Karnataka Bank Ltd. is aiming at over 15 percent growth in loan book this financial year, and plans to bring down gross bad loans to 4 percent, its Managing Director and Chief Executive Officer MS Mahabaleshwara told BloombergQuint in a telephonic interview.
Gross non-performing assets (NPA) of the private lender, as percentage of total advances, in the April-June quarter increased to 4.34 percent from 4.21 percent in the sequential quarter.
MS Mahabaleshwara, MD & CEO, Karnataka Bank Even though there is an increase in gross NPA in percentage terms in Q1, I am very optimistic and confident of achieving that target.
Asset Quality Blues
Net slippages for the private lender came down from Rs 127 crore in the year ago quarter to Rs 109 crore in Q1FY18 while restructured advances saw a reduction of 35 percent to Rs 1,139 crore. However, gross NPAs rose 21.7 percent over last year to Rs 1,691 crore owing to a steel sector account to which the bank has an exposure of Rs 122 crore. The steel account slipped into NPA this quarter.
The bank has exposure of Rs 48 crore to one of the 12 accounts identified by the Reserve Bank of India under insolvency and bankruptcy law.
It is an automobile sector account for which Karnataka Bank has already initiated NCLT proceedings. However, the bank has made provisions to the tune of 15 percent for that account, in line with regulatory requirement.
So, the bank will have to provide for the rest beginning second quarter of FY18 and will amortise it over three quarters as allowed by the RBI.
Scope For Further Expansion In Margin
Net interest margin (NIM) for the bank in the quarter rose by 19 basis point to 4.23 percent driven by lower cost of deposits, which fell by 62 basis points to 6.33 percent and higher credit-deposit ratio. “NIMs at 2.6 percent levels is sustainable,” Mahabaleshwara said. The bank is aiming to take the credit-deposit ratio from the current 69 percent to 70.5 percent by the fiscal year end led by growth across its corporate, mid-corporate and retail books.
In its retail book, the bank is focusing on residential housing with competitive pricing and is also focused on SME advances and agricultural sector.
Shares of Karnataka Bank were trading 3.6 percent lower at Rs 159.85 on the NSE at 12:08 p.m.