State-run Bank of India, posted a 20 per cent year-on-year decline in net profit for the second quarter this financial year, on account of higher provisioning made for bad loans.
The bank’s net profit was Rs 491 crore as on September 30, as compared to Rs 617 crore in the same quarter last year.
The bank made provisions of Rs 824 crore towards non-performing assets (NPAs) as it migrated fully to an automated NPA recognition system in the July-September 2011 quarter.
“Around 60 per cent of the total slippages came from accounts of below Rs 10 lakhs that were shifted to the system,” said Alok Misra, chairman and managing director.
In addition, the bank saw fresh slippages of Rs 328 crore from restructured accounts which required provisioning.
Gross NPA ratio increased from 2.64 per cent to 3.02 per cent and net NPA ratio increased from 1.14 per cent to 1.98 per cent in the period under review. Misra said that going forward the bank will see lesser NPAs as the bank has fully migrated to the system identification of bad assets.
Credit growth was muted in the September ended quarter as the bank saw nine per cent growth as compared to last year. While, the bank’s home loan portfolio shrunk by 1.7 per cent, while overall retail credit grew by 6.97 per cent. “Credit demand was low as a result of rising interest rates,” said Misra. The bank aims 17-18 per cent growth in advances by the end of current financial year.
The bank’s deposits grew at a healthy pace of 19.39 per cent over a year though growth may moderate to 17 per cent by March 2011 as the bank has decided to shed bulk deposits. As a result of increase in cost of funds, the bank’s domestic net interest margins (NIMs) have fallen to 2.77 per cent from 3.17 per cent a year ago. “We will shed high cost deposits that will help achieve NIMs of around 3 per cent by March 2012,” said the bank’s chief financial officer, Ravi Kumar. The bank’s cost of funds grew by 116 basis points over the year.
The bank’s capital adequacy ratio was at 11.97 per cent as on September 30, 2011. Misra said that the bank is awaiting capital infusion from the government that holds around 66 per cent stake presently. The bank’s has board approval of up to Rs 1000 crore infusion in this financial year, he said.
