We are not in the race to build a book for the sake of growth: Parthasarathi Mukherjee, MD & CEO, Lakshmi Vilas Bank

In an interview with ET Now, Parthasarathi Mukherjee, MD & CEO, Lakshmi Vilas Bank, speaks on the quarterly results. Excerpts:

Profit growth has been strong. What led to the NII growth though of just 14%?
Parthasarathi Mukherjee: The trading profits were pretty strong and we booked Rs 100 crore odd in trading profits. Obviously a first for the bank in any single quarter and clearly that was the biggest contributor to our revenues. We are making no bones about the fact that the credit book did not grow at all, as a matter of fact it shrunk, and while the fact remains that to a fair extent this was also because of the overall slowdown that we saw in this quarter particularly after the announcement of the withdrawal of SBNs and even that itself led to shrinking of about Rs 450 crore of loans. It was reported somewhere in the media that these were bad loans that were recovered. Actually these were reasonably good loans that were recovered to the extent of about Rs 450 crore. Leaving that aside I must confess that we have not seen adequate demand in the markets, I must also tell you that we are very clearly not in the race to build a book just for the sake of growth, so we have been very careful and the SME and the retail teams are looking around and will be extremely careful in these difficult times and would like to avoid the risk of adverse selection in these times. So we have been careful and as a result the credit book has not grown at all during the quarter. It has, a matter of fact, shrunk a bit, but we were rescued by the fact that the treasury had a very good quarter.

What led to stable asset quality and what were your slippages and recoveries?
Parthasarathi Mukherjee: Expectation is that asset quality will be largely stable, we will always have a few accounts slipping here and there. For the current quarter that we are talking of out of the Rs 87 crore of slippages that I reported, one single account accounted for about Rs 45 crore it was account in which we were part of a consortium and this was an account linked to the shipping industry and we lost Rs 45 crores there. The next highest account slippage was somewhere in the region of under Rs 3 crores so you will realise that the rest of it is pretty granular. As far as recoveries are concerned, we recovered about Rs 81 crores during the quarter, the effort of course will be to step up on recovery…

I am looking at your provisions they have come down the provision cover though remains at about 62%. Do you see that improving?
Parthasarathi Mukherjee: I sincerely hope so. Our eventual intention is to keep ourselves somewhere in the region of about 70%. I am not sure that I will be able to achieve it so quickly, but eventually we intend to be there.

NIMs 2.7%, CASA has improved 21% due to the note ban. What is the outlook ahead here?
Parthasarathi Mukherjee: You will appreciate that the CASA got a boost partly on account of the benefits coming out of the withdrawal of the SBNs so our effort in the first pace will be to ensure that we can at least retain the present levels. We had anticipated reaching these levels about a year later so we are actually a year ahead of this as far as our business plans are concerned. I would be delighted if we were to keep our CASA on a daily average basis somewhere in the region of 20 to 21% over the next one year. As far as the NIMs are concerned, let me tell you that my NIMs are alright considering the sort of CASA book that I run, considering the sort of cost of funds that I have, so my focus is actually more on improving and going up the value chain as far as my lending book is concerned. So to the extent I save on funding cost I would like to pass that on to my lending book and keep my NIMs reasonably stable around here. I am not really in a hurry to raise my NIMs up to over three or more.

What will be the next capital raising plan in FY18 and what is the amount?
Parthasarathi Mukherjee: I do not think I have a time table in mind at this moment. We would look to bring in some quality investors at the appropriate time so we are in no absolute hurry to raise capital today or tomorrow. As I said earlier, we have enough breathing space at this time available to us. So the effort will be to now produce some results and make a splash in the markets and attract quality investors.