Have made provisions worth Rs 585 crore: State Bank of Mysore

In its first quarter earnings for this fiscal, State Bank of Mysore reported a disappointing set of numbers where it clocked a net loss of Rs 471.9 crore against a profit of Rs 94.1 crore in the same quarter last fiscal.

The bank's gross non-performing assets (GNPA) were up 18.9 percent to Rs 4323.1 crore quarter-on-quarter (QoQ) and the net NPA stood at Rs 2479.9 crore, up 9.9 percent (QoQ).

In an interview with CNBC-TV18, N Krishnamachari, MD of SBM, said that the slippages for this quarter increased to Rs 1050 crore against Rs 250 crore (YoY) as many inherently weak accounts slipped.

He also said that provisions worth Rs 585 crore are made on a prudential basis for accounts that can turn into NPAs in the next 3-6 months.Below is the verbatim transcript of N Krishnamachari’s interview to Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Latha: Can we start with the slippages, how did it look?A: We had slippages of around Rs 1,050 crore this year, this quarter compared to about Rs 286 crore last year.Latha: That is almost quadrupling. What led to this fairly sharp increase?A: Most of these accounts were being saved by us at the end of the quarter for several quarters. However, this time many of them slipped because they are inherently weak accounts.Sonia: Going forward what do you think the slippage run rate could be for the next couple of quarters?A: We also made some additional provisions, prudential provisions on account of some other assets, which we thought could go into slippage anytime in the future quarters. So to that extent we have provided for them. However, if they do slip may be in another three months or six months, we could have further gross non-performing assets (GNPA) ratios going up.Latha: In that case can you give us what is the total quantum of your watch list as it is called and how much of that might slip?A: The amount of slippage we have not been able to estimate, but we have provided for about Rs 585 crore additionally this quarter for some of the assets which we see has to be inherently weak.Sonia: You did say that your gross NPAs could inch up further. From this level of 7.8 percent how much could it go up to next quarter?A: We have not been able to estimate it. May be it will go up by another 1 percentage point.Latha: Rs 585 crore is almost Rs 600 crore, even if I assume that is 20 percent of the provisioning that you will need or 25 percent of the provisioning, we are starring at almost Rs 2,500 crore of further slippages?A: This is on account of all those assets, which were showing inherent weakness, but not all of them will slip in the ensuing quarter. They may slip may be in the next nine months one year or so. So, it is sort of a cleanup, which we wanted to do.Latha: Is the arithmetic right that we may assume that if you are providing prudential provisions of Rs 585 crore that may perhaps account for 25 percent of assets that you are worried about?A: I will have to cross check on what percentage it constitute but we have estimated that most of the weak assets, which we have in our books we have tried to be in alignment with the consortium members and leaders.Latha: How much of your assets are you likely to put under this sustainable scheme of stressed assets restructuring?A: Scheme for sustainable structuring of stressed assets (S4A), the number has not been estimated. However, we are looking at, at least 4 to 5.Latha: Can you tell us a little bit about the recovery? How much could you recover from old assets?A: In this quarter our recovery was Rs 56 crore.Latha: Net interest margins?A: Net interest margin is 2.84, a slippage from 2.79, 5 basis point slippage.Latha: I just wanted to know how the merger issues are proceeding. Have you been able to convince your workforce?A: That process is still on, but what we have done is that we have gone ahead with the valuation exercise. The merchant bankers for the purposes of valuation and opinion stand appointed.