Loans to steel sector is not a major cause of worry because of the measures by the
government as well as the resumption of mining, says Animesh Chauhan, MD and
CEO, Oriental Bank of Commerce . "We see the sector stabilising more in coming
quarters rather than seeing larger slippages," Chauhan tells CNBC-TV18. He says the
jump in gross non-performing assets during the June was mainly due to slippages in
two major accounts totalling Rs 640 crore. Below is the transcript of Animesh
Chauhan’s interview with Reema Tendulkar and Mangalam Maloo on CNBC-TV18.
Reema: I heard you say in your press conference that two accounts have contributed
to about Rs 600 crore of slippages. So, we have that number, could you give us some
other numbers on what the restructured assets were or what the restructured book
looks like right now, your refinancing, your net interest margins, could you give us all
these internals?
A: The net interest income and net interest margins have shown improvements year-
on-year also and quarter-on-quarter also. The slippages this time to non-performing
assets (NPA) has been higher, around Rs 1,600 crore. Basically, because of these two
major accounts which contributed around Rs 640 crore, they have slipped from the
restructured book and that is what has taken the number higher for this quarter on
the gross NPA and the slippages front.
Reema: Could you give us what the
refinancing has been under the 5:25 route as well as have you restructured any
assets?
A: Yes, we have done around four accounts under the 5:25 route, around Rs 1,400
crore. Mangalam: You also indicated that the asset quality should improve from
current levels because the two accounts that contributed Rs 600 crore to slippages,
the pain has been taken off, but do you see more pain coming in from various other
sectors because we understand that a lot of borrowers, steel, real estate companies
are under pressure?
A: Which companies, you said? Mangalam: Steel companies and
real estate infra companies?
A: I do not see many slippages in the steel companies because of the various measures the government has taken as well as some of the mining starting again on the iron ore. So, the steel, we see the sector stabilising more in coming quarters rather than seeing larger slippages. That is our expectation from the steel sector. Because of these two larger accounts which was not in steel that we saw the slippages happen in this quarter, we hope that going forward, especially third and fourth quarters, we hope to see some upgradations also should happen because of the economy improving during that period.
Reema: Were there any upgradations or recoveries in this quarter?
A: Upgradations were around Rs 300 odd crore. Upgradations were around Rs 292 crore during the quarter which is improvement from the Rs 51 crore in the previous quarter. Mangalam: And the sale to asset restructuring companies (ARC)? A: The sale to ARC during this quarter was only around Rs 35 crore, one or two accounts. It was a minor position.
Reema: And restructured assets?
A: Restructuring during the quarter has been around Rs 1,000 crore and majorly about Rs 460 crore is in agriculture accounts.
Reema: Could you give us what the pipeline is looking like for refinancing as well as restructured? How the slippage is likely to look in the coming quarters? Give us a sense of how your asset quality will be in the September quarter.
A: Predicting asset quality quarter-to-quarter is a very difficult task because as you can see, one or two accounts sometimes creates a difference. But, we hope to, in the percentage of gross NPA and net NPA, we expect going forward, by the end of the year, financial year, the percentage should come down from what it is in Q1. But, look at the profitability should remain good because if you look at the basic, on the operating front of the bank, the net interest income (NII) improving and the net interest margins (NIM) improving, we expect profitability to be stable or better improving.
Reema: We were just talking about the provisions of Dena bank. Even for Oriental bank of Commerce, the provisions have actually halved on a quarter-on-quarter basis. Can you walk us through what led to that?
A: I will tell you. Provision in the last quarter, this provision of depreciation on investment, as we told you there was a reversal of around Rs 280 crore because of asset sale, profit of 13-14 which was reversed. So, that was an abnormal item there which has gone out. Then there was issue of wage revision provision. Now, that it is actually paid, there is no provision shown, it has gone into the expenses part of it. So, from below the operating profit, it has gone directly into the wage expenses. So, that is another reason why that provision has gone down. These are the two major reasons for reduction of this provision.
Reema: You said that the gross NPA number will be better by the end of the year compared to what it was in this quarter. So, from 5.85 percent, how much... (Interrupted)
A: We are saying the gross NPA percentage? Reema: Yes, so from 5.85 percent, can you give us some target how you will end FY16 with? A: I will not be able to hazard a guess on that right now. We will have to see how the quarters progress because giving that would be not a good thing to do right now.
government as well as the resumption of mining, says Animesh Chauhan, MD and
CEO, Oriental Bank of Commerce . "We see the sector stabilising more in coming
quarters rather than seeing larger slippages," Chauhan tells CNBC-TV18. He says the
jump in gross non-performing assets during the June was mainly due to slippages in
two major accounts totalling Rs 640 crore. Below is the transcript of Animesh
Chauhan’s interview with Reema Tendulkar and Mangalam Maloo on CNBC-TV18.
Reema: I heard you say in your press conference that two accounts have contributed
to about Rs 600 crore of slippages. So, we have that number, could you give us some
other numbers on what the restructured assets were or what the restructured book
looks like right now, your refinancing, your net interest margins, could you give us all
these internals?
A: The net interest income and net interest margins have shown improvements year-
on-year also and quarter-on-quarter also. The slippages this time to non-performing
assets (NPA) has been higher, around Rs 1,600 crore. Basically, because of these two
major accounts which contributed around Rs 640 crore, they have slipped from the
restructured book and that is what has taken the number higher for this quarter on
the gross NPA and the slippages front.
Reema: Could you give us what the
refinancing has been under the 5:25 route as well as have you restructured any
assets?
A: Yes, we have done around four accounts under the 5:25 route, around Rs 1,400
crore. Mangalam: You also indicated that the asset quality should improve from
current levels because the two accounts that contributed Rs 600 crore to slippages,
the pain has been taken off, but do you see more pain coming in from various other
sectors because we understand that a lot of borrowers, steel, real estate companies
are under pressure?
A: Which companies, you said? Mangalam: Steel companies and
real estate infra companies?
A: I do not see many slippages in the steel companies because of the various measures the government has taken as well as some of the mining starting again on the iron ore. So, the steel, we see the sector stabilising more in coming quarters rather than seeing larger slippages. That is our expectation from the steel sector. Because of these two larger accounts which was not in steel that we saw the slippages happen in this quarter, we hope that going forward, especially third and fourth quarters, we hope to see some upgradations also should happen because of the economy improving during that period.
Reema: Were there any upgradations or recoveries in this quarter?
A: Upgradations were around Rs 300 odd crore. Upgradations were around Rs 292 crore during the quarter which is improvement from the Rs 51 crore in the previous quarter. Mangalam: And the sale to asset restructuring companies (ARC)? A: The sale to ARC during this quarter was only around Rs 35 crore, one or two accounts. It was a minor position.
Reema: And restructured assets?
A: Restructuring during the quarter has been around Rs 1,000 crore and majorly about Rs 460 crore is in agriculture accounts.
Reema: Could you give us what the pipeline is looking like for refinancing as well as restructured? How the slippage is likely to look in the coming quarters? Give us a sense of how your asset quality will be in the September quarter.
A: Predicting asset quality quarter-to-quarter is a very difficult task because as you can see, one or two accounts sometimes creates a difference. But, we hope to, in the percentage of gross NPA and net NPA, we expect going forward, by the end of the year, financial year, the percentage should come down from what it is in Q1. But, look at the profitability should remain good because if you look at the basic, on the operating front of the bank, the net interest income (NII) improving and the net interest margins (NIM) improving, we expect profitability to be stable or better improving.
Reema: We were just talking about the provisions of Dena bank. Even for Oriental bank of Commerce, the provisions have actually halved on a quarter-on-quarter basis. Can you walk us through what led to that?
A: I will tell you. Provision in the last quarter, this provision of depreciation on investment, as we told you there was a reversal of around Rs 280 crore because of asset sale, profit of 13-14 which was reversed. So, that was an abnormal item there which has gone out. Then there was issue of wage revision provision. Now, that it is actually paid, there is no provision shown, it has gone into the expenses part of it. So, from below the operating profit, it has gone directly into the wage expenses. So, that is another reason why that provision has gone down. These are the two major reasons for reduction of this provision.
Reema: You said that the gross NPA number will be better by the end of the year compared to what it was in this quarter. So, from 5.85 percent, how much... (Interrupted)
A: We are saying the gross NPA percentage? Reema: Yes, so from 5.85 percent, can you give us some target how you will end FY16 with? A: I will not be able to hazard a guess on that right now. We will have to see how the quarters progress because giving that would be not a good thing to do right now.
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