Indian Overseas Bank(IOB) has reported a net profit for the second consecutive quarter as the Chennai-headquartered public sector bank hopes to come out of RBI’s PCA framework soon with all its parameters showing improvements.
For the quarter ended June 30, 2020, the bank recorded a net profit of ₹121 crore as against a net loss of ₹342 crore in the year-ago quarter. It posted a net profit of ₹144 crore in March 2020 quarter after making losses for 18 quarters.
Higher operating profit due to an increase in interest on investments and reduction in interest rates along with lower provisions helped the bank post a profit amid a drop in interest income.
Interest income stood at ₹4,302 crore (₹4,336 crore in Q1 of FY20), while other income was higher at ₹932 crore (₹670 crore). Operating profit for Q1 of this fiscal stood at ₹1,094 crore (₹828 crore).
“Overall, there is a marked improvement in most of the areas despite Covid-19 related challenges. There has been a commendable improvement year-on-year, while month-on-month performance is decent given the challenges in the market,” said Partha Pratim Sengupta, who recently took charge as Managing Director & CEO of the bank.
Provisions & contingencies were lower at ₹970 crore (₹1,158 crore). Total business grew to ₹440,609 crore (₹437,269 crore).
In Q1 of this fiscal, gross NPA declined to ₹18,291 crore with a ratio of 13.90 per cent from ₹33,262 crore with ratio of 22.53 per cent a year-ago and ₹19,913 crore with a ratio of 14.78 per cent in the preceding quarter.
The bank recovered ₹1,991 crore in Q1, while fresh slippages (other than debits to existing NPA accounts) were ₹257 crore.
Net NPA was contained to ₹6,081 crore (down from ₹6,603 crore in Q4 of FY20 and ₹14,174 crore in June 2019 quarter). Net NPA ratio stood at 5.10 per cent, down from 5.44 per cent in March 2020 quarter and 11.04 per cent in Q1 of FY20.
Sengupta indicated that though the bank would seek to maintain profitability going forward, it would face some challenges in the immediate quarters due to Covid-19 and resultant restructuring of loans.
It expects pressure for more provisions due to Covid-19 though it doesn’t expect any major slippage in the coming quarters. It is not in a hurry to make a submission to RBI to come out PCA as it would like to test its resilience during this Covid period.