Corporation Bank: Margins to expand on recoveries

Excerpts from an interview of Ms P.V. Bharathi, Managing Director, and Chief Executive, Corporation Bank with CNBC-Tv18:

Update on the Indian Equity Market:

On Thursday, NIFTY closed -0.3% lower. Among sectoral indices, NIFTY Metal (-2.2%), NIFTY Auto (-1.0%), and NIFTY FMCG (-0.6%) closed lower. While NIFTY Media (+4.1%), NIFTY Realty (+0.6%) and NIFTY Financial services (+0.3%) closed on a positive note. The biggest losers were BPCL (-6.0%), Coal India (-3.4%), Tata Steel (-3.3%) whereas Zee (+11.7%), Eicher Motors (+2.1%) and Dr Reddy (+1.4%) ended with gains.

• Speaking about Essar steel judgement Ms P.V. Bharathi said that the Essar recovery which was long pending has now come. The bank expects that by November 2019 around ₹1,300 crore will be coming in.
• The bank had already targeted recovery of ₹ 6,000 cr, including National Company Law Tribunal (NCLT) recoveries.
• In the Essar Steel case, the bank has already provided 100% in respect of this account, so the entire amount of recovery will help to improve profit. In this process, the net interest margins (NIMs) will also increase by 40-50 bps.
• The bank’s exposure to Bhushan Steel is small, it is ₹150 cr. The bank has around ₹2,500 cr exposure to Videocon.
• The recoveries will increase profit; for the first half of the year net profit was up 24%.
• Total profit by the end of FY20 would go up to ₹2,000 cr out of which ₹1,300 cr will directly come from recoveries.
• The NPAs are less than 6%, the bank has been able to bring it down to 5.59% and by the end of FY20, it will be near 5.3%.
• The targeted loan growth is ₹1,30,000 cr and at the beginning of the year, it was around ₹1,20,000 cr. The bank has targeted 60% growth in RAM (Retail, Agri and MSMEs) and 40% in corporate.
• Speaking about the merger, Ms P.V. Bharathi said that it is expected to take place from 1 April 2020, once the process of valuation is over then swap ratios will come out.
• Ms P.V. Bharathi says this is peak period for retail home loan growth as well as vehicle growth.
• The total exposure to private sector NBFCs is ₹4,000 cr and the  exposure to Dewan Housing Finance Corporation is around ₹500 cr.
• The bank has factored in around ₹750 cr of slippages in third quarter, last quarter it was ₹950cr.