After IndusInd Bank said it is likely to see an adverse impact of 2.35 percent on its net worth due to discrepancies in its derivative portfolio, its CEO Sumant Kathpalia said the bank is likely to absorb the losses in the ongoing quarter itself. "The full year won't be a loss at all. And I think Q4 will also be in profit...The bank will start seeing great profitability from Q1," he said while speaking to CNBC-TV18.
His statement comes after the bank's disclosure rattled investor sentiment, triggering a massive selloff. The bank's shares crashed 27 percent to record their biggest ever single day fall.
When asked why investors were not informed on October 24 when the issue was found and an external agency was appointed, Kathpalia said the bank was not sure then about the size of the anomaly, which was spread over 7 to 8 years.
"We found this anomaly around October 24, and that is when we started our internal assessment and hired an external agency. We did not know the real impact. As soon as we understood the impact, we held a board meeting and made the disclosure," he said.
"The bank has not hidden any disclosures at this point. We have been very transparent. This is a one-off item, not a recurring item. We should get over it in this quarter. You should see the growth the bank is seeing and the profitability which the bank is used to," he said.
Kathpalia further said that bank’s capital adequacy will be above 15 percent after the impact of the issue subsides. "I don't think the bank would need additional capital in the upcoming four quarters. As of now, we believe well-capitalied. We will be able to manage our business," he said. This comes after Ashok Hinduja said the promoters are ready to inject capital into the bank if needed.
Earlier during a call, Kathpalia had commented on RBI’s decision to approve only one-year extension to his term. The IndusInd Bank CEO had said that central bank may have been uncomfortable with his leadership skills. “I don’t know what the rationale is for them to give me one year (tenure). I think they are uncomfortable with the way my leadership skills with the bank have been, and I respect that. This is a litmus test for the bank and a succession point,” Kathpalia said during an investors’ call March 10.
In the recent conversation with the business news channel, Kathpalia said the board will look at succession planning. It will consider external as well as internal candidates to find the way ahead.
"I am very happy. I don’t want to leave the bank in a lurch at all. I have created this bank over the past years. The bank today has a very strong foundation," he said.
"Affordable housing and SME lending are interesting domains. The gross number is Rs 1,970 crore, with a net impact of about Rs 1,500 crore. The revolving rate has come down in the credit card business. The bank will get back to 4 percent margins," he further said.
"The bank is very very solid…I continue to believe that the bank is fundamentally very strong. Yes, we had our hiccups. But I think I is a matter of time that the bank will come out. I don’t think there are any hidden skeletons in the cupboard. We are not hiding any losses from the investors. There is an absolute transparency in the system," he concluded.
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