The Hindu Business Line : IOB net up 30 pc in Q4

FOCUS ON CORE BANKING: Mr T. S. Narayanasami (right), CMD, Indian Overseas Bank, and Mr A. R. Nagappam, ED, at a press conference in Mumbai on Thursday. - Paul Noronha

Mumbai , April 27

Indian Overseas Bank (IOB) registered a 30.05 per cent increase in its March 2006 quarter net profit at Rs 204.44 crore against Rs 157.21 crore in the year-ago quarter due to growth in interest income.

"Our Net Interest Income (NII) has been progressively growing in the last year. This shows our assets have expanded and that we are intense in the core banking area," said Mr T.S. Narayanasami, Chairman and Managing Director, IOB.

The bank board has proposed a dividend of Rs 2.60 per share of face value Rs 10.

Total income rose to Rs 1,374 crore (Rs 1,165.2 crore). NII increased to Rs 541.09 crore (Rs 478.53 crore). Other income was Rs 221.24 crore (Rs 173.91 crore).

For the fiscal 2005-06, net profit was Rs 783.34 crore (Rs 651.35 crore). Total income was Rs 5,134.48 crore (Rs 4,750.6 crore). NII was Rs 2,067.18 crore (Rs 1,855.52 crore).

Other income fell to Rs 728.21 crore (799.55 crore), due to a decrease of Rs 140 crore in treasury gains.

The ratio of net non-performing assets to total assets was 0.65 per cent (1.27 per cent). The bank recovered Rs 308 crore in 2005-06.

Capital Adequacy Ratio stood at 13.04 per cent (14.21 per cent).

`Cost-effective deposits'

IOB was able to reduce its cost of deposits to 4.69 per cent from 4.74 per cent by focusing on low-cost deposits. Mr Narayanasami said, "If we had gone for bulk deposits, our deposit growth would have been higher, but margins would be lower. We did not want to show higher growth in deposits. We wanted to be cost effective."

Total deposits grew by 14.21 per cent to Rs 50,529.32 crore (Rs 44,241.24 crore). Gross advances grew by 36.1 per cent to Rs 35,759.43 crore (Rs 26,274.13 crore).

The growth in credit was met by offloading its SLR securities, which now form 28.67 per cent of demand and time liabilities against 37.34 per cent last year.

Interest income

Going ahead the bank will focus on core interest income.

"Resources are going to be expensive. We will have to look at avenues that will give better margins, such as loans to traders and consumer loans. We will also cut down on the sub-PLR exposure," Mr Narayanasami said.

The bank has set a target of 25 per cent growth in advances and 20 per cent deposit growth for 2006-07. It has applied for permission to open a branch in Auckland and a representative office in Vietnam.

IOB's shares closed at Rs 98.3 on the Bombay Stock Exchange (BSE) up 3.42 per cent from the previous close of Rs 95.05.

The bank's board will meet on April 30 to consider raising Rs 1,200 crore through perpetual hybrid Tier I capital, upper Tier II subordinated bonds and lower tier II subordinated bonds.

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