Higher provisioning tempers Bank of India's net profit

Higher provisioning towards bad loans and investments moderated Bank of India's net profit in the October-December 2011 period. Profits rose by a modest 10 per cent to Rs 716 crore, against Rs 653 crore in the corresponding year-ago period.

While net interest income (the difference between interest earned and expended) nudged up by 4 per cent to Rs 2,067 crore (Rs 1,986 crore), non-interest income (includes commission, exchange and brokerage, profit from exchange transactions and recovery in written off accounts) rose by 19 per cent to Rs 471 crore (Rs 396 crore).

Quarter-on-quarter, the public sector bank managed to bring down the gross non-performing assets level by Rs 162 crore to Rs 6,386 crore. However, since March-end 2011, the NPAs have surged by Rs 1,574 crore. In the reporting three months period, provision towards NPAs jumped 169 per cent to Rs 333 crore (Rs 124 crore in the October-December 2010 period) and provision for investments rose 80 per cent to Rs 119 crore (Rs 66 crore). Total provisions rose by 38 per cent to Rs 1,016 crore (Rs 736 crore).

According to Mr Alok Misra, Chairman and Managing Director, BoI, the global and domestic economic environment has become challenging and stress is showing in sectors such as steel, textiles, aviation, and power (especially state-owned power distribution companies). Though the year-on-year advances growth was 8.23 per cent as on December-end 2011, the bank is hopeful of achieving a credit growth of 15.5-16 per cent by March-end 2012, he added.

Focus on recoveries

Mr N. Seshadri, Executive Director, BoI, said the bank is aggressively focussing on recoveries from small value loan accounts that have turned bad. This move has paid rich dividends, with the bank realising Rs 186 crore from written-off accounts, against Rs 66 crore in the corresponding period last year.

In the nine-month period ending December 31, 2011 the bank's net profit declined by 13.53 per cent to Rs 1,725 crore (Rs 1,995 crore) as the bank recognised NPAs through the system driven process in the June and September quarter, said Mr Ravi Kumar, General Manager & CFO.

Bank of India's scrip closed up at Rs 352.85 per share on the BSE, up 3.17 per cent, against the previous close of Rs 342.