Going forward, IOB will be posting very good results: MD & CEO Sengupta

State-run Indian Overseas Bank (IOB) has posted a 33 per cent rise in second quarter net profit, with signs of further improvement after coming out of the Reserve Bank of India’s (RBI’s) prompt corrective action (PCA) on September 29, 2021. Partha Pratim Sengupta, managing director (MD) and chief executive officer (CEO) of the Chennai-based lender talks to Shine Jacob about growth roadmap, plans to improve asset quality and impact of the global financial crisis on India.

Your profit was up by 33 per cent in Q2. What were the major drivers of your growth?

First of all, let us see the journey of IOB over the last two-and-a-half years. We started first posting profit after 18 quarters of losses in March 2020. From then on, we have been continuously making a good year-on-year (YoY) growth. It has been in the range of 20-30 per cent in almost every quarter. This quarter also, the profit has mainly come from the growth in interest income. There has been good growth in the credit portfolio. On the deposit front, there has been an increase in the cost of deposit. Overall, NIM (net interest margin) has increased and this was always a concern.

Our NIM was around 2.5 per cent in the past and it has increased to around 2.79 per cent. I think this is one of the major factors that contributed to the growth. It has also helped in a good recovery in the return of assets. This helped us in getting good numbers. We have a target that every quarter we have to recover around Rs 1,000 crore — both NPA (non-performing assets) and technical write off. This quarter also, we have achieved that. Almost Rs 350 crore of the recovery, out of this Rs 1,000 crore, has been directly towards profit and loss accounts. These are the main factors that helped our net profit.

You came out of PCA in September 2021. How do you see the bank’s progress since then?

It has been quite a tough journey because for six years we had been in PCA. Last few quarters, RBI also watched us very carefully after they took us out of PCA. We have been doing progressively well after September 2021. We have come out with four quarterly balance sheets. There has been progress on all fronts, whether it is recovery of NPAs or growth in advance. When we went into PCA, our major share of advances was in the corporate sector.

Now, we are making almost a secular growth. If you look at our advance portfolio, in retail, agriculture, MSME (micro, small and medium enterprises) and corporate, we are not tilted towards any sector. The journey has been quite fruitful and, going forward, IOB will be posting very good results.

The bank’s gross advances stood at Rs 1.55 trillion as of March 2022. Where do you see it, going ahead?

When we did our budget for the current year, in our credit target that we made, we have almost achieved it now. Advances portfolio as on March 2022 was Rs 1.55 trillion crore for that year. We had set a target of Rs 18,000 crore growth out of which almost Rs 17,000 crore has been achieved.

As the trend continues, we can see that good investments are happening in infrastructure. We are confident that this trend will continue. We will be looking at another Rs 7,000-8,000 crore growth this year. We have already made a long-term strategy and are targeting to bring all our ratios at par with the industry. Business growth is around Rs 4.34 trillion of deposits and advances. We hope to reach around Rs 5 trillion by the first quarter of 2024-25.

What is the status of your capital-raising plans for the year?

We already have a plan of raising around Rs 1,000 crore through qualified institutional placements (QIP) only. We have started talking to investors and are waiting for a good market scenario. We want to come up with another good quarterly result that can create more confidence in investors. Maybe, by the December quarter, we aim to give a good balance sheet and confidence to our investors.

How do you plan to improve gross NPA?

We started our journey at a point when our gross NPA (GNPA) was more than 25 per cent (2018-19). From there, we are today at 8.53 per cent. A year ago, our GNPA was 10.21 per cent and it was 9.03 per cent as of June. Our target is to bring it down to 7.5 to 8 per cent. Definitely, our efforts have yielded results. This quarter, if you look at my figures, the net NPA percentage (2.56 per cent) has gone up a little, sequentially. I think we will be back to putting our net NPA number below 2.5 per cent within the next two quarters.

In terms of domestic advances, the share of retail, agriculture, MSME (RAM) is around 73 per cent. Is it like too much focus on one segment?

Today, my portfolio is not focussed on any one sector. The distribution is almost secular. That percentage we want to continue and maintain. Previously, when we went into PCA, our corporate book was 50-55 per cent. That was when the economy was not doing well and it had a bad effect on the bank’s balance sheet. We don’t want to commit that mistake again. We want to grow or distribute growth in all these sectors. RAM will continue to have a share of 70-75 per cent of the total portfolio.

How do you see the impact of the war and the global financial situation on India?

Two three things are a matter of concern, like the Russia-Ukraine war. Inflationary trend happening in the global economy has definitely impacted our country. RBI has also openly said that it is now withdrawing the accommodative stance, so the main focus is to contain inflation. That will see some interest rates increasing in the coming one or two MPCs. We should be prepared for that. We need to see what is the effect of the prolonged Russia-Ukraine war on the Western economies.