Mumbai: Public sector lender Bank of India’s (BoI) fourth quarter (Q4) net profit rose 69.35%, from Rs447 crore to Rs757 crore, on higher total income. Total income for the quarter rose 32.8% to Rs4,154.86 crore.
For the full year, the bank’s net profit increased 70% to Rs2,009 crore. Its deposit portfolio for the year rose 25.13% to Rs1.5 trillion while advances rose 32.26% to Rs1.15 trillon, much higher than the banking industry’s 21.5% growth.
BoI’s stock rose 2.93% to end at Rs342.65 on the Bombay Stock?Exchange?on?Wednesday.
Chairman and managing director T.S. Narayanasami said the bank has provided $5 million (Rs20 crore today) in this quarter for mark-to-market losses on its investment in credit-linked notes.
Marking to market is an accounting practice of valuing investment portfolio at the prevailing market price. The bank does not have any exposure to credit derivatives, he added.
According to Narayanasami, the bank entered into 74 transactions with 34 corporate clients on derivatives and foreign exchange swap transactions and its customers suffered a mark-to-market loss of Rs125 crore. However, the bank has not made any provision for this as the losses are on the books of its clients.
“We don’t foresee any default from the corporations because they have been honouring their committments for many years,” Narayanasami added.
“Our clients are mostly big corporations and they have full knowledge of what they did,” the bank’s executive director K.R. Kamath added, referring to the mark-to-market losses arising out of derivatives transaction.
Narayanasami said the bank has no plans to hike its interest rate following the cash reserve ratio (CRR) hike by the Reserve Bank of India.
The net interest margin, or the spread between its cost of funds and interest earned, rose to 3.24% from 3.14% a year ago. However, Narayanasami warned that the banking industry might have to live with lower net interest margin level in 2008-09.
“You have to be equally bullish on non-interest income. This net interest margin level is not sustainable for long. We have to depend on non-interest income seriously from next year,” he said.