Good recoveries in Q2 ensured profitability: Indian Bank

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Good recoveries in Q2 ensured profitability: Indian Bank

CMD of Indian Bank, TM Bhasin told CNBC-TV18 that their good profitability came on account of good recoveries in the quarter.

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

Indian Bank announced a 12.74% increase in net profit today at Rs 469 crore versus Rs 416 crore, year on year. Its net interest income (NII) came in at Rs 1,145 crore, up 16% year on year. In an exclusive interview to CNBC-TV18, chairman and managing director of Indian Bank , TM Bhasin said that their good profitability came on account of good recoveries in the quarter.

"Rs 150 crore has been recovered in this half year, out of which the major recovery amounting to Rs 145 crore has come in Q2 alone," he said.

Below is an edited transcript of his interview with Reema Tendulkar. Also watch the accompanying video.

Q: Could you take us through the key highlights of the quarter?

A: The net profit is up by about 13% compared to Q2 of last year, where it was Rs 415 crore. The operating profit has seen a growth of about 24.62% from Rs 738 crore last year and the capital adequacy ratio is 13.23%. Net worth of the bank has also increased from Rs 7,830 crore to Rs 9,202 crore, EPS has gone up from Rs 37.61 to Rs 42.54 and the book value of the share has gone up to about Rs 205. So these are the major highlights of this quarter.

We have crossed Rs 2 lakh crore in total business and deposits have gone up to Rs 1,16,000 crore. Savings bank has also seen a growth of about Rs 3,000 crore which was possible because of a CASA campaign we conducted for the last 5-6 months or so. Credit has also seen a growth of about 23%. The credit-deposit ratio of the bank is 74% and the deposits have grown about 18.64%.

Major highlights of our good profitability are on account of good recoveries made during the current quarter which has been possible because we shifted the system into an NPA in June 2010. 3% of the portfolio of agriculture needed some fine tuning of the software which done. So as on September 2011, we are 100% through the core banking system. We are focusing a lot on recoveries, both in NPA and also the technical written off account. Rs 150 crore has been recovered in this half year, out of which the major recovery amounting to Rs 145 crore has come in Q2 alone.

Q: Could you tell us what the net interest margin has been because last quarter there was a significant drop in your net interest margins. For this quarter where does it stand and what's the outlook?

A: The NIM as on 30th September 2011 has been maintained at 3.76% and this has been possible mainly because we have mobilized saving accounts of Rs 3,000 crore and we have done the re-pricing of our loan book.

Q: There has been a significant increase in your provisions as well on year on year basis and even on a quarter on quarter basis. What has been the asset quality like and any kind of fears that you have about the fresh slippages?

A: Gross NPA as we see, it was 1.29% which has been brought down to 1.2%. Net NPA has been brought down from 0.73% to 0.69%. We have provided for Rs 92 crore on account of depreciation, on account of equities and we have made adequate provisions for the loan assets, and that is why the provisioning requirement has gone up.

Q: There has been a. increase your provisions. This quarter it stands at 1.21% but in Q1 it stood at about 0.98%. Any particular places or segments where you are seeing some pressure?

A: There are three major accounts which we have classified as NPAs. One is the Pollution Control Board account where about Rs 50 crore exposure, one is textile account and the last is a steel account and that is why provisioning requirement for these accounts was required to be made.

The other thing is agriculture, where about 3% portfolio was yet to be put on core banking solution. That has also been put and for those accounts also we have made some provision and that is why the provisioning requirements are more.