Improved asset quality, lower provisions and higher other income helped private sector lender South Indian Bank to report 10.2 percent jump in its Q3 net profits. But, its net interest income (NII) declined marginally to Rs 350.5 crore in Q3 from Rs 352.6 crore in a year ago period.
Explaining this fall in NII, MD & CEO VA Joseph said the bank shifted its focus from corporate lending to retail lending, which led to slow pick-up in advances. However, he is confident of sustaining profitability going ahead. NII is the difference between interest earned and interest expended.
He pointed out that the bank’s recoveries were higher than slippages in Q3. Slippages stood a little over Rs 100 crore and recoveries were at Rs 160 crore. Meanwhile, the bank’s net interest margin stood at 3.03 percent.
Going forward, the bank would aggressively focus on recovery and aims to reduce its gross NPA and net NPA below 1.5 percent and 1 percent respectively by March.
Below is the edited transcript of VA Joseph’s interview with CNBC-TV18
Q: First a word on net interest income (NII) because while the numbers look good in all the parameters, it is the NII which has flatten or has seen a bit of negative tick. What explains that?
A: It has come down slightly this quarter, because the advances growth has been slightly low compared to earlier period, but we could make it up. Non-interest income has essentially got up, so we could compensate it. In the coming quarter we should be able to manage it very well. What happened is we have shifted our focus to a great extent to retail advances this time.
Even though the growth has been little slow the retail advances have picked up during this year, housing almost 10 percent. Our vehicle and other personal loans by 80 percent and micro and small enterprises also by 30 percent, agriculture has also grown around 11 percent during this year. There has been a shift mainly from the corporate to the retail lending so the advances pick up has been little slow, but we will be able to sustain profitability with the shift from the corporate to retail during this year.
Q: Can you just take us through what led to the provisions coming so much lower on a year-on-year as well as sequential basis?
A: This time against the first slippages of around Rs 103 crore the recovery and upgradation was around Rs 163 crore, so that has been advantageous as far as the provisioning is concerned to a great extent. If you look at the restructured advances, the figure has come down compared to last March which has substantially come down during this quarter. So both this has helped.
Q: Your slippages were low on a sequential basis. It was at over Rs 100 crore, but your recoveries exceeded your slippages?
A: Yes, it is Rs 163 crore against Rs 103 crore slippages. Recovery and upgradation was to the tune of Rs 163 crore.
Q: What can we expect in terms of a trend going forward? Are you going to focus more aggressively on recoveries and what is your slippage pipeline as well?
A: In the next quarter, we are very aggressively going to focus on our recovery. In the last quarter our gross NPA was 1.92 percent which has come down to 1.66 percent and our aim is to bring it below 1.5 percent by March. Similarly the net NPA was 1.39 percent last quarter has come down 1.18 percent which we want to bring below 1 percent. The main focus during the next quarter will be on recovery front and bringing down our NPA substantially.
Q: What about the restructured assets this time around? What was that in terms of fresh restructuring?
A: Fresh restructured advances come to around Rs 261 crore this quarter.
Q: Can you just leave us with your net interest margins (NIM)?
A: NIM is 3.03 percent.
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