Punjab National Bank's (PNB) second quarter profit missed analysts' expectations but its net interest income (NII) came in ahead of estimates. The bank's profit increased by 8 percent year-on-year (YoY) to Rs 621 crore, impacted by lower other income, slow growth in operating profit & net interest income and increase in provisions.
Speaking to CNBC-TV18, Usha Ananthasubramanian, MD & CEO, Punjab National Bank, says the bank's fresh slippages stood at Rs 3,126 crore, adding that the bank is focusing on taking steps to reduce non-performing assets (NPAs).
"An asset reconstruction company (ARC) route is also being seriously attempted at," she adds.
On the road ahead, Ananthasubramanian says, she expects net interest margins (NIMs) to come in at 2.8- 3 percent.
Below is the verbatim transcript of Usha Ananthasubramanian’s interview with Latha Venkatesh on CNBC-TV18.
Q: Your numbers clearly are showing directionally an improvement in the net non-performing loan (NPL) and the gross NPL numbers, both in aggregate terms and in percentage terms are lower. But if you can give us some more colour in terms of what your slippages are?
A: As you said, this is a directional indication and it has not happened, it has happened in small doses. So, certainly, there is a very serious focus on the branch on reducing non-performing assets (NPA). And as I spoke to you earlier also, the bank is very focused in taking certain steps like we have been one bank which has not tapped the asset reconstruction company (ARC) route. So, this is for the future, I am telling, because this is a trend that is setting in, in terms of reduction in NPAs.
So, ARC route is being seriously attempted at and we have special auctions happening – taking the residential separate, industry separate, commercial separate, so that there is a focused buying or interest in buyers being created. And we have an internal team which is working very strongly. There are messages across the country to – there is a daily target being placed on the circles. I mean it is very important. 76 circles have to contribute, everybody has to work and this kind of very serious monitoring and there are these kind of steps.
And our executive directors have been visiting a lot of centres personally to do on the spot one time settlements (OTS). So, these are all kind of drivers that would help us see even further reduction in future.
Q: Just to get some elementary numbers first, what were the slippages this quarter?
A: The slippage for this quarter have been of the order of Rs 3,126 crore and out of this, from the restructured, it is Rs 1,480 and others Rs 1,546.
Q: It is important that most of the slippages have come from the restructured book. Last time you recorded only Rs 536 crore from the restructured book, what is the restructured book now?
A: The restructured book has come down to Rs 38,261 crore. It was Rs 39,969 crore last quarter. So, there is a reduction of almost Rs 1,700 crore.
Q: It is quite clear because some of these have now gone over into the NPL category. As you said, Rs 1,480 has slipped from the restructured to the NPL category. Basically, do you think that process can accelerate because Q1, Rs 536 crore slipped from restructured. Now, it is almost three times that number at Rs 1,480. Will the restructured book throw up more NPLs?
A: It is very difficult to answer this question, but the efforts are on to either go for recovery, full-fledged recovery or upgrade them.
Latha: I just want to know what are your recovery and upgrade figures. What was the recovery and upgrades this quarter?
A: I will give you the break up. On a half yearly basis, if I have to give you, the cash recovery has been at Rs 1,882 crore. And upgradation has been to the tune of Rs 1,536 crore. On a quarterly basis, Q2 has been Rs 868 crore cash recovery and Rs 963 upgradation.Latha: You said that your total slippages were Rs 3,126 crore. If I subtract the slippages from restructured it is Rs 1,546 crore. Now, is that trend coming down?A: It is coming down in a way. I would be confident to the extent of having incremental control happening in the gross and net NPAs. I cannot say 6.36 will come down to 5.25. It will happen in increments and the intent is to do it in increments.Latha: Is there a target, say, six percent this year?A: Again the credit growth is going to be the key factor. In calculation of these ratios. So, the credit has been muted and the growth has been only 6.7 percent given the busy season that has set in already if you are able to pitch in and I have to also say that the bank is shifting gears towards the retail and small loans in a big way. While we continue to be bank for corporates we also have started focus in a big way on retails. So, there is a risk dispersion and there are 7000 branches to work at it.So, the credit growth should happen, point number one. Point number two, the recovery acceleration will happen which will give us some impetus in the reduction targets. Latha: You said in the press conference that your NIM has come down a little below 3 to 2.97?A: 2.97 for the quarter and this is the global NIM and domestic NIM is three plus.Latha: We just got the Uday reforms on power distribution companies yesterday from the government. What is your exposure to power discoms?A: It is about Rs 9,340 crore.Latha: This might mean that your returns from this instead of being 12 or 13 percent are likely to go down to about 8.5 percent?A: True, that is one aspect of it but otherwise the loan book gets cleaned up and the provisions that have been made on this that will get released. So, there are some headroom getting created very clearly.Latha: Net-net what would be the impact, if you net off the provision you still will suffer a bit of loss to your interest income, is that to be accounted for an NPV loss or something?A: There could be a small NPV loss happening but you need to take the overall picture. You need to see how your book of Rs 9,340 crore which otherwise you have not been able to tackle well gets a respite.Latha: Can you just give me an idea of what will be your margins be?A: You are talking about NIM?Latha: Yes.A: We are at 2.37 - anywhere I would say because we have reduced the base rate this quarter to 9.6. So, with all these things it could be hovering anywhere between 2.8 to 3.Latha: What kind of a credit growth are you seeing this year for the second half?A: As of now it was just 6.7 percent but I hope there are some sectors which have started opening up. Like chemical and chemical products. Road is slowing up and we are looking at some new areas where the bank has traditionally not been there. It is trying to some more portfolios which has not been traditionally into and grow up to it and the other route is the retail, agriculture and Micro, Small and Medium Enterprises (MSME) portfolio.
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