Bank of Bar­oda to clean up its bal­ance sheet in 4Q: PS Jayaku­mar

The Pak Banker - - COMPANIES/BOSS -

In­dia's Bank of Bar­oda, which de­cided to clean up its bal­ance sheet at one go in the third quar­ter re­sult­ing in a loss of Rs.3,342 crore for the Oct-De­cem­ber pe­riod, is now re­bal­anc­ing its port­fo­lio.

This will re­lease cap­i­tal, help­ing the bank re­port a profit in the fourth quar­ter.

PS Jayaku­mar, Man­ag­ing Di­rec­tor and Chief Ex­ec­u­tive Of­fi­cer of the se­cond largest len­der of the coun­try, said in an in­ter­view. He said we have to re­bal­ance the port­fo­lio and we have to move to bet­ter rated cor­po­rate en­ti­ties. What we have done is bring­ing back the re­la­tion man­agers for the large cor­po­rate bor­row­ers so that they can deal with one fixed per­son. We are also cen­tral­iz­ing the large cor­po­rate into a fewer num­ber of branches. Third, we are defin­ing a tar­get mar­ket and go­ing for sales so that we can tar­get the right kind of cus­tomers. Fourth, we are adding a fair num­ber of sec­tor spe­cial­ists so that an in­formed view is taken while do­ing busi­ness. And fifth, we are ex­pe­dit­ing the de­ci­sion-mak­ing process. At the end of the day we have to im­prove the re­turns of the cor­po­rate port­fo­lio, which is 50 per cent of the bal­ance sheet.

About re­bal­anc­ing the port­fo­lio, he said the other thing which we are clearly do­ing is ex­it­ing a lot of port­fo­lios. For ex­am­ple, we have par­tic­i­pated on an over­seas loan syn­di­ca­tion for some clients.

He said we know the cus­tomer but they don't know us. Some­times, you want to shed those as­sets and lighten the risk weight. Be­cause, know­ing the cus­tomer port­fo­lio is im­por­tant for us. Also, if the rat­ing is bet­ter, for the same amount of cap­i­tal, you can take more ex­po­sure. There are also many sec­tors like au­to­mo­biles, phar­ma­ceu­ti­cals which we are un­der rep­re­sented. We want to in­crease our pres­ence in th­ese sec­tors. There is an op­por­tu­nity to be­come more ef­fi­cient. Those ef­fi­cien­cies trans­late into re­al­lo­ca­tion of port­fo­lio. We are mov­ing away from cold re­la­tion­ship as­sets to warm re­la­tion­ship as­sets. That process gives us some amount of lee­way on cap­i­tal.

What­ever we thought was a non-per­form­ing as­set it has been iden­ti­fied. Now, there are cer­tain sce­nar­ios that could emerge. It is dif­fi­cult to lay out one sin­gle se­quence of events that could hap­pen. So, let us say we have stress tested our busi­ness which we have done. The risks for us are largely around the re­struc­tured port­fo­lio. That is the cus­tomers who are pay­ing, but pay­ments are get­ting de­layed. So far as the cor­po­rate port­fo­lios are con­cerned, which the RBI fleshed out the em­bed­ded risks, there are not any fur­ther em­bed­ded risks. The cor­po­rate port­fo­lio is rea­son­ably sta­ble. We can think of some ac­counts be­ing up­graded. The upgra­da­tion to a large ex­tent will de­pend on how the econ­omy per­forms. But there are client-spe­cific ac­tiv­i­ties, like a pro­ject which was stalled for some rea­sons, has now got the clear­ances or a client is sell­ing as­sets to lower debt.

About bad loan port­fo­lio, he said so, in a Rs.40,000 crore port­fo­lio (to­tal gross NPA), we have a sce­nario where we can re­cover Rs.5,000 crore. The bal­ance of the bad loans could slip to doubt­ful as­sets. But what you gain from re­cov­ery and what you make pro­vi­sion for doubt­ful as­sets, the in­cre­men­tal amount may not be that large, may be about Rs.1,000 crore.

The se­cond risk we have is that we have a re­struc­tured port­fo­lio of Rs.17,000 crore, out of which Rs.3,300 crore are from dis­coms, and no fur­ther de­te­ri­o­ra­tion is pos­si­ble since states guar­an­tees are there. Out of the re­main­ing amount of re­struc­tured port­fo­lio, we have gone ac­count-by-ac­count, and ex­pect health of bor­row­ers' worth Rs.6,000 crore to im­prove. The re­main­ing Rs.8,000 crore is po­ten­tially at risk, for which we have al­ready pro­vided 5 per cent. Now, we are left with ac­counts which are in the se­cond level of spe­cial men­tion ac­counts (SMA-2), that is, over­due for more than 60 days but less than 90 days.

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