PAT up 36%, margins at comfortable levels: ING Vysya

Shailendra Bhandari, MD & CEO, ING Vysya Bank explains on CNBC-TV18, after the announcement of quarterly results, that growth in NII led to an expansion in NIM to 3.61 percent.  Advances grew 20 percent despite two large repayments from telco segment while deposits grew at 19 percent and the CASA was at 32 percent (y-o-y).

The bank’s cost-to-income ratio fell down to 55 percent from 59 percent  and there were no significant asset-quality headwinds were seen in the third quarter. The bank has provided fully for all NPAs.
Bhandari adds that there could be some seasonal variation in the NIM in the fourth quarter which currently is at the higher end of range. The bank witnesses no signs of stress on gold loans and it cautious on the commercial-vehicle segment. The capital adequacy ratio stood at 12.5 percent. Below is an edited transcript of the interview on CNBC-TV18
 Q: What kind of margins have you managed to clock this quarter and what might you be able to hold on the NIM front for the rest of this year?
A: We had a very good quarter. Our profits rose 36 percent after tax. Our NIMs actually increased upto 3.61 percent for the quarter compared to 3.49 percent earlier.
Margins for the full year tend to be around 3.3 percent and during the year it fluctuates to as low as 3.1 percent and goes upto 3.6 percent. So, the margins this quarter are at the upper end of the band. During the March and June quarters there was some seasonal variation but we are quite comfortable that margins will be at the higher end of our normal range. Q: What’s going on the deposit front? While loan growth is very strong for your bank, but most bankers seem to feel that deposit growth is very tardy. Do you see a change around in the situation anytime soon?
A: I guess, to some extent I am also a little confused at the calculations because if the Reserve Bank projects an M3 growth of 13 percent, I don’t see how deposit growth can be more than 13 percent unless the cash in circulation comes down. So, I think there is an element of a liquidity squeeze in the economy and unless there is more liquidity, deposit-growth will be high. Q: A breakup of your growth in loans raises concerns on segments such as commercial vehicles (CVs) and gold loans. On that, do you expect to see any stress through the course of this year?
A: For us, commercial vehicles constitute a very small portion- about 1.5 percent of total loans. Yes, there are signs of stress. But within the CV space there are various segments such as the large fleet operators, the small-to-medium segments and the first-time users. We are observing keenly and I think our credit policy tends to be a little on the conservative side. So, we are being a little cautious.
As of now there are actually no signs of stress on gold loans. Regarding gold, typically the concerns are regarding fraud rather than anything relating to actual default. So unless gold prices crash, most people are reasonably comfortable with gold loans. Q: Some of your private sector peers have been raising equity and your stock has done quite well over the last many months. Any attempts to raise some equity capital?
A: We raised capital in June 2011 and announced that we would not return to the market for two years. The capital adequacy is around 12.5 percent. So, I don’t think we want to be opportunistic and go just because the market is good and after having announced of not returning at least till the middle of this year. I think after we cross the middle of this year, we will look at various scenarios such as the need for capital and the pending general elections. Q: You have been part of the banking industry for a long time. What did you make of the draft recommendations from the Reserve Bank of India (RBI) on the restructuring of bad loans? What an impact do you think it will have on public sector banks?
A: I think this long overdue. For us the impact is completely marginal, almost nil. Promoters should be allowed to bring in enough skin into the game and I am actually in favour of slightly tighter norms on restructuring.