NII increased 9 per cent to Rs 1854 crore due to a 32 basis points improvement in net interest margin (NIM) to 3.02 per cent in the quarter ended September as cost of funds fell to 3.88 per cent in September 2021 from 4.73 per cent last year.
NIM is the difference between the yield earned by a bank on loans and that it pays on deposits.
Staff costs fell 12 per cent to Rs 698 crore in September 2021 from Rs 789 crore a year earlier while tax expenses fell 39 per cent to Rs 208 crore from Rs 341 crore a year earlier.
The fall in expenses masked the bank’s dismal performance in growing its loan book. Total advances grew just 0.41 per cent to Rs 1.64 lakh crore from a year earlier and actually shrunk 0.72 per cent compared to the quarter ended June 2021 as corporate loans shrunk 15 per cent while loans to retail, agriculture and micro and small enterprises grew by a timid 3.16 per cent.
CEO Rakesh Sharma however expressed confidence that the bank will be able to achieve its targeted 8 per cent growth in corporate loans this year.
“Our sanctions are happening but disbursements have not picked up. But we are still confident of a 8 per cent growth in mid and large companies which will need about Rs 6000 crore of loans in the rest of the year,” Sharma said.
Both interest income and other income were down compared to last year due to lower yield on advances as interest rates came down and unlike last year the bank did not have the advantage of booking one of the gains like the sale of partial stake in NSDL. A 12 per cent fall in total provisions also helped net profit.
Key parameters fell compared to the quarter ended June 2021 with NII falling 26 per cent while non-interest income fell 40 per cent as unlike the last quarter the bank did to have a large write back like the Kingfisher account which led to gains both on the interest as well as fee income side.
The bank also had to provide for its Rs 400 crore exposure to the Srei Group which has slipped into NPA in the quarter.
Sharma said with the economy opening up due to increased pace of vaccinations the bank will ramp up both its corporate and retail loan book and increase loan growth in the second half of the fiscal.
