on secured and unsecured book. Overall, the provision coverage ratio is 84.2% which is highest among the industry.

The gross NPA had gone up to 1.45% which has been brought down to 0.98%. The net non performing assets were down from 0.76% Q1, 2010 to 0.51% in Q1, 2011.

Q: Your net interest margins (NIMs) in Q4 were 3.75 % what is the update on that?

A; NIMs for Q1 is at 3.63%, 2010 which was at 3.43% in Q1, 2011. There is movement of 3.5% saving bank deposit to short-term term deposits. For the year as a whole, we expect the NIMs to be around 3.5%.

Q: So you expect to make up for the lost NIMs in the remaining three quarters?

A: The effect on NIMs is because we did not pass the rate of interest in June. Hence, now the pass on effect will be showing in the next 2-3 quarters and will give us better NIMs in the three quarters.

Q: Are you expecting to announce the rate hike any time soon and will it only on lending and not on deposits?

A: The asset liability committee (ALCO) is meeting today and we will announce the impact on both loan book and deposit rate also.

Q: What about the full year growth forecast in terms of advances and deposits?

A: It will be at about 22% and advances also at about 21%.

Q: With the rise in interest rates, do you still expect demand will continue?

A: The areas where we are working offer good business potential and the loan book should grow at 21-22%.

Q: Why have your provisions fallen on a year on year basis? Was there some unnaturally high provisioning last year?

A: Last year, we shifted to system driven NPA in Q1 2010 and Rs 830 crroe was added in Q1 2010 and this year the addition is only Rs 160 crore and recoveries are also robust. There have also been some upgrades.

Q: What do you expect by way of recoveries this year?

A: On the year as whole, we should recover something like Rs 500 crore.