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Jan 25, 2013, 10.49 PM IST | Source: CNBC-TV18

Expect Q4 margins to be better than Q3: OBC

The Q3 margins stood at 2.84 per cent as compared to 2.79 per cent quarter on quarter basis. In an interview to CNBC-TV18, SL Bansal, Chairman & MD, OBC said, 'We are expecting that our margin in the next quarter will be much better. It should be close to 2.95 per cent".

The year as a whole we expect our margin to be close to 2.85

SL Bansal

CMD

OBC

Oriental Bank of Commerce (OBC) announced its third quarter numbers today. They were below the expectation. Net profit fell 7.8 per cent year-on-year to Rs 326.4 crore in the third quarter of financial year 2012-13 due to asset quality concerns. Net interest income increased 5.6 per cent to Rs 1,204.4 crore from Rs 1,140 crore during the same period.

The Q3 margins stood at 2.84 per cent as compared to 2.79 per cent quarter on quarter basis. In an interview to CNBC-TV18, SL Bansal, Chairman & MD, OBC said, "We are expecting that our margin in the next quarter will be much better. It should be close to 2.95 per cent".

Also read: OBC Q3 profit falls 8% to Rs 326.4 cr on higher provisions

He also informed that this quarter Rs 700 crore worth of assets have been restructured and now Q4 will see restructuring of Moser Baer . "We have not written off Kingfisher Airlines but it is very well on our books and we will recover our full money back", he adds.

Below is the edited transcript of his interview to CNBC-TV18

Q: You could manage to hold the margins at 2.8 percent in fact bettered it to 2.84, will that be the performance in the next quarter as well?

A: We are expecting that our margin in the next quarter will be much better. It should be close to 2.95 for next quarter and the year as a whole we expect that our margin should be close to 2.85.

Q: What about the asset quality, certainly you have held your quality now, about Rs 200 crore more in terms of the increase in the gross non-performing loans (NPLs), how would things pan out in Q4 or in next six months should we expect this number to steady?

A: One will appreciate during the last four quarters, we have been holding on our asset quality. We started our journey with 3.17 percent in the month of March. Now we are at 2.98 percent. We have been hovering around 2.92 to 2.98 percent during the last three quarters. We expect that we will be close to three percent hopefully. The economy will start reviving and few assets we expect from stress category will move to the standard category. Then hopefully we should be in a position to post better results from Q2 onwards of FY13-FY14.

Q: The recovery and upgrades are close to about Rs 400 crore this quarter because of the transition to the computerized asset quality mechanism. Do you think asset quality could be a bit volatile in terms of recoveries improving because a lot of payments come with a marginal delay?

A: In the beginning of the year, we have given a guidance that our slippages will be close to Rs 700-800 crore per month. In the first nine months our slippage is close to Rs 2,100 crore, which is as per our guidance. Simultaneously, we have given guidance that our recovery will be closer to Rs 170-200 crore per month.

In the first nine months our recovery and upgradation is Rs 1,520 crore, which is again an average of Rs 170 crore. So, I think by and large our guidance and recovery in today’s environment is very tough. However, we have been improving.

Our recovery last year for the first nine months was close to Rs 1,000 crore. Hopefully we will end this year by closer to Rs 2,000 crore recovery and Rs 3,000 crore slippages.

However, redeeming feature of our recovery is that we have been recovering a lot of money under technical written off account. A written off recovery of worth Rs 430 crore in first nine months has given us a boost. We have gone ahead for writing off few assets, so that we can maintain our asset quality.

Q: You reported Rs 714 crore restructured assets this time because of various bits and pieces of news. We were expecting that Moser Baer and the Punjab SEB would be restructured this time. A number of more than Rs 2,000 crore was what some investors were guessing, are these to hit in a Q4?

A: Absolutely, Punjab is still to approach us for restructuring. I think hopefully Canara Bank will be doing the restructuring on behalf of all the banks. Our exposure is about close to Rs 1,200 crore layers.

Moser Baer was supposed to happen in last quarter but MRA has been signed only two days back. So, this Rs 465 crore additional will happen in this quarter. So, hopefully there will be Rs 2200 crore worth of assets in the next quarter.

This quarter Rs 700 crore worth of assets have been restructured out of which Rs 460 crore repayments is coming. At present the repayment has come from Air India. Air India has repaid Rs 500 crore to us and that is why this restructured book looks flat.

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