Expect NPAs of Rs 200-220 crore in Q4: SBM

Higher provisioning and employee cost resulted in dip in the third quarter earnings, said Sharad Sharma, MD of the company said. The bank’s net profit dipped 71.98 percent to Rs 26.94 crore for the third quarter and total income rose 2.8 percent to Rs 1940.22 crore. Speaking to CNBC-TV18, Sharma said higher provisioning for non-performing loans (NPLs) was done as per the Reserve Bank’s directives. The bank’s Q3 gross non-performing assets (GNPAs) and restructured assets stand at Rs 5,000 crore, which is about 9 percent of loans. The bank’s Q3 slippages came in at Rs 475 crore. Provisioning of Rs 210 crore was done on account of asset quality review (AQR). There are 15 accounts under AQR of which six accounts will be reconsidered by the RBI, Sharma said. Under RBI’s 5:25 scheme, the bank restructured 9 accounts and will complete one more by March this year. Sharma said adding that he expects NPAs to be near Rs 200-220 crore in Q4. Below is the transcript of Sharad Sharma’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: 34 percent rise in gross non-performing asset (NPA), is this all or since the Reserve Bank has given you two quarters for the first tranche of the bad loans that it has identified, you will likely distribute it between two quarters?A: To put it in perspective, I will give you a number. If you look at the Gross NPA, asset quality review (AQR), what AQR of RBI has done is that some of the stressed assets which were there, where income recognition was happening and it was being serviced, they have accelerated that and they said that you rather classify it as a NPA. If you look at our bank’s numbers, in terms of stressed assets portfolio, in March, 2014 we had a gross NPA and a restructured asset portfolio of 12 percent which came down 11 percent in March, 2015 and even after this AQR which has happened, in December, 2015 my gross NPA plus restructured asset portfolio is just 9.5 percent. So, things fairly under control. But, as far as the bottomline is concerned, we have done higher provisioning based on RBI’s recommendation and that is what it is.As far as our operating profitability is concerned, we are Rs 10 crore down over the previous on a year-on-year (Y-o-Y) basis and if this AQR issue had not come, I would be very happy in giving you numbers where our nine months profit would have been equal to our full profit of last year.Latha: Therefore, what you are saying is, what you have recognised as gross NPA was anyway something that was restructured. What will be, for this quarter, your gross NPA plus restructured?A: This quarter gross NPA plus restructured book would be around Rs 5,000 crore.Latha: That is 9 percent, is it?A: That is right, 9.3 percent.Sonia: So can you give us what the fresh slippages were that the bank saw this quarter?A: Other than the AQR thing, there has been not much of slippage and what we have recognised this quarter is about Rs 475 crore of gross NPA and the provisioning which has been there has been to the order of Rs 210 crore on account of AQR. So, if the AQR had not been there, my post tax profit would have been higher by about Rs 130-140 crore.Latha: So, you are saying that this entire fresh slippage of Rs 500 crore were original restructured assets which you are recognising as NPA, is it?A: Exactly, to give you an idea, as on September, my restructured asset and gross NPA portfolio was Rs 5,100 crore and that is down to about Rs 5,000 crore. So, Rs 100 crore on the minus side. So, it has not affected me per se, but yes, on the income side, I have not been able to recognise it, so about Rs 50 crore of income recognition has been reversed even though that had been realised. And of course, the provisioning of Rs 210 crore which has been made.Sonia: So, from this 5.5 percent gross NPA that you are currently at, can you give us an indication of how you will end FY16 and also in the first half of FY17, what could the gross NPA of the bank be?A: We have done an evaluation and at the most, what I see is includes corporate, maybe Rs 160-175 crore and Rs 25 crore on the retail, so maximum MPA growth in the fourth quarter could be Rs 200-220 crore. So, not much of a change which we should be able to comfortably cover through our profit. But the only thing is the AQR, the phase II of AQR will also come in. So, that will have an impact.For entire discussion, watch accompanying video...