Dear Shareholders Heartiest Greetings
It gives me immense pleasure to welcome all of you in the 19th Annual General Meetingof your Bank. Now that the financial results of your Bank for the year ended March 2015has been declared it is my privilege and honour to present the Annual Report for the yearended March 31 2015 of your bank.
As you are aware the economy is yet to come out from the slowdown phase completely andthe banking industry is still beset with challenges. On the domestic front banking sectoris subject to stringent regulatory and prudential obligations. Coupled with a tough globalenvironment Banks have to perform a tight rope act. However the new government with adecisive mandate is a huge ray of hope.
The global economy passed through a sluggish phase during most of 2014-15. Bothdeveloped and emerging economies were not immune to this phase. According to estimates bymajor think tanks including the International Monetary Fund global growth is still in lowgear and is set to slow down from 3% during 2014-15 to 2.8% during 2015-16. As and whenrecovery commences it will be led by Emerging Market Economies (EMEs). However recentlystructural bottlenecks in infrastructure and investment slowdown have led to decline ingrowth rates of many emerging market economies.
During 2014-15 the U.S economy was seen gradually recovering. There were improvementsin key indicators. For instance unemployment rate declined below 5.5% from previous highsof 7%. In response to recovery the Fed decided to taper its Quantitative Easing (QE)programme and is now contemplating the most opportune moment to reverse the rock bottominterest rates.
In Japan fiscal stimulus and monetary easing unleashed under the new policy package -Abenomics - had led to hopes of a rebound in activity. But the expected unwinding offiscal stimulus and reconstruction spending together with a consumption tax hike took itstoll on growth.
Realization of 2% inflation target is still elusive.
In China growth is projected to decelerate from above 7 per cent during 2014-15 to 6.9per cent in 2015-16.
In the Euro area several policy actions resulted in major risk reductions and alsostabilized financial is still constrained. The fiscal consolidation and structural reformsundertaken in Europe was the basis for slow recovery. The region is expected to graduallypull out of recession with growth expected to touch 0.3 percent in 2015 from 0.2 per centin 2014.
As far as Indian economy is concerned the Central Statistical Organization (CSO) hasshown growth to be 7.3% for 2014-15 compared to 6.9% for the previous year. The majorcontributors to growth were manufacturing and service sectors which registered growthrates of 7.1% and 10% respectively. Farm output however grew by a subdued 0.2%. Howeverwe remain constrained by stalled projects land acquisition issues low capacityutilization weak investment and high non-performing assets in the banking system.However major think tanks have estimated Indias growth rate to outpace that ofChina in the current financial year. Another positive is the reduction in current accountdeficit (CAD) to below 2 per cent. Inflation as seen from CPI and WPI data is also on ading path.
Outlook for FY 2015-16
The global economy is expected to decelerate slightly and growth is likely to fall to2.8% from 3% for FY 2015 due to slowdown in China. Indian economy is expected to showgrowth rate of around 7.5 per cent with pick-up in manufacturing and service sectorssubject to normal monsoons. The outlook for industrial activity is contingent upon achange in business sentiment and a necessary push for investments through speedy clearanceof stalled projects. Both retail and wholesale price index inflation has slowed down andRBI has projected retail inflation close to 6% by January 2016. Meanwhile Indicators suchas corporate performance and industrial outlook do not indicate significant increase inpricing power. Banking sector is also under stress since it is beset by asset qualitytroubles. Credit off take is also muted with the latest data showing y-o-y growth in bankcredit at 9.8%. For FY 2015-16 credit growth is expected to be around 12-13% for theindustry while growth in deposits is also expected to be in that range.
However now that a government with a decisive mandate is in place and certain boldinitiatives are underway economy should regain some lost momentum and banks should seeimprovement on the asset quality front.
With this background I now share with you the Banks performance for theFinancial year 2014-15.
Your Bank posted an overall Global business growth of 10.60% during FY 2014-15 to Rs943633 Crore from Rs 853202
Crore during FY 2013-14.
Your Banks Low Cost Deposits(CASA) posted an overall growth of 8.46% during FY 2014-15to Rs 114386 Crore from Rs 105467 Crore during FY 2013-14.
Your Bank Operating Profit and Net Profit stood at Rs 7488 and Rs 1709 Crore during FY2014-15.
Net Interest Income of the Bank for FY 2014-15 rose by 4.74% to Rs 11344 Crore duringFY2014-15 from Rs 10831 Crore during FY 2013-14.
Non-Interest Income during the year 2014-15 marginally declined by 1.38% and stood atRs 4233 crores.
Your Bank posted an overall Total Priority Sector growth of 9.76% during FY 2014-15 toRs 94572 Crore from Rs 86161 Crore during FY 2013-14.
Your Bank posted Total Agriculture Credit growth of 7.39% during FY 2014-15 to Rs43183 Crore from Rs 40211 Crore during FY 2013-14.
Your Bank posted an overall Retail growth of 11.20% during FY 2014-15 to Rs 34153Crore from Rs 29600 Crore during FY 2013-14.
Your Bank posted an overall MSME growth of 20.68% during FY 2014-15 to Rs 54406 Crorefrom Rs 45081 Crore during FY 2013-14.
Your Bank has successfully surpassed the Total MSME Y-o-Y growth target of 20%stipulated by Government of India.
The Earning per Share (EPS) of the Bank for FY 2014-15 stood at Rs 26.57.
The Book value per share improved from Rs 381.69 as on 31st March 2014 to Rs 398.02 ason 31st March 2015.
The Cost to Income Ratio rose during the year from 44.30 % in FY 2013-14 to 51.93% forFY 2014-15.
Your Banks Net Worth increased to Rs 26494 crore as on 31st March 2015 from Rs24543 crore as on 31st March 2014.
Capital Adequacy Ratio (CRAR) stood at 10.73% as on 31st March 2014 as per Basel IIIand at 11.42% as per Basel II.
The International Operations of the Bank showed robust performance with Y-o-Y growth of13.70% in Total Business and reached at Rs 256118 Crore.
Board of Directors of your Bank have declared final Dividend at the rate of Rs 5/- pershare (50%) for the year.
There is strain in asset quality and consequent profitability.
The Bank has drawn suitable strategy to address it.
Initiatives during FY 2014-2015
Your Bank undertook several initiatives to foster business growth and customerservices. The major highlights are:
246 new Branches and 400 e-Galleries was opened during 2014-15. adding 1.65 mn newcustomers taking the total customer base to 78.65 mn.
306 Rs Branches of Future providing specialised customer service areoperationalised 49 Retail Business Centers (RBCs) have helped grow much faster in Retailcredit Bank has launched chip based Debit & Credit cards
Your bank is also socially committed and has undertaken various initiatives in thisregard. Your Bank remains one of the front runners in the commitment and implementation ofFinancial Inclusion Initiatives.
The bank has been in the forefront in the implementation of Prime Ministers JanDhan Yojna and has mobilized amount worth Rs 443 Cr during 2014-15.Your Bank alsoconverted its representative office in Dubai to a branch during the current financialyear.
I wish to place on record the valuable contributions made by the directors of the Boardwho demitted office during the year viz. Shri R. Koteeswaran Shri K. K. Nair Shri P. M.Sirajuddin Shri Pramod Bhasin and Shri Umesh Kumar Khaitan. The Bank thanks theGovernment of India the
Reserve Bank of India the SEBI Other Regulatory authority and the Board from whom ithas been receiving excellent support and valuable guidance. I thank our BusinessAssociates customers and shareholders without whose faith and trust the Bank would nothave reached where it has reached today. These accomplishments would not have beenpossible but for the tireless efforts of our committed staff members. On behalf of theBank and on my personal behalf I would like to thank all the stakeholders and lookforward to their continued patronage guidance and support.
With warm regards
Managing Director & CEO.