State-owned Bank of India on Thursday reported a net profit of R101.72 crore for the December quarter, as against a loss in the corresponding quarter last year, aided by a decline in provisions for non-performing loans.
The bank had reported a loss of R1,505.58 crore for the December quarter last year, weighed down by high provisioning for bad loans.
The lender’s total income for the reviewed quarter came in at R11,594 crore, 4.6% higher year-on-year. Net interest income, the difference between interest earned and interest expended, increased 5.7% to R2,862.61 crore. Its domestic net interest margin (NIM) rose by 69 basis points to 2.65%.
Despite the tepid rise in interest income and worsening of the asset quality over the period under review, Bank of India managed to end the quarter in black as its provisions declined by over 36% year-on-year to R2,302.57 crore. The total provision for non-performing loans stood at R2,546.20 crore, 27% higher y-o-y.
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In terms of the asset quality, the bank saw its NPAs rise significantly from the same quarter a year ago, with gross non-performing assets as a percentage of total loans increasing by 420 basis points to 13.38%.
Net NPAs rose by 184 basis points to 7.09%, which if coupled with the 0.06% return on assets, puts the bank dangerously close to triggering prompt corrective action by the Reserve Bank of India.
In the post-results conference, Bank of India managing director Melwyn Rego said total stressed assets constituted 16.7% of all loans. The SMA2 book, which comprises loan accounts for which interest payment has not been received for a period of 60-90 days, consisted of loans totalling around R12,000 crore.
The bank recovered, upgraded and wrote-off loans worth R3,691 crore during the quarter, higher than R3,182 crore for the corresponding quarter in FY16. It did not sell any loan to asset reconstruction companies.
Executive director RA Sankara Narayanan said the bank had identified five loan accounts totalling R700 crore for sustainable structuring of stressed assets (S4A).
The public sector lender’s total loan book contracted by 2.7% year-on-year to R3.87 lakh crore, as the bank had to repay a loan against FCNR(B) deposits totalling $1.4 billion, which were redeemed during the quarter. The share of retail loans in the total loan book increased by 140 bps to 14.17%.
