United Bank of India reported a rise of more than 22% (YoY) in profits for the first quarter of FY12. The net profit of the bank increased to Rs 132 crore as against Rs 108 crore in the corresponding quarter of FY11.
Net interest income rose to Rs 569 crore from Rs 509 crore year-on-year (YoY), a jump of 12%.
Bhaskar Sen, the chairman and managing director of United Bank of India talks about his banks first quarter results on CNBC-TV18. He also elaborates on the banks future plans and where he sees it headed in the coming year.
Below is a verbatim transcript of his interview with CNBC-TV18’s Latha Venkatesh and Anuj Singhal. For complete details watch the accompanying video.
Q: What were your advances and your disbursal growth and more importantly what did you do by way of margins in the quarter under review?
A: As far as credit growth is concerned we have seen a YoY growth of 19%. On margins, if you take June 2010 figure, we have seen a marginal improvement in net interest margins to 3.03%.
Q: What did you do in the final quarter of FY11?
A: The final quarter of FY11 was a little higher at 3.13%. We have seen some kind of depression in NIMs. Going forward, this is going to be a challenge and we have to see how best we can retain margins at this level and improve it further.
Q: The slippages have gone up; the amount of gross NPAs is at Rs 1,535 crore versus Rs 1,355 crore quarter-on-quarter (QoQ). Why has that been the case and would you arrest the trend in the next quarter?
A: Yes, we are very much concerned with slippages. In fact, information which we are getting is that it’s not from a particular segment but a mix of exposures. We have seen low ticket advances. They constitute about nearly 30% of the total slippages. So we are arranging for different measures like Lokadalat recovery camps, etc.
About 70% of slippages have occurred in the mid corporates segment and in each of the cases we are going into details. We are finding out what the reasons are and how best we can upgrade these accounts. Hopefully, next quarter we will see some improvement in the quality of assets.
Q: Therefore, your fresh slippages are not because of system recognition but because you did see an inability on the part of your borrowers to pay back?
A: Yes. As far as system driven NPAs are concerned, we have already drilled down to Rs 10 lakh and above and remaining accounts will be covered by September 30.
Q: There is a growth slowdown and there is an interest rate increase, pressure on margins for many small companies which will continue as the results show. How much worse will your NPA get from hereon? How much more can the slippages be in the second quarter?
A: It’s going to be a major challenge. In most cases I have seen that in addition to the rising input cost, the funding cost has also gone up very substantially for all the borrowers. Definitely, it’s a major issue and that is why we have seen a moderation in our credit growth. Retaining credit quality is going to be a major issue for us and we are very much concerned about it and we are talking all possible steps.
Q: It’s quite interesting that if you see corporate and wholesale banking, the revenues have gone up from Rs 758 crore to Rs 950 crore but the earnings have come down. In case of retail banking, it’s been a healthy growth, both in topline and bottomline. What’s been the problem with wholesale banking and corporate banking?
A: In most of the cases in wholesale banking, although, the sanctions are in place we have seen in most of the cases borrowers preferring to defer the project. They are just postponing the whole thing possibly because of the rising interest rate scenario. That could be the major reason.
Q: You are at 2.89% of total assets going bad at this point in time – gross NPAs. How much north of 3% can this go? What is your estimate of your margins and your disbursements for the full year?
A: As far as gross NPAs are concerned, if you take the June 2010 figure, the current figure is much lower than that which means we have taken a number of initiatives which are paying up but fresh slippages are taking place. That is where we are concerned. We are trying to address this issue and we will try to keep our gross NPA level at the current level. We are taking many steps and I am sure that it should not cross 3%.
Net interest income rose to Rs 569 crore from Rs 509 crore year-on-year (YoY), a jump of 12%.
Bhaskar Sen, the chairman and managing director of United Bank of India talks about his banks first quarter results on CNBC-TV18. He also elaborates on the banks future plans and where he sees it headed in the coming year.
Below is a verbatim transcript of his interview with CNBC-TV18’s Latha Venkatesh and Anuj Singhal. For complete details watch the accompanying video.
Q: What were your advances and your disbursal growth and more importantly what did you do by way of margins in the quarter under review?
A: As far as credit growth is concerned we have seen a YoY growth of 19%. On margins, if you take June 2010 figure, we have seen a marginal improvement in net interest margins to 3.03%.
Q: What did you do in the final quarter of FY11?
A: The final quarter of FY11 was a little higher at 3.13%. We have seen some kind of depression in NIMs. Going forward, this is going to be a challenge and we have to see how best we can retain margins at this level and improve it further.
Q: The slippages have gone up; the amount of gross NPAs is at Rs 1,535 crore versus Rs 1,355 crore quarter-on-quarter (QoQ). Why has that been the case and would you arrest the trend in the next quarter?
A: Yes, we are very much concerned with slippages. In fact, information which we are getting is that it’s not from a particular segment but a mix of exposures. We have seen low ticket advances. They constitute about nearly 30% of the total slippages. So we are arranging for different measures like Lokadalat recovery camps, etc.
About 70% of slippages have occurred in the mid corporates segment and in each of the cases we are going into details. We are finding out what the reasons are and how best we can upgrade these accounts. Hopefully, next quarter we will see some improvement in the quality of assets.
Q: Therefore, your fresh slippages are not because of system recognition but because you did see an inability on the part of your borrowers to pay back?
Q: There is a growth slowdown and there is an interest rate increase, pressure on margins for many small companies which will continue as the results show. How much worse will your NPA get from hereon? How much more can the slippages be in the second quarter?
A: It’s going to be a major challenge. In most cases I have seen that in addition to the rising input cost, the funding cost has also gone up very substantially for all the borrowers. Definitely, it’s a major issue and that is why we have seen a moderation in our credit growth. Retaining credit quality is going to be a major issue for us and we are very much concerned about it and we are talking all possible steps.
Q: It’s quite interesting that if you see corporate and wholesale banking, the revenues have gone up from Rs 758 crore to Rs 950 crore but the earnings have come down. In case of retail banking, it’s been a healthy growth, both in topline and bottomline. What’s been the problem with wholesale banking and corporate banking?
A: In most of the cases in wholesale banking, although, the sanctions are in place we have seen in most of the cases borrowers preferring to defer the project. They are just postponing the whole thing possibly because of the rising interest rate scenario. That could be the major reason.
Q: You are at 2.89% of total assets going bad at this point in time – gross NPAs. How much north of 3% can this go? What is your estimate of your margins and your disbursements for the full year?
A: As far as gross NPAs are concerned, if you take the June 2010 figure, the current figure is much lower than that which means we have taken a number of initiatives which are paying up but fresh slippages are taking place. That is where we are concerned. We are trying to address this issue and we will try to keep our gross NPA level at the current level. We are taking many steps and I am sure that it should not cross 3%.
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