Oriental Bank of Commerce (OBC) reported a loss in the fourth quarter due to large slippages in non-performing assets and restructuring of loans, said Animesh Chauhan, MD & CEO of OBC in an interview with CNBC-TV18.
The net interest margin of the bank stands at 2.61 percent, and Chauhan expects to maintain it
“We are not seeing the slippages going up in the present quarter,” added Chauhan. The bank is expecting growth in segments like retail, agriculture and mid-corporate.
Below is the edited transcript of Animesh Chauhan’s interview with Latha Venkatesh on CNBC-TV18.
Q: Can you take us through the loan growth and the net interest margins (NIM) because the net interest income (NII) has not shown any improvement?
A: Because of the larger slippages into non-performing assets (NPAs) during the year and also because of the restructuring about Rs 5,400 crore, the net interest income has been flat for us during this year. The NIM is at around 2.61 percent which we hope will be maintained in the coming quarters as well.
Q: This Rs 5,400 crore was restructuring for the full year?
A: It is for the full year. For the quarter, it is Rs 1,755 against the restructuring of Rs 2,055 last quarters.
Q: Your fresh slippages have come around Rs 700 crore?
A: Yes, it is Rs 760 crore odd for the quarter.
Q: You appear to have sold about Rs 392 crore of assets to the asset restructuring companies (ARCs). If we didn’t count that your slippages would have been higher?
A: No, basically we have not sold this year. That Rs 290 was a previous year issue. This year we sold about Rs 137 crore in June and about Rs 18 crore that is around Rs 160 crore figure, which is quite less. That is not counted in this amount.
Q: What is the sense you are getting? We are already about 45 days into the current quarter and half the quarter is over. Are you getting a sense that you will be able to report even lesser slippages? Lesser than Rs 700 crore in current quarter. What is the feedback from clients?
A: We can’t be very sure of the slippages because if something happens with a major account or if something happens, it impacts the entire figure, but we are not seeing the slippages going up in the present quarter. If you see Q4 of 2014, it was Rs 1,200 crore, Q3 was Rs 1,342; already quite contained to 762 levels so we expected to be coming into that in the coming quarters. We are trying our best to get it contained or reduced.
Q: You don’t see anybody asking for restructuring now?
A: There are restructuring requests that are pending which could not be decided in March. That will be there, but that should happen across one quarter maximum and then it should go down.
Q: What may be the amount or number of cases?
A: It has to be between Rs 1,200 to 1,400 crore.
Q: What kind of loan growth did you see in Q4 and what are you expecting in FY16?
A: In FY15, we are deliberately planning a loan growth of around 12 percent and looking into our books, the major 52 percent of it is large corporate credit where we are not expecting much of a growth, much lesser growth or muted growth next year also. May be part of it deliberately, but in the other segments like retail segments, agriculture and Mid Corporate, we expect a much better growth. Quarter four has been better than the previous 9 months. It was around 8 percent growth there.
Q: What is your exposure to gas-based plants? Do you expect now that those at least will not go down? What is the total exposure?
A: The total exposure is much less, around Rs 350 crore odd. With the policy getting activated, we don’t expect them to go down.
Q: Where do you see the chances of things getting bad at all? Would it be in metals? What is your exposure to steel and metals?
A: Steel is a sector which is still a bit of constraint. In fact, in restructuring also they are the biggest component if you see the entire year and in slippages also, they have a big content of iron and steel industry. With mining getting restored and some of the import duties and all getting rationalized, we hope that this sector, not immediately but a quarter onwards, should come back on rails.
Q: This net loss that you have reported is just for this quarter because of that ARC adjustment that you had to make?
A: This ARC sale was for previous year; it was for 2013-2014. The profit of 2013-2014 had this figure of Rs 280 crore added. So, this reversal is a previous year income that we have reversed in this quarter, so that is what has resulted. Plus, the wage provisions that we had to do had a component of about Rs 70 crore for previous year which we have done in this quarter. So that is what has impacted this loss. It is not a loss for the quarter. For the quarter, we have seen a better position.
Q: What is the net interest margin you are expecting?
A: We expect to maintain around 2.65 percent in the coming year as a whole.
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