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After registering robust growth in net profit and decline in loan loss in the second quarter, the country’s third largest lender, Bank of India, is confident on improving profitability and asset quality. Vijayalakshmi Iyer, chairperson and managing director, tells Abhijit Lele and Manojit Saha improving the share of low-cost deposits will be a priority. Excerpts:
After a healthy growth and robust profitability in the second quarter, how has been your performance in the October-December quarter?
Credit growth was a little muted as compared to the second quarter, but deposit growth continued to be strong. This was mainly because borrowers are in wait-and-watch mode due to the general uncertainty in the economy, with impending elections, etc.
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Provisional figures suggest business, outstanding as on December 31, was Rs 8.1 lakh crore up from Rs 7.7 lakh crore of the previous year.
The business growth in the third quarter was about Rs 41,000 crore as compared to Rs 49,000 crore in the first quarter and Rs 46,000 crore in the second quarter.
Deposit and credit grew by Rs 21,000 crore and Rs 20,000 crore, respectively, during the quarter.
On a year-on-year basis, this translates to 29.8 per cent growth in deposits and 27.3 per cent credit growth.
The point is, we have got the momentum back after a period of sluggish growth during 2010-2012.
The field people are responding, which gives us confidence this growth will be sustained.
Net profit growth was more than 100 per cent in Q2 and one reason was a lower base. But, in Q3 last financial year, the net profit was Rs 800 crore. Do you think the bank will be able to maintain profit growth?
My desire is to surpass that number. I don’t want to comment on that since the numbers are still to be finalised.
The bank has seen robust credit growth of 30 per cent in the second quarter and, as you said, the third quarter has also seen healthy growth. Which sectors are contributing?
We are also tapping the opportunity of lending to non-banking finance companies (NBFCs).
Since the money market has become an expensive proposition for fund raising by NBFCs, they are coming to banks.
Retail grew by 32 per cent and agricultural lending is also growing very well.
There are also refinancing opportunities where the implementation of the project is over like the road sector.
Annuity projects are coming for a lower rate of interest.
In such projects, payment of interest and principal is guaranteed.
Some of the good companies are there in the sector like L&T.
In addition, the bank has low presence in the public sector segment.
I have personally approached some of them to garner business, like NTPC and SAIL, and we have given them credit facilities.
The bank was one of the two public sector lenders which has seen a decline in non-performing assets (NPAs) in Q2. Do you think the trend will continue?
We will be able to also contain NPAs in this quarter also.
Recovery has gained momentum, while slippages are not that much.
We also sold Rs 1,200 crore worth of non-performing asset (NPA) in the third quarter to the asset reconstruction companies.
Our provision coverage ratio has also improved.
The resolution of debt recast for state electricity boards will also benefit as half of the Rs 4,500 crore (BoI’s share in debt recast) will be converted into bonds.
The pipeline of loan restructuring is also modest, at Rs 1,000 crore.
While the bank is the third largest lender in the country, one aspect that needs improvement is the share of current and savings accounts (Casa) in total deposits, about 32.6 per cent now. How do you plan to improve your Casa?
We are now concentrating on increasing profitability and want to see returns on asset improve by 2015.
We are working on every component of profit and expenditure.
We are diversifying our income stream.
So, getting more low-cost deposits assumes significance.
Casa grew by 2-2.5 per cent in this quarter. We plan to increase the share of Casa to 35 per cent by the end of September.
At the same time, we have reduced our dependence on bulk deposit which is now 5.33 per cent of our total deposits.
RBI has come out with draft guidelines for banks becoming insurance brokers. The finance ministry has advised public sector banks to enter the business. But banks that have insurance subsidiaries may find it difficult. What are your thoughts?
We have said banks that have a insurance subsidiary have the obligation to honour the MoU signed among various partners.
It should be insisted for those banks that have a subsidiary in place.
Broking requires a different set of skills. We don’t have that kind of staff now, so to develop those skills will take time.
