The Hindu Business Line : Bank of India Q3 net doubles on higher income

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Bank of India Q3 net doubles on higher income

Windfall gains in treasury and substantial rise in interest income help

Paul Noronha

Mr T. S. Narayanasami, CMD, Bank of India –

Our Bureau

Mumbai, Jan. 22 Bank of India’s net profits increased by a whopping 101 per cent for the quarter ended December 31, 2007 at Rs 512 crore against Rs 255 crore in the same quarter last year. This is the second quarter in a row that Bank of India has seen over 100 per cent growth in its profits.

Apart from substantial increase in net interest income, the bank had a significant rise in other income.

Mr T.S. Narayanasami, Chairman and Managing Director, Bank of India, said, “We have seen windfall gains in treasury in this quarter, which has added to our other income. About 80 per cent of this is from equities, while the rest is from debt. Other components of other income include fee-based income related to core banking such as commission on guarantees and letters of credit and recovery in written-off accounts.”

Fee-based income was Rs 273 crore (Rs 187 crore) and income from recovery in written-off accounts was Rs 75 crore (Rs 15 crore).

The bank managed to improve its net interest margin to 3.24 per cent from 3 per cent. Deposits grew over 27 per cent and advances grew by almost 30 per cent.

The share of low cost deposits, CASA (current account savings account) is now approximately 37 per cent, down from about 39 per cent last year.

“When credit grows banks need volumes and, therefore, have to depend on bulk deposits to raise resources. As a result the CASA proportion goes down. This is the case for the industry as a whole. While CASA helps in cutting costs, it does not create volumes,” Mr Narayanasami said. The capital adequacy ratio is 12.54 per cent (11.76 per cent).

About the bank’s proposed QIP issue, Mr Narayansasami said. “We must get a fair price and fair premium. So, we may have to wait a little longer for the QIP. If the market revives then we can do our QIP issue even in this quarter, hopefully before the end of February,” he said.

According to banking analyst, Bank of India has managed to improve its margins in spite of growth in volumes. “Its fee income is comparable to any private bank,” the analyst said.

Shares of Bank of India closed at Rs 391.35, up 2.5 per cent from the previous close of Rs 381.8 on the BSE on Tuesday.