Indian Bank, which tripled its net profit in the first quarter of FY22, says post-amalgamation of Allahabad Bank, the synergy benefits are coming in terms of cost efficiencies. Merger of IT operations and integration of systems had resulted in economies of scale through vendor rationalisation, finer pricing on AMCs and improved operational efficiencies. In a virtual press meet, after releasing the earning performance, Padmaja Chunduru, MD & CEO, says though the bank’s corporate loan book had a muted growth in the June-ended quarter due to the impact of the Covid second wave, she expects the pie to grow significantly in the next two quarters, on the back of improved economic activities. Excerpts:
In Q1, corporate loan growth appears to be almost muted?
The advances were mainly led by the RAM (retail, agriculture and MSME) sector which grew by 13% and the corporate book was almost muted. However, there is enough traction available, there are a lot of approvals waiting to be disbursed. We have a backlog of Rs 20,000 crore in the corporate that needs to be disbursed. I think in the next two quarters, corporate lending will pick up as there are new ventures forming in the industry. We expect the demand to come from PSUs, road projects, steel and cement sectors. There are also expansion plans from top-notch corporates.
Do you think the bank has reached a level where more than Rs 1,000-crore net profit could be achieved in a quarter consistently?
We have reached a level where we have visibility about the profitability on the back of our assumptions about the economic stability. If we can achieve Rs 1,182- crore net profit in a quarter of Covid-19 lockdown uncertainties, we think we have the visibility about the revenue streams. And if one of them does not work out, we have enough diversification for another stream of income to catch up. I think this is a performance that can be sustained, unless the third wave or something like that disrupts the whole economy.
How was the fresh slippage in Q1?
The fresh slippage was to the tune of `4,204 crore and out of it, a sum of Rs 2,472 crore pertained to the SME sector. Entire SMEs were under stress due to second Covid wave impact and around Rs 897 crore worth accounts have been restructured. The collection efficiency was down because of the Covid lockdown impact, but we expect it to improve this in the coming quarters. SMEs currently account Rs 67,600 crore portfolio, which is 18% to 19%, of the entire loan book.
Will you be taking up stake in the proposed bad bank?
We have taken the board approval to take 9.9% stake in the proposed bad bank, National Asset Reconstruction Co (NARCL). It is now up to NARCL to go to the banking regulator and get the approval for our request for investment. We have also identified eight accounts amounting to Rs 1,898 crore to be transferred to the bad bank for resolution in the first phase. Overall we have identified 33 accounts that are eligible for transfer to the bad bank, in the subsequent phases.
What are the strategies and focus areas going forward?
We have identified digital transformation, leveraging of balance sheet strength, revenue maximisation, cost optmisation and employee growth as the focus areas. Under the digital transformation, strategies will be on improving digital penetration, focus on new age digital products, end to end solution for digital lending and implementing HRMS solution. The bank has made long term investment in strengthening IT infrastructure, IT security and network operations. Focus will be there on capital conservation, potential for increase in corporate exposure and capital strength to diversify the asset base.