Higher provisioning drags Oriental Bank Q3 net 13.2%

Oriental Bank of Commerce (OBC) has reported a 13.24 per cent decline in net profits for the quarter ended Deecmber 31, 2011, at Rs 354.22 crore (Rs 408.25 crore). The bottom-line declined despite a 37.61 per cent increase in total income for the quarter under review at Rs 4,491.76 crore (Rs 3,264.17 crore).

The bottom-line performance was hit largely by higher provisioning towards restructured advances and diminution in value of investments in government securities, Mr Nagesh Pydah, Chairman and Managing Director of OBC said after a board meeting here on Monday.

For the third quarter, the bank had to provide as much as Rs 90.30 crore for its investment book (mainly G-secs). The marked-to-market provisioning was negligible in the same period the previous year. The total provision for restructured advances stood at Rs 186 crore (Rs 14 crore). Overall provision (other than tax) stood at Rs 380.86 crore (Rs 191.75 crore)

For the nine months period ended December 30, 2011, OBC has reported a net profit of Rs 876.66 crore, down 25 per cent over the net profit of Rs 1,169.21 crore in same period in previous year. In 2010-11, OBC had reported a net profit of Rs 1502.87 crore.

The volatility in the yields of 10-year Government paper has taken a toll on the financial performance of OBC for the current fiscal. So far, in the nine months ended December 31, 2011, the bank had to provide for Rs 303 crore towards diminution in value of investments. The total treasury loss in fiscal 2010-11 was only about Rs 78 crore, senior officials of the bank pointed out.

The yield of 10-year government paper has moved from 7.99 per cent in end-March 2011 to 8.57 per cent in end-December 2011. However, with yields strengthening to about 8.27 per cent levels, Mr Pydah indicated that the bank could book treasury gains of about Rs 180 crore in the current quarter.

‘Challenging times'

“Today, we are facing challenging times. It's too early to make any forecast on whether we would be able to achieve last year's bottom-line performance. But it is certainly unreasonable to expect it to be like last year,” Mr Pydah said when asked if bottom-line performance for 2011-12 is likely to be lower than last fiscal.

He also noted that there cannot be any more surprises on the NPA front this quarter as the bank had been using system-driven NPA classification for the last four months.

krsrivats@thehindu.co.in