Though Indian Bank’s third quarter net profit dropped 20 percent year-on-year on account of depreciation on its AFS (available for sale) portfolio, lower net interest income and fall in provisions, the asset quality improved sequentially.
Also Read: Indian Bank Q3 net falls 20% on low NII but NPA improves
Gross non-performing assets (NPAs) fell 34 basis points quarter-on-quarter (up 24 bps year-on-year) to 3.42 percent and net NPAs slipped 31 bps sequentially (up 8 bps Y-o-Y) to 2.25 percent in the quarter gone by.
In absolute term, gross NPAs dipped 8 percent Q-o-Q (up 20.6 percent Y-o-Y) to Rs 3,834.78 crore and net NPAs stood at Rs 2,483.6 crore, down 11.4 percent Q-o-Q and up 16 percent compared to a year ago period.
Speaking to CNBC-TV 18’s Latha Venkatesh its CMD TM Bhasin said the bank has been able to reduce its bad loans by a proper follow up.
The bank’s overall fresh NPL (non-performing loans) addition has been less than the recoveries and the total loans sold to asset reconstruction companies (ARCs) over the last 9 months stand at Rs 582 crore, Bhasin said.
The bank’s cash recoveries stood at Rs 374 crore. The fresh slippages were at Rs 531 crore against Rs 700 crore quarter on quarter. The total restructured assets were at Rs 9,690 crore.
Indian Bank’s net interest margin (NIM) stood at 2.65 percent against 2.63 percent (Q-o-Q). “We expect NIM to be in range of 2.7 percent and net NPAs to be at current levels going ahead,” Bhasin said, adding that the slippages in Q4 could be lower than Q3.
Below is the interview of TM Bhasin with Latha Venktatesh on CNBC-TV18.
Q: Can you take us through exactly what were the fresh slippages and recoveries that managed to bring your non-performing loans (NPL) lower?
A: I was saying you right from the beginning that we have been able to reduce the gross non-performing asset (NPA) by proper follow-up of all NPL accounts and for three quarters we have recovered over Rs 535 crore. We have also affected some sale to the asset reconstruction companies (ARC) for this Rs 582 crore, so overall the fresh NPL addition is less than the recoveries.
Q: What exactly was the amount of loans you sold to the ARC in the quarter, in the last months and what were the fresh slippages?
A: Rs 582 crore.
Q: Is Rs 582 crore over 9 months?
A: As on the date of 31st March, 2013, the number was Rs 3,565 crore. The addition has been Rs 1,664 crore, so the total goes up to Rs 5,229 crore. The cash recoveries have been about Rs 374 crore. Prudential write-offs and upgradations have been about Rs 134 crore and actual write-offs are Rs 297 crore. Rs 582 crore are being sold to the ARCs, so exactly Rs 1,395 crore it has come down, so as on 31 December, 2013 our figure is Rs 3,834 crore which is 34 bps less than our September number.
Q: What were the fresh slippages generated in the quarter - October-December?
A: In the quarter we have generated about Rs 531 crore fresh NPL.
Q: How does that compare with previous quarter?
A: Previous quarter was around some Rs 700 crore.
Q: What has been the restructured assets picture in the quarter under review and the previous?
A: Restructured assets have gone up by about Rs 300 crore only during the current quarter.
Q: Can you give me the aggregate number?
A: Aggregate number is Rs 9,690 crore.
Q: Your profits have come under pressure because there has been an increase in employee cost. Why is there this unusual Rs 60 crore rise just in one quarter?
A: What we have done is we have made a provision of about Rs 83 crore for the pension requirement and last quarter there was an extra item of Rs 28 crore on local recent receivables. So, today the board has decided that we should take it equitably in four quarters instead of looking in one quarter alone, so that such aberrations can be avoided in future.
Q: Will we have these pension extras in the next two quarters as well?
A: We will go by the actuarial calculation. So as on date this was the requirement. Last quarter it was Rs 41 crore, this quarter it was Rs 104 crore, so it depends upon the yield and other patterns which are as per the actuarial calculation. But down the line we do not expect because now the yields are hardening, so going down the line there will not be such large provision required.
Q: What is the growth in deposits and loans in the quarter under review?
A: The overall business has gone up by about 15 percent. The loan book has grown by about 12.5 percent and the deposits have grown by 16.5 percent.
Q: 12.5 percent is year-on-year?
A: Yes. If you see for the quarter it will be around 4 percent.
Q: What is the expectation for the full year as well as for the fourth quarter?
A: Full year we have given a guidance of about 14 percent loan growth. Q4 is always better than the first three quarters, so 14 percent will be the year-on-year growth as on 31st March 2014.
Q: Can you give me an idea of your margins for the third quarter?
A: 2.65 percent will be NIM and it will be something like in the vicinity of 2.70 percent.
Q: How will the NPL picture pan out in the fourth quarter and maybe even FY15?
A: I think our NPL is quite well as compared to the system or other banks and we will continue to have net NPL in the vicinity of 2.25 percent or so.
Q: You will maintain net NPLs current levels?
A: We will maintain it at the current levels only.
Q: I am more interested in knowing fresh slippages. You have brought it down to Rs 500 crore this quarter. What might be fresh slippages that you may generate in the current quarter and the next?
A: The current quarter should be better than the previous quarter. It should be around Rs 400 crore or so.
Q: What about the restructured assets trend for the industry as a whole? Every other week we are confronted with one big company asking for Corporate Debt Restructuring (CDR). For you for the fourth quarter how is the restructuring ask looking like?
A: Fortunately for Indian Bank we have been concentrating for the past three years on retail, MSME and agriculture and large requests are not coming from there. So for us we have taken either very small exposure on corporate and commercial and otherwise our growth is more on retail and agriculture MSME etc. so that sector is not seeing as much demand as from the large corporates, because for large corporates big amounts are there, so we are insulated from that type of restructuring.
Q: So your best guess is that you should not have too much of a restructured assets demand in the current quarter?
A: Yes, we have planned for that and we hope so.
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