More pain of job loss awaits employees of Dhanlaxmi Bank. As the Kerala-based private bank moves ahead with business consolidation and rationalisation, more heads are expected to roll.
Already, the staff strength of the Thrissur-headquartered bank has come down to a little over 4,200 from 4,600 in November last year, as more than 300 employees have moved out. More exits were expected, chief executive officer P G Jayakumar said on Monday. “We do not need this much staff. Some rationalisation will happen,” he told reporters here.
Of 4,200 employees, about 1,500 are already on the pay structure of the Indian Banks’ Association (IBA). The remaining 2,700 are on market-linked wages. From this lot, 700-800 have opted for the IBA pay structure.
Jayakumar said the bank was conducting a branch-wise manpower requirement study. “The picture will become clear in five to 10 days,” he said, but declined to elaborate on how many more could lose jobs from such a procedure.
With rapid expansion of branches and increase in headcount, the 1927-founded bank’s cost-to-income ratio stood at 140 per cent at the end of December 2011.
About an expense audit, chief operating officer, R Muralidharan, said an independent audit had commenced in the fourth quarter. “Till now, nothing has been reported,” he maintained. “The report will provide clarity on which areas the bank should concentrate to prune expenses.”
Dhanlaxmi Bank has been in turmoil after Amitabh Chaturvedi resigned as chief executive and managing director in February. Its business — deposits plus advances — has shrunk from Rs 23,900 crore at the end of December 2011 to Rs 21,000 crore at end-March 2012.
The bank has already begun to change its business model to scale down wholesale banking operations and increase retail banking activity. It would like to increase the share of retail business to 50 per cent in the current financial year, against 40 per cent now.
“We depended on wholesale banking,” Jayakumar said. “But the interest earnings from this portfolio were not great. Now thrust will be on efficiency of operations and augmenting non-interest income.”
He ruled out closing any of the 275 branches. There could be relocation of ATMs based on commercial considerations. The bank will continue to expand aggressively with branch-centric banking, he added.
The CEO also dispelled fears of merger with another bank, saying there is no such possibility. Nor was the bank available for sale, he said.
Referring to return to profitability, he said the bank, which posted a loss of Rs 36.9 crore in Q3, expects to return to profit in the current financial year. Its net interest margin (NIM) has dipped below two per cent. The lender is targeting 2.5 per cent NIM by the end of September 2012.
The bank plans to raise around Rs 200 crore of Tier-II capital in the first quarter of FY13. “We will raise Rs 200 crore of tier-1 capital in the second quarter of this fiscal,” Jayakumar said. “After capital infusion, our capital adequacy ratio will be in the range of 11-12 per cent from the present 9.88 per cent.”
