The Mumbai-headquartered public sector bank will focus on protecting the bottomline rather than increasing business volumes from its global operations.
The bank has estimated a 15-20 per cent growth in its business for 2008-09 against a year-on-year growth of over 30 per cent in the last two years, a senior executive said.
The advances (foreign loans) went up by 37.83 per cent to Rs 23,404 crore ($5.85 billion) and the loan growth was nearly 34 per cent in 2006-07. The bank's overseas investment portfolio is about $1 billion.
The bank will actively churn its asset portfolio. It will replace low-yielding assets such as short-term trade finance that are often contracted at just 50 basis points over the London Inter Bank offer rate (Libor) with high yielding long term advances that earn atleast 300 basis yield.
Another executive in the bank's international division said, "Raising resources in the turbulent market has become a costly affair. Moreover, fund deployment is a challenge. Lending is takin place at steep rates due to a rise in credit spreads".
India Inc has raised large amounts through external commercial borrowings (ECBs) and foreign currency convertible debentures (FCCBs) in the last three years, for the purpose of mergers and acquisitions and to fund capital expenditure.
Indian banks with a sizeable overseas presence benefited by lending (ECBs) and related businesses. But with restrictions on the end use and rise in borrowings costs, the ECB/FCCB pipeline is drying up.
"While ECB/FCCB may give us less business this year, we see a good opportunity in lending directly to the Indian companies for overseas acquisitions," the executive said.
The bank will also actively participate in local syndication to lend to non-Indian entities, the executive added.
BOI's foreign business (deposits plus advances) rose from Rs 42,118 crore ($10.52 billion) in 2006-07 to Rs 48,000 crore ($12 billion) in 2007-08. The net profit from foreign operations contributed Rs 351 crore to the bottomline in FY08 as against Rs 303 crore a year ago.
