Vijaya Bank will grow net profit by 5 times in FY19, says CEO Sankara Narayanan

Vijaya Bank, one of the smallest public sector lenders, hopes to grow its net profit by five times to over Rs 1,000 crore by the end of this financial year ending March 2019.

The Karnataka-based bank, which has just about six percent of the business of State Bank of India saw its net profit rise marginally to Rs 207 crore for the January to March quarter.

Sequentially though, the net profit jumped by over 150 percent from Rs 80 crore in the previous quarter.

RA Sankara Narayanan, CEO and Managing Director of Vijaya Bank said, “The profits were a drag in Q4 because of the Reserve Bank's circular that increased provision requirement. Also, we did not use any of the three dispensations – mark-to-market provisions in treasury, insolvency provisions, and gratuity provisions – allowed by the central bank. Had they were used, it would have added another Rs 450 crore to my net profit.”

The Reserve Bank of India (RBI) has allowed banks to stagger their provision requirement over four quarters on the treasury losses, on accounts undergoing insolvency and towards gratuity payments.

The provisions or the capital set aside towards potential loan losses, surged by 60 percent to Rs 552.91 crore in the fourth quarter as against Rs 344.56 crore in March quarter of 2016-17.

He adds, "You will see better results in June...Next year, I am confident of getting four figures in the profit numbers."

Leap from a bigger bank

Narayanan, who joined the bank in September last year from a bigger lender Bank of India, is looking to increase its provision coverage ratio (PCR - to cover bad loans) to 65 percent (from 59 percent) in about six months time.

During the January to March period, net interest margin (NIM), one of the key financial ratios, rose to 3.14 percent, up from 2.77 percent a year ago.

Better asset quality

Asset wise, even as the bank’s gross non-performing assets (NPAs) worsened in absolute terms, as a percentage of total loans, it reduced to 6.34 percent at the end of March 2018 from 6.59 percent as on March end-2017.

Net NPAs were also trimmed to 4.32 percent of the net loans from 4.36 percent.

For FY18, recoveries surged to Rs 827 crore versus Rs 500 crore last year, with upgradation of bad loans to Rs 900 crore versus Rs 700 crore last year.

“I am confident, these numbers will be the best in the industry...Most recognition is done and resolutions along with recoveries going forward will help us to bring the gross NPA lower than 6 percent and to below four percent in the next quarter," the bank chief said.

Growth in quality loans

Narayanan is attempting to clean up the NPAs and grow good quality business at Vijaya Bank, driven by home loans, lease rental discounting and secured lending portfolio. On the troubled corporate side, which grew by 14 percent for the bank, he prefers to lend to government-backed projects.

"We plan to not focus on consumption loans and unsecured lending but more on good quality loans," Narayanan stated.