Shares of Union Bank of India lost ground after Merrill Lynch downgraded the stock on concerns of asset quality and margin slippage. Confirming the margin pressure, SC Kallia, executive director at Union Bank said that the bank expects margin slippages worth Rs 1800 crore in FY12, which will reflect in the earnings of first and second quarters of this fiscal.
"Going forward, we expect the net interest margins to stand at 3.2% for the financial year 2012," he told CNBC-TV18.
He added that bank will see an increase in its non-performing assets (NPAs) after it shifts to technology-based system for calculating bad loans. Below is the verbatim transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video. Q: What do you expect to see in terms of asset quality or NPA hits in the first quarter of this year? Is it true that you will probably need to take substantial hit?
A: We are yet to come out with the exact amount of slippages to be calculated in the current quarter. However, we are in the process of recognizing all our NPAs on the basis of the systemic- based recognition and carry forward that decision in respect of all accounts other than agriculture accounts. We have decided to account for all this NPAs on the basis of this system. So, expectations are high that the slippages would increase as against what we have seen in the quarter ending December. Q: Is it likely that it will be around Rs 1000 crore plus of slippages?
A: I don
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