Provisioning for bad debt pushes IOB net down 88%

The net profit of Indian Overseas Bank plummeted by 88 per cent to Rs 59 crore for the quarter ended March 31, 2013, against Rs 529 crore in the corresponding quarter last year.

The decline was an outcome of provisioning for bad and doubtful debts and restructured accounts, said Chairman and Managing Director M. Narendra.

Total income was Rs 5,898 crore — a 8.92 per cent increase over the same quarter last year.

For the financial year ending March 31, 2013, net profit was down by nearly half, to Rs 568 crore from Rs 1,050 crore the previous year. Total income was Rs 22,649 crore (Rs 19,578 crore).

Higher NPA

The bank’s gross non-performing assets (NPAs), or loans in jeopardy of default at the end of the financial year, increased to Rs 6,607 crore, against Rs 3,920 crore the previous year.

“It was a difficult period. Not many companies came forward to restructure their loans,” Narendra told newspersons.

Narendra said the NPAs of international clients have gone up substantially. “We are going for speedy recovery this year,” he said.

On the domestic front, the NPAs were mainly with small and medium businesses that are going through tough market conditions.

“This year, we should be able to contain the NPA level,” Narendra said.

The bank is cautious on bulk deposits, which have dropped to 11 per cent from 35 per cent. However, core deposits have increased substantially, he said. “This trend is a good sign for the bank and has helped in overall business growth,” he said.

Our Coimbatore Bureau adds: The IOB share price, hovering around Rs 68 for most of the day, took a sharp dive once the results were flashed on the Web sites of stock exchanges just after 3 pm and crashed to a 52-week low of Rs 62.20 on the BSE before pulling back marginally to Rs 63.70 at close.

The stock shed a third of its value in three months after touching a 52-week high of Rs 94.85 on January 7. The bank has cut the dividend payout by half to Rs 2 (Rs 4.50 last year).

Commenting on the results, Vaibhav Agrawal, VP, Banking, Research, Angel Broking, Mumbai, said the bank had reported a “disappointing operating performance” for Q4 of last year.

Asset quality

He felt that because of the asset quality pressures, provisioning expenses had more than trebled on a y-o-y basis, leading to earnings decline by 89 per cent y-o-y.

He said ‘more clarity from the management’ was being awaited about the asset quality pressure faced during the quarter.

raja.simhan@thehindu.co.in

Source: thehindubusinessline