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Indian Overseas Bank’s prospect to exit RBI’s PCA (prompt corrective action) brightened further as the Chennai-headquartered public sector bank exhibited an impressive performance for the December 2020 quarter with good profit and improvements in asset quality.
IOB was brought under RBI’s PCA programme, which put several restrictions in September 2015, after reporting high levels of bad loans. With various efforts in recent years, the bank managed to trim losses and contain slippages, even as capital infusion by the Government of India aided the bank’s turnaround.
It has now reported a good net profit for the fourth quarter in a row, while asset quality has also been improving quarter-on-quarter basis. Thus, with improved parameters, chances are bright the bank will move out of the RBI’s PCA framework soon.
For the quarter ended December 31, 2020, IOB reported a net profit of ₹213 crore against a net loss of ₹6,075 crore in the year-ago quarter, driven by higher non-interest income and lower provisions.
Operating profit of the bank more than doubled to ₹1,731 crore from ₹762 crore.
Gross NPA as of December 31, 2020, stood at 12.19 per cent against 17.12 per cent as on December 31, 2019. The net NPA dropped to 3.13 per cent from 5.81 per cent in December 2019 quarter.
“Now, IOB has been generating profits continuously for the past four quarters, and the quantum of profit is also increasing. In Q3, too, there were marked improvements in all parameters. There was perceptible reduction in gross and net NPAs. Also, provision coverage ratio improved to 91.91 per cent, one of the best in the banking industry. In a nutshell, IOB has performed well and will continue to show good results,” said Partha Pratim Sengupta, Managing Director & CEO of IOB.
Interest income fell to ₹4,244 crore (₹4,352 crore in Q3 of FY20), while non-interest income was 83 per cent higher at ₹1,543 crore (₹846 crore). Total income stood at ₹5,787 crore (₹5,198 crore).
Total recovery, including technical write-off, stood at ₹1056 crore, slightly higher than its collection target of ₹1,000 crore for the quarter.
Gross advances stood at ₹1,37,469 crore (₹1,38,643 crore as on December 31, 2019). The bank has evolved a policy of not taking fresh exposures in stressed sectors.
With expected restructuring of ₹2,000 crore worth of accounts in Q4, the total restructured assets are estimated at ₹3,000 crore in FY21, about 2.5 per cent of the book. About ₹18,000 crore worth of assets await NCLT resolutions. Any positive outcome will add to the bottom line of the bank.