Bank of India (BOI) reported a net loss of Rs 11.56 billion in the second quarter compared to a net profit of Rs 1.79 billion in the same period in 2017.
The Reserve Bank of India in December 2018 put BOI under the prompt corrective action (PCA) framework, allowing it to take decisions to keep the state-owned lender steady.
The bank said that the Rs 11.56 billion loss is largely on account of higher provisioning against both investments and loans, delays in bad debt recoveries, and regulatory restrictions on certain practices. “Though capital challenges are there, during the first half of this year we have gone for capital maximisation and low capital consuming asset build-up, As a result we have reduced our Risk Weighted Assets (RW) have reduced from Rs 3.17 trillion in Q2 FY2018 to Rs 3.06 trillion at the end of Q2 FY2019, which has held grow the domestic business particularly retail and other asset books," said Dinabandhu Mohapatra, managing director and chief executive officer of BOI.
"The CASA deposits have grown from 39.01 per cent in September 2017 to 41.44 per cent as of September 2018, which has reduced our cost of funds," he said.
Gross Advances, globally, have declined from Rs 3906.9 billion in Q2 FY2018 to Rs 3761.8 billion at the end of Q2 FY2019. Domestic Advances have grown by 10.1 per cent from Rs 2781.85 billion in Q2 FY2018 to Rs 3063.2 billion at the end of Q2 FY2019.
The share of lending to the retail, agriculture and the MSME segment (RAM) has increased to 49.98 per cent of total advances. RAM advances have increased by 7.5 per cent from Rs 1430 billion in Q2FY2018 to Rs 1531 billion at the end of Q2FY2019.
The major share of retail lending has been to home loans, vehicle loans and personal loans.
Net Interest Income has marginally increased from Rs 29.08 billion in Q2 FY2018 to Rs 29.3 billion at the end of Q2 FY2019. Total Income is down from Rs 116 billion in Q2 FY2018 to 108 billion at the end of Q2 FY2019.
Non-interest income has reduced, mainly due to rising Government security yields, from Rs 17.06 billion in Q2 Fy2018 to Rs 10.3 billion as of quarter-ended September 30, 2018.
Net Interest Margin improved from 2.15 per cent in Q2 Fy2018 to 2.27 per cent in Q2 FY2019.
The bank said net profit was impacted due to NPA provisioning and provisions against mark-to-market (MTM) losses.
The bank charged depreciation on investments worth a total of Rs 7.57 billion, relating to the quarter ending March 2018 and June 2018, in the second quarter of
FY2019, and has will spread MTM losses worth Rs 4.2 billion in the coming quarters.
They had expected to recover at least Rs 18 billion from the sale of assets through the National Company Law Tribunal (NCLT), but recent intervention in those cases by the Supreme Court has postponed the recovery to the third-quarter of this year.
BOI has placed Rs 79.12 billion in provisions against the NCLT List 1 and 2 accounts, against a total outspend of Rs 93.5 billion to these corporate defaulters.
BOI has managed to recover around Rs 2.22 billion in Electrosteel Steels insolvency case and another Rs 2 billion through the Monnet Ispat & Energy insolvency case.
Mohapatra said that the bank had sold ‘bad assets’ worth Rs 3 billion to asset-reconstruction companies and another Rs 3 billion was recovered through out-of-court settlements or one-time-settlements during the quarter.
Further, the bank is in discussions for the open sale of Rs 100 billion worth of assets.
The bank has an exposure of Rs 3.4 billion to the holding company of Infrastructure Leasing and Financial Services (IL&FS), the troubled financier and infrastructure developer. It has an exposure of Rs 34 billion to various IL&FS subsidiaries.
Asked about the present crisis facing non-banking financial companies (NBFCs), Mohapatra said that the market has stabilised with many NBFCs showing pre-payments on their commercial paper payments and most the banks’ exposure was asset-based, or secured.
Further, in operational terms, treasury operations of the bank performed poorly over the past one year, as its net profit is down substantially from Rs 11.4 billion in Q2 FY2018 to Rs 1.2 billion at the end of Q2 FY2019.
Losses in the wholesale banking operating widened from Rs 16.8 billion in Q2 FY2018 to Rs 24.7 billion at the end of Q2 FY2019.
Provisions against Non-Performing Assets (NPA) have increased from Rs 18.67 billion in Q2 FY2018 to Rs 28.27 billion as of Q2 FY2019. The provision coverage ratio stands at 69.12 per cent in September 2018 as compared to 65.23 per cent in September 2017.
Total provisioning is up from Rs 19.5 billion in Q2FY2018, to Rs 33.43 billion at the end of Q2FY2019.
There have been fresh slippages of Rs 26.24 billion in the second quarter of this year, majority of which is in agriculture segment said a senior BOI official. The bank recovered or upgraded NPAs to the tune of Rs 26.98 billion.
Gross Non-Performing Assets (GNPA) in absolute terms have increased from Rs 606 billion in Q1FY2019 to Rs 615.6 billion at the end of Q2 FY2019, while the GNPA ratio has come down in sequential terms from 16.66 per cent to 16.36 per cent during the same period.
Net Non-Performing Assets (NNPA) has come down from 8.45 per cent in Q1 FY2019 to 7.64 per cent in Q2 FY2019 or from Rs 279.3 billion to Rs 259.94 billion during the same period.
The bank rationalised 35 branches domestically, 5 branches and offices overseas and 483 auto-mated teller machines, the results of which will be viable in the coming quarters.
CET 1 (capital adequacy ratio) stood at 7.53 per cent at the end of September 2018, as against the regulatory minimum of 7.3 per cent.
BOI’s stock price closed at Rs 87.25 on the BSE, down by 4.85 per cent from its closing price last Friday.