Bank of India Q2 net fell 20.4% on higher provisions

State-owned Bank of India ’s second quarter (July-September) net profit dropped by more than 20% year-on-year to Rs 491 crore on the back of higher provisioning due to rise in non-performing assets (NPAs). A CNBC-TV18 poll expected net profit at Rs 603 crore. Provisions for NPAs almost trebled from Rs 286 crore to Rs 824 crore Y-o-Y.

“We were passing through the challenging time,” said Alok Mishra, chairman and managing director, Bank of India, addressing the media here in Mumbai.

“In India, the consecutive policy rate hikes (13 times) has impacted our credit growth. Moreover, we have just completed the process of migrating to system based NPA recognition. It has resulted in higher NPAs requiring more provisions. However, we should see some good numbers coming in the next two quarters.”

Net interest income or the difference between interest earned and expended rose 7% to Rs 1,904 crore. The net interest margin (NIM) stood at 2.44% as against 2.19% in the April-June quarter.

The lender’s domestic loan book expanded at a slower pace at 9% to Rs 1.58 lakh crore while the global loan book rose 18% Y-o-Y to Rs 2.17 lakh crore. Despite such lower rate of growth, the bank is still aiming to achieve 17-18% credit off-take for the full fiscal year.

“In the coming busy season, we are confident of growing our domestic book at a higher rate. Growth is expected to come from sectors like retail, agriculture and mid corporates,” said Mishra.

It is learnt that the bank will reduce lending exposure to large corporates that accounted for 47% of total domestic loans by the end of Q2. It will rather increase its focus on retail credit that form only 10% of the book.

Gross NPA ratio (domestic) shot up from 2.69% to 3.69% quarter-on-quarter while net NPA ratio stood at 2.54% compared with 1.27%. This suggests that there has been sharp deterioration in terms of asset quality. The bank expects to bring down its gross NPAs to 2.52% by the end of March, 2012.

Meanwhile, domestic deposits at the bank climbed 19.39% to Rs 2.45 lakh crore. Current account and savings account (CASA) ratio improved to 31.64% from 30.48% a quarter back.

Bank of India shares on Tuesday fell more than 4% to close the day at Rs 327.80.

Source: www.moneycontrol.com

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