Money & Banking

IOB’s profitable march: Asset quality improves further in Q1

Our Bureau Chennai | Updated on August 04, 2021

Lender reported y-o-y net of ₹327 cr on higher operating profit, lower provisions

Indian Overseas Bank (IOB) continued its profitable growth journey as the Chennai-headquartered public sector bank reported a net profit of ₹327 crore for the quarter ended June 30, 2021 compared to a net profit of ₹121 crore in the year-ago quarter, helped by higher operating profit and lower provisions. The bank’s operating profit grew to ₹1,202 crore in June 2021 quarter as against ₹1,094 crore in the corresponding period last year, on account of reduction in interest expenditure and higher non-interest income.

Drop in income

Total income stood at ₹5,155 crore as compared to ₹5,234 crore. Interest income fell to ₹4,063 crore (₹4302 crore in Q1 of last fiscal), while non-interest income was higher at ₹1,092 crore (₹932 crore).

Provisions and contingencies were lower at ₹868 crore (₹970 crore). Slippages stood at ₹1,159 crore during Q1 of this fiscal.

“Some slippages are sudden due to the impact of second wave as cash flow was affected. However, cash recoveries are also higher. We recovered ₹1,125 crore in Q1. With better recoveries and provisioning coverage ratio, we don’t expect any impact on profitability if there are some unexpected slippages in the coming quarters,” said Partha Pratim Sengupta, MD & CEO of the bank.

Gross NPA declined to ₹15,952 crore as of June 2021 quarter when compared with ₹18,291 crore in June 2020 quarter and ₹16,323 crore in March 2021 quarter. Gross NPA ratio fell to 11.48 per cent from 13.90 per cent in the year-ago quarter and 11.69 in the year-ago quarter. Net NPA ratio stood at 3.15 per cent, down from 5.10 per cent in Q1 of last fiscal and 3.58 per cent in Q4 of FY20.

Also read: The turnaround story of Indian Overseas Bank

Its provision coverage ratio improved to 91.56 per cent from 87.97 per cent in the June 2020 quarter and 90.34 per cent in March 2021 quarter. IOB hopes to recover about ₹4,500 crore during this fiscal and of which it has already recovered ₹1,100 crore in the first quarter. “The bank’s request to move out PCA (Prompt Corrective Action) framework is under consideration by RBI and we have answered all queries relating to this. RBI will be looking at other aspects to take a call,” added Sengupta.

Deposits increased to ₹2,42,941 crore in Q1 of this fiscal when compared to ₹2,25,546 crore in year-ago quarter, while gross advances stood at ₹1,38,944 crore as compared to ₹1,31,565 crore. IOB will also be focusing on growth in advances this fiscal. It will focus on lending to select corporates in addition to traditional segments. “Our capital position is also comfortable as of now,” he added.

The bank has restructured ₹4,400 crore worth of accounts and expects another ₹3,000 crore worth of restructuring in the coming quarters.

Published on August 03, 2021

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