Corporate advances are marginally lower while gold loans have increased by 48.64% year-on-year and now stand at 26.06% of the total loan book.
Dhanlaxmi Bank appointed JK Shivan as the managing director and CEO on February 1 after an unprecedented move of taking shareholders’ approval by e-voting. Shivan tells Rajesh Ravi of FE in an interview that he wants to run the bank professionally and create value for shareholders. Excerpts:
There are many legacy issues in the bank and the RBI asked for shareholders’ approval before your appointment. How do you view the problems faced by the bank?
Many from the top leadership have resigned in the past and such things create governance and regulatory issues. My message is that executives will decide what has to be done in the bank and they will report to me. I do not want anyone, including shareholders and the directors, to interfere in the working of the bank.
I have been voted by shareholders and selected by an independent panel. There are two RBI directors on the board and this bank is under close supervision. The board is the supreme in any organisation and I report to the board. Since I have a chairman who is a former banker, I think things will be smoother and issues will be settled. At the end of the day, I want to run the bank professionally and create value for shareholders. This is a 95-year-old bank and you cannot run it like a fiefdom.
What is your assessment of the bank?
The bank has a capital to risk assets ratio (CRAR) of 14.4%. However, I would be happy with a CRAR of 12% and more profitability. Ideally, CRAR for a good private sector bank is 17%+. NPA position is not bad and we have made adequate provisions. I should give credit to the committee of directors which managed the bank, because despite all untoward incidents, no depositor has walked away.
How do you assess the third quarter results given that advances have shown a marginal decline?
Corporate advances are marginally lower while gold loans have increased by 48.64% year-on-year and now stand at 26.06% of the total loan book. The bank may focus on smaller-ticket loans with good collateral, and not push for bigger corporate loans under a consortium of banks where smaller banks don’t have much say.
I have 40-45 days left in this fiscal and I am focusing on improving CASA, recover as much as possible, increase retail gold loans and do whatever corporate loans I can do.
What about slippages and provisions? What is the proforma GNPA and NNPA for Q3?
The proforma GNPA in absolute terms would be around Rs 330-340 crore, out of which only Rs 130 crore is corporate advances. The rest are small advances and I am not worried about it. As a prudent measure, I have made a provision of Rs 37 crore. Our gross non-performing assets (NPA) as a percentage of gross advances for the quarter stood at 5.78% and the net NPA was at 1.11%. Proforma GNPA ratio would be 9% and proforma net NPA 2.1%.
Any plan to raise capital as the loan book is still small?
When we grow, we will have to think of capital. We will have to go to the board and decide how to raise capital. Maybe a rights issue or a follow-on public offer or something else. Sadly, the share market is not reflecting the intrinsic value of the bank. With good governance and steady growth, I think we will get good value.
What is the NIM for Q3, and what would be the ideal NIM?
During the third quarter, NIM reported is 2.9%, and ideally, we should have it above 3%. For the last 3-4 months, some of the money has been invested in treasury, and hopefully, we could see more advances and higher interest income in the coming quarter.
Have you any plans for branch expansion and hiring?
We had to close or merge many loss-making branches when the bank was under the Prompt Corrective Action framework. So, we can immediately open 30 branches. We are getting good traction from Andhra Pradesh and Tamil Nadu. The bank is currently short of 200 employees and we need to hire soon.