Bank of India said that its first quarter net profit fell 16 per cent as it set aside more money as a cover against rising bad loans. In the quarter ended June 30, 2014, the bank’s net profit fell to ₹806 crore from ₹964 crore a year earlier.

While the total income at the state-run bank increased 17 per cent to ₹11,329 crore, non-interest income dipped to ₹1,024 crore (₹1,189 crore) during the three-month period.

Vijayalakshmi Iyer, Chairperson and Managing Director, said “… the financial markets are experiencing a very positive outlook, but the fact remains we are yet to witness much improvement at the ground level.”

She added that the loan growth at the bank will remain somewhat subdued at 16-18 per cent this year (against 28 per cent last year).

Bad loans The infrastructure sector, especially iron and steel, continued to pose problems for the bank during the quarter.

These two sectors largely contributed to the bank’s increase in non-performing loans of about ₹3,119 crore in the April-June quarter. Gross non-performing assets as a percentage of total loans increased to 3.28 per cent (₹12,532 crore) from 3.04 per cent (₹9,413 crore).

The bank set aside ₹893 crore as cover against potential bad loans during the quarter, against ₹695 crore a year ago.

Iyer said the bank will “endeavour” to bring down its gross non-performing assets to under three per cent of total loans and net non-performing assets to under two per cent (2.14 per cent as on June 30, 2014) during the course of the year.

She cited the improving economy, expected credit pick-up from October and better recovery/monitoring mechanisms put in place by the bank as factors that will help the bank achieve the target.

The bank, Iyer said, will continue to focus on lending more to the retail, and small and medium enterprise segments during the year.

Shares of the Mumbai-based bank closed at ₹280.95 apiece, down 0.86 per cent on the BSE.

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