Kolkata-headquartered UCO Bank is targeting to lower its net non-performing asset (NNPA) ratio by 11 basis points (bps) to 1% by FY24 end. MD & CEO Ashwani Kumar tells Piyush Shukla that the bank is also aiming for Rs 2,000 crore in recoveries and upgrades during H2FY24. Excerpts:
Your Q2 PAT fell 20%, what are the key reasons?
On a quarter-on-quarter (QoQ) basis the net profit has risen from Rs 223 crore to Rs 402 crore, but year-on-year (YoY) the bottomline is down 20%. There are two reasons for it. My treasury income during Q2FY23 was Rs 163 crore and in Q2FY24 it is around Rs 57 crore. Similarly, recoveries in written off accounts stood at around Rs 408 crore in Q2FY23 as there was some account wherein we got a good recovery. This year also recovery in written off accounts stood at 290 crore. So both these factors contributed to a lower PAT.
Do you expect recoveries to improve going ahead in fiscal?
The recoveries from written off accounts will be better in the second half (H2FY24). We already have NCLT resolution pending in two accounts of a large NBFC, and a partial amount of around Rs 80 crore has already been received this quarter from these accounts and around Rs 400 odd crore more we are expecting anytime in Q3 or Q4. Second, we are expecting that there will be an upgrade from an already restructured account and that will be around Rs 170 crore.
There is likely to be another write-off recovery of around Rs 175 crore by way of upgradation. So with these four accounts, I expect that around 800 crore of recovery and upgradation put together in the next half year. There will be other normal upgradation and recoveries also in H2FY24, and if all these accounts which we are targeting are on track, I believe that recovery in remaining half of the year will be around Rs 1,800 crore to Rs 2,000 crore.
Your guidance on GNPA, NNPA for FY24?
We will be bringing GNPAs to less than 4% in Q3 (from 4.14% in September), and hopefully in Q4 we should see more moderation. On Net NPA, our guidance is 1% (as against 1.11% in Q2FY24), it may not happen in Q3 but definitely in March quarter it should be there.
Will domestic NIM sustain at 3.05%
If you look at our cost of funds and cost of deposit, it has increased this quarter as well. There are certain high-cost deposits which will be there with the bank till March. It is because last year in the March quarter there was a rate hike, so at that time the bank had taken bulk deposits at a slightly higher rate.
But we are continuously monitoring our level of deposit on a daily basis… we are trying to make sure that my onboarding of fresh deposit is lower than my cost of deposit…therefore we should at least maintain this level of NIM, but the rider is that if there is a pressure on the cost of deposit, there can be 5 basis points (bps) to 10 bps here and there.
What is the quantum of corporate loans in pipeline?
During second quarter, we have sanctioned around Rs 14,000 crore of corporate loans. Out of that, around Rs 9,000 crore was disbursed and there were certain repayments and that is the reason our corporate book remained constant. As far as sanctions are concerned, we are taking credit decisions, but the only thing is quality of corporate credit on a profitable growth basis. Anything which is giving me only top line growth, not margin gain, that we are trying to see how to make it more profitable.
How may more Russian banks Vostro account will you open?
We have already opened six Vostro accounts –five of Russian banks and one from Belarus–and another eight accounts we have already obtained approval from Reserve Bank of India, and foreign banks have to complete the documentation formalities.
Who are the large banks?
Gazprom, Russian Regional Development Bank, Russian Universal Banking, Exobank, Moscow Bank and Belarus Bank.
What are the transaction volumes happening from these accounts?
Currently these accounts are used for settling European transactions. But transactions are not so huge currently. All permitted transactions are being carried out and the volume is yet to pick up.