Bank of India posts Rs3,587 crore loss in Q4 as provisions double | Mint
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Business News/ Companies / Company-results/  Bank of India posts Rs3,587 crore loss in Q4 as provisions double

Bank of India posts Rs3,587 crore loss in Q4 as provisions double

State-owned Bank of India's losses widen, missing analysts' estimates, as the lender doubled provisions amid a surge in bad loans

Gross NPA ratio for the fourth quarter climbed to 13.07% from 9.18% in the third quarter. Photo: Pradeep Gaur/MintPremium
Gross NPA ratio for the fourth quarter climbed to 13.07% from 9.18% in the third quarter. Photo: Pradeep Gaur/Mint

Mumbai: State-owned Bank of India’s net loss more than doubled in the three months ended 31 March on a sequential basis as bad-loan provisions surged.

Net loss was 3,587 crore in the quarter, up from a net loss of 1,505 crore in the three months ended December. In the year-ago period, the bank had reported a loss of 56 crore.

A Bloomberg survey of 16 analysts had expected the bank to post a fourth-quarter loss of 1,145.60 crore.

Several state-run lenders have reported large losses in the March quarter after heeding a Reserve Bank of India (RBI) directive to count visibly stressed assets as bad loans and make provisions to cover the risk of default.

The RBI’s directive followed an asset quality review (AQR) of banks.

Punjab National Bank reported a record 5,367 crore net loss for the quarter ended March.

Bank of India’s provisions in the quarter rose to 5,470 crore from 2,255 crore in the year earlier and from 3,603 crore in the December quarter.

Bank of India’s gross non-performing asset (NPA) ratio for the January-March period climbed to 13.07% from 9.18% in the third quarter. Gross NPAs as an absolute number during the quarter rose 36% to 49,879.13 crore from 36,519.14 crore in the October-December period. The net NPA ratio rose to 7.79% as of 31 March, from 5.25% three months ago.

“Of our total gross NPAs, about 10,052 crore were owing to the AQR exercise that was spread over two quarters. We have an aggressive recovery and upgradation target of 17,500 crore for the new financial year," said Melwyn Rego, managing director and chief executive officer, Bank of India.

The bank will be using all recovery strategies available, Rego said.

The lender has set up an internal recovery unit, which will oversee one-time settlements and seizure of properties to recover bad loans.

“We will not be pursuing the ARC (asset reconstruction company) route much since it doesn’t fit well with our broader recovery plan. We might consider selling to an ARC if they are willing to pay 100% of the net asset value. Unless we are in a situation where an entire consortium is selling, ARCs are not something we will consider seriously," Rego added.

Despite mounting provisions, the bank’s provision coverage ratio remained low at 51.14%.

Capital adequacy, a measure of bank financial strength expressed as a ratio of capital to risk-weighted assets, under the Basel III international standards rose to 12.01% in the quarter ended 31 March from 10.73% a year ago. The ratio during the third quarter was 11.28%.

Of the total capital adequacy, Tier I capital was reported at 9.03%, the bank said in a statement.

The ratio got a boost as the bank added revaluation reserves to its Common Equity Tier-I capital following relaxation of rules by the RBI. The bank said that it had revalued part of its fixed assets and added 2,901 crore to the revaluation reserves.

“We have a capital requirement of 8,000-8,500 crore for FY17; we will consider a mix of equity and debt to raise this amount. We have also identified 1,000 crore of non-core assets to monetize during this year," Rego said.

Bank of India shares fell 0.25% to 80.35 on the BSE on a day the BSE’s benchmark Sensex rose 0.3% to 25,305.47 points.

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Published: 24 May 2016, 05:53 PM IST
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