IOB's Q4 net tanks 90% on higher provisioning

Banks plans to raise $2 bn through MTN

Indian Overseas Bank (IOB) has reported a 89 per cent drop in net profit during the quarter ended March 31 at Rs 58.60, compared with Rs 528.88 crore in the year-ago period. The drop was mainly due to higher provisioning against bad loans.

Chairman and Managing Director M Narendra said total provision had increased over three-fold to Rs 1,087.28 crore. He said, “We are taking all efforts to reduce NPA (non-performing assets), by an aggressive recovery process. The bank’s NPA currently stands at Rs 6,607.96 crore as on March 31, compared to Rs 3,920.07 crore as on March 31, 2012.”

Narendra added the increase was mainly due to industries, agriculture and others.

The bank has managed to recover Rs 1,100 crore in cash and Rs 500-600 crore has been upgraded.

During the last quarter, around Rs 1,700 crore was recovered.

Net interest income (NII) dropped by 3.3 per cent year-on-year (y-o-y) to Rs 1,296 crore.

According to Vaibhav Agrawal, vice-president for banking research at Angel Broking, the fall in NII is due to the decline in margins. He added that operating profits grew 14 per cent y-o-y, aided by the 33 per cent growth (y-o-y) in non-interest income growth.

“Considering the asset quality pressures, provisioning expenses for the bank more than tripled on a y-o-y basis and hence, earnings declined by 89 per cent y-o-y. We await more clarity from the management regarding the asset quality pressure faced during the quarter and outlook on the same going ahead,” he said.

To raise $2 billion
The bank said it would look at raising $2 billion through medium-term notes (MTN) and said it would also look at rights issue and follow on public offer (FPO) to raise around Rs 2,350 crore to support its 18-20 per cent growth during the current financial year. The bank closed FY13 with a total business of Rs 3.66 lakh crore, compared to Rs 3.21 lakh crore in the previous financial year, an increase of 14 per cent.

Commenting on raising $2 billion, Narendra said the bank will raise the money “depending on the market situation”. The money will be raised over the next two years, he added.