Bank of India Q2 net profit jumps 97% on rise in income

Public sector lender Bank of India (BoI) on Friday reported a net profit of Rs 526 crore in the September quarter of FY21, up 97% year on year (YoY), owing to a 22% rise in other income on a year-on-year basis to Rs 1,613 crore. Profit growth was supported by net interest income (NII), which rose 6.6% YoY to Rs 4,113 crore.

The bank’s management claimed Q2 profit figure looked a little understated because of additional provisioning. The extra provisions that the bank has made are to the tune of Rs 800 crore, where it has included different segments and accounts, which are sub judice. MD & CEO AK Das said, “The provisions will help to absorb any shock in the current quarter (Q3) and Q4. Second, there will be a good write-back opportunity. So that way our asset quality concerns not only at current levels but for the future quarter also are reasonably safeguarded.”

The number of accounts eligible for restructuring is 3.1 lakh and the exposure therein stands at around Rs 24,000 crore. Of the 3.1 lakh accounts, 80-85% are retail and micro, small and medium enterprises (MSMEs). So far, BoI has received over 500 requests for debt recast, with 34 proposals with a Rs 5,141-crore exposure in the corporate segment and 474 applications worth Rs 62 crore in the non-corporate segment.

BoI’s provision coverage ratio (PCR) improved to 87.91% from 84.87% at the end of June. Slippages fell to Rs 274 crore from Rs 3,166 crore a year ago. In the absence of the Supreme Court’s interim order on recognition of bad loans, BoI’s non-performing assets (NPAs) would have been higher by Rs 202 crore. The bank made recoveries worth Rs 1,172 crore in Q2FY21, up from 966 crore a year ago. “In Q2, our recovery efforts were good despite the Covid challenges. We have got Rs 12,000 crore NPA reduction target for the entire year, out of which we are almost through with 50%,” Das said, adding that in the second half of the current fiscal, the lender expects recoveries of around Rs 6,000 crore.

BoI’s domestic net interest margin (NIM), a key measure of profitability, rose 15 basis points (bps) sequentially to 2.88%. This was nonetheless lower than the 3%-plus levels seen a year ago. Das said margins were likely to remain compressed because of a better transmission of rate cuts. “There is also a lot of competition in the market and demand is also not that great, especially from the manufacturing side. Margins will, therefore, continue to be under stress, but we will make attempts to cover it up through volume growth in advances,” he added.

Advances as on September 30 were at Rs 4.08 lakh crore, up 8% on a y-o-y basis. Retail, agriculture and MSME (RAM) advances accounted for 49.4% of the domestic loan book at the end of September. BoI expects loan growth of 7% in FY21, with much of it being driven by the RAM segment and government-backed accounts.

Deposits increased 17.3% YoY to Rs 6.07 lakh crore at the end of September. The current account savings account (CASA) ratio stood at 39.49% at the end of Q2FY21, lower than 42.35% a year ago.

The lender showed an improvement on the asset quality front in Q2, with the gross non-performing asset (NPA) ratio falling 12 bps sequentially to 13.79%. The net NPA ratio fell 69 bps to 2.89%.

The capital adequacy ratio of BoI, as per Basel-III, stood at 12.8% as on September 30, down from 14.09% a year ago. Its common equity Tier-I (CET-I) ratio was at 9.67%, down from 11% a year ago.

BoI’s shares on the BSE ended 3.01% higher than their previous close at Rs 41.1 on Friday.