Bank of Maharashtra aims to maintain NIM ahead

Anup Shankar Bhattacharya, chairman and managing director of Bank of Maharashtra said, the bank's business model has helped them to achieve robust net interest margin (NIM) of 3.18% in this quarter. He is hopeful of  maintaining the same in the near future.

Its NIM stood at 2.38% in June 2010. The bank reported marginal rise of 3% in the net profit of Rs 122 crore in this quarter against Rs 118 crore in the same period the previous year.

However, according to Bhattacharya, operating profit is the mirror of the bank and one needs to look at operating profit rather than net profit.

"To strengthen the balance sheet of the bank we have made substantial provision and as a result the net profit as of June 2011 is subdued which will ultimately increase in the next and subsequent quarters also, he added.

Also Read: Bank of Maharashtra eyes 25% loan growth in FY12

Below is the verbatim transcript of his interview with Vidhi Godiawala of CNBC-TV18. Also watch the accompaning video.

Q: Can you take us through your numbers and tell us why just the profit number coming up just 3%?

A: The operating profit is the mirror of the bank. You need not go to the net profit, first you have to see the operating profit of the bank. Our operating profit, as on June 2010, is Rs 260 crore and has increased to Rs 414 crore in June 2011. To strengthen the balance sheet of the bank we have made substantial provision. As a result, the net profit as of June 2011 is subdued which will ultimately increase in the next and subsequent quarters also.

Q: Staff expenses was one reason because of which the bank has set for lower profits. Can you throw some light on that?

A: We have made amortisation of pension and gratuity liabilities and we have taken Rs 27 crore during this particular quarter. For future provisions we have taken Rs 25 crore as a staff cost. As a result of this, the staff cost has slightly increased.

Q: Margins are looking fairly robust at 3.18% versus 2.38%. How has the bank been able to really get the margin figures in place?

A: The policy of the bank or the business model of the bank is very-very simple. We are going for simple deposits from the individual, increasing CASA and have avoided dependence on bulk deposit. As a result, my cost of deposit has been contained to the extent of 5.98%.

Secondly, in case of advances, we are depending mostly on meet corporate advances which normally give me a reasonable rate of return. As a result, my NIM is robust at 3.18%. I am hopefull that I will be able to maintain the same in the near future also.

Q: If you see the breadth of the banking industry, there margins are compressing with the higher impact of saving bank deposit as well as interest rates going up on the higher side. To what extent can this be contained?

A: As I already told you the impact of savings has already been factored in the 3.18% growth in June 2011. The business model of my bank is different from that of the other banks. The business model of my bank is dependent not only on the bulk deposit, but on the low cost deposit. My CASA is one of the highest in the banking industry. Number two, I am lending to SMEs where the income is reasonably good.