Rs 1170 cr of standard loans may face stress: South Indian Bank

In an interview to CNBC-TV18, VG Mathew, MD & CEO of South Indian Bank spoke about the results and his outlook for the company.Below is the verbatim transcript of VG Mathew's interview to Sumaira Abidi and Abhishek Kothari on CNBC-TV18.Sumaira: On the asset quality side, things are looking good. Can you take us through where the push has come through on the asset quality front?A: We have been mentioning in the previous calls is that our problems are only relating to the large corporate book of the advances portfolio and the fact is that the stress in that area has come down significantly and over the last two years, we have been consistently staying away from that sector. Our corporate growth is only in the range of Rs 25-100 crore band and therefore, it is not putting any additional pressure on the non-performing assets (NPA) and on the other hand, we have been able to show some improvement in terms of recovery, settlement, compromise etc over a period of time.Abhishek: Could you highlight what has been the amount of your gross NPA in the current quarter, how much is the slippages and how much is the recovery and write-off?A: We started with Rs 1,651 crore as opening balance. Rs 224 crore is the fresh slippage and Rs 2 crore is the addition in the drawings level. Against that we had recoveries of Rs 21 crore, write-offs of Rs 72 crore and upgrades of Rs 39 crore. The total is adding up to Rs 132 crore. Therefore, the net position is Rs 1,651 crore plus Rs 224 crore minus Rs 132 crore and in that slippage if you look at it, out of the Rs 224 crore of slippage, Rs 138 crore is from the restructured assets only and only Rs 88 crore comes from the remaining part of the standard assets which is only from the retail book.Abhishek: The last time you had mentioned there are few accounts in the corporate sector about Rs 945 crore, so the major slippage of Rs 130-140 crore that you are mentioning is on that portfolio or is it from other corporate portfolio?A: No, it is not at all from the standard assets part of the corporate portfolio. It has come entirely from the restructured standard portfolio of Rs 945 crore. So that has now come down to Rs 761 crore because it has slipped to NPA. The total restructured assets stand at Rs 1,293 crore.Abhishek: What has been the net interest margins (NIMs) this quarter? Last quarter we were at about 2.9-2.8.A: This is 2.75, the NIMs have improved on a year-on-year (Y-o-Y) basis by 8 basis points (bps). Now it is 2.75 and the last quarter also it was 2.74.Abhishek: So is the worst in terms of asset quality over or would we still see some pain coming in from that Rs 700 crore that you mentioned of the restructured book?A: I won't say that the pain is completely over but you rightly said there is a restructured standard book of Rs 761 crore and similarly we mentioned last time also, we have some cases where the Strategic Debt Restructuring (SDR) has been invoked and the process is on at the moment. That is coming to around Rs 1,048 crore. Then we have one steel exposure in the standard assets book, which is not in either Corporate Debt Restructuring (CDR) or SDR or any of those areas -- and that number also if it is into SDR or any of those areas, it maybe another Rs 120 crore. So what we are trying to say is Rs 1,170 crore is the only book in the standard asset portfolio, which can ever face any stress. Otherwise, we are completely clean on the standard asset books.Abhishek: What has been the business growth both in terms of your loan growth and deposit growth in the quarter and also how was the improvement in your low cost deposit share?A: When we look at the advances growth, total is only 10.5 percent Y-o-Y. If you look at the agri sector, it has grown by 20.4 percent, MSME has grown by 19.1 percent and home loans and loan against property (LAP) together as combined portfolio has grown by 40.3 percent and auto loans by 28 percent.Sumaira: So no danger of your NPAs going over that 4 percent mark?A: We do not find any serious possibility particularly because the economy is improving and also the regulatory stance seems to favour resolution in the stress portfolio including the SDR, which I have mentioned sometime back.