Total income increased by 16.2 per cent to Rs 625 crore. Operating costs in the quarter rose by 12.5 per cent to Rs 348.7 crore. Operating profit was up 21.4 per cent to Rs 276.3 crore and cost-to-income ratio improved to 55.8 per cent from 57.7 per cent. The rise in profit came on account of a 19.4- per cent jump in net interest income (NII) for the quarter, which stood at Rs 440.3 crore from Rs 368.8 crore in the corresponding quarter of the previous year. Net interest margin (NIM) was flat at 3.46 per cent, compared to 3.45 per cent in the year-ago period. “There was pressure on NIM on account of the policy action in July 2013, which resulted in a sharp increase in funding cost, which was not fully transmitted to the borrowers,” the bank said in a statement.
The bank had parked surplus liquidity in short dated T-bills. However, with the change in policy guidelines, a cap of 0.5 per cent of net demand and time liabilities was placed for repo borrowings.
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As a result, the bank had to resort to marginal standing facility (MSF) borrowings at a significantly higher cost. However, the adverse impact of this has significantly reduced after the recent lowering of MSF rates or partial run-off of the T-bills portfolio.
Provisions and contingencies increased to Rs 18.1 crore from Rs 6.4 crore in the corresponding quarter of the previous year. During the quarter, one NPA account from the previous quarter was upgraded to standard on implementation of corporate debt restructuring package, the bank said.
Asset quality continued to be robust with gross NPA ratio and net NPA ratio at 1.72 per cent and 0.19 per cent, respectively, as on September 30. The capital adequacy ratio improved to 16.75 per cent according to Basel-III norms. The return on assets stood at 1.25 per cent from 1.26 per cent in the year-ago quarter.