Expect to catch up with industry loan growth next qtr: PNB

Latha: The market has given thumbs up to your numbers, primarily impressed by the fact that fresh slippages are half of what it was last quarter. What is the sense you are getting. Is this permanently arrested, how will things pan out in the current quarter?

A: Before answering your question I should take you back to the last quarter where we said that the consolidation period is over and growth phase will begin now. So, we have seen growth in our advance numbers which also contributes to non-performing asset (NPA) percentage coming down. We had also said we feel that the worst was over because whatever had to be done, whatever pain had to be taken appears to have been taken and given the fact that the economy continues to be in a state that it is presently now and does not deteriorate, we feel that the worst is over. So, our expectations have come through. So, accordingly we feel that as against Rs 3,500 crore in Q1 of slippage Rs 3,000 crore of slippage in Q2 is just Rs 1,505 crore this time.

Latha: What is the trajectory?

A: Trajectory is always difficult. We stand by what we said that the worst is over.

Latha: What about restructured assets. How much was restructured this quarter?

A: Rs 2,150 crore was restructured, out of which Rs 2,145 crore moved out on account of the bond issue of the two State Electricity Boards (SEBs) of Rajasthan and Uttar Pradesh. We found that Rs 1,812 crore had slipped into NPA out of the restructured category where restructuring had failed. Earlier we were reporting both as NPA as well as in restructure thereby showing double counting to this extent in stressed assets. So, once the restructuring had failed, we got this out, so Rs 1,800 crore came down because of that then there was Reserve Bank of India (RBI) circular which said that if date of commencement of commercial operations (DCCO) is extended and accordingly the date of repayment is extended then also you are allowed to take it out of restructured category. That gave us a benefit of almost Rs 2,900 crore so the number has come down from Rs 37,000 crore to Rs 31,000 crore.

Latha: On a like on like comparison between the two quarters so on net-net basis how much was restructured last quarter and this quarter, now that you are giving me a net figure?

A: Last quarter we did about Rs 2,500 crore and in this quarter it was Rs 2,150 crore.

Latha: How is the pipeline looking? You think the run rate might be around Rs 2000 crore in the current quarter or even get worse?

A: We cannot say. We hope it has tapered - whatever had to be done is done. There is a deadline which is coming in when restructured as a category would attract the same provisioning as NPA assets, which is April 1, 2015, so the worst would be over even on this category.

Latha: You spoke about loan growth. Can you give me an idea of loan growth and how it might end the year?

A: In September we were at 6.5, now we are at 9.7. The industry is growing at around 14 percent. So, we expect to catch-up with the industry in the coming quarter so that the year-end growth should be close to that and that of course would be aided by the base effect.

Latha: Where is the growth? Is it in retail, is it in small and medium enterprises (SME), is it agriculture?

A: Six percent came in agri, which was quite good. Industry grew at about 11.3 percent out of which micro, small and medium enterprises (MSME) grew by 21 percent, large industry only grew by about 7 percent, retail for the first time grew by about 18 percent and today our retail to total asset has grown to 12.3 percent of total assets, something which used to be less than 10 percent about two years ago. So, we have seen growth…

Latha: Your net interest margins, you have done 3.5 percent. How do you see that progressing?

A: We give a yearly guidance of 3.5 percent and we try and stand by it. This quarter was 3.57, next year whenever the RBI gives their projection, which we feel is always more accurate based on wider gamut of inputs. So, depending on that we give our guidance. For this year 3.52 percent, I am sure we will meet our guidance that we gave at the beginning of the year.

Ekta: I just want to focus on the power sector exposure that PNB has at this point in time. Considering that you have got in out of your consolidation strategy, will you now be aggressively looking to lend towards power and infrastructure as well as iron and steel. The sectors which have been detrimental for you all in terms of asset quality?

A: I would be wary of doing that – for the first time our growth in infrastructure has come in single digits - that is 8.3 and unless something dramatic happens where the enabling environment is conducive for banks to lend otherwise by all these years we have been getting flag for having funded this industry. I think we would be very careful but that would be our personal view.