See no profound stress; aiming for 20% credit growth: Federal Bank

Earlier in the month, Finance minister Arun Jaitley at the CNBC-TV18 IBLA Awards had assured that soon some steps would be taken to resolve the non-performing asset (NPA) problem of banks.

Now, CNBC-TV18 learns that there is likely to be a high-profile meeting between the finance ministry and bank heads along with Reserve Bank of India (RBI) representatives.

In an interview to CNBC-TV18, Shyam Srinivasan, MD & CEO of Federal Bank said for the bank per se there has been no profound stress building up, infact it has been improving in most geographies.

The government needs to come out with a meaningful resolution for the ten odd accounts which add up to Rs 2 lakh crore of stressed assets.

Speaking about the business outlook for the bank, he said credit growth has been on the uptick and would be around 20 percent going forward and will only get better in FY18. Retail loan growth too would be in high-teens.

When asked if the bank was approached for any overtures for a merger or if the bank was looking at some acquisitions, he said no one had approached them for a merger but with regards to acquisitions, he said although their focus was on organic growth if something were to come up in geography of interest or portfolio of interest then they would look at.

A: I don't have anything incremental to add other than what you guys are reporting. There is expectation that something more constructive around how the resolution can happen. It may come out but it is all the realm of speculation. I don't have anything differential to add this morning other than the fact that there is an expectation that something meaningful come up.

A: The finance minister also pointed out, the problem is probably ten odd accounts which add up to Rs 2 lakh crore. So something that can help address that because if you take the last two-three quarters, I would only speak from my portfolio point of view, we haven't seen any profound stress in any form building up, in fact it is improving in most segments and most geographies. It is really the large ticket super structure infra build on big expectations and gone into stress. So to address that maybe more focused strategy as oppose to something that maybe a catch on. However, when I say meaningful I mean something that can address these ten odd accounts mercifully. We are not in any of those but something that addresses that.

A: The distinct between sector and accounts where we are quite thin only because if you take steel that have four-five accounts barring one or two of the premium ones, they all are at some kind of stress. So the sector and segments and the client names are all synonymous. So I would not believe that we could have a much differentiated approach. Yes, one account in the whole steel may have come off better but most of them have had challenges.

However, the infra ones which is either roads or ports, it is fairly sectoral; some could have had worst problem because of management issues, some kind of money moving away into other investments but broadly they have all hit by the sector having a challenge and that is something more amplified in a client or two but broadly the sector does require some kind of support, if you will.

A: We are in the tail end of the quarter but as I mentioned to you when we did our Q3 results. We have been quite disciplined and quite focused on the segments and the geographies that improvement has been quite marked. It will continue. I had mentioned then and I will say it now. The trajectory of improvement should continue. We do not see any significant impact on account of demonetisation per se. If you are a part of a large account means you had industry level challenges, one or two are there which we have to deal with at a market level. Beyond that per account any particular geography, any particular segment, nothing new to add than what I said that we are improving and we continue to do that. However, in the last four-five years we have been conservative in lending.

A: We are gaining share and we will continue to in this quarter and even in the year ahead. We will see north of 20 percent credit growth. Last quarter was little inflated because we had one chunky portfolio buy but keep that aside we were north of 20 percent - that momentum will continue for many reasons like - 1) we have strengthened our team, we have assembled some of the best guys in the industry with us 2) many of our bigger competitors have challenges, so that combined with our discipline and our team we are able to gain share - that will continue. I am confident going into '18 it will only get better.

A: Yes, high teens for sure. For 25 percent as I mentioned, I had about one portfolio purchase but by itself about high teens and that will continue. However, the network of branches outside Kerala are three-four years old, they have matured quite materially, so they are performing quite well. Therefore, we believe that run rate should continue.

A: No.

A: I will split it in two parts. For long we have maintained our focus as organic and we will continue to do that but if something were to come up either in geography of interest or portfolio of interest for sure yes, we have demonstrated that. The year that we are sitting in, we have put in two portfolio transactions which we have bought but we do not want to catch a falling knife. We will be quite watchful of what we pick up but if something is either in the area of interest, segment of portfolio, surely we will.

However, specific to your question on NBFCs, gold loans; from the early look there is nothing that we have identified barring a few Rs 20-30 crore kind of portfolios which are aside. So there is no large NBFC that is on the radar for now.

A: We are wading into a territory that is speculative but that said it is board managed, professionally managed company. So the board does have the discipline of reviewing opportunities and if the board identifies something as meaningful, can be value adding over a time of period ahead, it will be considered but at this juncture there is nothing on the discussion item, nothing on the plate.

However, we have had fair amount of refocusing of business, getting in people of right profile. They have all sort of measuring into their roles this year. So we think the time at this point of time is to scale up given the market, given the environment and we believe we are well on course for it. We are knocking on 1 percent market share of assets in the country. So we should be able to pick up on that growth. If in the process we will pick up some asset some portfolio for sure but in itself - no.

To specific question on the shareholding - that is the philosophy of the bank; board, management and shareholding will be three distinct components.

A: We have stayed away for very long but rate of consumption of capital, if you noticed over the last two years, has been almost 300 bps. If this run rate continues, which it should, sometime in the course of this financial year for sure we will be looking at some instrument, nature of the instrument, timing, these things have been evaluated but we are at a cusp of it more than ever before now because our rate of consumption of capital, all growth capital, all good capital is certainly high.