IOB Q3 loss widens to ₹6,075 cr. on higher provisions

Shifting focus: Going forward, we don’t want to be aggressive in the corporate sector, says Mr. Karnam Sekar.

Shifting focus: Going forward, we don’t want to be aggressive in the corporate sector, says Mr. Karnam Sekar.   | Photo Credit: Bijoy Ghosh

Lender to focus on retail, agriculture, MSME sector; eyes coming out of Reserve Bank’s PCA in FY21

Public sector lender Indian Overseas Bank’s (IOB) net loss for the third quarter ended December 2019 widened to ₹6,075 crore on higher provisioning of ₹6,664 crore for non-performing assets (NPAs) and investments.

In the year-earlier period, provisioning stood at ₹2,075 crore.

During the period under review, total income stood at ₹5,198 crore (₹5,689 crore), net interest income at ₹1,279 crore (₹1,384 crore) and total expenditure at ₹4,436 crore (₹4,222 crore). Net interest margin (NIM) stood at 1.94%.

IOB brought down its gross NPAs to ₹23,734 crore with a ratio of 17.12% against ₹35,787 crore with a ratio of 23.76% in the year-earlier period. Net NPAs were contained to ₹7,087 crore with a ratio of 5.81% against ₹17,988 crore with a ratio of 13.56%. Provision coverage ratio improved to 86.20% (64.23%).

Fresh slippages during the period stood at ₹1,648 crore (₹1,700 crore) and recovery, including technical write-offs, was ₹7,085 crore (₹3,723 crore).

“To come out of the Prompt Corrective Action (PCA) of the RBI, we have to cross two major hurdles. One is to keep the net NPAs below 6% and another is to make a profit. We have brought down the net NPAs to 5.81%. Our next objective is to make profit every quarter and make it sustainable,” said Karnam Sekar, MD & CEO, Indian Overseas Bank.

“This is the year of resurgence. We plan to come out of the PCA by focusing on recovery, low-cost deposits and less capital-consuming advances,” he said.

Stating they were hoping to make profit from the next quarter onwards, he pointed out that IOB had been incurring losses for almost five years.

“Going forward, we do not want to be aggressive in the corporate sector. We will be in retail in a big way. Currently, the split between corporate and retail is 28% and 72% respectively. The slippages in the corporate sector accounts have been fully exhausted. We don’t foresee any fresh slippages. The slippage in fourth quarter towards corporate accounts will be almost zero,” he said.

NCLT accounts

Mr. Sekar also said exposure towards telecom sector was nil and slippages in retail, agriculture, MSME (RAM) sector was coming down to an average of ₹500-600 crore per quarter. He also expected to recover a huge sum from two huge NCLT accounts.

“We have a net NPA of about ₹7,000 crore and this could be provided for within three years.

“With conviction and confidence, I can say we will sustain net profit as we will be making a profit of ₹3,000 crore every year and with this, the net NPAs could be taken care off,” he said.

Mr. Sekar said that they had made provisions of 86% towards bad debts, which is one of the highest in the industry, and efforts were on to recover the balance.

With regard to huge provisioning of ₹45,000 crore made in the last six years, he said even 1% recovery amounted to a conservative sum of ₹450 crore and that would strengthen the bank’s balance sheet.

NIM at 1.94% is still a concern and this would increase to above 2% in the coming quarters, he said.

Total deposits marginally increased to ₹2,21,290 crore from ₹2,20,311 crore while gross advances stood at ₹1,38,643 crore (₹1,50,590 crore).

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Printable version | Apr 1, 2020 11:02:19 AM |

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