Indian Overseas Bank (IOB) has reported a turnaround in its operations as the Chennai-headquartered PSB posted a net profit of ₹144 crore (includes the extraordinary income of ₹53 crore) for the quarter ended March 31, 2020, compared with a net loss of ₹1,985 crore in the year-ago quarter.

The bank has recorded a profit after reporting a net loss for 18 quarters. While the bank’s net NPA has dropped below 6 per cent in the past two quarters, it has reported net profit for March 2020 quarter, indicating the possibilities of coming come out the RBI’s PCA framework soon.

“Higher operating profit and lower provisions have helped post a strong net profit in March 2020 quarter. It is a great turnaround and landmark event for the bank as several initiatives taken in recent months have helped,” said Karnam Sekar, Managing Director & CEO of IOB.

Operating profit of the bank grew by 6 per cent to ₹1,197 crore against ₹1,131 crore in the year-ago quarter. Interest income was lower at ₹4,442 crore (₹4,556 crore), while non-interest income was higher at ₹1,095 crore (₹917 crore).

Provisions and contingencies were lower at ₹1,060 crore (₹4,502 crore)

Gross NPA declined to ₹19,913 crore with ratio of 14.78 per cent as on March 31, 2020, against ₹33,398 crore with ratio of 21.97 per cent a year-ago.

Total recovery was ₹5,386 crore in Q4 of FY20, while the total fresh slippage for the same period stood at ₹1,350 crore.

Net NPA was contained at ₹6,603 crore with ratio of 5.44 per cent of March 31, 2020, against ₹14,368 crore with ratio of 10.81 per cent a year ago.

Provision coverage ratio improved to 86.94 per cent as March 31, 2020, against 71.39 per cent a year ago.

IOB believes growth in retail advances and management of NPAs will help the bank sustain its profitability going forward.

While the bank doesn’t expect any further stress on the corporate loan side, it claims to have a strong hold on the RAM segment – retail, agriculture and MSME. But it expects Q1 and Q2 of this fiscal to be muted.

Its net interest margin was 2.30 per cent in Q4 of FY20, and the bank aims to take it to three per cent in the future. It had a capital infusion of ₹4,360 crore from the government during Q4.

“IOB will emerge as a strong PSB in future. The bank has learnt its lessons in the last 4-5 years and will devise right strategy to grow stronger,” said Sekar.

Published on June 25, 2020

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