Asset quality worsened during the quarter, and gross non-performing assets (NPAs) increased to R12, 532.49 crore, a 33.1% increase y-o-y and 5.6% on sequential basis. Meanwhile, net NPAs stood at R8,041.56 crore and net NPAs, as a percentage of net advances, were up 14 basis points sequentially at 2.14%.
Though the banks total advances increased 25.37%, year-on-year, in the quarter under review and it saw a 28.5% y-o-y growth in corporate credit, yields were subdued since a fourth of the corporate book had been loaned to highly rated public sector companies who borrow at the base rate.
The net interest income (NII) of the bank increased 5.8% y-o-y to R2,686 crore, while the domestic net interest margin (NIM) fell 62 basis points (bps) to 2.45% y-o-y. Non-interest income stood at R1,024 crore, down 13.3% y-o-y. The bank gave a guidance of 3% on NIMs and a loan growth of 18-20% for FY15.
Of the R3,777 crore of slippages, R900 crore were due to technical reasons and are likely to be upgraded; 60% of them in the third quarter. The major slippages are from the infrastructure, iron and steel (sectors), and from pharma to some extent, VR Iyer, chairman and managing director of BoI, said.
The bank made a total recovery of R1,203 crore, of which R623 crore was from the loan book, R580 crore was sold to asset reconstruction companies (ARCs), and R1,034 crore worth of loans were upgraded. Slippages during the quarter were to the tune of R3,777 crore, and Bank of Indias restructured assets during the quarter were R1,631 crore. Global advances increased to R3,81,566 crore, registering a growth of 23.31% y-o-y and its global deposits grew 20.7% y-o-y to R5,00,875 crore.
We are confident of pick-up in credit offtake from Oct
After Bank of India reported a 16% year-on-year drop in net profit, chairman and managing director VR Iyer spoke to the media about the performance and future expectations. Excerpts:
What is your outlook on slippages
Of the R3,700-crore slippages, R900 crore are due to technical reasons and may be upgraded. Major slippages are in the infrastructure, and iron and steel segments, and pharma to some extent.
The banks cost-to-income ratio dropped sharply in foreign offices...
Income from international operations has increased. We improved net-interest margin (NIM) from 1.04% to 1.40%, helping our income rise. The domestic cost-to-income ratio looks higher because we made provisions for wage revisions and pension benefits. We also planned capex expenditure for increasing ATMs. Now, well try to rationalise some branches where we are in a position to close down or merge with nearby branches. Lastly, with many retirements in place and new recruits joining, cost will fall.
What wage hikes are you expecting
Negotiations are still on with regard to wages; it is not clear. But, it appears that it will come between 12% and 13%. For wage revision, we have provided R80 crore in the June quarter and, as of now, we have R419 crore, which is sufficient to take care of our requirements.
You have set a target of below-3% gross NPAs and below-2% bet NPAs. How will you achieve these
When I told you about the target, I had in mind the improved condition of the economy, coupled with the seriously improving investment climate. I am confident that credit pick-up will be seen from October. As of now, we are not seeing much investment activity, but we are all witness to the fact that the government is seriously trying to remove hurdles to investments. That apart, we have also enhanced our recovery and monitoring mechanism, which should help us achieve our target.
You said your NIM softened as you lent to navratna PSUs at base rate. How did this benefit the bank
One benefit is the quality of credit. Besides, the entire economy was in a downturn and we were not finding any scope for credit. However, our growth in the deposit has been significantly higher than the banking industry. So, when funds are flowing through deposits, it is better that I leverage at least from the public sector. Moreover, since the navratnas have got very good treasury books and if we are in a position to offer competitive and online facilities to them, they are quite happy with that.