Bank of India's second quarter net profit rose, but missed analysts' estimates.
The lender's standalone net profit increased 52% to Rs 1,458 crore in the quarter ended September, according to an exchange filing on Saturday. This compares with the Rs 1,650-crore consensus estimate of analysts polled by Bloomberg.
The rise in net profit was due to a drawdown in provisions during the quarter, as they fell 57% year-on-year to Rs 818 crore on account of standard and sub-standard assets, Chief Executive Officer and Managing Director Rajneesh Karnatak said, in a post-earnings press briefing.
Sequentially, the net profit dropped 6%.
The net interest income, or core income, rose to Rs 5,740 crore, up 13% year-on-year. Other income, too, increased 19% year-on-year to Rs 1,687 crore during the reporting period.
The public lender's overall net interest margin remained flat at 3.04% on a quarterly basis. In the September quarter last year, the NIM stood at 3.08%. The domestic NIM, however, rose 10 basis points to 3.47% on a sequential basis during the quarter.
"Despite pressures, higher yield on advances would help us to bring the net interest margin below 3%, going forward," Karnatak said. The target for net interest margin is 3.35%, due to "hardening interest rate scenario", he said.
Global NIM is seen around 3.01-3.03% by the end of FY24.
The bank's yield on advances ratio improved to 8.54% in the quarter ended September, from 8.10% in the previous quarter. A year ago, the ratio was at 7.21%.
Asset quality for the lender also improved in the reporting quarter, with gross non-performing asset ratio falling 83 basis points quarter-on-quarter to 5.84%. Net NPA ratio also fell 11 basis points to 1.54% on a sequential basis.
"Aggressive recovery practices would help the bank to maintain GNPA ratio below 6%," Karnatak said. The net NPA ratio is expected to fall below 1.2%.
The bank's slippage ratio stood at 0.34% as of Sept. 30, down 19 bps from the previous quarter.
In the September quarter, fresh slippages stood at Rs 1,560 crore, down 34% on a sequential basis. Of these, corporate slippages registered the largest fall of 41% on a quarterly basis to Rs 218 crore. This was followed by a drawdown in slippages in retail as well as MSME sector.
Recoveries and upgradations were at Rs 1,638 crore, and loan write-off stood at Rs 2,876 crore as on Sept. 30.
The bank's provision coverage ratio improved by 62 bps year-on-year to 89.58% as on Sept. 30. While overall provisions boosted net profit, provisions against bad loans rose 2% year-on-year during the quarter to Rs 677.9 crore. "Legacy NPAs have been provided for," Karnatak said.
The lender's gross advances increased by 10% year-on-year to Rs 5.43 lakh crore in the September quarter, driven by a 12% growth in retail, agriculture and MSME advances. The advances constitutes over half of the bank's total loans. Further, the deposits rose 8.68% year-on-year to Rs 7.03 crore in the September quarter.
"We have a healthy pipeline of Rs 70,000 crore, out of which Rs 14,000 crore is deployed for RAM... Good traction in corporate loans in sectors is helping credit growth," Karnatak said.
"Channel financing, co-lending, pool purchases would drive the credit growth of 11-12% by the end of the year... We are seeing good traction in refinancing in power sector," he added.
Bank of India's CASA ratio stood at 43.13% as on Sept. 30.
The bank's advances to priority sector also grew by 9.25% year-on-year, meeting the Reserve Bank of India's priority sector lending target of deploying 40% of the bank credit towards the segment. Bank of India's advances to priority sector stood at 42.95% as on Sept. 30, driven by agricultural advances.
The bank's credit cost improved to 0.54% in the September quarter, as against 0.60% a year ago.
Bank of India's capital adequacy ratio stood at 15.63%, with CET-1 ratio at 12.60% as on Sept. 30.
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