Net profit fell 15 per cent to Rs 720 crore in the quarter ended June 2021 from Rs 844 crore a year earlier as the bank’s loan book shrank 0.18 per cent to Rs 4.14 lakh crore. The subdued loan growth impact both net interest margin (NIM), as well as net interest income (NII) as deposit growth at 5 per cent, outpaced credit growth.
NIM or the difference between the yield earned on loans and that paid on deposits fell to 2.16 per cent from 2.48 per cent a year ago as the yield on advances fell 88 basis points year on year. One basis point is 0.01 percentage point.
NII fell 10 per cent also due to the bank’s slow loan growth mainly as corporate loans remained stagnant whereas loans to retail, agriculture, and micro and small SME segments (RAM) grew by 11 per cent.
CEO AK Das said the bank is hopeful of a 6 per cent to 7 per cent growth this fiscal riding on a 14 per cent growth in RAM loans.
“We have already shed Rs 16,000 crore of bulk deposits during the quarter. As these deposits reprice and loan growth picks up we expect to do better. We expect our NIM to increase to 2.50 per cent this year,” Das said.
High provisions and operating expenses also pulled down profits. NPA provisions increased 14 per cent to Rs 873 crore from Rs 767 crore a year ago. Operating expenses rose 16 per cent to Rs 2715 crore as the bank provided for salaries and also set aside Rs 20 lakh for each deceased employee who died due to the Covid 19 virus.
Das, however, maintained that the bank will achieve its 12 per cent gross NPA target by the end of the fiscal from the 13.51 per cent reported at the end of June.
Slippages of Rs 3942 crore during the quarter included Rs 1600 crore from MSMEs which have been badly hit due to the demand and supply disruptions from the pandemic.
Executive director PR Rajagopal said MSMEs have suffered the maximum damage but things will improve by the end of 2021.
“MSMEs have faced the maximum damage. According to the CII-MSME survey, about 35 per cent have closed down because they could not continue the business. But as the economy opens up we expect things to be better by the December quarter,” he said.
The bank has outstanding restructured loans of Rs 5963 crore under the first RBI window and has so far restructured loans of Rs 5299 crore under the second window which closes at the end of September.
A rise in other income helped the bank during the quarter. Other income rose 39 per cent to Rs 2377 crore mainly due to a Rs 406 crore recovery from a written off aviation account and also as foreign exchange led income increased.
