Increase in bad loans and provisions pulled down Bank of India's net profit by 20 per cent in the quarter ended September 2011. The bank posted a net profit of Rs 491 crore in the second quarter against Rs 616 crore in the corresponding quarter last year.
Gross non-performing assets increased to Rs 6,548 crore from Rs 4,870 crore (as at September-end 2010) and provisions rose to Rs 1,060 crore (Rs 763 crore).
“We have now moved to 100 per cent system-based recognition of NPAs. As a result, provisions have increased by 39 per cent and this has impacted net profit. But going ahead we should start seeing downward movement in NPAs because there would be more recoveries,” said Mr Alok Misra, Chairman and Managing Director, BoI.
Going ahead the bank would focus on asset quality and credit monitoring, he added.
Credit growth muted
Credit growth was also muted as several corporates are putting on hold their investment proposals.
There was credit growth in agriculture, retail and small business segments.
“We will be getting into the busy season in the next two quarters. Therefore, there will be cyclical and seasonal growth in credit,” Mr Misra said.
For the full year, the bank is targeting a credit growth of 17-18 per cent and a deposit growth of 17 per cent.
The bank will not rollover high-cost deposits and will focus on customer acquisition in order to improve its share of low-cost current and savings account deposits in the total deposits. It is targeting a CASA share of 33 per cent this year, against 31.75 as at September-end 2011.
By the year end, Gross NPAs are likely to come down to 2.5 per cent, against 3.02.
The bank has got an approval from its board to raise Rs 1,000 crore through equity capital. It has approached the Government for permission and is hopeful of capital infusion through a preferential issue, Mr Misra said.
Shares of BoI closed at Rs 327.7, down 3.96 per cent on the BSE, on Tuesday.