Stressed asset book has fallen to Rs7,000 crore: IDFC Bank’s Lall
Rajiv Lall, managing director and chief executive of IDFC Bank, said a valuation mismatch led to the merger with Shriram collapsing.
IDFC will, however, continue to explore various alternatives, he said. Lall denied the lender had honed in on Mannapuram Finance with regards to inorganic growth but said it routinely look at options and are speaking to a lot of people. On stressed assets, he said total advances as of September 2017 stood at Rs69,000 crore of which Rs29,000 crore are legacy assets that the bank does not desire to grow. Out of this Rs29,000 crore which are largely infra assets, Rs7,000 crore are stressed, he said.
Currently, the bank has retail, non-infra and good infra wholesale book of about Rs40,000 crore. Credit growth in the non-legacy book was close to 40%, while legacy and stressed book saw a decline of 14% year on year as of September quarter, said Lall. The bank plans to bring the whole legacy exposure under 25% of the total book by FY20, he said.
On net interest margin (NIM), he said the bank would like to preserve them at present levels but it also largely depends on interest rates. He also specified that in spite of keeping their savings rate at around 4%, the bank had managed to growth their CASA (current account, savings account) book. Edited excerpts:
What went wrong with Idfc-shriram deal? Everything I had to say about the transaction is very much in the public domain. But, in a nutshell, it is a valuation mismatch and that is how the merger did not happen or the principles could not come to an agreement.
But may there be a meeting of minds in the future when you will not be constrained by 90-day exclusivity or anything?
Who knows? You are not shutting it out, are you?
I am not shutting anything out inorganic. We are on record saying that we will continue to explore various alternatives for inorganic growth and in that context, what is going to happen is going to happen.
Are you therefore looking at any other opportunity since you say that you are on record that you will look at inorganic opportunities?
We routinely look at other things and so we continue to do that.
We are told that you are speaking with Manappuram.
I do not think that is accurate. Actually let me rephrase that. We are speaking to a lot of people, but it is not the case that we have honed in on Manappuram.
Can you tell me a little bit about what is your exposure to infrastructure and how much of that is stressed?
We have been very transparent about this for the last two-three years now. Our total stress book was a couple of years ago, about Rs9,000 crore. This has now come down to Rs7,000 crore odd. You said Rs7,000 crore is the stressed asset book. What is the total exposure to infrastructure? Total exposure to infrastructure, our legacy book, our total advances as of September, end of last quarter, are about Rs69,000 crore. Of this, Rs29,000 crore are what you might call legacy and those assets that we do not want to grow. This is largely infra- structure. Of the Rs29,000 crore, Rs7,000 crore are stressed. So that means, we now have a retail and non-infra largely and good infra wholesale book that is about Rs40,000 crore.
So let me give you a sense. The growth in this non-legacy book that we are focused on growing, the credit growth in that year-on-year, Septemberon-september was close to 40%. And in the legacy and stress book, there was a degrowth of 147%.
Did you get any stress in the non-rs29,000 crore?
No. Barring there was one case, but we provided for it and it cleaned out.
Therefore, you may end in the next 12-18 months, say FY19, what would you see as the split? Now it is Rs30,000 crore, Rs40,000 crore.
By FY20, our stated goal is to bring the whole legacy exposure to well under 25% of the book. So it will be on a much larger book. We expect that three quarters will be in retail of different kinds and in largely non-infra wholesale. Your net interest margin (NIM) was 2.9%. Yes, it had grown by about 50 basis points. How much can it grow to?
That is difficult to say. Depends on what happens to interest rates and such and it depends on the pace at which we are able to continue retailising our balance sheet. But let us put it this way. All things considered, we would like to preserve our NIM at the present level because there will be competing pressures that will be applying to our NIM.
IDFC Bank MD and CEO Rajiv Lall.