BOI Q3 net down 70% on high wage bill, NPA provisions

Asset quality to stay under pressure in Q4

Bank of India’s net profits for the third quarter ended December 2014 dipped by 70.2 per cent to Rs 173 crore on a meagre growth in net interest income, higher provision for the wage bill and bad loans. The public sector lender had posted net profits of Rs 585 crore in the September-December 2013.

Reacting negatively to weak performance, the BoI stock closed 5.7 per cent down at Rs 227 on the BSE. Feeling the heat of the slump in the economy, its earnings came under pressure.

Net interest income rose by 2.2 per cent to Rs 2,780 crore in the quarter from Rs 2,719 crore in the same quarter of the previous year. The other income, comprising fees and treasury, fell to Rs 1,079 crore from Rs 1,097 crore.

V R Iyer, chairperson and managing director, said net profits were down due to small growth in net interest income, in the backdrop of slump in demand for credit and increase in provision for employee costs. Employee costs rose to Rs 1,288 crore from Rs 988 crore. While making provision, BoI has assumed 13 per cent increase in its wage package being negotiated with staff unions.

Its total deposits grew 16.7 per cent to Rs 5,30,213 crore in the 12 months ended December 2014. Total credit rose by 15.1 per cent to Rs 4,10,410 crore in the same period. Credit growth would be 10-12 per cent for the financial year ending March, Iyer said. The provisions for non-performing assets  moved up to Rs 1,580 crore in the quarter, up from Rs 1,430 crore. The provision coverage ratio stood at 56.32 per cent at end of December.

Its gross NPAs stood 4.07 per cent at end of December 2014 as against 2.81 per cent year ago. The provision coverage ratio for NPAs stood at 56.62 per cent. Asset quality continues to be under pressure. While bank is taking steps to arrest slippages, only broad-based recovery in the economy can address the problems, Iyer said.

Bank restructured assets (in domestic business) worth Rs 769 crore in Q3. Total standard restructured advances stood at Rs 21,836 crore at end of December 2014. Its capital adequacy ratio of 10.68 per cent with tier-I 7.77 per cent.