State-owned Indian Overseas Bank (IOB) reported a net profit of ₹143.8 crore for the fourth quarter ended March 2020, after posting losses for 18 quarters.
The bank had reported losses of ₹1,985 crore in the year-earlier period and ₹6,975 crore in the December quarter, respectively. During the fourth quarter, operating profit rose 5.83% to ₹1,197 crore, from ₹1,131.50 crore.
“It is a great landmark we have achieved due to several initiatives taken during 2019-20. We have posted a net profit after 18 quarters,” observed Karnam Sekar, MD & CEO. “Now that we have some profit, we will wait for the June quarter results and then approach the Reserve Bank to remove us from the Prompt Corrective Action (PCA) framework,” he said.
Mr. Sekar said to come out of PCA, the bank had to improve its performance in key ratios, reduce non-performing assets (NPAs), improve capital adequacy ratio and make a profit.
“We had leveraged key ratios and were always comfortable with it. Net NPAs were brought down in December 2019. Corporate accounts were classified. With fresh infusion of capital during July 2019, the capital adequacy ratio factor was taken care off.
“We could post profit as we had made huge provisioning in the past and arrested fresh slippages. This increased our operating profit. This profit is sustainable,” added Mr. Sekar. As we have already made a provision of ₹40,000 crore in the balance sheet, we expect straight 5% recovery and this would add ₹2,000 crore of profit every year,” he said.
For the period under review, the bank total income stood at ₹5,537 crore against ₹5,474 crore, interest income stood contracted to ₹4,442 crore from ₹4,556 crore, while non-interest income stood at ₹1,095 crore (₹917 crore). Net interest margin was 2.30% against 2.03%. It would be in 3% in the near to medium term, he said.
On the asset side, gross NPA came down to ₹19,913 crore from ₹33,398 crore. In percentage terms, it was 14.78% against 21.97%. Net NPA stood at ₹6,603 crore with ratio of 5.44 % against ₹14,368 crore with ratio of 10.81%. Provision Coverage Ratio improved to 86.94% (71.39%).
During the quarter, IOB recovered ₹5,386 crore, while fresh slippage was ₹1,350 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, he said.
“Going forward, the bank will focus on home loan, jewellery loan, MSME and retail sector so that interest income will go up. The business in June/September quarters will be muted and growth will be there in second half of FY21,” he said.
