See credit growth between 15-16% in FY13: BoB

In an interview to CNBC-TV18, SS Mundra, chairman & managing director, Bank of Baroda gives his views on the bank's Q3 performance. The bank's net profit dropped nearly 22 percent year-on-year to Rs 1,012 crore, dented by higher provisions against bad loans.

On talks of management change impacting the bank's performance, Mundra says the managment change did not have any impact whatsoever. " I have taken over the bank on January 22. It has just been ten days. Anyone familiar with the process would know that the contours of the results must have been largely decided by then," he says.

However, on views of the bank's performance for FY13, Mundra says he sees credit growing between15-16%. "Overall credit growth in the economy is sluggish. While in the recent past we have always been growing faster than the industry, but having assessed the macro environment this year, our projection is to grow more or less in tandem with the industry. As far as this year is concerned, the credit growth should be something in the range of 15-16 percent and deposit growth in the range of 14-15 percent looks more realistic," he says.

Below is the edited transcript of Mundra's interview to CNBC-TV18.

Q: Your numbers have disappointed the street quite considerably in terms of analysts’ estimates. There is talk of a management change. Hence, can we assume that this is a one-off quarter and the results were because of a management change?
A: I do not know why this is a very prevalent perception that the change of management in public sector bank (PSB) results into kitchen sinking. Let me clarify a few things. I have taken over the bank on January 22. It has just been ten days. Anyone familiar with the process would know that the contours of the results must have been largely decided by then.
There is nothing like a management change. There maybe a matter of little concern for the market about the reduction in profitability or some of the stress which is seen in the asset quality. However, I think it is largely reflective of whatever is happening around us also. The asset quality of Bank of Baroda still continues to be the best among the peer groups. So, while there is a reason to be vigilant and to be slightly cautious and concerned, there is no reason to have any extreme feelings about it. Q: Take us through the slippage figures this quarter. Where did the maximum stress emerge, in which sector?
A: As far as the domestic book is concerned, slippage during the quarter is to the tune of Rs 1,600 crore. Those are the fresh slippages seen during this quarter but there are more things to be considered. Firstly, the slippages are not coming from any particular sector as such. So, it is not representative of any specific sector. Within this, there could be few larger accounts, which can be called slightly lumpy in relation to the other accounts. This may represent around 40-45 percent of the slippage. So, the composition of the portfolio has directed that they get to burst together in one particular quarter. Otherwise, it is across the sector and across the ticket-size of the book. Q: What about the fresh restructuring that you undertook this quarter? Which sectors underwent restructuring?
A: The restructuring during the quarter is to the tune of Rs 1,567 crore. This restructuring has not come from a particular sector. I will not be discussing the individual accounts, but it is not representative of any particular sector. It is fairly spread across the sector and across the various size of the credit book. Q: It is not just the asset quality. However, even the growth has disappointed. For instance, the net interest income (NII) also disappointed the street. Why this fall or minor 8 percent growth in NII? What is the guidance on growth in the coming quarters?
A: If there is any restructuring and if there is any non-performing asset (NPA), there would be an element of interest reversal which should have impacted the NII growth. So, I expect this to improve slightly as we move further in next two to three quarters in a gradual manner. Q: Coming to bit of a broader issue, you all have passed on 25 basis points to consumers post the RBI policy, but in general, what is credit growth looking like? Are you constraining credit growth possibly to vulnerable sectors?
A: It is a combination of both. Number one, overall credit growth in the economy is sluggish. While in the recent past we have always been growing faster than the industry, but having assessed the macro environment this year, our projection is to grow more or less in tandem with the industry. So, it is a combination of both. My sense is that atleast as far as this year is concerned, the credit growth should be something in the range of 15-16 percent and deposit growth in the range of 14-15 percent looks more realistic.
As far as the next year is concerned, we will continue with the same consistency as far as the first couple of quarters are concerned and then reassess the situation. If overall there is an improvement in the macro environment, then perhaps we can go back to our old goals.