Hope to maintain NIM guidance of 3.52 % for FY13: PNB

Country’s second largest public sector lender Punjab National Bank (PNB) surprised the street with its third quarter earnings. It beat estimates by reporting 14% rise in net profit at Rs 1,306 crore on a year-on-year basis, on the back of lower provisions against bad loans.

Net interest income surged by about 6% y-o-y to Rs 3,733 crore during the same period. Speaking to CNBC-TV18 about the financial performance of the company, ED Rakesh Sethi, said PNB added about Rs 2,473 crore restructured assets in this quarter, which totals up to Rs 30,118 crore. "The slippage was about 12.5 percent from this, but there was 14.4 percent upgradation out of the non-performing loans (NPLs) which were restructured over the past few years," he added. Net interest margin (NIM) in Q3 stood at 3.47% and it hopes to maintain NIM guidance of 3.5% going forward. Below is the edited transcript of Rakesh Sethi’s interview with CNBC-TV18 Q: Can you take us through how much was the restructured assets fresh in the third quarter and what is the total now? A: The total now is about Rs 30,118 crore and we added about Rs 2,473 crore in this quarter. There were two other relevant things in this. First was that the slippage was about 12.5 percent from out of this restructure, but what was equally important was there was 14.4 percent upgradation out of the non-performing loans (NPLs) which were restructured over the past few years. Q: Are you looking at any fresh restructuring that has already been requested to you? So in the Q4 do you have some visibility on restructured assets? A: As on date whatever is applied to the Corporate Debt Restructuring (CDR) we have cleared everything. The last account which was restructured in our books was Suzlon Energy. Other than that as on date we are not looking at anything really big, but then quarter-to-quarter you just have to watch. Q: In a sense do you think the restructured assets could be more than Rs 1,000 crore even in Q4? A: It is very difficult to give it a number. The way the economy is growing and the way the transmission is taking place I feel that tomorrow is going to be better than today. Q: If one looked at your fresh slippages Rs 2,968 crore compared to Rs 4,544 crore in Q2. Where do we go from here? A: The slippage is not in our hands. What gives us the confidence this quarter is our ability to respond to this. Slippages are a consequence of what the economy is, but the way the transmission has happened, the way the government has moved, the way the Reserve Bank of India (RBI) is moving today still you can say that tomorrow is going to be better than today, but then slippages still would be a consequence of too many moving parts. _PAGEBREAK_ Q: I am asking you whether you will maintain that it could at least go lower. You have come down from Rs 4,500 crore to a fresh generation of Rs 3,000 crore. Will the fresh generation be a little less in the fourth quarter? Are you getting that sense from your borrowers? A: The point is that it is a derivative of the economy and the economy is improving. So based on what the condition I see today it appears a no-brainer that things are going to get better. But what gives us the confidence today is our ability to deal with them and I think ultimately our ability to deal with them will also decide what my end number is going to be. Q: Your gross NPAs have marginally gone down from Rs 14,023 crore to Rs 13,997 crore, yet your fresh slippages have risen by Rs 3,000 crore. So can you give me some idea of what was recoveries and upgrades in the third quarter? A: About Rs 1,800 crore was on account of upgradations and about Rs 1,100 crore and something and a consequential write-off because of a recovery was about Rs 34-35 crore. So totally it was Rs 2,994 crore as against slippage of Rs 2,968. That is how the gross number came down. Q: What about margins you all have cut the base rate by 25 basis points that is still a distance above the prevailing base rate of your biggest competitor. He has cut by 5 basis point, but still comes down from 9.75 to 9.7, you have cut by 25bps and you have still come down to 10.25 percent (ten and a quarter). What is the likely impact on margins in the first place for the fourth quarter itself? A: We would see some stress naturally because we have not brought down the deposit rates as yet because we thought that let’s see what the inflation numbers come out and then atleast the real rate on return should not be done. But we have headway in one area that is our statutory liquidity ratio (SLR) securities held close to 30 percent, 29.62 to be exact. So, we hope to get something out of that to push up lending because this is the busy season when it starts. If we can pull something out of that and replace it with even credit at something which is base rate plus then NIMs would be protected. We stand by our yearly guidance of 3.50 and I am sure we will achieve that. Q: What about advances growth or loan growth? YoY what can you deliver? A: YoY we are still delivering close to about 10 percent, but the point is that we are undergoing a structural change. We were one of the large banks which had just about 10 percent of our book in retail, so that is something which has really started growing for the first time after I have been at the bank. It has grown at the highest rate within the subsectors of advances i.e. agriculture is at 9 percent whereas this has grown at about 16.5 percent. We hope that this will happen and we are still hoping as the last quarter is always the quarter when the build up happens, still anything close to 12-14 percent growth is what we would be looking YoY. Q: So you grew by 10 percent YoY on advances and you may end the year by 12-14 percent is your hope? A: Yes, 12-14 percent.