‘Bank will not drop lending rates unless deposit rates fell first’.

Our Bureau

Chennai, Oct. 18 A 47 per cent growth in advances helped Indian Bank turn in an operating profit of Rs 532 crore for the quarter ended September – 55 per cent more than in the corresponding quarter of last year.

But provision for depreciation, and tax, took away most of it and the bank was left with a net profit of Rs 283 crore, only 14 per cent higher.

Sources explained that the bank decided to take a part of the deferred tax liability in the second quarter itself, whereas for last year, it was taken only in the final quarter. As a result, ‘tax expense’ rose to Rs 140 crore, compared with Rs 46 crore previously.

Also, the bank provided Rs 247 crore for depreciation (mainly of the value of investments in bonds) as against nil in the corresponding quarter of last year.

Growth in advances reflected in a 34 per cent rise in interest income to Rs 1,688 crore, which also helped buoy net interest margin – to 3.86 per cent compared with 3.23 per cent.

In the first half of year, Indian Bank recovered Rs 253 crore from sour loans and contained fresh build-up of non-performing assets at Rs 142 crore.

At a press conference here on Saturday, the bank’s Chairman and Managing Director, Mr M.S. Sundara Rajan, said the bank would not drop lending rates unless deposit rates fell first.

For dropping interest rates on deposits too, the bank would wait for other bank to do that first, as “our deposit rates are already lower”. Indian Bank pays 10 per cent for a one-year term deposit.

The bank’s capital adequacy ratio fell to 11.27 per cent from 13.85 per cent on September 20, 2007, but Mr Rajan said the bank would not need to raise fresh capital this year.

The bank’s share closed on the National Stock Exchange on Friday at Rs 123.65, or 4.48 per cent (Rs 5.80) lower than the previous close.

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Indian Bank Q1 net up despite higher depreciation

(This article was published in the Business Line print edition dated October 19, 2008)
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