Bank of India Q2 net falls on higher provisioning

Bank of India Q2 net falls on higher provisioning

Mumbai: State-run Bank of India on Thursday posted a 58% fall in quarterly profit as higher slippages led to higher provisioning for bad loans.

Shares of the bank plunged 12.33% to Rs357.80 on the Bombay Stock Exchange. The BSE benchmark was down 1.42%.

Total provisioning for July-September rose to Rs8.83 billion, from Rs4.52 billion a year ago, due to slippages of Rs13 billion, mainly from restructured loans, chairman and managing director Alok Misra said at a media briefing.

“About 60% of the slippage was from restructured loans resulting in higher provisioning," he said adding total restructured loans till now were at Rs65 billion.

Net profit for July-September fell to Rs3.23 billion, down from Rs7.63 billion a year ago.

Gross non-performing assets rose to 2.61%, from 1.53% a year ago owing to bad loans.

The bank has asked for Rs20 billion of capital infusion from the federal government as its capital adequacy ratio was at 13.52%, he said.

The bank will also provide Rs4 billion of additional provision in the next four quarters to reach a provision coverage target of 70%, from 59% at present, Misra said.

The bank has also revised FY10 loan growth target to 18% from 20% earlier.

“Loan demand from paper, textile, ceramic and diamond exports have been hit in the last quarters, impacting credit growth," he said.

“We expect loan demand to pick up in the next two quarters," he said.

Analysts also found the results disappointing.

“Asset quality is a concern," Manish Shukla, analyst at India Infoline, said.

Pre-provisioning profit was also flat because of the low loan growth, he said.


The bank’s net interest margin for the July-September quarter was at 2.57%.

Misra said the bank expects net interest margin to improve in the next two quarters with re-pricing of deposits.

The cost of deposits have already fallen to 5.59% from 5.89% a year ago and is expected to fall further with re-pricing of deposits in the next two quarters, he said.

The bank, having 62% of its branches in rural and semi-urban areas, plans to open 150 branches in the current fiscal. The lender currently has a branch network of 3,100 in India.