Iyer sees no reduction in the interest rates for now. Rates for some segments have already been reduced and more of that will strain margins, she adds.
Iyer feels that the Reserve Bank may surprise the street by keeping repo rates unchanged in its October 29 meet. Kaul, on the other hand, anticipates a 25 bps reduction in the marginal standing facility (MSF) and a hike in repo rate by 25 bps.
Below is the edited transcript of their interview to CNBC-TV18.
Q: What is your capital adequacy now? What will it jump to the Tier I capital after the infusion?
Iyer: Capital adequacy has been around 10.98 percent. If I see the profit for the quarter ended June 2013, the capital adequacy should rise by another 30 bps.
Q: Are you going for a qualified institutional placement (QIP)? What are the plans?
Iyer: We went in for Tier II bond a couple of weeks back. There is absolutely no urgency to go for QIP right away this quarter. We will definitely examine it in the next quarter, in the last quarter of the current financial year.
Q: You are expected to receive about Rs 200 crore from the government. What will that do to your capital adequacy ratio? Would you need more capital for which you would approach the markets?
Kaul: Our capital adequacy as on March 31, 2013 was approximately 14.15 percent with Tier I capital approximately at 9.10 percent. Current year, we are hopeful of maintaining Tier I above 9 percent with Rs 200 crore from the government. It should help us to go slightly above the 9 percent.
In our case although the credit growth is 15-16 percent, but the risk weighted asset growth is very small. We are very careful in the type of assets. We should be able to manage pretty well this year also, tier I would remain about 9 percent.
Q: Are you going to drop any rates? You have just got Rs 1,000 crore and your asset book is nearly Rs 3 lakh crore. Will that really give you elbow room to drop any rates?
Iyer: As of now, there is absolutely no thought of dropping further rates. We have recently done a round of rate cuts for all our consumer segments and retail schemes. There is no thought to reduce the rates further. Margins are under pressure and let us see how the policy announcement is going to be on October 29 and then we will take a call.
We have already dropped our rates by almost 3 percent for the durables and for the two-wheelers. There is also a small flexibility for the retail schemes.
On October 25, 2013, at 14:10 hrs Bank Of India was quoting at Rs 181.75, down Rs 4.25, or 2.28 percent. The 52-week high of the share was Rs 392.20 and the 52-week low was Rs 126.95.
The company's trailing 12-month (TTM) EPS was at Rs 47.37 per share as per the quarter ended June 2013. The stock's price-to-earnings (P/E) ratio was 3.84. The latest book value of the company is Rs 400.88 per share. At current value, the price-to-book value of the company was 0.45.
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