Expect higher restructuring in next quarter: United Bank

Public sector bank, United Bank of India expects higher restructuring of assets in the next quarter informs CMD Archana Bhargava. Speaking to CNBC-TV18 post first quarter results, she says there has been a quarter on quarter growth of almost 5 percent in the restructured accounts and fresh restructuring has happened in around 10 large accounts.

"There would be a lot of restructuring happening but by the end of the current quarter we would be in a much stronger position, it would be a much stronger balance sheet," she adds.

Also Read: SBI Q1 net falls 14% on higher provisions against bad loans According to Bhargava, in all the bank has restructured account worth Rs 4,718 crore. It is also focusing on higher recoveries, upgrades. United Bank of India reported net profit of Rs 44.7 crore in Q1FY14 against Rs 174 crore year on year. Below is the verbatim transcript of Archana Bhargava's interview on CNBC-TV18 Q: Bad loans have been rising for several banks like State Bank of India, United Bank. In your case, in one quarter it is 25-27 percent rise in bad loans to Rs 4,000 crore, do you think you have got most of the bad news? Do you think another Rs 1,000 crore in the current quarter can also be ruled out? A: Our top-line has grown by almost 18 percent from Rs 1.60 lakh crore to Rs 1.81 lakh crore which is a phenomenal increase. It includes an increase in good quality assets as well. There is an increase in advances to almost Rs 71,534 crore from Rs 63,000 crore levels last year. We are going through a lot of pain in the form of non-performing assets (NPA) that are large value accounts, there the slippages have come and we are in the process of having a very strong balance sheet. There has been an increase in the non-performing asset levels. Q: You have seen over 50 percent of the current quarter, do you think there is more trouble? A: There is more trouble round the corner. This quarter will be another difficult quarter because there are certain large value accounts that are stretched. There would be a lot of restructuring happening but by the end of the current quarter we would be in a much stronger position, it would be a much stronger balance sheet. Q: Can you give us the exact numbers in terms of what the slippages and the restructuring has been this quarter because last quarter it was about Rs 1060 crore or so? A: There has been net reduction in the non-performing assets (NPA) of Rs 152 crore so quarter on quarter there has been a reduction but there have been fresh slippages too. The slippages of Rs 1200 crore gross and so NPA has increased to Rs 4,000 crore level from Rs 3,210 crore last year, which is quite an increase. But last quarter also we have registered slippages of almost Rs 1,100 crore Q: What about restructuring? A: The total restructured accounts stand at Rs 4781 crore and there has been a quarter on quarter growth of almost 5 percent in the restructured accounts and fresh restructuring has happened around 10 large accounts. They all have now gone into corporate debt restructuring (CDR). Q: If the situation gets worse, would you not rule out even 6 percent gross NPA level as you head into the next couple of quarters? A: We are in the process of recovery. There has been substantial amount that stands to be sub standard and if we get very aggressive on recovery this quarter, we should be able to at least upgrade a sub standard asset line. Q: What are your margins? Net interest margins as well will you consider a base rate hike given that the money market tightness is continued for a month? A: As far as margins are concerned and operating profit has actually gone up during the current quarter we crossed the Rs 600 crore mark from Rs 510 crore last quarter. Last year, last quarter our profit came back from write back of cash benefits –Rs 76 crore were written back last quarter but this year our net profits, we are at Rs 45 crore which in terms of percentage is phenomenally high figure because last quarter was almost loss quarter. Net interest margins stands at 3.30 percent, it is 3.27 percent and now we are 3.30 percent – a lot of correction happened. The good news is since we have added quality assets of almost Rs 10,000 crore in the current quarter, we will gradually see the effect coming in, in the next two quarters.