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Oriental Bank of Commerce (OBC) is targeting a 10 per cent increase in net profit for the current fiscal, the bank's Chairman and Managing Director SL Bansal said.
This target is somewhat ambitious in the current economic environment, especially since the public sector lender on Wednesday reported a 14 per cent decline in net profit for 2013-14 at ₹1,139 crore (₹1,328 crore).
But the bank expects support from treasury operations to increase profits by 10 per cent this fiscal.
“For the last two years, we had very little support from treasury operations to bolster our profits. But this year it (this trend) should change and I expect treasury to strongly support our overall profit growth,” Bansal said during a press conference after the announcement of the bank's annual results for the 2013-14 financial year.
NIM flat OBC’s bottomline was pulled down by a sharp rise in provision for income-tax and also depreciation on investments, he said. Net interest margin for the full year stood at 2.78 per cent (2.80 per cent).
“Under difficult circumstances, we have been able to hold on to our net interest margin at 2.78 per cent — almost the same level of last year.” The bottomline for the fourth quarter was “flat” at ₹310 crore (₹308 crore) despite a 46 per cent increase in operating profit, aided by lower cost of deposits.
Tier-II capital The fourth quarter bottomline was weighed down by higher provision on non-performing assets at ₹728 crore (₹499 crore) and provision for taxes at ₹143 crore (minus ₹120 crore), Bansal said.
The Board of Directors has declared a final dividend of ₹3.60 per share. This is in addition to the interim dividend of ₹4 per share.
Bansal said that the bank had headroom to raise tier-II capital and the board had already approved fund mobilisations of up to ₹1,000 crore.
Oriental Bank would raise tier-II capital bonds as and when market conditions are right.
Both the Life Insurance Corporation of India and the Employee Provident Fund Organisation have evinced interest in buying into the tier-II bonds of the bank under the new Basel 3 capital framework, sources said.
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