GTB write-off pushes Oriental Bank into loss

Oriental Bank of Commerce (OBC) reported a loss of Rs 99.44 crore in the fourth quarter of 2007-08 compared to a net profit of Rs 54.86 crore in the corresponding quarter, as it wrote off the losses incurred by the erstwhile Global Trust Bank, which was merged with the public sector bank in 2004.

OBC had to provide for Rs 305 crore till March 2009 towards GTB's losses, but decided to write off the losses at one go in the fourth quarter of 2007-08.

"The idea is to clean the balance sheet and address investor queries pertaining to GTB's non-performing assets (NPAs)," the bank's chairman and managing director Alok Misra said.

OBC's total income during January-March rose 31 per cent to Rs 2,071 crore from Rs 1,577 crore in the fourth quarter of 2006-07. The bank plans to raise debt worth Rs 2,285 crore to support credit growth in 2008-09. 
 

Financial parameters quarter ended March
Rs crore	Oriental Bank
	2006-07	2007-08
Interest earned	1,433.58	1,910.46
Other income	143.71	160.55
Expenditure	1,252.40	1,746.03
Net profit	54.86	-99.44
CAR (%)	12.51	12.12
Net profit margin (%)	3.83	-5.21

The share price of OBC fell 3.55 per cent to Rs 194.45 today compared to the previous close of Rs 201.6 on the Bombay Stock Exchange.

With GTB's Rs 1,300 crore losses written off entirely, OBC expects its profits to go up substantially in 2008-09.

For fiscal 2007-08, the bank reported a 39 per cent decline in net profit at Rs 353 crore compared to Rs 580 crore in 2006-07. The bank's total income rose 29 per cent to Rs 7,454 crore in 2007-08 compared to Rs 5,768 crore in 2006-07.

"The decline in net profit is due to the write-off of GTB's Rs 487 crore. With the GTB legacy gone, the bank will show a substantial increase in net profit in 2008-09," said Misra.

The bank's net interest margin (NIM) declined to 2.34 per cent as on March 31, 2008 compared to 2.7 per cent as on March 31, 2007 due to negative impact of the Rs 7,000 crore high cost bulk deposits raised in early 2007.

The bank has shed this high cost portfolio entirely and plans to improve NIM by focusing on low cost deposits in 2008-09. The bank's net non-performing assets stood at 0.99 per cent of the net advances.

The total business (deposits and advances) rose 22 per cent to Rs 1,33,184 crore in 2007-08 compared to Rs 1,09,391 crore in 2006-07. Deposits rose by 21.7 per cent and advances increased by 21.9 per cent in 2007-08.

The bank expects business to grow by around 25 per cent to Rs 1,66,000 crore in 2008-09. It sees the deposits increasing by 23-24 per cent and loans rising by 25 per cent in 2008-09. "We expect total business to cross Rs 2,00,000 crore and net profit to be around Rs 1,500 crore by 2010," said Misra.

The bank has headroom to raise Rs 1,500 crore through Tier II bonds and Rs 785 crore through Tier I bonds to support its asset growth in 2008-09. "We will need the capital to support asset growth and maintain the current capital adequacy ratio of around 12 per cent in 2008-09," said Allen C A Peirera, executive director, OBC.