'No slowdown seen in retail growth'

Shailendra Bhandari, MD and CEO Centurion Bank of Punjab, expects the RBI to hike rates one to two times by the year-end. He does not expect a slowdown in retail or SME growth.

Speaking on the bank's Q1 earnings, Bhandari says that non-interest income is up 6 per cent (QoQ). He further says that the bank holds most MTMs in T-Bills and short-dated securities.

Excerpts from CNBC - TV18's exclusive interview with Shailendra Bhandari:

Is business on track for you?

Yes, I am happy that the momentum has remained very strong. This has been the ninth quarter for us of sequential growth. So that means not only profits, but also each quarter has been better than the last, so the momentum is good.

This quarter non-interest income actually grew quite a bit. Between the NII growth that you have seen and the non-interest side, which one has kicked in more strongly this quarter?

For the moment if you start with the topline and compare since March, this has been a tough quarter for the markets. But if you look at us, since March in this quarter, the banking system advances have grown 1% and deposits 2%. In our case, advances grew 14 per cent and deposits grew 10 per cent.

Again if you compare only with March, and remember March always is a great quarter, our NII was up by about 6 per cent.

Our non- interest income, I thought would be slightly lower than the March quarter because March is a great month for wealth management, but here too it has gone up 6-7 per cent QoQ. Hopefully, the next March quarter will be a bonanza compared to the previous March quarter, so very strong momentum.

For the next few quarters of this financial year do you expect the banking space to have a tighter situation and do you expect to maintain this double-digit growth in advances and deposits?

We have seen that uptill June 23, the banking system has not grown very much. The space, in which we are in have continued to grow. We are largely retail; about 70 per cent of our advances are retail. During the monsoon months people buy less cars, two wheelers, trucks and so on. But apart from this seasonal blip, we are not seeing a slowdown.

We are not seeing too much of a slowdown in SME, in our business space, in our segments we continue to see strong momentum.

What is it that you are factoring in terms of interest rates by the end of this year?

We are looking for probably 1-2 hikes by the Reserve Bank, not necessarily the one in July but almost certainly between July and October we see one hike in the repo and reverse repo rates coming and we could see another one either towards the end of the year or in January. We, however, belong to the school of thought that it might come close to the end of the cycle. We are not seeing interest rates going up too much after these 1-2 rate hikes.

What is your treasury book like and if you can give us a bit more clarity on the size, the marking that you have done? What is the average portfolio yield curve that you run on? Do you see yourself being set back this year at all by interest rate changes?

We have discussed on separate occasions that we run a totally de-risk treasury book, so we as a rule do not maintain securities more than the regulatory SLR requirements. That portion, which gets mark-to-market, we typically hold in treasury bills and short dated securities. The duration is something like 0.2, 0.3 so there is no mark-to-market risk.

On the held-to-maturity category, which is not mark-to-market, we do have longer dated bonds where we get higher yield and typically it is 70-80% of the book. If interest rates go up, the impact on our profits will be virtually zero.