See 3% yield on advances in Q2: South Indian Bank

Excerpts from Markets Midday on CNBC-TV18 Watch the full show » RELATED NEWS South Indian Bank Q1 PAT up at Rs 60.1 cr Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty?

South Indian Bank has announced its first quarter results. The bank's Q1 net profit was up at Rs 60.1 crore versus Rs 38.6 crore. Its NII was up at Rs 152.5 crore versus Rs 102.8 crore while its other income was up at Rs 56 crore versus Rs 34 crore.

Commenting on the results, VA Joseph, Chairman and CEO, South Indian Bank, said margins have improved from 2.45% in the first quarter of last year to 3.11% because the cost of deposit unit has come down to 6.93. He added that the bank could maintain the yield on advances at 11.82 and that it is targeting around 3% yield on advances and expects to perform better than expectations.

Here is a verbatim transcript of the exclusive interview with VA Joseph on CNBC-TV18. Also watch the accompanying video.

Q: Can you take us through the earnings? Your profits are much better than what the street expected. Can you take us through what your provisioning was; what your net interest margins (NIMs) were?

A: In the first quarter of last year, the margins were 2.45 which has improved to 3.11 because of the cost of deposit unit has come down to 6.93 and we could maintain the yield on advances at 11.82. So we could maintain a good margin, we are targeting around 3%, we could do better than our expectations.

Q: What was your advances and deposit growth rate?

A: Advances has grown by 4.09% and deficit growth for this quarter was 3.80. If you look at year-to-year, deposit growth was 21.28 and advances growth was 18.79 and overall business grew by 20.26%.

Q: Can you take us through your net total asset (NTA) ratio? How much of provisioning has possibly gone-up and even the current account/savings account (CASA) and the capital adequacy ratio?

A: We could maintain capital adequacy ratio at 13.89. A substantial non-resident aliens (NRA) deposits is a plus point for us. We have a total deposit of Rs 3,482 crore as NRA deposits which is very much cheap. It is almost like a CASA because we pay normally less than around 4% only for this deposit.

Even if we take out this NRA deposits also, we could show a growth of 17.32% in CASA and on the non-performing assets (NPA) front, we could make a substantial recovery during this quarter and we could bring it down to 0.68 net NPA which was 1.13 as on March 31.

Q: What are your expectations for NIMs and advances and deposits going forward?

A: We have a target of 20% growth both in advances and deposits for current year but we are very confident of doing better than what we have planned for.

For NIM also we are planning to maintain a level of at least 3%.