The bank chief executive Padmaja Chunduru exuded confidence on sustainability of net profit around this level, if no further crisis hits the economy.
“We have reached this level despite the challenging environment and therefore we expect this to be sustainable,” she said. But the micro small and medium enterprise (MSME) sector has turned out to be “most vulnerable” with more than 15% of the MSME loans becoming sticky.
She projected pick-up in corporate credit from this quarter onwards. The bank has about Rs 20,000 crore in the pipeline to be disbursed to the corporate sector.
It’s operating profit for the quarter under review rose 26% at Rs 3472 crore from Rs 2753 crore in the year ago quarter even as interest income dipped 5% to Rs 9624 crore from Rs 10120 crore over the same period. However, a 41% rise in other income at Rs 1877 crore helped the bank in recording higher profit.
“A two-pronged approach helped the performance. While we are trying to boost income, we are also exploring how to optimise expenditure,” Chunduru said. The bank’s cost of funds fell 81 basis points year-on-year to 4.08% with expenses ratio easing 620 bps to 40.86%. Recovery of bad debt to the tune of Rs 359 crore as against Rs 24 crore in the year ago period also helped.
The bank’s total provision increased to Rs 2615 crore from Rs 2139 crore, despite fall in provisions to cover bad loans.
Its asset quality improved with gross non-performing assets (NPA) ratio falling to 9.69% at the end of June from 10.9 a year back. Net NPA ratio too fell to 3.47% from 3.76%.
However, fresh slippage was reported at Rs 4204 crore with the MSME sector contributing about 60% of it. The MSME sector accounts for about 18% of the bank’s advances of Rs 3.9 lakh crore while more than 15% of the MSME book has turned into NPA.