Indian Overseas Bank cuts loss to Rs 1,985 crore, plans to raise funds

Indian Overseas Bank (IOB) has seen a reduction of 45 per cent in its net loss during the quarter ended March 31, 2019, even as there were increased provisions on non-performing assets (NPAs) and one big account declared as fraud. It has received approval from the Board to issue up to 300 crore equity shares at a premium to public through follow-on public offer, or rights issue, and to raise Tier II capital of up to Rs 1,500 crore by issue of Basel-III Compliant bonds.

The bank has reduced its NPA levels during the quarter compared to the corresponding quarter of last year and said that it is expecting NPA reduction of around Rs 6,300 crore in the financial year 2019-20 (FY 20), subject to court resolution.

The bank has registered a net loss of Rs 1,985.16 crore compared to Rs 3,606.73 crore during the same quarter of last year. Total income stood at Rs 5,473.92 crore during the quarter, as compared to Rs 5,814.42 crore during same period last year, a decline of 5.9 per cent.

The loss is due to increased provisions on NPAs and fraud accounts especially due to back dating of NPAs and one big account declared as fraud. Impact on account of these two events is around Rs 2,150 crore on provision, said the management. 

The Gross NPA has come down to Rs 33,398.12 crore, which is 21.97 per cent of gross advances, as compared to Rs 38,180.15 crore (25.28 per cent) in the same quarter last year. Net NPA has come down to Rs 14,368.30 crore (10.81 per cent) as against Rs 20,399.66 crore (15.33 per cent) during the same quarter of last year.

Total recovery stood at Rs 4,102 crore achieved for quarter ended March, this year, while the total slippage was Rs 1,402 crore. 

"Recovery achieved is substantially higher than slippages during the quarter mainly due to focused priority action on arresting slippages and improving recovery in NPA/OTS accounts," said the Bank.
 

For the financial year ended March 31, 2019, the net loss was reduced by 40.66 per cent to Rs 3,737.88 crore as compared to Rs 6,299.49 crore net loss in the previous year. The net loss was due to additional provision in the existing NPA to the tune of Rs 1,400 crore and one fraud account for which 100 per cent provision was made to the extend of Rs 700 crore. 

The Bank has evolved a policy of not taking fresh exposures in stressed sectors, below hurdle rated accounts and BB and below rated accounts. It has also exited from accounts in the stressed sectors, wherever feasible, it said.

The total income grew marginally to Rs 21,837.58 crore during 2018-19 as against Rs 21661.65 crore registered in the previous year. The annual operating expenses were reduced by Rs 1116 crore, which is around 20.29 per cent decline. 

For the whole year, the gross NPA has come down to 21.97 per cent from 25.28 per cent posted during previous year, while the net NPA has come down to 10.81 per cent during the fiscal compared to 15.33 per cent registered during 2017-18. Recovery in NPA was Rs 14,669 crore during the year compared to Rs 15,496 crore in the previous year. The fresh slippage was of Rs 6071 crore for the year ended March, 2019 and debits in existing NPA accounts was Rs 2,774 crore.  

It has recovered Rs 757 crore in NCLT accounts during the year and it expects recovery of around Rs 1247 crore in current quarter in NCLT accounts where the resolution is at an advanced stage. 

Its total business stood at Rs 3,74,530 crore during the fiscal ended March 31, 2019, as against Rs 3,67,831 crore during same period last year. IOB's operating profit was the highest in its history, at Rs 5033.87 crore, added the Bank.