Would like to maintain NIM at 3% in FY14: South Indian Bank

South Indian Bank, which reported net interest margin of 3.21 percent in quarter ended March is determined maintain it at 3 percent in FY14.

“We do not want to see that it comes down but we are now planning to see that this is maintained at any cost at 3 percent,” VA Joseph, MD & CEO, South Indian Bank told CNBC-TV18 today.
The private sector lender today reported 26 percent year-on-year increase in net profit at Rs 154 crore and its revenue grew 46 percent on year to Rs 121 crore. Net NPA ratio worsened from 0.28 percent to 0.78 percent in quarter ended March from a year ago period.
The company's provision for bad loans also significantly increased to Rs 66 crore from Rs 12 crore as it had to make higher provision for Nafed (National Agricultural Cooperative Marketing Federation of India Ltd) loans, which has slipped in to NPA during July-September last year.
“The total amount as you may be aware it was Rs 150 crore out of which we have already provided Rs 90 crore so this quarter we have provided Rs 30 crore for that account. So out of Rs 150 crore already Rs 90 crore is provided, the remaining Rs 60 crore will be provided during this financial year,” Joseph said. Below is the verbatim transcript of his interview Q: Good growth numbers and a decent fall in your gross non-performing loans (NPLs), can you tell us what the fresh slippages in Q4 were? Your gross NPLs have fallen but how have your slippages done in Q4 compared to Q3?
A: If you look at our gross NPA it can be seen that compared to the last quarter it has come down, even though there were some slippages in the normal course. Compared to last year even though the NPA has gone up, compared to last quarter it has substantially come down. So we hope next year we should be able to improve our position. Q: I am just asking you if you have the figures for the fresh bad loans you created, do you have that number handy.
A: I don't have the exact number right now but overall the slippages have been less compared to previous quarter. Q: What exactly were the net interest margins (NIMs) this quarter?
A: NIM last year was 3.10 percent, this year it has improved to 3.21 percent. Q: For the Q4 itself how much was it?
A: The cost of deposit has remained at 8.29 percent whereas our re-loan advances improved to 12.72 percent. So NIM has stood at 3.21 percent for the last quarter. Q: For the provisions this quarter does it include the National Agricultural Cooperative Marketing Federation of India Ltd (NAFED) account and is most of the provisions over for that account? What would your provisions look like going forward?
A: The total amount as you may be aware it was Rs 150 crore out of which we have already provided Rs 90 crore so this quarter we have provided Rs 30 crore for that account. So out of Rs 150 crore already Rs 90 crore is provided, the remaining Rs 60 crore will be provided during this financial year. Q: While the bank’s gross NPLs as a percentage of total loans has gone down from 1.62 to 1.36, your net NPLs as a percentage of the total book have gone up. Have you provided less therefore, what is your provision coverage ratio now and what was it a quarter ago?
A: Provision coverage ratio comes slightly below 50 percent now. Q: Would you want to increase it? A lot of the banks, even PSU banks have as high as 80 percent coverage.
A: Mainly this provision coverage has come down because of NAFED, where we had to make substantial coverage now. Since we have already provided Rs 90 crore and once that is fully provided provision coverage will automatically go up. Q: What were your recoveries this quarter because in the previous quarter you all had guided that your recoveries would actually pickup in terms of substantiating your asset quality concerns? What was it this quarter?
A: Our provision coverage is exactly 53.19 percent. Q: Just give us an idea about your capital adequacy? Will you be raising any money for capital?
A: As far as capital adequacy is concerned we are comfortable at nearly 14 percent because we had a qualified institutional placement (QIP) this year. So immediately we don't have any requirement because tier II is also very comfortable. Q: How do you think your NIM will do in the current year in FY14 or even in the first two quarters? Are you expecting it to improve or take a beating?
A: It is really challenging but at any point we want to see that it is maintained at 3 percent. We do not want to see that it comes down but we are now planning to see that this is maintained at any cost at 3 percent. Q: Why are you saying there is pressure, because of falling rates?
A: The rates are falling and it depends. Suppose if things are improving, if economic conditions improve definitely we will be able to improve it. But whatever may be as a policy, we would like to keep it at 3 percent because we do not know how the interest scenario is going to move in days to come. Q: What is the percentage of gold loans as a percentage of your total loans and with the fall in the price of gold are you noticing that some people don't want to pay back their gold loans?
A: As far as gold loan is concerned this year we have not gone very aggressive. Gold loan increase has been only 1.5 percent compared to last year. Even though we have got more than 20 percent advances on gold overall. However at the same time we keep a substantial margin on gold loans and take care of the surprise fluctuations. So we ensure no asset becomes bad as far as gold loans are concerned because even 5-10 percent fluctuation is not going to make any impact as far as our advances are concerned. Q: The RBI restricted banks to finance import of gold jewellery for domestic use. Is that any impact on the bank in particular, could you just take us through that quickly?
A: Absolutely no, we will always go by the RBI guidelines and it is not going to make any impact for us.