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Business News/ Companies / Bank of India posts first quarterly loss since 2001
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Bank of India posts first quarterly loss since 2001

Bank posts net loss of Rs56.14 crore in March quarter as income falls while provisions and expenses grow

The lender’s net NPA ratio, too, rose to 3.36% as on 31 March, up from 2.5% as on 31 December. Photo: MintPremium
The lender’s net NPA ratio, too, rose to 3.36% as on 31 March, up from 2.5% as on 31 December. Photo: Mint

Mumbai: Public sector lender Bank of India on Thursday reported a quarterly net loss for the first time since the three months ended March 2001, as the bank’s net interest income registered a fall even as provisions and expenses ballooned.

The bank posted a net loss of 56.14 crore in the March quarter, compared with net profit of 557.51 crore a year ago. In the March 2001 quarter, the bank posted a net loss of 30.24 crore.

The median estimate in a Bloomberg poll of 25 analysts was a net profit of 485.2 crore for the quarter.

“The stressed loan environment is an area of continuing concern. Additionally, economic slowdown, low credit growth and slowing private investment are also affecting profitability," said chairman and managing director V.R. Iyer.

Gross non-performing assets (NPAs) made up 5.39% of the loan book in the March quarter, as against 4.07% in the October-December period. The lender’s net NPA ratio, too, rose to 3.36% as on 31 March, up from 2.5% as on 31 December.

Iyer said loans worth 8,126 crore slipped into the NPA category in the fourth quarter, of which loans worth 2,098 crore were on account of restructured assets failing. “Nearly 45% of the freshly added NPAs were from the infrastructure sector, while 41% were those classified as bad loans on technical grounds, like payments coming in on the 93rd or 94th day. We expect that about 3,500 crore worth of loans will be upgraded to the standard category in the first quarter of this financial year," Iyer said.

Iyer added that the bank had taken a conscious step to classify accounts as bad even on technical grounds as she “did not want to leave any problems for her successor".

“The idea is that we need to put some pressure on our borrowers so that they can get their house in order and repay loans in a timely manner," she said. Iyer will retire as the bank’s chairman on Saturday.

The state-owned lender made cash recoveries worth 2,688 crore in the financial year ended 31 March 2015, while loans worth 2,381 crore were upgraded to standard category. The bank had written off 801 crore worth of loans during the year. Recovery from written-off accounts stood at 121 crore during the quarter, 28% lower than the 168 crore recovered in the year-ago period.

During the January-March quarter, Bank of India restructured 2,743 crore worth of loans. Iyer confirmed that the bank did not have a pipeline of assets to be restructured under the corporate debt restructuring (CDR) route.

Provisions and contingencies rose 45.77% year-on-year to 2,255.49 crore. Of this, provisions for bad and doubtful assets during the fourth quarter stood at 2,240 crore, as compared to 1,135 crore in the same quarter a year ago.

“The worst is over in terms of bad loans and stressed assets for the bank and we should be seeing a revival now," Iyer said.

The bank’s net interest income, or the difference between interest earned on loans and that paid on deposits, fell 6.6% to 2,846.29 crore, against 3,047.31 crore in the year-ago quarter.

Other income grew 22.79% to 1,122.15 crore from 913.88 crore in the year-ago quarter. Net interest margin during the January-March quarter dropped to 2.24%, down from the 2.49% reported on 31 December.

Bank of India’s global advances rose 9.44% year-on-year to 4,11,726 crore, while deposits stood at 5,31,907 crore, up 11.52% from a year ago.

“We have taken a very cautious approach in terms of growing our credit portfolio. We will not be taking any large exposure to any infrastructure assets. We have also put construction contractors on our negative list, where we will avoid lending," Iyer said.

In the financial year ending 31 March 2016, the bank aims at 10-11% credit growth and 20% growth in fee income. The lender wants to cap its gross NPA ratio at 4.5% and wants to record a domestic net interest margin of 2.6%.

Bank of India is also aiming to add 250 new branches and 1,000 new automated teller machines (ATMs) as part of its expansion drive this year.

“It is difficult to believe when a bank of this size and such high exposure to infrastructure loans says that it has no pipeline for CDR. The bank seems to be too optimistic about its return to profitability even as macroeconomic factors have not improved much," said an analyst with an international brokerage on condition of anonymity, as he is not allowed to talk to the media.

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Published: 28 May 2015, 04:06 PM IST
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