Expect credit growth of 19-20% in FY12: UCO Bank

Public sector lender UCO Bank has posted a 12% rise in its net profit for the first quarter of fiscal year 2012. Its profit after tax (PAT) came in at Rs 292 crore as against Rs 269 crore posted in the same quarter last year.

In an interview with CNBC-TV18, Arun Kaul, chairman of UCO Bank said, the bank is very hopeful that for the full year it should be able to achieve net interest margin (NIM) of approximately 3%. He further said, he expects credit growth of 19-20% in FY12. Below is the transcript of his interview. Also watch the accompanying videos. Q: This quarter your margins have improved slightly, but over the past few quarters there has been a decline in your margins. Where do you see margins headed? A: My net interest margin (NIM), for the last full year, was 3.07%. However, in the fourth quarter, NIM slipped to about 2.32% or 2.33%. We have seen this quarter improvement from 2.30% to about 2.43-2.44%. Gradually, we are seeing improvement on NIM numbers. As the high cost is about to mature, the NIM would improve. So, we are very hopeful that for the full year we should be able to achieve NIM of approximately 3%. Q: Your non-performing assets (NPAs) have seen an increase this time around on a sequential basis as well. Can you take us through the reasons for that? A: If you look at the NPAs, as on March 31, system driven NPA was above Rs 1 crore. This time we brought it down to Rs 50 lakh and above. For the fourth quarter my slippage was Rs 1,150 crore in the quarter. This time slippage is much lower, just about Rs 500 crore odd. But the recoveries and upgradations is much higher. The quarterly recovery upgradation almost was Rs 300 crore for quarter compare to approximately Rs 700 crore the full year, last year. Going forward, we are absolutely sure that we should be able to contain our NPA and bring it down substantially. Q: As far as your provisions are concerned, they have also seen a jump. Could you take us through a breakup of your provisions? A: We have provided all the necessary provisions as per the RBI guidelines. Whatever is required, we have totally provided that. There has been some jump in the provisions because of the MTM losses on the investments. Otherwise, we have provided, all the RBI guidelines have been taken care of. Q: By when do you expect to pass on the rate hikes that were announced yesterday by the RBI and in what quantum do you see the hikes being passed on? A: My ALCO (Asset and Liability Committee) would shortly we will take a view on that. Q: But any sort of indication as to how much you see the hikes being passed on? A: I would not be able to comment right now. Let my ALCO meet and discuss about this then we will take a view on this. Q: What is your target for credit growth, where do you see it heading this year? A: We had indicated in the beginning of the year that credit growth would be in line with the RBI expectation of about 19-20% growth. We have maintained our target of 19-20% growth. So, we do think that we will be able to grow with something like 19-20% or so. Q: What is your CASA ratio currently? Where do you see that headed? A: CASA has improved. It has improved to 25.6% compare to 24% last year. So, we are hopeful that with all the efforts we are making we should be able to go beyond 25-26%. So, immediate effort is on CASA. We have been able to procure almost about 200,000 customers a month. So, going forward, we are very hopeful that we should be able to bring about improvement in CASA. Q: Deposit growth, which has been very slow this time around, can you take us through the reason for that? A: We have deliberately shed some high cost deposits. If you remember the fourth quarter, deposit costs have really moved up. We have not rolled over the high cost deposits. So, deliberately we kept our deposit growth slightly on the lower side with a view to contain the cost.