NIM seen between 3.4-3.5% during first half FY16: DCB Bank

NIM for FY15 as a whole was 3.72 percent.

The banks slippages in FY15 was Rs 105-110 crore, excluding the shipyard account of Rs 65 crore.

Natrajan expects non performing assets and slippages to be stable this fiscal.

Below is the transcript of Murali M Natrajan's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Latha: Take us through how the credit growth was, how the margins were and what do you expect margins to look like? Are you clearly looking at better margins in the current and next quarter?

A: The credit growth, advances growth was about 28.5 percent in FY15 and we had a very diversified portfolio of growth, our focus has been on mortgages, SME, MSME, agri-inclusive banking, we have very limited exposure to corporate loans, it is only 23 percent of our total book. We had a very strong growth in retail that has helped us to grow our loans, we also had extremely strong growth in agri and inclusive banking, which helped us to meet the priority sector lending. The margin for the full year was 3.72. Last year it was 3.56 if I am not mistaken. We were helped a bit because of the capital raising in October 2014, which helped the margin by about 5-6 bps.

I am looking at the margin outlook for this year. I think there is a lot of pressure in the yield. So I do expect the margins to come down a bit in the first six months but as the deposit rates starts to come down, we should be able to sustain a margin of anywhere between 3.40 and 3.50 bps.

Latha: A bunch of banks have already cut deposit rates, haven’t you cut, deposit rates have preceded both in terms of quantity and time, the amount of lending rate falls?

A: 80 percent of our deposits are in the retail segment and unless and until you keep your deposit rates at least 15-20 bps higher than the banks that you are competing with, it is not easy to grow the retail deposits. Yes, we have cut some deposit rates and I expect that to happen over the period of time but our focus has been on retail deposits. So I don’t think retail deposit rates especially the buckets in which we are trying to get which is one-three years has come down too much.

Sonia: Can you tell us a little more about your asset quality, this time around your headline non-performing loans (NPLs) were stable because of a sale that you did to asset reconstruction company (ARC) but can you tell us going ahead, do you expect to see more stability in the asset quality and also on the slippages front, this time around you did see one corporate account of Rs 65 crore slipping into non-performing assets (NPAs), what is the expectation for the next couple of quarters?

A: As far as mortgages book is concerned, agri-inclusive banking book is concerned and SME and Micro, Small and Medium Enterprises (MSME), I would say the NPAs, the slippages would be pretty stable and is in line with our expectations.

We had Rs 65 crore one corporate loan going NPA. This account has been with us for about 6-7 years. This is a shipyard account. If you remove that account, our total slippage for the year instead of Rs 170 crore would be Rs 105 crore and Rs 110 crore. I expect the slippages to be 1.5 percent of the opening balance even in the current year barring any one or two large accounts that is not predictable in a corporate loan, which is very small anyway in our portfolio.

So I don’t expect NPAs to be causing too much trouble for us in the coming 12 months and we sold Rs 62 crore worth of gross NPA which is a net NPA of Rs 35 crore to ARCIL. We got Rs 20 crore as the payment. So that was also one of the reasons why we were able to keep a stable NPA.

Latha: Will you be offering deposits with varying deposit rates, those that can be withdrawn prematurely and those that will not? You expect that product to start pretty quickly?

A: We started brainstorming on that yesterday after we looked at the new guidelines. It is very early for us to comment whether we would be able to offer and what would be the customer take on that and who would we market this to. So maybe in a month or so, we would come back and see what we should do with these new guidelines.

Sonia: One word on growth as well, what is the expectation going ahead as far as credit growth is concerned?

A: Our aim is to double the balance sheet in 3-3.5 years. That would mean we have to grow every year by 25 percent. If you see our balance sheet about three years ago, it would be just about half the size of what the balance sheet we achieved, which is Rs 16,100 crore.

So I believe that if we continue to work on our distribution branch network, productivity and distributed portfolio or the diversified portfolio that we are working on, we should be able to grow the book at about 25 percent per annum.

Latha: You have come from StanChart, a foreign bank and turned around Indian private sector bank, now there are advertisements out for people like you to turnaround public sector banks, would you show interest?

A: I am very happy with my job in DCB Bank, I like my people here, I like my board and I think the promoter also like me. So I am quite happy continuing here.