Rise in gross NPAs seasonal; NIMs to be stable: L&T Finance

The company’s gross NPA increased marginally at 3.01 percent in December quarter compared to 2.93 percent in the year-ago period and 2.96 percent in previous quarter. Net NPA during the same period stood at 1.98 percent against 2.06 percent and 2 percent, respectively.Below is the verbatim transcript of YM Deosthalee’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.

Latha: 66 percent jump in profits, please take us through the headlights and tell us what led to this growth?

A: It has been a very satisfactory quarter for us. In fact the nine months period itself as been satisfactory. The performance on all fronts was very good. We have had healthy growth in assets about 20 percent growth in assets and we are at around Rs 45,000 crore. Also healthy growth in disbursements which resulted in growth in assets and more importantly 66 percent growth in profit for the quarter and about 29 percent growth in profit for the nine months period.

This has happened mainly because of four reasons one is we have had very stable margins during this period. The borrowing cost has been optimised very well. Operating cost has been managed well in the sense overall the operating cost has been maintained extremely well. The fee income for both wholesale as well as retail businesses has gone up. All that has resulted in a robust improvement in profits.

Sonia: Asset quality saw a marginal deterioration this quarter what is the reason for this? Do you see asset quality improving from hereon?

A: This particular quarter there is a marginal deterioration in gross non-performing assets (NPAs). Net NPAs have been lower than the previous quarter but that is because we have improved our provision coverage and that is also one thing which we have been doing over the last three quarters. So, over all for the group our provision coverage is at 35 percent now.

Our effort is to improve that further in the last quarter. Because of which the net NPA percentage has shown some slight improvement. Gross NPAs, yes there is a slight increase but that is we believe it is largely seasonal. In the last quarter there should be some improvement in that. So, over all we do not see any deterioration in the asset quality in the last quarter.

Latha: Can you give us some guidance on your net interest margins for the year?

A: The margins will remain stable what we expect is that in the retail business they should be in the range of about 7-7.25 percent and in the wholesale business it will be somewhere around 4 percent so that is the more important point for us. Yield as well as borrowing cost this is something which change time to time and depending on the market environment we need to decide whether to pass on some of the benefits of low cost to the customers. So, yields and cost of borrowing of course it is our effort to maximise yield and minimise cost of borrowings. However, we are in a market situation so what we track regularly is net interest margin and which we expect to remain stable. 

Latha: Are you reverse merging with another bank? Is there any acquisition anything on the cards?

A: Acquisition we will inform you as and when they happen. There is nothing on the cards right now but the fact is we need to know that in the last five –six years we have build a comprehensive portfolio. This enables us to manage our risk better which enables us to manage the business cycles well.

These results prove that point adequately and going forward it will be the same strategy in the portfolio. We will manage our portfolio and in the portfolio from time to time we will take decisions of growing in certain sectors and de-focusing some sectors. It does not mean that we will exit these businesses that is not the point I am making but we have created abilities to manage the portfolio better.