South Indian Bank reported 22.38 percent increase in net profit at Rs 93.38 crore in the second quarter ended September 30, helped by lower provisions for bad loans. But on the asset front, its net non-performing assets (NPAs) went up to 1.39 percent during July-September as compared to 0.90 percent year ago.
The bank's gross NPA rose 25 percent quarter-on-quarter to Rs 892.25 crore. Of this, Rs 119 crore of fresh NPA is from one large restructured pharma account, says VG Mathew, MD and CEO of South Indian Bank. Another important thing to keep in mind is that no major standard asset has slipped in the quarter, he told CNBC-TV18.
He says the bank may close the year with NIMs at 2.75-2.8 percent.
Below is the verbatim transcript of VG Mathew's interview with Latha Venkatesh & Sonia Shenoy.
Latha: The non performing loans (NPLs) have risen by 25 percent, the gross NPLs. What is the source of this and should be see more of this?
A: Out of the total additional nonperforming assets (NPAs) of Rs 222 crore in this quarter, Rs 119 crore came from one large restructured account. We had indicated that two or three such slippages from the restructured book cannot be entirely ruled out. It is equally important to note that no major standard assets have slipped.
Latha: Was this is a steel or can you give us some colour about the account that went bad?
A: This is a pharmaceutical account which was under corporate debt restructuring (CDR) and our efforts; in fact efforts for the entire syndicate and consortium have not really worked out well.
Sonia: So, from this 2.24 gross NPL level that you are currently sitting at how much do you think you could bring it down to by the end of this fiscal?
A: We expect that it could be in the range of around 2 percent because going forward what happens is the slippages are likely to be a little lower that is number one. Number two, our recovery efforts during last quarter that is September quarter, some of the results have really spilled over to this quarter. Therefore there could be some improvement in terms of recovery at up gradation during this quarter.
Latha: What is your game plan for the coming competition from payment banks and small banks? We saw DCB Bank announced a major expansion in its branches. Do you see the payment banks taking away your current and savings account and the small banks taking away some of your borrowers?
A: Payment banks, is an area where we need to be very careful about. Our own focus on the retail micro, small and medium enterprises (MSME) areas, those things have really helped us quite a lot in terms of significant credit growth and also current and saving account (CASA) growth of 17 percent this year. Therefore we will continue to do all that and we are also working very strongly on the technology front. Our mobile banking application is proven to be quite attractive. We also might look at tie-ups and other strategic initiatives in this area. We might even look for certain consultancy intervention, if necessary, going forward.
Latha: Give us some idea of what the bill might be in technology, in increasing branches if you are?
A: Branch increase may not be required immediately beyond what we have been growing at. We have been growing at around 50 units either branch or extension counters and around 200 automated teller machines (ATMs) every year and that kind of a growth is sustainable even today without any problem. Our focus is really to grow in certain clusters, certain centres where you have got much larger opportunities for MSME agri and other niche areas which are of strength for the bank.
Sonia: Two internals that have improved for you are - (1) your net inertest margins (NIM) which have gone to 2.67 percent and (2) the loan growth which is up about 12 percent year-on-year. Can you give us expectations for both these by the end of the year?
A: The NIM, on a standalone basis it will improve a little bit more. However, we expect it to close the year at around 2.75 to 2.8.
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