Will maintain 3% plus NIMs in FY12: Allahabad Bank

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Will maintain 3% plus NIMs in FY12: Allahabad Bank

"I stand by the guidance of 3% plus NIMs (net interest margins) that we had given at the start of this year," says JP Dua, chairman and managing director of Allahabad Bank. In an interview to CNBC-TV18, post the Q2 results, Dua says the bank major growth verticals have been the core business and the fee based income.

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"I stand by the guidance of 3% plus NIMs (net interest margins) that we had given at the start of this year," says JP Dua, chairman and managing director of Allahabad Bank .

In an interview to CNBC-TV18, post the Q2 results , Dua says the bank major growth verticals have been the core business and the fee based income. "The bank's fee based income has gone up by 21% in the second quarter," he adds.

Talking on the margin front, Dua says the bank has been able to contain the cost and maintain a strong franchise as far as the mid-corporate sector is concerned. Further, on the asset quality, he says, "growth may moderate in the second half but we are confident that we will be able to achieve our total business target of Rs 2,80,000 crore."

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

Q: What is contributing to the growth in your net interest income, both in terms of deposit growth and loan growth that you have seen in this quarter?

A: The bank has been growing above 20% for the last two years and this year our thrust was on profitable business. The major verticals that have contributed to the growth are the core business and our fee based income. The bank's fee based income has gone up by 21%.

Q: In terms of your margins that has delivered a surprise this time around or at least an improvement at 3.68%, does that look like a sustainable rate going into the second half or do you expect to see a bit of compression on the margin front?

A: In the beginning of the year, we had given a guidance of 3% plus which I stand by. We have been able to contain our cost and at the same time, we have been able to build up our relationship with the corporate. We have a very strong franchise as far as the mid corporate is concerned where the realization was higher and we have been able to increase our NIM to 3.68%.

Q: Could you talk us through the net NPAs, both in terms of where we stand out in rupee crore and percentage-wise, what is the net NPA figure at?

A: We have been able to keep the gross NPA at the same level of 1.77%, so it is Rs 1,715 crore. The net NPA figure is Rs 664 crore, so net NPA comes to around 6.69%.

Q: What is a sustainable increase rate that the bank would be able to do for the second half, in terms of your net interest income because loan growth has been quite disparate amongst banks this quarter? What looks like a sustainable loan growth rate?

A: We had targeted average growth for the bank at 25%. In the first half year, we have grown by around 21-22% on an average. First quarter, the credit growth was 30% but second quarter growth has come to around 16%. We have come out of few of the sectors, so short-term loans vertical have reduced our outstanding. As far as the asset quality is concerned, growth may moderate in the second half but we are confident that we will be able to achieve our total business target of Rs 2,80,000 crore.

Q: Is there any restructuring that Allahabad Bank has had to do this quarter, on specific projects?

A: Yes, we have restructured couple of accounts but it's not a very big restructuring. They were standard accounts and I don't think any stress is expected on those accounts. My outstanding as a restructure is only around Rs 3,000 crore.

Q: Have you made any decision with regards to the savings deposit rate?

A: We are not increasing the rates immediately or changing the rates at all. We will take a call later, depending upon the market scenario. We are looking at how the market reacts to this and hence, as of now we have not taken any decision.