GNPLs may be in 3.75-4% range by FY16-end: SBM

Second quarter earnings showed improvement in State Bank of Mysore’s gross non-performing loans (GNPLs) from 6.5 percent on December 2013. Sharad Sharma, Managing Director of the bank expects GNPLs to be in range of 3.75-4 percent by the year-end.The bank’s net interest income (NII) rose 1.5 percent to Rs 527.6 crore and profit grew 25.7 percent to Rs 74.8 crore. Gross non-performing asset improved 3 basis points (bps) to 4.19 percent against 4.21 percent in the corresponding quarter last year. Of the total slippages of Rs 400 crore in the second quarter, Rs 100 crore worth were recovered in September, Sharma said adding that the bank also wrote off slippages worth Rs 260 crore. In the quarter gone by, four to five accounts worth Rs 600 crore were restructured under the Reserve Bank’s 5/25 scheme, Sharma said.The bank’s home loans grew 19 percent in the second quarter. Sharma expects accelerated growth in the second half of the year with festival season underway. Below is the transcript of Sharad Sharma’s interview with Nigel D’souza and Reema Tendulkar on CNBC-TV18.Nigel: The numbers look quite good, the street is quite happy, the stock is higher by a good 3 percent as we speak, but give us some clarity in terms of the provision numbers, both on a sequential basis as well as on a year-on-year (Y-o-Y) basis, the provision number has come in lower. Why exactly is that? Are you expecting asset quality to improve going ahead?A: Yes, it has already improved substantially. To give you an idea, our provision coverage ratio (PCR) has already been built up to 72 percent. And our gross non-performing asset (NPA) is in a declining mode. Take you back to December, 2013 where our gross NPA percentage had gone up to 6.5 percent. From 6.5 percent, a steady reduction which was happening and last it had come down to 5.1 percent in September, 2014 and March, 2015 to 4 percent and it is presently at 4.19 percent. Similarly the net NPA is also declined from 2.9 percent on a Y-o-Y basis to 2.2 percent.Q: So, we can see it improve even from these levels of around 4.19 percent?A: To some extent, yes because if you look at my overall, the gross NPA plus the restructured standard assets, we have also moved positively there from 12.1 percent last year, we have come down to 9.8 percent and on a net NPA basis, we have come down from 9.9 percent to 7.8 percent. So, yes maybe, what I could look at is anything between 3.75 to 4 percent maybe by the end of the year.Reema: So, gross non-performing loan (NPL) target is 3.75-4 percent by the end of FY16.A: I would say more towards 3.75 because why I have got 4.2 at this point of time is because of the small growth on a Y-o-Y basis in advances and on a year-to-date (YTD) basis, there is a small negative growth. But going in the second half, I am sure and our base rate also, we have been a little clued-on and aggressive and we have reduced that to 9.65 percent this month.What gives me a little confidence also is the home loans. The home loan growth on a Y-o-Y basis, we have shown 19 percent growth and we propose to build up on that because the second half and the current festival season is where a lot of these business gets booked.Reema: Just to get some numbers in, could you tell us what were the total slippages in this quarter? What were your net interest margins (NIM)? Any restructuring that you did under the 5:25 rule? If you could just help us with these absolute numbers?A: The aggregate slippages which I had during the quarter was about Rs 400 crore. Out of which Rs 100 crore which slipped in September has already come back. It was a temporary slippage. So, net I would say, temporary slippage was Rs 300 crore against which there was a recovery of Rs 124 crore and upgradation of Rs 26 crore. We have written off Rs 260 crore, so on a net basis, our NPA is down by Rs 38 crore during the quarter.Reema: And what about restructuring under 5:25 on the NIMs?A: Restructuring, not much. Restructuring has happened during the quarter, but yes, the 5:25, there have been there in four or five accounts like the steel assets which are there and the power assets.Nigel: What was the total value of that because in the last quarter, you told us that there were six assets of around Rs 400 crore, this time around you are saying it is around 4-5 assets, so what is the total value?A: The last time we spoke was in early September, so this would be about Rs 600 crore of assets which were under the 5:25. Restructuring there was nothing which came in towards the end of the quarter. In fact, there was one restructuring where there was an upgradation of Rs 100 crore which happened.Nigel: So, under the 5:25, what is the total value currently because Rs 400 crore in the first quarter, this quarter you are saying it is around Rs 600 crore. Or is Rs 600 crore the total figure?A: No, aggregate. Aggregate for the half year would be about Rs 600-700 crore.Reema; And what will the NIM be and also considering that you have lowered the base rate effective October, what is the NIM likely to be? Will we see some pressure?A: In fact, we had done a 10 basis point reduction effective mid-September, so the results have some impact. NIM which I have had for this quarter is 2.86 percent. Base rate reduction of 10 basis points in September and another 25 basis point reduction which has happened in October. I do not see much of slippage in terms of our NIMs because going ahead, I see at least about Rs 100-125 crore of recovery in my written off assets. We have 3-4 accounts which are just ripe an in their final stages. Nigel: You had given us you housing loan growth number, that was around 19 percent in the past quarter. In the first quarter as well it is impressive around 17 percent. Do you expect to maintain this run rate and secondly also, what is your total loan book growth rate? In the first quarter, I think it was around 8 percent, could you give us both those numbers?A: On a Y-o-Y basis, the growth is 5 percent negative as far as corporate advances is concerned by 2 percent and personal growth is 15 percent and small and medium enterprise (SME) and agriculture growth is around 6-7 percent.And the housing loan growth, as I said recent quarter, Y-o-Y basis, this year is 19 percent and even on a five year compounded annual growth rate (CAGR), if you look at it, our housing loan growth is at above 16 percent. Reema: Any guidance on the loan growth for the second half of the year and will the corporate advances continue to see contraction?A: Going ahead, I do not see further contraction, because base rate was also an issue and liquidity, but the one factor on which this will depend is the liquidity in the market because as far as the larger and the better corporates are concerned, they were moving out of the loan book to the treasury side. So, if they come back, yes. And there are some term loans also which have to be dismal.