LVB posts more than three-fold jump in profit

Expressing satisfaction over more than three-fold jump in the net profit of Lakshmi Vilas Bank during 2010-11, its Chief Executive and Managing Director, Mr P.R. Somasundaram, said: “this could be a record of sorts mirroring the bank's growth path. There is more scope for improvement though”.

The bank's net profit crossed the Rs 100-crore mark to reach Rs 101.14 crore compared with Rs 30.67 crore for the fiscal ended March 2010.

Asked if it had been a challenging year for him since taking over the reins of LVB, Mr Somasundaram told

Business Line , “there has been a cultural change on both sides. While you can't say if this has been the right decision, I foresaw a need for initiating the change and the first outcome of this effort is our results. We have managed a consistent and continued growth quarter-on-quarter.”

Besides initiating some cultural change, Mr Somasundaram is also keen to usher in some structural change in the organisation. “The bigger change would be in getting our people field-oriented, understanding our products and being able to market these aggressively. We intend bringing in lots of people at the middle management level. This year, we will focus on people pricing, like how to incentivise people, productivity-linked bonus and so on. Branches are important for us,” he added.

The total deposit of the bank increased by 23 per cent to Rs 11,150 crore at the end of the 2010-11 fiscal against Rs 9,075 crore the previous year; advances grew 29 per cent to Rs 8,188 crore (Rs 6,350 crore).

“We have set a policy to focus on NPAs by ensuring recovery and focusing on legacy accounts that impacted our growth. We sold two assets during the third quarter of 2010-11 and some more during the last quarter, specifically targeting the written off assets. In the process, we were able to recover Rs 11 crore. We have managed to bring down the gross NPA from 5.12 per cent to 1.93 per cent. The net NPA has fallen to less than one per cent from 4.11 per cent in 2009-10,” he said.

The capital adequacy ratio has fallen from over 14 per cent to 13.19 per cent under Basel II and 12.09 per cent under Basel I.

To a query on strengthening the CAR, he said that capital raising is definitely on the radar. “We will look at both options – subordinated capital and raising tier II capital.”

The bank is in the process of appointing a merchant banker. “Pricing and size would follow. We plan to go to the market in the next one or two quarters,” Mr Somasundaram said.

The Board, meanwhile, has recommended a 25 per cent dividend (Rs 2.50/share) for the 2011 fiscal against Rs 0.60/share (6 per cent) the earlier year.