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.

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