Indian Overseas Bank

Indian Overseas Bank has reported faded results for the quarter ended December 11 with 53% dip in the Net Profit over marginal 8% increase in NII at Rs 1221.57 crore. Modest growth in other income by 17% was offset by 390 bps jump in the cost to income ratio there by moderating growth in Operating Profit by 2% to Rs 822.36 crore. Spike in the provisions by 86% to Rs 667.48 crore on the back of sharp spike in provisions on restructured assets and depreciation on investments pulled the sheen of the profitability.

Asset Quality:

• Gross NPA has increased 22% y-o-y and 2% q-o-q to Rs 1299.74 crore at end of December 11. The slippages during the quarter were Rs 686 crore while the cash recover was Rs 173 crore, up gradation Rs 112 crore and Write off Rs 327 crore. Slippages from 2 big accounts constituted Rs 274 crore in the quarter under review. Net NPA has declined 13% q-o-q and 14% y-o-y to Rs 1299.74 crore in the quarter under review.

• %GNPA improved to 3% against 3.26% a year ago and 3.07% a quarter ago. %NNPA improved to 1.23% against 1.51% a year ago and 1.21% quarter ago. The provision coverage ratio stood at 71.70% at end of December 11. The bank has created counter cyclical provisioning buffer of Rs 564.06 crore at end of December 11 against total requirement of Rs 811 crore as on end of September 10. The Bank is in the process of building up the balance amount.

• The Bank has restructured Rs 3216 crore of advances in the quarter under review while Rs 313 crore of advances were repaid taking the outstanding restructured assets to Rs 10082 crore at end of December 11. Slippages of the restructured book were to the tune of Rs 177 crore in the quarter under review. Of the above outstanding restructured assets Rs 9712 crore were Standard assets and Rs 202 crore substandard assets while Rs 168 crore were doubtful assets. The major account restructured in the quarter was GTL amounting to Rs 1000 crore.

• The Break up of restructured assets in different sectors is as follows: Textile Rs 909 crore, Iron and Steel Rs 834 crore, Power Rs 966 crore, Aviation Rs 129 crore, Telecom Rs 1222 crore, Trade Rs 1342 crore and SME Rs 691 crore.

Business Highlights:

• Business of the bank has improved 33% y-o-y and 4% q-o-q to Rs 299555 crore at end of December 11.

• Advances grew 32% y-o-y and 4% q-o-q to Rs 132549 crore of which domestic advances grew 30% to Rs 117373 crore at end of December 11. Agri credit grew 27% to Rs 17745 crore and that of SME grew 31% to Rs 17163 crore and Retail by 23% to Rs 8951 crore. The un availed limits in hand were to the tune of Rs 33290 crore.

• Deposits grew 34% y-o-y and 2% q-o-q to Rs 167006 crore at end of December 11. CASA deposits grew 13% to Rs 43676 crore mainly driven by CA deposits by 23% to Rs 33376 crore. On the other hand SA deposits grew 10% to Rs 10300 crore. CASA ratio stood at 26.15% against 30.97% in the corresponding previous quarter.

• Credit to deposit ratio has slipped to 79.37% against 80.60% in the corresponding previous quarter.

• Average cost of deposits increased to 7.31% against 5.59% a year ago and 7.17% a quarter ago. Yield on advances grew 10.81% against 10.91% a quarter ago and 9.77% a year ago.

• NIM stood at 2.61% against 2.86% a quarter ago and 3.27% a year ago.

• Investment book stood at Rs 54324 crore with duration of 5.23 years at end of December 11. SLR securities constituted major Rs 48281 crore of the total investment book. Yield on investment improved to 7.35% against 7% a year ago and 7.10% a quarter ago.

• Capital Adequacy ratio stood at 10.89% with Tier I of 6.68% at end of December 11 against 12.43% with tier I of 7.02% in the quarter ended September 11. Total capital funds of the bank improved to Rs 15137 crore at end of December 11 against Rs 12582 crore in the corresponding previous year.

• Business per employee stood at Rs 11.55 crore in the quarter ended December 11 against Rs 11.58 crore a quarter ago and Rs 8.61 crore a year ago.

• RoA stood at 0.21% against 0.60% a year ago and 0.42% a quarter ago. ROE declined to 5.63% against 11.07% a quarter ago and 13.83% a year ago.

• Book Value per share stood at Rs 124.90 at end of December 11 against Rs 125.13 in the corresponding previous year.

• Domestic network of branches stood at 2373 and ATM's at 1344 at end of December 11.

Quarterly Performance:

For the quarter ended December 11, the bank has reported 48% jump in the interest earned at Rs 4604.26 crore, thanks to the 55% jump in the interest on advances at Rs 3512.94 crore and 34% increase in the income from investments at Rs 1012.82 crore. The bank has took NPV hit of Rs 180 crore on the back of restructuring GTL account in the quarter under review. The interest income reversal of Rs 75 crore happened in the quarter. Thanks to the spike in the cost of deposits, Interest earned outgrew interest earned by 72% to Rs 3382.69 crore, there by curtailing growth in NII to just 8% at Rs 1221.57 crore.

The core fee income grew 47% to Rs 237 crore while that of profit on sale of investment grew 52% to Rs 35 crore and other non interest income grew 33% to Rs 118 crore. However, 73% dip in the recovery in written off accounts at Rs 21 crore had resulted other income up 17% to Rs 411.07 crore. Net Total income grew 10% to Rs 1632.64 crore.

The employee cost grew 13% to Rs 545.80 crore and the other expenses grew 37% to Rs 264.48 crore and led total operating expenses up 37% to Rs 810.28 crore. Cost to income ratio has jumped up 390 bps to Rs 49.6% and moderated growth in Operating Profit up 2% to Rs 822.36 crore. Further, driven by the huge restructuring during the quarter, provisions and contingencies jumped up 86% to Rs 667.48 crore. Provisions for restructured assets amounted to Rs 214 crore in quarter under review against Rs 5 crore in the corresponding previous year and provisions on depreciation on investments jumped up 118% to Rs 84.2 crore and that of Standard advances grew 461% to Rs 56.7 crore. On the flipside, provisions on NPA's declined marginally 2% to Rs 294.9 crore. Further, provisions on taxation slipped 78% to Rs 46.61 crore and led Net Profit down 53% to Rs 108.27 crore.

YTD Performance:

For the nine months ended December 11, the bank has reported 18% dip in the Net Profit at Rs 521.31 crore on the back of 23% jump in NII at Rs 3675.59 crore. Strong 40% increase in the other income at Rs 1177.43 crore coupled with 300 bps dip in the cost to income ratio at 47.8% has led Operating Profit up 34% to Rs 2531.79 crore. However, sharp jump in total provisions by 73% to Rs 2010.48 crore has pulled down growth in the Net Profit.

Indian Overseas Bank: Financial Results