Tag: loan growth

Indian Overseas Bank targets 3.25-3.30% net interest margin in FY25

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Despite challenges from rising budget costs, Indian Overseas Bank (IOB) intends to maintain its margins around 3.25% to 3.30% going forward. The bank also plans to reduce gross non-performing assets (NPA) by 100 basis points (bps) to 2.10% by FY25, with net NPA targeted at 0.25-0.30%.

In an interview with CNBC-TV18, Ajay Kumar Srivastava, Chief Managing Director & CEO of Indian Overseas Bank, highlighted the bank’s strategy to maintain margins and reduce NPA while growing loans at a mid-teen rate.

In further discussion regarding net interest margins (NIMs), Srivastava mentioned that the bank raised interest income while simultaneously decreasing expenses on interest paid by managing its CASA (low-cost deposit accounts). They opted against acquiring high-cost bulk deposits, and a combination of these strategies led to an enhancement in NIM to 3.28%.

“There will be a challenge on the margin because the deposit is getting costlier day by day. But we have our plans concretised and we are implementing it successfully and we hope that by the same strategy will be able to maintain it,” Srivastava added.

Also Read | RBI wants lenders to stop unfair interest rate charges right away

When discussing loan growth, the CEO stated that it would be upheld at 13-14% for FY25, with the bank aiming for double-digit growth in retail, agricultural, micro, small, and medium enterprises (MSME), as well as corporate credit segments.

The bank posted a 24% rise in its net profit to ₹808.10 crore during the January-March quarter of FY24, up from ₹650.07 crore in the corresponding period of the previous year, driven by strong growth in core earnings and a decrease in provisions.

Quarter-on-quarter (QoQ), the net profit surged by 12% from ₹722.56 crore in the third quarter of FY24.

The bank’s total income saw a notable increase of 37.43% to ₹9,112.67 crore compared to the same period last year, with net interest income (NII) climbing by 27.67% to ₹6,629 crore. Meanwhile, other income escalated to ₹2,477 crore from ₹1,430 crore in the corresponding period.

Also Read | Indian Overseas Bank targets 13-14% credit growth next year, plans fundraise

The market capitalisation of Indian Overseas Bank is around ₹1,17,383.98 crore. Its shares have gained close to 153% in the past year.

(with input from Business Standard)

For the entire interview, watch the accompanying video

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UCO Bank targets 12-14% credit growth in FY25, margin of around 3%

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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UCO Bank is targeting credit growth of around 12-14% and net interest margin (NIM) of 2.9-3.0% for the the current financial year (FY25).

The bank had a good January-March performance with a jump in margin and improvement in asset quality.

Ashwani Kumar, MD & CEO of UCO Bank expects gross non-performing assets (GNPA) at around 2.75% and net NPA of 0.9% in FY25.

Kumar said while the bank is well capitalised, the board has approved a ₹400 crore fundraising to help bring down the government stake in the bank.

“Since our government holding is 95%, to bring it down to 75% we have taken Board approval and after the approval of the AGM, we will go to the market at an opportune time, and in multiple tranches, not at one go,” he said.

Below is the verbatim transcript of the interview:

Q: What are your targets for FY25 when it comes to loan growth when it comes to names, and at the same time when it comes to your asset quality?

A: The target for the current year’s credit growth will be around 12-14%; last year also did a growth of around 16%. So, 12-14% growth target will be there. Net interest margin (NIM), we have given a guidance of 2.90-3% and we will continue with that guidance for this year. We achieved an NIM of 3.12%. Now the NIM will continue to be around 2.9-3%. So far as asset quality is concerned, we have already improved our asset quality to 3.48 from 4.78 last year, and we will try to make it to 2.75 in this year, and net NPA, our endeavour will be to bring it further down from 0.89%.

Q: Two-part question on the asset quality. Slippages ₹476 crore is marginally lower as compared to ₹483 crore last quarter. What is your outlook on slippage going ahead?

A: If you look at our slippages in the year 2022-23, it was around 1.70% over slippage ratio, and this current year our slippage ratio is around 1.10% and our endeavour will be to bring it further down maybe somewhere around 1% slippage ratio in this year and we are targeting upgradation of around 25% of the account which slipped last year.

Q: Slippages, you expect this figure to probably continue. Are you guiding for maybe ₹470-450 odd crore in the next couple of quarters. Will it rise, will it reduce. What is the quarterly run rate?

A: It will be in the same range because the book is also growing, annual percentage will come down and slippages will be in the same range expectedly though we don’t have any large chunky accounts where we expect some slippage, but there are certain agriculture accounts, MSME accounts which are slipping and then getting upgraded also. So, slippages will be in this range.

Q: I wanted your thoughts on your credit deposit ratio. That has increased. What is the number that you would be comfortable with going forward?

A. If you look at our CD ratio, it was around 64% in the last financial year and now it is around 71%. Our endeavor will be to reach 75% CD ratio during this year.

Q: For the fundraise, you have an approval for about ₹400 crores and multiple modes are open to be explored. Could you give us a sense of the time at which you are looking to raise funds? What could be the amount? And what will you be looking at; a QIP or an FPO? 

A. If you look at our CRAR (capital to risk-weighted asset ratio), it is around 17%. As far as the growth part is concerned, the bank does not need further capital raise. But since our government holding is 95%, to bring it down to 75% we have taken Board approval and after the approval of the AGM, then we will go to the market at the opportune time in multiple tranches, not at one go.

For the entire interview, watch the accompanying video

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Bank of Baroda forecasts FY24 loan growth at 14-16%, net interest margin at 3.15%

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Bank of Baroda expects a robust loan growth of 14-16% for the current financial year with a net interest margin (NIM) of around 3.15%.

Debadatta Chand, the MD and CEO of the bank explained, “…for the full year, NIM would be around 3.15%, plus or minus 5 basis points. On the credit side, the growth is almost at 18%. So in a scenario where growth is very fast, you have to have some levelling on the NIM side, and that is how we are managing the book in terms of the NIM.”

The bank’s domestic net interest margin for the first half was at 3.30%.

The Gujarat-based public sector bank expects FY24 to be a period of significant expansion. Chand said the bank maintains its FY25 growth guidance of 14-16% on loans and 12-13% on deposits.

In the quarter gone by, the bank’s loan growth was close to 18%.

Bank of Baroda reported its second-quarter financial results on Saturday, November 4. The lender reported an operating profit of ₹ 8,020 crore, up 33% from the year-ago period. The profit after tax (PAT) came at ₹4,253 crore, up from ₹3,313.4 crore in the corresponding period in the previous year. As per a CNBC-TV18 poll, the PAT was estimated to come at ₹3,921.5 crore.

On November 5, brokerage firm Motilal Oswal gave a ‘buy’ rating on the stock with a target price of ₹240. This translates to a near 25% upside from the current level of ₹192 apiece on the NSE.

The stock has given a return of nearly 11% over the last six months against Nifty Bank index return of a little over a percent.

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CSB Bank expects gold loans to be 45-55% of portfolio till FY25

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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CSB Bank expects the share of gold loans in its portfolio to range from 45% to 55% by FY25.

In an interview with CNBC-TV18, Pralay Mondal, Managing Director and CEO of the bank, said after the business updates for the bank’s second quarter of FY24.

He said, “We will sustain at 30% and hence our mix will remain between 45% and 50% and that will sustain till FY25. Also, we are focusing on SME and wholesale in a big way, and all of that we will start seeing from FY25 onwards and till then gold will continue to be close to 50% of our portfolio.”

Discussing loan growth, Mondal stated that the bank intends to outpace the overall system’s loan growth rate, and within the core industry segment, CSB Bank aims for a 50% higher loan growth rate. The bank anticipates achieving a loan growth rate of 25% for FY24.

In his view, the expansion of low-cost deposit accounts (CASA accounts) has been relatively subdued compared to the growth in overall deposits. Customers are expected to yield a more favourable return on term deposits than on CASA accounts.

“The growth in CASA has been slightly muted compared to the deposit growth; if you look at most of the banks in the system, whatever we have seen so far, there has been faster deposit growth than CASA, and that is when you have a (G-sec) at 7.2 plus and it is bound to happen because customers will have better returns on deposits compared to CASA,” said Mondal.

He further added, “Having said that the core CASA, which is current and savings, will continue to grow for banks which has a full-service franchise. For us also, we are building that gradually, and hopefully in the next few years, we will continue to see momentum on the CASA franchise as well.”

For more details, watch the accompanying video

Also, catch all the live updates on markets with CNBC-TV18.com’s blog

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

UCO Bank sets sights on strengthening low-cost deposit accounts, NIM targets

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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One of the key aspects of UCO Bank’s growth strategy is to expand its current and savings account (CASA) deposits significantly, aiming to improve the CASA accounts or low-cost deposit accounts proportion to 40 percent of the bank’s total deposit base.

In an interview with CNBC-TV18, Ashwani Kumar, MD and CEO of UCO Bank highlighted the bank’s primary objectives, which include bolstering the current and savings account (CASA) base, maintaining a healthy net interest margin (NIM) range, and concentrating on key sectors within the bank’s loan portfolio.

State-owned UCO Bank has reported a significant 80.8 percent year-on-year (YoY) increase in its net profit, reaching Rs 223.5 crore during the first quarter that concluded on June 30, 2023.

This notable surge in profitability marks a considerable improvement compared to the net profit of Rs 124 crore recorded in the corresponding quarter of the previous year, as stated in the company’s regulatory filing.

Furthermore, the bank’s net interest income (NII), representing the difference between the interest income generated from lending activities and the interest paid to depositors, witnessed a noteworthy YoY growth of 21.8 percent, totalling Rs 2,008.8 crore, in comparison to the previous year’s NII of Rs 1,649.6 crore.

Talking further about CASA, Kumar said, “On the deposit front our focus will be on CASA where we intend to grow our saving account portfolio, current account portfolio.

So, internally we have kept a target to reach 40 percent level though in the current environment when the differential in the savings and FD rate is high, it will be a challenge for the team to bring it to 40, but our endeavour will be to bring additional products in the savings portfolio to make it to 40 percent in times to come.”

He also provided insights into UCO Bank’s diverse loan portfolio, shedding light on the bank’s focus on specific sectors. The corporate portfolio currently accounts for 39 percent of the bank’s loan book, while retail, agri, and micro, small and medium enterprises (MSME) segments together constitute 61 percent. This balanced approach allows UCO Bank to tap into different market segments and mitigate risks associated with concentrated exposures.

Within the retail, agri, and MSME segments, UCO Bank has identified housing, vehicle, and personal loans as the primary focus areas. The bank’s strategic emphasis on these segments aligns with the growing demand from consumers and businesses, presenting opportunities for healthy loan growth and increased profitability.

For more details, watch the accompanying video

Also, catch all the live updates on markets with CNBC-TV18.com’s blog

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

South Indian Bank aims for steady loan growth and enhanced net interest margin in FY24

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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South Indian Bank, a private sector lender, reported a significant 75.5 percent year-on-year (YoY) increase in net profit, reaching Rs 202.3 crore for the first quarter ended June 30, 2023. According to a regulatory filing, in the same quarter of the previous year, the bank’s net profit stood at Rs 115 crore.

Furthermore, the bank experienced a noteworthy surge of 53.9 percent in its Net Interest Income (NII), which represents the difference between the interest income earned from lending activities and the interest paid to depositors. The NII for the quarter amounted to Rs 807.7 crore, compared to Rs 603.4 crore in the corresponding quarter of FY23.

Murali Ramakrishnan, the Managing Director & CEO of South Indian Bank, recently shared the bank’s growth projections and strategic targets for the fiscal year 2024 during an interview on CNBC-TV18. With an optimistic outlook, the bank foresees loan growth of 13 percent for FY24, along with plans to achieve a net interest margin of 3.5 percent by the year’s end.

He said, “We are looking at 13 percent growth for the full year and we have done well compared to the guidance we have been giving.”

The target reflects the bank’s commitment to supporting various sectors of the economy by providing much-needed credit facilities. As India’s economy continues to recover and expand, South Indian Bank aims to play a pivotal role in fuelling growth through its lending activities.

Another key area of focus for South Indian Bank in FY24 is to enhance its Net Interest Margin (NIM) to 3.5 percent by the end of the fiscal year. NIM is a crucial metric that measures the difference between the interest income generated from loans and investments and the interest expenses paid on deposits and borrowings.

A higher NIM indicates improved profitability for the bank, allowing it to generate more earnings from its core lending and investment activities. Achieving a NIM of 3.5 percent would position South Indian Bank on a path of sustained financial strength, enabling it to reinvest in its operations, technology, and customer-centric initiatives.

For more details, watch the accompanying video

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

South Indian Bank sees fewer bad loans in FY24 – Stock jumps 10%

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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South Indian Bank expects fewer bad loans in the current financial year.  Managing Director and Chief Executive Officer (CEO) Murali Ramakrishnan told CNBC-TV18 that the gross NPA (non-performing assets) will be 4.5 percent in the financial year ending March 2024, and the net NPA will be 1.5 percent.

If the company meets this guidance, the asset quality for South Indian Bank would be a lot better than what it was at the end of March 2023.

The stock surged over 10% in early trade on Friday (May 12), the day after the Thrissur, Kerala-based bank reported the highest-ever net profit in any three months in its 94-year history.

The bank reported a 22.7 percent year-on-year increase in net profit at Rs 333.9 crore for the fourth quarter that ended March 31, 2023. This is the highest-ever net profit in the history of the bank. In the corresponding quarter last year, the bank posted a net profit of Rs 272 crore.

“I am at 12-13 percent growth in asset numbers for the coming year. We are currently at about Rs 72,000 crore and our endeavour is to reach at least Rs 82,000 crore in the coming year,” Ramakrishnan said.

He expects the net interest margin — the difference between the interest earned from loans and the interest paid on deposits — to hold at 3.5 percent this year, just as much as it was in the last three months of the last financial year that ended in March.

Also Read | South Indian Bank clocks highest-ever net profit of Rs 333 crore, declares dividend

For more details, watch the accompanying video.

Also, catch all the live updates on markets with CNBC-TV18.com’s blog

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Fiscal wrap | Banking sector saw an exceptional loan growth

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Loan growth for banking sector has been phenomenally strong in FY23. For the period ending January 27th 2023, overall credit growth was at 16.3 percent year-on-year and non-food credit growth was 16.7 percent year-on-year.

What has driven this loan growth and how it will pan out going head?

Incremental loan growth on the non-food credit side for FY23 till now has been Rs 14.6 lakh crore. In FY23 monthly credit demand up to January 23 has been at Rs 1.46 lakh crore which is much higher than the previous best, which was recorded in FY20 of about Rs 1.4 lakh crore and it is one of the best in many years.

Which sector has driven the long growth?

Personal loans, which include home loans have been one of the biggest drivers of loan growth in FY23 so far.

Services has been the next best segment to witness strong loan growth momentum, it formed around 31.50 percent of the incremental loans in the system up to January 2023.

Agriculture formed around 12.1 percent of the incremental loans, with industry forming around 9.50 percent of the incremental loans.

Talking about the best performing segment, in personal loans 35.55 percent has been driven by the housing sector, which includes priority sector lending as well. The second large part was from the other personal loans which contributed 30 percent of the incremental personal loans.

Vehicle loans and credit cards have done well too. Credit card performance in FY23 so far has been one of the best in the history for the banking sector with respect to outstanding lows, card issuances, as well as massive increase in ticket sizes.

Services sector performance has been strong too. NBFCs switch to banks from money market as liquidity dried up and money market rate shot up. So trade also formed a substantial portion of the incremental growth in services segment.

Shipping witnessed a decline in terms of incremental loan flows.

A look at the outlook.

Loan growth rate is expected to soften a bit going head, some part of the loan growth has been derived from lower principal repayment. Hence, when the repayment in principle starts to happen in the EMI it starts to increase, we may see some impact on the loan growth as well.

Capex demand is yet to come back, it may not come back in a high inflation scenario.

Corporate loans may continue to see working capital demand from the lenders due to better rates than money market instruments. Expect personal loans to continue driving the overall loan growth momentum.

NBFC demand will remain healthy due to favorable interest rate from banks than other instruments.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

March will be the best quarter for this small lender

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Five Star Business Finance, a non-banking finance company, Q4 performance has been impressive so far, with strong disbursement growth. This is a positive sign for the company, as disbursements are a key driver of growth in the non-banking finance sector.

In an interview with CNBC-TV18, Lakshmipathy Deenadayalan, CMD of the financial institution, said that March would be the best quarter for Five Star in terms of performance.

He said, “Q4 shows very strong business growth, both in disbursement and logins, we are seeing one of the best quarters. March quarter will be the best among the best of Five Star.”

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He also expects the difference between actual gross non-performing assets (GNPAs) and guidance to be lower than the previously projected range of 75-100 basis points (bps). This is a positive sign, as a lower GNPA indicates a healthier loan portfolio and improved asset quality.

Deenadayalan also said that the game is moving from return on assets (ROA) to return on equity (ROE). This shift is significant because it reflects a focus on profitability rather than just growth. By prioritising ROE, companies are looking to maximize their returns on investment and generate more value for their shareholders.

Also, Nuvama, an investment and financial services company, has initiated coverage on the stock with a buy rating and target of Rs 710. Nuvama is expecting assets under management CAGR of 30 percent over FY22-25 and a high return on assets (ROA) of 8 percent.

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For more details, watch the accompanying video

Also, catch all the live updates on markets with CNBC-TV18.com’s blog

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Ujjivan Small Finance Bank says need to be prepared for pressure on margins

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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[wealthdesk shortname=”Ujjivan Small” isinid=”INE551W01018″ bseid=”542904″ nseid=”UJJIVANSFB” sector=”” exchange=”nse”]

Ujjivan Small Finance Bank released its third quarter (Q3FY23) business update, and the bank has seen robust disbursals but failed to translate into higher asset under management (AUM) growth. However, the bank’s asset quality continues to improve.

Ittira Davis, the MD and CEO of Ujjivan Small Finance Bank, appeared on CNBC-TV18 to discuss the state of the bank. He acknowledged that the bank will have to be prepared for some pressure on net interest margins (NIMs), but assured that they will take a decision on hiking lending rates after the Reserve Bank of India’s policy.

In the past two months, Ujjivan Small Finance Bank has raised deposit rates ahead of its competition. Davis expects this move to lead to further improvement in asset quality in the fourth quarter of the fiscal year 2023.

“Our deposit growth has been done in a way that we anticipated this growth in demand for loans. And we had prepared ourselves for that. So, we were one step ahead perhaps of the market and we have seen 49 percent growth in our deposit base, which is quite phenomenal at this stage of the interest rate cycle,” he said.

Despite the challenges facing the bank, Davis emphasized that their process for collections is robust and that they have seen five continuous quarters of growth. In fact, the bank has seen a 33 percent year-on-year (YoY) growth in outstanding loans.

Overall, Davis remained positive about the future of Ujjivan Small Finance Bank and its ability to weather any economic storms.

The RBI approved reappointment of Ittira Davis as Managing Director and Chief Executive Officer of the Ujjivan SFB for a further period of 2 years.

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For more details, watch the accompanying video

Also, catch all the live updates on markets with CNBC-TV18.com’s blog

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow