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Informist, Monday, Jul 22, 2024

MUMBAI – Indian Overseas Bank's net profit for the June quarter rose 26.5% on year to 6.33 bln rupees due to a sharp fall in provisions for non-performing assets and largely unchanged operating expenses. However, sequentially, the bank's bottom line was down 21.7%.

The bank's operating expenses were up 1% on year at 17.98 bln rupees for the quarter. In Apr-Jun, provisions (other than tax) and contingencies rose almost 12% on year to 9.38 bln rupees. Of that, provisions for NPAs were down a whopping 80% on year at 1.64 bln rupees. The provision coverage ratio was at 97% as of Jun 30.

The overall provisions rose primarily because of an increase in the standard provision made by the bank. "So, what we have done is that we have provided around 7.5 bln rupees as standard provision, just to give strength in the balance sheet," Ajay Kumar Srivastava, managing director and chief executive officer, Indian Overseas Bank, said in a post-earnings conference call.

The total income of the state-owned bank rose 21.5% in Apr-Jun to 75.68 bln rupees. Of this, interest earned was 65.35 bln rupees, up 20.5% on year. Other income rose 28.6% on year to 10.33 bln rupees.

For the lender, advances rose over 20% on year to 2.30 trln rupees, but total deposits rose only 13% on an annualised basis to 2.99 trln rupees. Low-cost current account savings account deposits saw a rise of nearly 8% on year to 1.26 trln rupees. As of Jun 30, the bank's current account savings account ratio was 42.17%, down 197 basis points compared to the corresponding period last year.

Of the total domestic advances, loans to the retail, agriculture, and micro, small, and medium enterprises sectors rose 138 bps to 72.7% for the June quarter. By the end of this financial year, the bank plans to bring advances to these sectors down to 65%, Srivastava said.

To support its advances, the state-owned bank is likely to open 35 new branches in Jul-Sep. It also aims to open five more branches exclusively for start-ups across the country this financial year.

The bank's cost of deposits rose to 4.95% in the reporting quarter from 4.88% a quarter ago. Meanwhile, the cost of funds fell to 5.03% from 5.09%.

The credit-to-deposit ratio for the bank was 77.04% as of Jun 30, marginally higher than 76.61% a quarter ago. A year ago, this ratio was 72.34%. The lender also saw some pressure on its net interest margin, which fell 15 basis points on year to 3.06%. The net interest income rose only 5.1% on year to 24.41 bln rupees. The bank is expected to maintain the net interest margin at 3.10% in the current financial year. 

The bank reported improvement in its asset quality. The gross non-performing asset ratio improved to 2.89% as of Jun 30, substantially lower than 7.13% a year ago, and slightly below 3.10% a quarter ago. The net non-performing asset ratio improved to 0.51% from 1.44% a year ago and 0.57% as of Mar 31.

The bank reported recovery of 5.82 bln rupees of bad loans, well short of its target of 9 bln rupees for the reporting quarter. But Srivastava was confident of achieving the target of recovering 55 bln rupees worth of bad loans in 2024-25 (Apr-Mar).  End

Reported by Sourabh Kumar and Nishat Anjum

Edited by Avishek Dutta and Rajeev Pai

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