Bank of India to raise Rs 8,000 crore to boost growth amid NPA clean-up

Beena Parmar, Aug 09, 2017

State-owned Bank of India plans to augment its capital by Rs 8,000 crore this year to boost growth amid the bad loan clean-up. The bank has asked for Rs 2,500 crore capital from the government for this fiscal year and its plans to raise balance amount from the capital market and by selling non-core assets, MD and CEO Dinabandhu Mohapatra told media after the bank announced Q1FY18 results.
This week, the bank already put out an RFP (request for proposal) to sell its 30 percent stake in STCI Finance, a non-deposit taking finance company where it expects to earn at least Rs 626 crore.
Mohapatra expects to finalise the process for the stake sale by this month and said he has identified more assets to sell this quarter but refrained from sharing more details due to price sensitivity.
Bank of India reported a turnaround in its net profit of Rs 87.7 crore for the June quarter 2017 as compared with Rs 741 crore net loss posted a year ago.
The profit, Mohapatra said, was due to better recoveries of bad loans, lower slippages and earnings from treasury operations.
While the lender's net interest income (difference between income earned and expended) fell 8 percent to Rs 2,533 crore, it's non-interest income including income from fee and distribution income, commission from cross-selling third party products and treasury operations rose 30 percent to Rs 1611 crore.
Its gross NPA ratio to total loans improved marginally to 13.05 percent from 13.22 percent in March and 13.38 percent from a year ago.
The bank’s total stressed assets ratio also improved a tad to 16.03 percent from 16.12 percent in March and 16.47 percent in June quarter last year.
Stressed assets includes gross non-performing and restructured loans.
Insolvency accounts
The bank has exposure of Rs 8,200 crore to 10 out of the 12 large accounts referred to the insolvency court. Towards the accounts, the bank will make Rs 915 crore provisions in coming three quarters.
In total, Bank of India has exposure of Rs 12,000 crore towards 36 loan accounts (including the 10 accounts above) admitted to the National Company Law Tribunal under the Insolvency and Bankruptcy Code.
"We have provided 60 percent for most of those loans and 100 percent in some cases," Mohapatra said.
The bank's net interest margin declined to 1.99 percent from 2.2 percent a year ago. The dip in net interest margin was mainly because total advances portfolio remain flat on a year on year at Rs 3.9 lakh crore. The deposit base rose 9 percent to Rs 7.06 lakh crore as on June 2017.
The slippages from standard loan category into non-performing assets was at Rs 4,037 crore against Rs 6,233 crore a year ago.
The recoveries of bad loans also improved to Rs 1360 crore against Rs 970 crore a year ago.
Mohapatra targets 8-10 percent growth in both credit and deposit base with a focus on retail growth in addition to upgradation and resolution of bad loans.

Reference

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