Indian Overseas Bank Q2 net loss widens

Public lender Indian Overseas Bank on Monday reported widening of net loss to Rs 2,253.64 crore for the second quarter ended September 30, 2019, on account of rise in operating expenses as well as provisions.

"The bank had posted net loss of Rs 487.26 crore during the same quarter last year," Indian Overseas Bank (IOB) said in a filing to the Bombay Stock Exchange (BSE).

For the quarter ended September 2019, the lender logged total revenue of Rs 5,024 crore as compared to Rs 5,348.35 crore during the same quarter last year.

The operating profit of the bank decreased to Rs 746.01 crore as against Rs 1304.19 crore in the corresponding quarter last year.

The Chennai-headquartered bank provided for Rs 2,996.04 crore towards provisioning and contingencies during September quarter of this fiscal, versus Rs 2,016.60 crore in the year-ago quarter.

The public sector lender's net interest income (NII), which is the difference between interest earned and interest expended, decreased marginally to Rs 4275.65 crore in Q2FY20 versus Rs 4,283.74 crore in Q2FY19, Indian Overseas Bank said.

Non-interest income or other income increased to Rs 748.35 crores in Q2FY20 from Rs 1,064.61 crores in Q2FY19.

On the asset front, gross non-performing assets (NPA) as a percentage of advances declined to 20 per cent versus 24.73 per cent in the year-ago quarter. Net NPAs also slipped to 9.84 per cent in the second quarter from 14.34 per cent in the year-ago period.

During July-September quarter, gross NPA in absolute term stood at Rs 28,673.95 crore as against Rs 37,109.96 crore during Q2FY20.

Ahead of Q2 earnings, shares of Indian Overseas Bank closed 9.81 per cent higher at Rs 11.98 apiece on the Bombay Stock Exchange on Monday.

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Indian Overseas Bank (IOB) Q1 result, loss narrows

State-owned Indian Overseas Bank (IOB) on Tuesday reported narrowing of its net losses to Rs 342.08 crore in the first quarter ended June 30.

Reduction in net loss was mainly due to lower provisioning and improved recovery, IOB said. The Chennai-based lender had posted a net loss of Rs 919.44 crore during the corresponding quarter of the previous financial year.

Its total income fell 6 per cent to Rs 5,006.48 crore in the three months to June of 2019-20 as compared with Rs 5,326.71 crore in the year-ago period, the lender said in a regulatory filing. The bank’s interest income grew 2.07 per cent to Rs 4,336.39 crore during the quarter, however, the non-interest income was down by 38 per cent to Rs 670.09 crore.

Even as the bank brought down its bad asset ratio, it remained elevated with the gross non-performing assets (NPAs) standing at 22.53 per cent (Rs 33,262 crore) of the gross advances at the end of June 2019, as against 25.64 per cent (Rs 38,146 crore) a year ago. Net NPAs or bad loans were 11.04 per cent (Rs 14,174 crore), down from 15.10 per cent (Rs 19,642 crore).

A fall in NPA proportion led to lowering in NPA provisions and contingencies at Rs 1,170.24 crore for the first quarter ended June, compared with Rs 2,051.03 crore parked aside for the corresponding period a year ago. IOB said it made a total recovery of Rs 2,238 crore during the June quarter, as against Rs 3,389 crore a year ago, while the total fresh slippage (other than debits to existing NPA accounts) stood at Rs 2,050 crore.

“Recovery achieved is higher than slippages during the quarter mainly due to focused efforts towards recovery. The bank has evolved a policy of not taking fresh exposures in stressed sectors, below hurdle rated accounts and BB and below rated accounts,” the bank said. IOB said it has also exited from accounts in stressed sectors and has rebalanced its credit portfolio with focus on RAM -- retail, agriculture and MSME (micro, small and medium enterprises).

Its total business stood at Rs 3.69 lakh crore as on June 30; total deposits were Rs 2.21 lakh crore. Gross advances stood at Rs 1.47 lakh crore by the end of the June quarter, down from Rs 1.51 lakh crore a year ago, as part of consolidation and reducing concentration risk, the lender said.

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Indian Overseas Bank(IOB) net loss slips 45%in Q4

Indian Overseas Bank’s (IOB) net loss for the quarter ended March 31, 2019, narrowed by 45 per cent to ₹1,985 crore, against ₹3,607 crore recorded during March 31, 2018.

In a press statement, the company attributed the loss in FY 19 to NPA provisioning.

Asset quality of the bank improved during the quarter.

Gross NPA during the quarter ended March 2019 stood at ₹33,398 crore (21.97 per cent of the total advances), against ₹38,180 crore (25.28 per cent) recorded during the same period last year. Net NPA ratio also improved to 10.81 per cent as of March 31, 2019, from 15.33 per cent recorded for the corresponding period previous year. In absolute terms, net NPAs reduced to ₹14,368 crore (₹20,400 crore) year-on-year as on March 2019.

Total recovery during Q4 FY19 stood at ₹4,102 crore, while fresh slippages for the quarter accounted for ₹1,402 crore.

Recovery

The bank has referred cases worth ₹18,400 crore to National Company Law Tribunal (NCLT) and expects to recover about ₹6,299 crore this year, of which, about ₹3,000 crore of recovery is expected this quarter, a senior bank official said.

Operating profit of the bank marginally improved to ₹1,132 crore (₹1,129 crore) for the quarter ended March 2019.

On a yearly basis, operating profit grew at a healthy 38.71 per cent to ₹5,034 crore as on March 2019, against the ₹3,629 crore profit it clocked a year earlier.

Total income for the quarter stood at ₹5,474 crore (₹5,814 crore) on y-o-y basis as on March 2019, while interest income during the period witnessed a marginal drop at ₹4,556 crore (₹4,828 crore).

Gross advances on yearly basis stood at ₹1,51,966 crore as on March 2019 (₹1,50,999 crore).

The bank has rebalanced the credit portfolio to focus on retail, agri and MSME (RAM), which contributed 67.20 per cent as on March 2019, up from 66.14 per cent during March 2018.

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Two Regional Rural banks going to amalgamate

Indian Bank, on Friday, said the Department of Financial Services, Ministry of Finance, has issued a notification for amalgamation of Pallavan Grama Bank (sponsored by Indian Bank) and Pandyan Grama Bank (sponsored by Indian Overseas Bank) in Tamil Nadu into a single Regional Rural Bank.

The new bank will be called Tamil Nadu Grama Bank, with its head office at Salem, under \the sponsorship of Indian Bank.

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Indian Overseas Bank(IOB) Q3 loss narrows by 64%

Indian Overseas Bank (IOB's) net loss for the quarter ended December 31, 2018 contracted by 64.37 per cent to Rs 346.02 crore from Rs 971.17 crore for the quarter ended December 31, 2017.

Total income was up 12.39 per cent to Rs 5,689 crore from Rs 5,062 crore in the year-ago quarter.

Gross NPA stood at Rs 35,787 crore (23.76 per cent of advances) as against Rs 33,267 crore (21.95 per cent) as on December 31, 2017.

Total recovery was up 23.24 per cent to Rs 3,723 crore achieved for quarter ended December 2018 as against the recovery of Rs 3,021 crore during quarter ended December 2017. Total fresh slippage for the quarter ended December 2018 stood at Rs 1,790 crore. Recovery was substantially higher than slippages during the quarter mainly due to focused priority action on arresting slippages and improving recovery in NPA/OTS accounts.

The bank has recovered Rs 121 crore in NCLT accounts during the quarter ended December 2018 and expects recovery aggregating Rs 988 crore in the current quarter in eight NCLT accounts where resolution is at an advanced stage, which will reduce GNPA by around Rs 2,624 crore, subject to court resolution.

Provision coverage ratio has improved to 64.23 per cent as on December 31, 2018 as against 57.83 per cent as on December 31, 2017.

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Govt mulls additional capital infusion in five PSU banks

The government is considering additional capital infusion of up to Rs 30,000 crore in public sector banks as they have been unable to raise required funds from the markets, sources said.

As part of the capital infusion plan announced by the Finance Ministry in October 2017, the government envisaged that public sector banks (PSBs) would raise Rs 58,000 crore from the stock markets by March 2019 to meet Basel III norms.

However, due to subdued market conditions, banks have been unable to raise enough funds from the markets so far.

In addition, non-performing assets of many banks have seen a spurt in the first two quarters of this fiscal, putting stress on their bottomlines.

However, the banks have got a breather in respect of Capital Conservation Buffer (CCB), a part of Basel III norms. The RBI, at its last board meeting, deferred the requirement to meet the CCB target by one year, leaving about Rs 37,000 crore in the hands of banks.

Despite this relaxation, PSBs need more funds to meet global capital norms called Basel III as the RBI has retained the capital to risk weighted assets ratio (CRAR) at 9 percent, sources said, adding, the shortfall could be around Rs 30,000 crore.

However, sources said the matter is being considered by the government and the final decision is expected in the next few weeks.

The government had decided to take a massive step to capitalise PSBs in a front-loaded manner, with a view to support credit growth. This entailed mobilisation of capital to the tune of about Rs 2,11,000 crore over the next two years -- through budgetary provisions of Rs 18,139 crore, recapitalisation bonds of Rs 1,35,000 crore, and the balance through raising of capital by banks from the market while diluting government equity estimated at Rs 58,000 crore.

As per this plan, the remaining capital infusion is about Rs 42,000 crore.

Earlier this year, the government pumped in Rs 11,336 crore into five PSBs -- PNB, Allahabad Bank, Indian Overseas Bank, Andhra Bank and Corporation Bank -- to improve their financial health.

PNB, hit by the Nirav Modi scam, got the highest amount of Rs 2,816 crore, while Allahabad Bank received Rs 1,790 crore. Andhra Bank got capital support of Rs 2,019 crore, Indian Overseas Bank Rs 2,157 crore and Corporation Bank Rs 2,555 crore.

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Indian Overseas Bank(IOB) reduce loss in Q2 on lower provisions

State-owned Indian Overseas Bank (IOB) on Friday reported narrowing of its net loss to Rs 487.26 crore in the second quarter ended September 2018 on lower provisioning.

The bank had registered a net loss of Rs 1,222.50 crore in the year-ago period. Sequentially also, its net loss narrowed from Rs 919.44 crore in the first quarter ended June of the current fiscal.

"Net loss is due to provisions on bad debts and investment and not due to operations," the bank said in a release. Total income fell to Rs 5,348.35 crore during July-September 2018-19 from Rs 5,610.35 crore in same period a year ago, IOB said in a regulatory filing.

Bank's asset quality deteriorated with the gross non-performing assets (NPAs) rising to 24.73 percent of gross loans by the end of the second quarter as against 22.73 percent as on end-September 2017. Though it was down when compared sequentially from 25.64 percent at end-June.

Net NPAs also rose year-on-year to 14.34 percent from 13.86 percent, sequentially down from 15.10 percent.In absolute terms, gross NPAs were Rs 37,109.96 crore as on September 30, 2019 from Rs 34,708.59 crore by September 2017. Net NPAs or bad loans were Rs 18,876.05 crore as against Rs 18,949.55 crore.

Provisions for bad loans and contingencies came down to Rs 2,016.60 crore for the reported quarter from Rs 2,238.09 crore.IOB said it received government capital infusion of Rs 2,157 crore on July 23 against preferential allotment of equity shares and has added the same as tier I equity capital. The provision coverage ratio of the bank as on September 30 stood at 61.97 percent. Deposits as on September 30, 2018 stood at Rs 2.23 lakh crore and advances were Rs 1.50 lakh crore.

Total business registered an increase of 3.12 percent and stood at Rs 3.73 lakh crore by the end of September 2018 against Rs 3.62 lakh crore as on June 30, 2018. IOB said its total recovery registered an increase of 12.53 percent to Rs 4,462 crore for quarter ended September as against the recovery of Rs 3,965 crore a year ago.

The total fresh slippage for quarter ended stood at Rs 884 crore from slippage of Rs 2,693 crore a year ago. "Recovery achieved is substantially higher than slippages during the quarter mainly due to focused efforts towards recovery and containment of NPAs (fresh slippage and other debits in existing NPA accounts)," it said.

Further, the bank has recovered Rs 247 crore in six NCLT accounts during the September quarter and expects further recovery aggregating Rs 802 crore in the third quarter in two NCLT accounts where resolution is at an advanced stage.

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PNB and Canara bank were on government's list for next merger, with which bank?

Bank of Baroda’s healthier financials, strong brand, technology and international presence helped the finance ministry settle for it as the anchor for an amalgamation with Dena bank and Vijaya Bank, instead of Canara Bank and Punjab National Bank, among others, which were considered for carrying forward the first consolidation exercise in the public sector space.

PNB was ruled out as its recovery is seen to be a few quarters away after a Rs 14,000-crore fraud, allegedly orchestrated by Nirav Modi and Mehul Choksi, leaving Canara Bank as the other option to anchor the amalgamation. But it was seen to be weak on a few financial parameters. Besides, the new entity would have been focused more on south India.

Financial services secretary Rajiv Kumar said, “We did not want consolidation for the sake of it. The first guiding principle was to create a healthy bank that was large in size. The second principle was to have an entity that had a strong brand, technology and a good reach.”

The merger of the three banks is one of the many ways through which the government is trying to deal with the bank NPA crisis. The merger of three banks clearly unveils a formula -  that the government decided to merge the three banks in accordance with their financial health. Among the three, Bank of Baroda has least NPA problem, followed by Vijaya Bank and Dena Bank. The bank merger formula, thus, will be Very big bank+ better bank+worst bank. 

In Dena bank, Vijaya and BoB, the government found the right fit. “Dena bank has a strong CASA base with a good retail and MSME presence. Vijaya Bank has been sensible in its lending, while BoB offers a good international presence, a strong brand and a good tech platform. It’s a win-win deal for the three banks and will result in a massive cost rationalisation,” the secretary added.

While consolidation has been on the government’s radar, the fraud at PNB pushed back the plan by a few months. But it has been in the making for at least four-five months, with the team at the department of financial services looking at various permutations and combinations. A source said, “It was an in-house exercise. Secrecy had to be maintained at all costs.”

Two sets of probable bank mergers in future. It said that the government is mulling the merger of more banks. However, this year there will not be any further merger as the amalgamation of the first lot of three banks will itself take 3-6 months. 

1. Punjab National Bank, Indian Bank, Indian Overseas Bank

The current business of PNB, Indian Bank and Indian Overseas Bank range in Rs 10,45,650 crore, Rs 3,74,550 crore and Rs 3,61,928 crore respectively. The deposits in three banks are Rs 630311 crore, Rs 210170 crore, Rs 213168 crore respectively. 

The Net NPA of PNB is 10.58%, Indian Bank 3.80% and Indian Overseas Bank 15.10%. The number of branches of these three banks are 6,993, 2,819 and 3,326 respectively. 

2. Canara Bank, Syndicate Bank and UCO Bank 

The total business of Canara Bank, Syndicate Bank and UCO Bank is Rs 8,63,359 crore, Rs 4,74,976 crore and Rs 2,76,784 crore respectively. Deposits in the three banks are Rs 5,00,866 crore, Rs 4,05,939 crore and Rs 1,78,211 crore.

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