The Hindu Business Line : Bank of India net rises 69% on all-round growth

Mumbai, April 30 Bank of India saw its net profit rise by 69 per cent to Rs 757 crore for the quarter ended March 31, 2008, from Rs 447 crore in the same quarter last year.

The rise in profits was aided by healthy growth in interest and other income and by recovery from written off assets.

For the full year 2007-08, BoI’s net profit grew by 79 per cent to touch Rs 2,009 crore. The bank has proposed a dividend of Rs 4 per share for the just ended fiscal.

In the fourth quarter 2007-08, the net interest income was Rs 1,217 crore (Rs 968 crore).

Other income was Rs 653 crore (Rs 577 crore). For the year 2007-08, cost of funds increased to 5.07 per cent (4.32 per cent) and yield on advances touched 9.34 per cent (8.51 per cent).

Net interest margin was lower marginally at 2.95 per cent (2.99 per cent). “We have to live with a lower NIM. We have to be equally bullish on non-interest income,” Mr T.S. Narayanasami, Chairman and Managing Director..

In 2008-09, the bank has set a target of Rs 125 crore as revenue from third party products as part of its strategy to focus on other income. The proportion of low cost CASA deposits (current account savings account) to total deposits fell to 36 per cent (40 per cent).

Income from recovery in written off accounts was Rs 129 crore (Rs 115 crore). The profit from sale of securities was at Rs 60 crore (Rs 48 crore).

Currency derivatives

The marked-to-market losses of the customers on account of currency derivatives transactions stand at about Rs 125 crore.

The bank has 34 customers for currency derivatives and has transacted 74 deals. “We don’t foresee any defaults on this account as these are corporate customers whom we service regularly,” Mr Narayanasami said.

The bank has made a provision of $5 million in the fourth quarter for its exposure to overseas credit derivatives instruments. In the current fiscal, the bank is looking to contain credit expansion at 20 per cent and will focus on non-interest income, said Mr Narayanasami.

In the current fiscal, the bank will look at overseas acquisition, in West Asia or Africa, which will help increase its visibility.

“We will look at an acquisition which is not capital intensive,” he said. Overseas operations of the bank currently form 17.5 per cent of the net profit.

While saying that there is no immediate reason to hike lending rates, Mr Narayanasami said that banks may look at cutting down deposit rates, if the interest rate scenario, particularly the yields on the 10-year government security, remain at current levels.

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