Shocking News? Bank Of India In Loss

aaBank of India reports first quarterly loss in 14 years

State-owned Bank of India (BoI) has reported a loss of Rs 56.14 crore in the quarter-ended March against a profit of Rs 557.51 crore in the same period in last fiscal on the back of higher provisioning for non-performing assets (NPAs).
BoI had reported a net profit of Rs 173.38 crore in the December quarter. This is the first loss posted by the bank since March 2001 when it had reported a Rs 30.24 crore loss.
The net interest margin (NIM) stood at 2.49% in FY15 whereas for the fourth quarter, it stood at 2.24% — a drop of 50 basis points from the same period in FY14.
The net interest income (NII) — the difference between interest earned and interest expended — fell 6.60% to Rs 2,846.29 crore while the non-interest income increased 22.82% to Rs 1,122.15 crore. Total income rose 8.98% to Rs 12,286.98 crore. Operating profit fell 28.53% to Rs 1,426.55 crore in the fourth quarter. Asset quality deteriorated with the gross NPAs as a percentage of gross advances increasing by 132 basis points to 5.39% on a sequential basis.

Gross NPAs also witnessed a rise of 224 bps y-o-y.
The net NPAs as a percentage of net advances rose 86 bps on a sequential basis to 3.36% and rose 136 bps y-o-y.

The bank pointed out that 45% of the fresh accretion to NPAs in the fourth quarter was from the infrastructure sector while 41% was due to technical reasons like payment coming just after the expiry of the 90-day period at which point an account is usually classified as an NPA.

Provisions and contingencies have increased 45.7% to Rs 2,255.49 crore in Q4 compared with Rs 1,547.27 crore on a y-o-y basis. BoI expects NIMs for FY16 to be at 2.60% and looks forward to bring gross NPAs down to 4.5% and net NPAs down to 2.75%. The bank expects a loan growth of 12% and a deposit growth of 14%. The stock fell 5.89% to close at Rs 191.40 on BSE.

Bank of India pays price for fast loan growth during a downturn-Livemint

The bank reported a loss of Rs56 crore in the March quarter, the first time since 2001 as it set aside more provisions for problem accounts

 

Bank of India shares plunged 6.2% after it posted a net loss for the first time in over a decade in the quarter ending March, as asset quality worsened more than expected.

V.R. Iyer, Bank of India chairperson, said during the press conference, “We have consciously taken a call to declare more non-performing assets (NPAs) this quarter.” She has cleaned up the book more aggressively in the three months ended March before retiring at the end of this month after a two-year stint.

 

Another reason why bad loans jumped for Bank of India was because it grew its loan book at a faster pace of 22% in the past three years while other public sectors banks slowed advances growth below 15%. As a result, the pain is showing up only now for Bank of India, according to Vaibhav Agrawal, vice-president—research, banking, from Angel Broking Pvt. Ltd. It is only in the last two quarters that Bank of India has put brakes on growing its book at a rate below 10%, as the economic slump has been longer than expected. The bank expects advances to grow in the range of 10-12% in 2015-16.

 

The management said it expects NPAs as a percentage of bad loans to ease below 4.5% in this fiscal year from 5.49% in the March quarter. Bad loans at the end of December quarter stood at 4.1%. It expects to recover loans worth Rs.3,500 crore in the quarter ending June. “The management is very optimistic on asset quality improvement. The recovery will be swift if chunky accounts get upgraded as and when the economy rebounds,” said Agrawal.

 

Accounts worth Rs.8,126 crore slipped or turned bad during the March quarter, of which around one fourth were restructured accounts. The bank restructured accounts worth Rs.2,743 crore during the quarter.

 

The bank reported a loss of Rs.56 crore in the March quarter, the first time since 2001 as it set aside more provisions for problem accounts. Bad loans continued to pile up from stressed sectors such as infrastructure, power, aviation and engineering.

 

Other income grew 23% to Rs.1,122 crore compared with a year ago, buoyed by a spurt in profit from sale of investments and exchange transactions. Overall net interest income fell 6.6% year-on-year, the first time in over five years due to lower loan growth and deterioration in asset quality. The bank is growing its medium and small enterprise and retail book, while refraining from lending to corporates in the infrastructure sector. The management expects net interest margins to improve to 2.6% from 2.49% at the end of 2014-15.

 

The bank’s capital adequacy ratio improved marginally to 10.73% in the March quarter and the bank is waiting for additional capital infusion from the government. Bank of India shares have underperformed those of other PSU banks in the past few months and they are trading at 0.4 times price to book for 2015-16. Unless asset quality improves, the stock may continue to remain under pressure, said analysts.