Corporation Bank aims to strengthen CASA ahead, says CMD

Public sector lender Corporation Bank's net profit fell 24.6 percent year-on-year to Rs 303.2 crore in the October-December quarter of financial year 2012-13, impacted by higher provisions. The bank's net interest income too increased marginally to Rs 883.4 crore from Rs 861.8 crore during the same period.

Ajai Kumar, CMD of Corporation Bank said that slippages in Q3 have not been more than 1.6 percent and it was mainly due to high levels of recovery and upgradation. According to him, the bank is on track to contain its non-performing assets or NPAs. Going ahead, Kumar feels Corporation Bank will be able to maintain its NPA level below 2 percent.

However, Kumar remains worried about the current account status of Corporation Bank. Although, savings account growth has been noticed, current account has not grown in tandem with it, he added. Therefore, they are trying to reach out with more branches in rural and semi-urban areas.

Here is the edited transcript of the interview on CNBC-TV18.

Q: If you could just tell us what the net interest margins (NIM) the bank has clocked in this quarter?

A: Net interest margin this quarter has improved. It has come to 2.35 as compared to 2.29 percent. In that way we are faring well here. If you look at the net profit though, you maybe looking at a slightly depressed figure but we have consciously provided more provisions. Against Rs 148 crore provisions we have done Rs 323 crore this quarter.

One more factor that you must look into is that the income from mutual fund disinvestment was about Rs 115 crore and it is not there in this quarter. So, if you take these two things into account, we have done fairly well in keeping the NPAs also under control, although you might have seen some increase in the numbers by about Rs 700 crore.

Even though the gross maybe at about 2.18 percent, out of this Rs 700 crore, only half can considered to create some delinquency in times to come. Otherwise, most of them are upgradable and we are very sure that 50 percent of them will be back to health this quarter.
 
Q: What are the slippages that you have seen in this quarter and what kind of trajectory are you hoping to see in terms of bringing down your slippages?

A: Slippages have not been more than 1.6 percent. The slippages have been about Rs 1700 crore. The gross has been increased by Rs 700 crore because we have been able to do a very high level of recovery and upgradation. It has been twice of what we could do in the last quarter.

So, in terms of that we are working on all fronts to see that the NPAs are under control but, we are also trying to see that the provision coverage is also at an appreciable level. Despite increase of NPAs by Rs 700 crore, we have kept it at least at 58 percent and we would like to go up to 60 percent.

We are also concerned about the cost of deposit but, it has been coming down gradually. As I said, it is only 8.06 percent as compared to 8.30 percent in the last quarter and in times to come this will graduate further. The only concern which I can say is the current and savings account (CASA). Savings bank accounts have been growing but, current account has not shown that much of strength.

However, we are working on both of these by increasing the number of branches and reaching out to some rural and semi-urban areas in a big way. I would also like to say that particularly, in the present quarter we have done very well in agriculture advances which have increased by 34.5 percent. SME advances have also shown an increase of 32.8 percent and retail advances have shown a rise to 53.1 percent. Moreover, yield on advances have increased to 11.67 percent for nine months as compared to 11.60 percent as on December 2011. So, the figures have to be seen in consideration with all these factors that I am mentioning.
 
Q: Going ahead, perhaps what your investors would like to know is how much you think you can bring down this gross NPA level by? Currently it stands at 2 percent plus, say by the end of FY13 or even in the first half of FY14 where do you see your gross NPA levels?

A: This will come back below Rs 2000 crore and I can very well assure you that it will be less than 2 percent. We have no problem in that. Many of the accounts are already in the process of upgradation.