Bank of India 's restructuring portfolio has reduced in the last quarter and we expect to lower the gross and net NPAs (non-performing assets) in the coming quarter, said CMD VR Iyer.
The public sector lender has lowered its domestic net interest margin (NIM) guidance from 3 percent to 2.9 percent during the quarter. NIM guidance for international portfolios is around 1.3 percent.
"I did give the guidance that on the domestic front our NIM will be around 3 percent but that was based on the assumption that the economic environment will certainly improve. But we have not seen that to the extent we would have desired. Thus, I said that our NIM on the domestic front may be around 2.90, up from 2.86 last quarter," Iyer said.
NIM is the difference between the interest income generated by banks and amount of interest paid out.
Bank of India's net profit fell 27percent to Rs 586 crore on account of higher provisions in the third quarter ended December. Slippages during the quarter stood at Rs 1,747 crore.
Speaking to CNBC-TV18's Ekta Batra and Anuj Singhal, Iyer said the bank has already sold bad assets worth Rs 2,000 crore during the quarter and is looking to sell more such loans to asset reconstruction companies in the fourth quarter.
So far, the bank has seen the bulk of credit growth coming from the priority sectors, with corporates contributing only around 11-12 percent. Iyer said the bank is expecting 23-25 percent credit growth in FY14, however is not looking at riskier assets to explore credit growth yet.
She added that they will be able to grow 18-20 percent in the coming years.
Below is the transcript of VR Iyer's interview to CNBC-TV18's Ekta Batra and Anuj Singhal.
Ekta: A brokerage report indicates that Bank of India is not currently seeing any sort of respite from slippages unlike its other peers such as Punjab National Bank hence slippages will remain stressed in Q4 as well as possibly in the first half of FY15. Would it then exceed the Rs 1750 crore that you all did in Q3 and if you could give us some guidance on the same as well?
A: I have not been able to get to the news that the slippages may not reduce this quarter. In fact what we are observing is that what is emerging that the deterioration has actually changed the direction.
The restructuring portfolio has reduced in the current quarter, many of the corporates are deleveraging and they have also reduced their debt burden. So for our bank as in the last three quarters we would be able to reduce our NPA percentage in terms of percentage. Certainly both the gross NPA as well as the net NPA we would be able to maintain the level which we have shown last quarter and perhaps show some improvement too.
Anuj: You have also cut down your margin expectation for FY14 to 2.9 percent. Is this just this quarter phenomenon and do you think in FY15 you would make an attempt to go back towards the 3 percent mark?
A: Our NII has been increasing at the rate of about 18 percent year-on-year which is on the background of we being able to reduce our cost of deposit and we have also taken number of initiatives on the CASA front. I did give the guidance that on the domestic front our NIM will be around 3 percent but that was based on the assumption that the economic environment will certainly improve. But that we have not seen to the extent that we would have desired so that is why I said that our NIM on the domestic front may be around 2.90 up from 2.86 last quarter.
On the international side of course our NIM which had lowered to 1.10, and we have made certain policy changes and in view of the same NIM on the international side will certainly improve from 1.10 to 1.20.
Globally we expect that our overall NIM should be around 2.50 percent up from 2.40 percent last quarter. So there will be marginal increase in the NIM both on the domestic side as well as on the international side.
Going forward for 2014-15 we are certainly expecting better deals to come and the credit to pick up may be post elections on the back of the government which will definitely take away these measures. Already on account of the various measures from the RBI"s side and from the government side we are seeing stability coming in the economy and little bit of a positive happening. So for 2014-15 our guidance for NIM would be 3 percent on the domestic side and around 1.25-1.30 percent on the international side.
Ekta: You did say that your ratios will possibly remain the same coming in Q4, would that be simply because of an excessive amount of loans possibly to asset reconstruction companies (ARCs), can you just give us a sense on how much BOI has put up for sale of loans to asset reconstruction companies in Q4 and how much has actually been adsorbed by ARCs at this point in time?
A: We would be able to make some improvement on the percentage of gross NPA and net NPA to the outstanding loans. Of course asset being sold is one of the additional tool that is now available for the bankers with a view to bring about quick resolution and that is working fairly well. We have sold about Rs 2000 crore of assets during the second and third quarter and we have also seen that when the assets are aggregated in the hands of the ARCs, the resolution is also much quicker.
Infact we are already seeing some of the resolutions happening in respect of assets which we have sold during the last two quarters. So as and when the need arises this is a process and we will definitely examine going forward. Even during the current quarter we are looking at and we are in the advanced stage though I may not be able to give a number as of now, but we are looking at asset sale in Q4 also.
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