Money & Banking

Oriental Bank’s Q4 net up 5.24% on lower deposit cost

| | Updated on: Apr 29, 2011
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Aided by lower cost of deposits and tax breaks from higher NPA (non-performing asset) provisioning, Oriental Bank of Commerce (OBC) on Friday reported a 5.24 per cent increase in net profit for the quarter ended March 31, 2011, at Rs 333.66 crore (Rs 317.04 crore).

Total income for the quarter under review increased by 19.70 per cent to Rs 3,532.14 crore (Rs 2,950.90 crore). Net interest income grew 2.42 per cent to Rs 1,013 crore (Rs 989 crore).

For the fiscal 2010-11, OBC's net profit recorded 32.45 per cent increase to Rs 1,503 crore (Rs 1,135 crore). The board of directors recommended a dividend of 104 per cent (Rs 10.4 per share of Rs 10 each) for 2010-11. OBC had paid a dividend of 91 per cent on equity shares for 2009-10. .

Net interest margin (NIM) of the bank as at end March 2011 stood at 3.18 per cent from 2.56 per cent in end-March 2010. The NIM was boosted by a 50 basis point drop in cost of deposits and a 12 basis point increase in yield on advances.

“Our better performance on the NIM front has been income led. The cost of deposits coming down also helped. For 2011-12, our NIM guidance is we want to maintain it (NIM) above 3 per cent”, Mr Nagesh Paydah, Chairman and Managing Director, OBC told reporters here soon after the board adopted financial results for 2010-11.

It was pointed out that OBC had moved to the base rate system during 2010-11. “Earlier our short-term loans were much below PLR. Short-term loan has now been shelved completely. We are not giving any loan below base rate of 9.5 per cent”, a senior OBC official said. The average interest bearing assets of the bank had seen an increase of close to Rs 19,000 crore during 2010-11.

For the current fiscal, OBC will look at achieving deposit growth of 22 per cent and credit growth of 25 per cent, Mr Paydah said. With the bank

OBC has also now migrated to system identification of NPAs in line with Government guidelines. This had called for some additional provisioning towards NPAs.

“We had handsome profits in 2010-11 and so there was an opportunity for us to liberally provide for the NPAs. Even borderline cases were recognised as NPAs. I always believe that when you are in doubt, it is better to disclose (as NPAs) and also provide for it”, Mr Paydah said.

The NPA provision for 2010-11 stood at Rs 934.37 crore as compared with Rs 531.60 crore for the previous year. On capital raising plans, OBC is not looking to raise capital immediately as it had recently got about Rs 1,740 crore capital infusion from the Government.

Mr Paydah later told Business Line that OBC is in the process of launching a co-branded credit card with Punjab National Bank (PNB).


Published on April 30, 2011

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