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Analyst Meet / AGM - Analyst Meet

Proposes to improve ROA to 1% in next 3-4 years

Lakshmi Vilas Bank

10-May-2016, 05:09
Lakshmi Vilas Bank conducted an analyst meet on 05 May 2016 to discuss the financial results for the quarter March 2016 and prospects of the Bank. Parthasarathi Mukherjee, MD&CEO and Palaniappan Manickam, CFO of the bank addressed the meet:
Highlights:

Business of the bank increased 18% to Rs 45,200 crore, with deposits rising 16% and advances 18%. Bank targets SME and retail books growth at 25% to 30%, while the wholesale book is expected grow at slower pace of 10% in FY2017.
NIM has been almost stable at 2.78% in FY2016 compared with 2.72% in FY2015 and 2.87% in FY2014, driven by increase in the CASA ratio. Bank proposes to improve CASA ratio sharply upwards to 25% in 3-5 years, on a daily average basis and show substantially higher levels thereafter.
The bank has reduced base rate by 70 basis points in FY2016 leading to decline in the yield on advances from 12.8% in FY15 to 12.2% in FY2016. However, the reduction in the cost of deposits compensated for fall in yield on advances to marginally improve NIMs.
Cost of deposits has come down to 8.2%, while the bank has drawn plans to substantially reduce cost of deposits.
CD ratio has increased to 78% from 75% on account of tight control on the surplus funds and reduction in high cost deposits.
The savings deposits increased at 19% CAGR from Rs 1382 crore in FY12 to Rs 2779 crore in FY16. Similarly, the current deposits advanced 23% CAGR from Rs 722 crore in FY12 to Rs 1636 crore in FY16. In the deposit mix, retail term deposits are at 64% of total deposits, bulk deposits at 18%, savings bank deposits 11% and current account deposits 6%.
On advances front, services constitutes 35% of total advances, of which trade constitutes 16%, commercial real estate 6%, NBFC 5% and the others at 6%. In the industry, the top most is infrastructure accounting for 7% of which transport is 2%, energy 3%, others 2%. Further in the industry, textile is 4%, and metal and metal products 4%. Within the retail book, the auto loan is 1.24%, housing 7%, non-agri gold loans is 5.2%. Agriculture loan book has been maintained at stipulated minimum requirement of 18%.
Net NPA ratio has declined to 1.18% at end March 2016 from 1.85% at end March 2015. Similarly, GNPA ratio also has come down to 1.97% from 2.75%.
GNPA is mainly contributed by the industrial segment with metal and metal products constituting 16%, food processing 13%, mining 12%, chemical 7%, textiles 3%, paper and paper products 3% etc.
Fresh slippagages of advances stood at Rs 196 crore in FY2016, showing decline from Rs 256 crore in FY2015, Rs 668 crore in FY14 and Rs 400 crore in FY13. Reduction of NPAs stood at Rs 260 crore in FY2016, down from Rs 348 crore was in FY15 and Rs 582 crore in FY14. In FY14 and FY15, the bank had made a large amount of sales to ARC.
Segment wise, the GNPA in the wholesale advances has declined from 8.4% in March 2014 to 5.6% in March 2015 and to 3.9% in March 2016. Similarly, in retail also there has been continuous reduction in GNPA ratio from 1.6% to 0.9% and further down to 0.6%. SME also has exhibited reduction in GNPA ratio to 1.8% and agriculture is mere 0.5%.
The restructured assets book of the bank has declined from Rs 1133 crore (6.86% of advances) end March 2015 to Rs 899 crore (4.58% of advances) end March 2016.
Iron and steel has the largest share in restructured advance book at 24.47%, followed by infrastructure 15.48%, metal and minerals 8.79%, engineering 6.83% and food processing 5%.
The cost to income ratio has gone up from 53% in FY2015 to 57% in FY2016 due to higher employee cost on account of bipartite settlement. The bank proposes to reduce the cost to income ratio to 50% in FY2017.
The bank has maintained investments yield still above 8.02%, despite a very volatile interest rates structure.
The ARC sale stood at Rs 142 crore of NPA accounts and Rs 45 crore SMA -2 accounts in FY2016.
The Bank has fully taken care of assets to be classification under Asset Quality Review of the banking system by the RBI.
With regard to capital raising, bank sees maximum dilution up to 25% is possible. The bank would like to take the Tier-I capital closer to about 10% to 11%.
Over the next three to four years, the bank proposes to improve ROA to 1%.
The bank has the network of 460 branches, of which 60 branches have been added in FY2016. The ATMs count of the bank stood at 910 ATMs.