BOI in red again, posts Q2 net loss of Rs 1,126 cr

Heavy provisions for bad loans, pension hit bottomline

Public sector lender Bank of India (BoI) has posted net loss of Rs 1,126 crore for the September 2015 quarter owing to huge provision for bad loans and employee pensions.

The flat net interest income (NII) and fall in non-interest income also hit the bottom line.

The bank had a net profit of Rs 786 crore in July-September 2014. It had posted a net loss of Rs 56.14 crore in January-March 2015.

BoI shares closed flat at Rs 133.45 on the BSE on Monday. BoI announced results after the close of trading hours. The bank had to make heavy provisions to cover the backlog of non-performing assets (NPAs), restructured advances and pension liabilities. The provisions for bad loans grew four-fold to Rs 3,036 crore from Rs 792 crore in the second quarter of 2014-15, its Managing Director and Chief Executive M Rego said after announcing the second quarter results.

NII declined by 0.36 per cent to Rs 3,020 crore in the quarter under review from Rs 3,031 crore in the year-ago period. Global advances declined 0.88 per cent to Rs 3,95,785 crore in September 2015 from Rs 3,99,288 crore a year ago.  The non-interest income fell 22 per cent in the second quarter to Rs 778 crore from Rs 1, 006 crore a year ago.

The gross NPAs rose to 7.55 per cent in September 2015 from 3.54 per cent a year ago. The provision coverage ratio was 55 per cent. Last month, rating agency CARE Ratings had downgraded BoI's Tier-II bonds from 'AAA' to 'AA+', citing deterioration in asset quality and a decline in profitability.

Rego said the bank has chalked out a three-point plan to improve credit and financial profile of the bank. First, it will focus on recoveries from NPA accounts. Second, it will also augment the share of low-cost deposits (current accounts and savings accounts) to 35 per cent in the coming quarters from 31 per cent at present. Third, the re-balance loan book will increase the share of non-corporate book (retail, small and medium enterprises, and agri-business) from 45 per cent to 55 per cent over three years.  

The Mumbai-based public sector lender would also look at selling some non-core assets and strategic investments to augment its capital base.

The capital adequacy ratio was 11.21 per cent with Tier-1 of 8.65 per cent September 2015.