Expect FY17 deposit growth to be around 5%: BOI

Bank of India reported decent set of second quarter earnings where it turned saw a profit of Rs 127 crore against a loss of Rs 1,126 crore in the same quarter last fiscal.

In an interview with CNBC-TV18, Melwyn Rego, MD and CEO of BOI said that net addition to gross non-performing assets (GNPAs) is around Rs 388 crore and sees FY17 slippages to be at Rs 17,500 crore.

He said that the bank is looking at further non-core asset sales and expects FY17 deposit growth to be around 5 percent.Below is the verbatim transcript of Melwyn Rego's interview to Latha Venkatesh on CNBC-TV18. Q: Can you just take us through the asset quality picture how come your slippages are actually halved Rs 3,963 crore is that all in terms of fresh bad loans that you created? A: That’s right the numbers you have mentioned are correct, but let me get step back when I had taken over as MD and CEO a little more than a year back, at that time we had detailed a three-pronged strategy which was christened Star Mission One which entailed NPA management being the first-pronged of the strategy and then of course augmentation of current account and savings account (CASA) and rebalancing and advances in favour of the retail portfolio. I had then mentioned that this strategy would bear fruit only by March 2017. I am happy that the first green shoots arising out of this strategy are clearly discernible and as a result the bank has earned a profit before tax (PBT) of Rs 197 crore and a profit after tax (PAT) of Rs 127 crore after having incurred losses for 4 quarters and you know a year back the mood was rather sombre and notwithstanding the apprehension expressed to that point in time and later in the 3 quarters, our result turnaround the fortunes of bank became even stronger. Q: Clearly take your point Rs 10,000 crore of non-performing loans (NPLs) in Q3 last year that is 4 quarters ago rose to Rs 16,800 crore the quarter after then Rs 6,000 crore last quarter and now Rs 3,900 crore is clearly an improvement. Can we see it halving in the third quarter you think? A: See even the number which you are talking about Rs 3,963 crore, I think we should look at in conjunction with the reduction, which is Rs 3,575 crore and we are looking at a net accretion of Rs 388 crore. Now when you look at Rs 388 crore net accretion and compare it with the previous quarter where it was Rs 1,995 crore and when you look at the March quarter it was Rs 13,360 crore. Q: You think you can continue the space of recoveries and especially upgradations, how much did you upgrade this time? A: Our upgradations was over Rs 1,500 crore. Q: And recoveries were? A: Recoveries were close to Rs 1,200 crore. Q: Will you be able to maintain this pace? A: Yes, we will definitely be able to maintain this pace. In fact, looking at the year as a whole, we had looked at overall slippages of about Rs 17,500 crore and recovery and upgradation at least matching this number. Now coupled with an increase in the denominator, we expect the non-performing asset (NPA) percentage to drop. Q: To drop well below 13 percent you think? A: To give an exact number would be difficult, but definitely it would drop. Q: I am also interested in your deposits, your overall deposit pool has shrunk by 3.8 percent, but your current and savings accounts have gone up by 1 percent over the previous quarter to 36 percent, so you could get rid of lot of high cost deposit? A: Yes, high cost deposits we have shared and I can only mention that the share of the term deposits of Rs 1 crore and less has grown from 64 percent to 75 percent and that has resulted in reduction in interest cost, has also in concentration risk. CASA incidentally if you look year-on-year (YoY) has grown by 5 percent from 31 percent to 36 percent. Q: You have more stake in Star Daichi to sell? A: We have a 30 percent stake, but we are not looking at Star Daichi for any further sale this year, but there are other strategic investments, which we are having a look at. Q: Your non-core investments which you will sell? A: That is right. Q: Which ones may they be? A: We are looking at a few of them, but the exact one it would be difficult at this point of time. Q: How much do you think your deposits may grow from now to December 30 given the environment of people converting cash to deposits? A: I would not factor that, but in the normal course I expect the deposit growth of about 5 percent in December. Q: This time you said net-net after upgradations and recoveries your NPL was only Rs 388 crore, should we expect a negative figure next time that your fresh slippages will be less than your upgradations and recoveries? A: That is what the expectations are barring of course surprises if there are any chunky accounts or accounts which we have reckoned that this point in time.