Q1 result suffers on low interest, loan write-offs: Muthoot

A higher loan write-off vis a vis the previous quarter and low income due to lower yields led to a fall in net profit says George A Muthoot, managing director, Muthoot Finance.

In an interview to CNBC-TV18, Muthoot says that the company has been working on reducing it yields that led to a low income figure.

However, Muthoot adds that the company has seen two lakh new customers this quarter and says that despite a drop in assets under management (AUM), the gold financing company has seen more people come forward to take loans against their gold deposits. Below is the edited transcript of Muthoot's interview to CNBC-TV18. Q: Is it that the foreclosures and dangers of people not coming back for their gold now decreased. What is the amount of bad loans in the quarter gone by?
A: The amount of bad loans or loan write-offs is only Rs 6 crore in this quarter, Rs 5.99 crore. Q: Compared to what in the year ago quarter?
A: It would have been lesser year ago. Q: Not year, in Q4 of last year?
A: Yes, it would be lesser. Q: What about the future, are you expecting that you will be able to maintain the write-offs at this level or will they even fall?
A: There has been a misconception in the minds of people. I have always been saying that this is not a commodity loan; this is a personal loan or a loan taken for some productive purpose or household purpose etc. So, even if there is a fluctuation in gold price, people do not have to abandoned their price and that is what is important. We have good systems of collecting interest, collecting our loans because based on that we have been able to maintain our business even in the area of falling gold price. Q: Why did you have to write-off Rs 46 crore last quarter?
A: Last quarter Rs 46 crore was no write-off, it was provisions. We had to make standard provisions. Q: What about loan growth because in year on year terms you stand flat and quarter on quarter compared to the January-March quarter your April-June quarter, the income has fallen from Rs 1,400 crore to Rs 1,289 crore. It is almost Rs 110 crore fall in volume of income. Is there a problem in terms of number of people coming for loans or loans you are willing to write?
A: The number of people coming for loans has increased in this quarter, about more than 2 lakh of new customers have come. Q: Then how come the income had fallen quarter on quarter?
A: Income has fallen because in the last one year, we have been consciously reducing our yields. We have reduced our maximum interest on the loans and the interest we are charging to the customers, we have been reducing it and now it is only 19.5 percent compared to 21 percent a year back. Q: A couple of more internals, since you have seen a huge drop in your provisions, what about asset quality, how much relief have you got and where gross NPAs stand at?
A: The non-performing asset (NPA) account continues to be at 2 percent. Last quarter it was 1.99. This time it is 2.01. It continues to be the same. One thing which we need to say is inspite of having small drop, a 2 percent drop in the assets under management, the gold holding in our hands has gone up from 134 tonne to 137 tonne. This shows that more people are coming forward with more gold to take loans. Q: What about your net interest margins, where do they stand at currently?
A: Net interest margin was around 10; it’s now about 9 because we have reduced our interest consciously.