New BoI chief splashes red ink all over, net loss at Rs 1126cr

State-run Bank of India today reported a massive net loss of Rs 1,126 crore for the quarter to September, as against a net profit of Rs 786 crore a year ago, as its bad loans more than doubled to 7.55 per cent which pushed up its provisions more than trebled.

The city-headquartered lender's gross non-performing assets more than doubled to 7.55 per cent of total loans from 3.54 per cent in the same period last fiscal, while net NPAs nearly doubled to 4.31 per cent from 2.32 per cent a year ago.

Similarly, the bank saw more and more assets turning bad during the quarter with fresh slippages more than doubling to Rs 6,251 crore from Rs 2,971 crore a year ago.

These sets of red marks come even as the bank improved its margins and lowered its bulk deposits with net interest margin improving from 2.27 per cent in March 2015 to 2.77 per cent in September 2015. The bank did not share the y-o-y NIM.

The rot was more visible as the bank's asset had a negative growth -- 0.88 per cent during the quarter while on an average public sector banks have reported around 10 per cent uptick in advances.

"The bank made provisions for bad and doubtful debt worth Rs 3,036 crore in Q2 against Rs 792 crore a year ago," its newly-appointed managing director and chief executive Melvin Rego told reporters here this evening.

The bank also made higher provisions for pension liability at Rs 353 crore during the period under review, which was based on revised data provided by LIC in which the life expectancy has gone up to 81 years from 75 years earlier.

Total provisions, excluding taxes, more than trebled to Rs 3,237 crore in the second quarter as against Rs 963 crore in the year-ago period, he said.

Net interest income stood at Rs 3,020 crore, and other income stood at Rs 778 crore during the reporting period.

Rego said total income came down to Rs 11,318 crore in the quarter under review from Rs 12,099 crore in the corresponding period last fiscal.

The low-cost Casa of the bank improved to 31.22 per cent from 28.40 per cent. "I would like to mention that CRAR, provision coverage ratio, net interest margin and CASA ratios have shown significant improvement," he said.

Provision coverage ratio has increased from 52 per cent in March 2015 to 55 per cent in September 2015. Due to shedding of high cost deposits, the net interest margin on domestic advances has, in fact, increased from 2.27 per cent in the March 2015 to 2.77 per cent in the September 2015, which means an increase of 50 bps.

Talking about the bank's future plans, he said "looking ahead, the bank would be adopting a three pronged strategy. The first and primary focus would be on NPA management for which a plan has been chalked out. The second would be on further augmentation of CASA from 31 per cent now to 35 per cent in the next one year.

"The third focus area would be on re-balancing of portfolio in favour of retail assets to reduce concentration risk. Currently, the corporate portfolio is 55 per cent and retail portfolio is 45 per cent," Rego who joined the bank from IDBI Bank said.

"The bank proposes to reverse the percentages with retail advances accounting for 55 per cent. This would be done over a period of two years," he said.

The bank is planning to sell its non-core assets in future. "From a medium term perspective, we would be examining selling of non-core assets and diluting strategic investment. In the medium term we will be closely looking at our subsidiaries and associates," he said.

"The credit growth of the bank stood at a negative 0.88 per cent in the period under review. But Rego said the bank is looking at credit growth at 10 per cent on annual basis by March," he said.