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Very little was going its way for Ujjivan Small Finance Bank when Ittira Davis took charge as its MD & CEO on January 13, 2022. He was quick to roll out a 100-day plan to get the bank back in the green. With this milestone achieved in the recently concluded March FY22 quarter, Davis says he’s a contented man. In an exclusive interview with Hamsini Karthik, he spells out the way forward for the bank. Edited excerpts:
FY22 started on a totally low note because of asset quality issues and the management and board exits but has ended with the bank coming back to green. How satisfying is this?
The return to profitability in this quarter completes the turnaround that we envisaged under the 100-day plans, which were rolled out in September 2021. The measures have yielded the desired outcome, and that has been gratifying. To address the challenges of stress build-up owing to Covid, a concerted strategy involved strengthening our collections team, hiring collection agencies, keeping a good mix of on-roll/ off-roll employees and having a focused approach towards different buckets and stress pools. This has resulted in a significant improvement in asset quality, with collections touching 100% in Mar’22. We have seen a progressive decline in GNPA/ NNPA in the last two quarters. NNPA has reduced from 3.3% in Q2 FY22 to 1.7% in Q3 FY22 and now to 0.6% in Q4 FY22.
It is heartening that we could maintain the credit cost guidance of ₹1,100–1,200 crore given in August 2021 without utilising the ₹250 crore floating provision.
Business volumes were also subdued in June FY22, as collections were impacted in the second wave of the pandemic. To address this, there was a sustained focus on regaining volumes, and we saw the highest ever disbursement in Q4 at ₹4,870 crores.
Deposits grew by 39% yearly and in Q4 to ₹18,287 crore. This is following 34% growth in the December quarter. Retail deposits contributed to 54 per cent of total deposits and CASA at 27 per cent.
We’ve hired some experienced leaders across different bank functions and inducted a new member to our board - B.A. Prabhakar, ex-CMD of Andhra Bank.
Is the worst of management exits behind the bank?
Q4’s performance is the outcome of experienced and senior banking professionals coming on board Ujjivan SFB, over the past two quarters. We’ve filled some critical positions such as CFO, head of digital banking, chief information officer and head of the audit since November 2021. We’ve also promoted our internal talent, continuing with our tradition of filling up some of the critical roles. All senior management positions reporting to the CEO have been filled.
On the business side, what should investors expect in terms of quality and quantity of growth? What would be the focus segment from a product’s perspective for the bank?
With a highly experienced team in place, we would be looking at qualitative, granular and profitable growth. We intend to build on the momentum from H2FY22. Led by better credit growth, higher margins and lower provisions, we will continue to build on the bank’s return to profitability in FY23. One of the objectives would be to further reduce our cost-to-income ratio. We will aim to diversify our asset book by increasing the share of affordable housing loans and micro and small enterprise loans, while continuing to grow our core micro-banking portfolio.
What’s the guidance on asset quality?
We implemented a concerted strategy to reduce the asset quality pressures, and we see this yielding good results. Going forward, gross and net NPAs should reduce further. Slippages have also come under control, and providing tailwinds on the provisioning side. We see FY23 as a year of normalisation in terms of slippages, and hence credit costs should be under control sub-1% mark.
What is the progress in terms of collapsing the holding company structure?
The board has approved a QIP of up to ₹600 crore as SEBI mandates that minimum public shareholding should be 25% within three years of launching the IPO. Meeting this criterion is a prerequisite to the reverse merger post, which we can go back to the regulator (for the approval), then move to NCLT and seek shareholder approval for the reverse merger. We cannot comment on the timeline for the reverse merger or collapse of the holdco structure, since it depends on how quickly the regulator responds.
With five years of operations behind, is the bank at an opportune stage to explore conversion to a universal bank?
Again, we cannot comment on the timeline. Once the reverse merger is completed, we will evaluate this. We intend to transform into a universal bank. However, irrespective of whether we are a universal bank or a small finance bank, we do not see foresee any change in our strategy. We will continue to drive purpose-led inclusive growth. We will drive the objective of financial and digital inclusion by offering a comprehensive suite of banking products, building a stable and granular deposit base, focusing on digital banking and analytics and diversifying revenue streams. Conversion to a universal bank will not change the focus of our business.
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