See FY14 NIM at 3.28%, FY15 NII growth at 15-18%:Federal Bk

Q: First could you give us some details about your asset quality, what the fresh slippages were fresh restructured assets and the recoveries and upgradations were in this quarter?

A: The total new slippages for the quarter was Rs 146 crore and the recovery and upgrades were higher and the restructured was Rs 19 crore. So restructured was quite muted and recoveries and upgrades were quite significant for the quarter.

Q: Can you give us the exact quantum of recoveries and upgradation?

A: Recoveries plus upgrades were Rs 150 crore. Rs 186 crore was sale to ARC. New slippages were Rs 146 crore.

Q: In this slippage figure of Rs 146 crore which are the key sectors or accounts where you have seen pressure?

A: There was no significant area of unique pressure, the slippage total was Rs 146 split between retail, SME and the larger credits, retail was about Rs 40 crore, SME was Rs 57 crore and the large credit was about Rs 24-26 crore. So it was quite low considering what we had seen in the previous years.

Q: Will the bank continue to do this sale to accounts receivable conversion (ARC)? Can you tell us what the pipeline is?

A: Not much is there in the pipeline. We had put through a sale this quarter and likewise sometime last year. So we really don't have a large portfolio for sale to ARCs.

Q: Your asset quality has improved a fair bit this quarter, what is the outlook for the next two quarters?

A: We continue to give this a lot of thrust and focus. It has been responding to all the efforts of the bank. You may have noticed sequentially retail and SME for nine quarters have continuously improved; in fact this quarter marked the best performance on retail.

Large corporate was a little volatile; there were quarters where we had to take one-two large accounts. Unfortunately they had to be recognised because the quasi government account didn’t keep its commitments. We don't see any of that prospectively; we have sacrificed some growth for quality. We believe that we are at a point where we have reached reasonable amount of confidence in the portfolio quality.

Q: Can you tell us what the net interest margins (NIMs) were in this quarter?

A: This quarter was 3.24, the full year is 3.22 percent and we see the full year for FY14 closer to 3.27-3.28 in that region.

Q: Any guidance for net interest income (NII) growth for FY15?

A: NII growth usually tracks the asset overall growth because if you need to ensure that NII is in the mid teens or higher, the asset growth has to be about 17 percent. Given many of the base alternations that we have done, sustained performance on retail and SME which is trending quite well. As the environment improves I am quite hopeful of growing our larger corporate credit in a focused manner.

So doing a 15-18 percent growth in NII in financial year 2015 is our focus. Caveat that by the quality of the environment that we operate but one is hopeful that FY15 turns out to be much better.

Q: Any target that you can leave us with regards to your gross non-performing assets (NPAs) and net NPA going forward?

A: At the beginning of FY14 we had targeted saying our gross should come below 3 percent and our net should improve by at least 20 percent. As we are close to exit, we are close to 8.86 percent net. We began the year at about 0.98 percent. So we are on trajectory and I would like to believe that the following year should see a similar trend.