Indian Overseas Bank has posted a 46 per cent drop in net profit at Rs 126 crore for the first quarter ended June 30, 2013, against Rs 233 crore in the first quarter of 2012-13. “This is mainly due to a 50 per cent spike in provisions compared with last year,” said M. Narendra, Chairman and Managing Director of the bank.
According to him, there was an additional provision of Rs 49 crore towards restructured accounts, and close to Rs 400-crore additional provision towards non-performing assets made during the quarter. This has taken the total provision for the period to Rs 929 crore (from Rs 613 crore in the comparable previous year quarter).
Drop in interest income
There was also a drop in net interest income at Rs 1,316 crore (Rs 1,328 crore). However, this was more than made up by increased non-interest income. Including profit from sale of investments, non-interest income of the bank, for the quarter under consideration, stood at Rs 785 crore (Rs 377 crore).
During the quarter, the bank consciously brought down high-cost bulk deposits to 11.2 per cent during the quarter from 15.50 per cent in the previous quarter. It reported an overall growth of 6 per cent in deposits to Rs 1.96 lakh crore (Rs 1.84 lakh crore. Advances too grew by over 12 per cent to Rs 1.66 lakh crore (Rs 1.48 lakh crore).
Gross NPA went up to 4.45 per cent (Rs 7,432 crore) as on June 30, 2013, from 2.97 per cent (Rs 4,410 crore) in 2012. The bank’s restructured loan portfolio stood at Rs 18,356 (Rs 18,049). The addition of Rs 307 crore came from 17 accounts, of which five were CDR accounts, with the steel and paper industries being the major contributors to this, he said. Provision coverage ratio was at 58.69 per cent at the end of the quarter.
Cash recovery
Cash recovery during the quarter was at Rs 198 crore against Rs 106 crore in the year-ago period. In the following quarters, the bank will focus on recovery and increasing the ratio of current account and savings account.
If the bank’s business grows by 14-16 per cent, it may require Rs 2,100 crore of additional capital to meet adequacy norms.