S L Bansal, who took charge of Oriental Bank of Commerce on 1 March, said his priority will be to bring down non-performing assets, and improve the share of low-cost deposits. The bank which reported a dip in net profit in the Jan-March quarter of the previous financial year expects the steps taken to improve asset quality will help it to improve profitability. Bansal talks about his priorities in an interview to Manojit Saha. Excerpts:
The bank has reported a dip in net profit of around 20 per cent during the fourth quarter of 2011-12 due to higher provisioning. How do you see the present financial year panning out in terms of profitability?
We are expected to post 20 per cent year-on-year growth in net profit for the current financial year. This will be because, first, the 125 bps cash reserve ratio cut by the Reserve Bank of India, will release additional fund of around Rs 2,200 crore which could be deployed and will result in a income of at least 240 crore, assuming 12 per cent interest is charged. Second, we have seen slippages of Rs 3,900 crore in the previous financial year so we will beef up our recovery efforts – both cash recovery and liquidation -- and that will add to our botttomline. We also think asset quality woes have peaked and we have to make lesser provisions going ahead.
What are the steps the bank is planning to improve asset quality?
Improving the asset quality is a priority for us. We have created a separate cell for restructuring loans and loans of more than Rs 10 crore will be handled from the head office. We have beefed up monitoring of stressed assets and we will hardly takeover any loans from other banks.
What kind of business growth you see in the current financial year?
As on March 31, 2012, the total business of the bank stood at Rs 2.7 lakh crore. In the current financial year we plan to growth our assets by 18 per cent and liabilities by 16 per cent.
Which sectors are expected to contribute to the loan growth?
We are de-risking our asset book by focussing on increasing our retail portfolio. We have already reduced the rate for home, auto and education loans, for both existing and new customers. In addition, we are offering additional 25 bps lower rate to the existing customers who have a good track record in terms of payment and savings account balance.
At present, our retail loan book constitutes 11 per cent of the total loan book and we want to increase the proportion to 15 per cent in the next two years.
Will there be thrust on retail liabilities also?
If you see our branch network, we had 1,625 branches as on 1 April, 2011 which is not a high number given our asset size and this shows the high dependence of the bank on bulk business. We are planning to beef up our branch presence and will open 225 branches in the current financial year which will take the number to 2,000. We had opened 147 branches in the previous financial year.
The opening of new branches will also help us to increase the share of low cost deposits or the current and savings account deposits (Casa).
What is the share of your Casa in overall deposits and where do you see it going ahead?
The Casa ratio was 24 per cent as on the end of the March. We are targeting to increase the share by 200 bps – in absolute terms – every year.
What is your guidance on net interest margin?
We expect to have margins around 3 per cent for the current financial year as compared to 2.69 per cent in 2011-12.
