Net profit fell to Rs 31 crore in the quarter ended September 2021 from Rs 144 crore a year ago largely due to a 5 per cent shrinkage in retail loans and also hit by a reversal in interest income from segments like microfinance.
The bank suffered an interest rate reversal of Rs 130 crore during the quarter as loans from microfinance and credit cards slipped. The reversals also impacted the bank’s net interest margin (NIM) which fell 28 basis points to 4.06 per cent in September 2021. One basis point is 0.01 percentage point.
CEO Vishwavir Ahuja said he expects the second half of the fiscal to be better than the first as new additions to NPAs slow down, recovery improves and greater economic activity helps loan growth.
“We have cleared the hump in the second quarter and NPAs will only trend downwards from here. We expect a 7 per cent to 8 per cent loan growth in the second half with credit costs less than half of the first half. All important vectors including NIM will improve in the second half and we expect to exit the year with more than 1 per cent return on assets,” Ahuja said.
Loan book fell 1 per cent compared to the quarter ended June as retail loans shrunk 5 per cent because the bank remained cautious on microfinance loans and was also impacted by the ban on US card company Mastercard imposed on July 14. Net interest income fell 2 per cent to Rs 915 crore.
Credit cards and microfinance remained the largest contributors to net slippages at Rs 431 crore and Rs 267 crore as the impact of the second wave of the pandemic lingered.
Gross NPAs increased to 5.40 per cent from 4.99 per cent in June 2021 and 3.34 per cent a year earlier.
Other income rose 42 per cent led by retail fees though it fell 9 per cent versus June due to a fall in treasury income and a Rs 39 crore fee income reversal.
Ahuja said the bank is not shedding caution on its microfinance book as the new book nurtured post the Covid pandemic which is roughly 55 per cent of the segment is performing very well with 98.5 per cent collection efficiency.
“We were a bit cautious on microfinance due to the devastating impact of the second wave especially in rural India. It is now 10 per cent of our book and we expect to keep it at that level. Our wholesale book is now very clean and we expect to grow it. Overall we expect to grow in the mid to high teens in fiscal 2023,” Ahuja said.
Ahuja said after a standstill since the July Mastercard ban credit card issuances have also picked up with the bank issuing 1.6 lakh cards in September and expects to top it by issuing 2 lakh new cards in October.
