Within the retail segment we will grow our gold loan portfolio. We will also lend to the right kind of corporate if it suits our pricing matrix.
Mr P.G. Jayakumar, MD & CEO in-charge, Dhanlaxmi Bank, is in the hot seat. He has been tasked with the responsibility of turning around the fortunes of the old generation private sector bank. Elevated to numero uno position in February, ‘Jayan Sir', as he is called in the bank, has hit the ground running.
All his energies are focussed on cost cutting — rightsizing, cutting salaries, vacating unwanted space in the corporate office and branches to save on rent, getting the branches to do more business, shifting the focus from wholesale banking to retail and SME, and reverting to the branch-centric model of banking from the silo structure.
Mr Jayakumar, who has risen from the ranks over a career spanning three decades, knows the bank like the back of his hand. He says the bank will return to profitability next year. In an interaction with Business Line, the new honcho discusses his gameplan to nurse the bank back to health.
Excerpts from the interview:
Why did the bank get into trouble?
The bank's financial performance deteriorated in the last three years.
From a profit of Rs 57.45 crore on a balance-sheet size of Rs 5,000 crore in FY2009 we slipped into a loss of Rs 37 crore on a balance-sheet size of Rs 21,000 in the October-December 2011 period.
Things came to such as pass as investments were gradually stepped up by the erstwhile top management in the October 2008-December 2011 period for creating infrastructure — expanding branch network as well as establishing a huge corporate office in Mumbai, re-branding, and hiring talent at salaries not commensurate with business growth. This strained our bottomline.
What remedial measures are you taking?
We are cutting down wasteful expenditure. So, salary reduction (up to 40 per cent for those who joined the bank on a cost-to-company basis); right-sizing/ cutting excess flab (in the last three months the staff strength has come down from 4,200 to 3,700).
Ideally, about 2,500-2,800 people are required to run the 280 branches. Further, we are surrendering excess space taken on lease in major metros and cities to save on rent.
Operational expenses on outsourced activities, such as ATMs and other areas too are being reviewed.
Are you re-balancing your loan portfolio?
We will give more thrust to retail and SME loan growth. These are high-yielding, small-ticket loans and the risks get diversified. Within the retail segment we will grow our gold loan portfolio from Rs 750 crore in FY2012 to Rs 2,500 crore in FY2013. In the case of corporate loans, we will not renew low-yielding advances. However, we will not let go an opportunity to lend to the right kind of corporate if it suits our pricing matrix.
What do you have to say to reports that Dhanlaxmi Bank is up for sale?
I vehemently deny this. This is just market speculation. We will continue as a standalone bank.