OBC profit down 24% on costly deposits

Hit by high cost deposits, Oriental Bank of Commerce's (OBC) net profit dipped by 24 per cent to Rs 138 crore for the third quarter ended December 31, 2007, compared with Rs 182 crore in the same quarter of the previous financial year.

"The dip in net profit was due to costly bulk deposits raised in March 2007. We will offload these bulk deposits by March and expect to save Rs 50-100 crore on the interest front in the third quarter," said Executive Director Allen C A Peirera.

The interest cost of the bank has gone up by over 50 per cent to Rs 1,345 crore in the October-December quarter from Rs 892 crore in the same quarter a year ago.

However, the bank has managed to reduce the incremental cost of deposits from 47 basis points in the second quarter to 14 basis points in the third quarter, Peirera said.

The bank is also converting some high cost deposits into normal deposits, the benefit of which will be reaped by the bank in the long-run, he added. Total income of the bank increased by 32 per cent to Rs 1,915 crore during the period from Rs 1,446.72 crore in the year-ago quarter.

The growth in deposits and advances were 22.2 per cent and 23.5 per cent y-o-y, respectively. The deposits and advances stood at Rs 74,180 crore and Rs 51,224 crore, respectively as on December 31, 2007.

The bank is closely watching the market developments post monetary policy review and expects some change in interest rates in two or three months.