IOB's profit up at Rs 783.34 cr, cross 5000 cr

Mumbai, Apr 27: Chennai-based public sector banking major, Indian Overseas Bank (IOB) has posted several firsts in FY 06 even as it registered a creditable performance across several crucial financial parameters. Its total business expanded by an impressive 22.37 per cent at Rs 86,288 crore as against Rs 70,515 crore in FY 05.

IOB's total income crossed the Rs 5,000 crore mark for the first time in its history even as its gross advances expanded by an unprecedented 36.10 per cent to Rs 35,759 crore in FY 06 as against Rs 26,274.13 crore in FY 05. The bank's net profit stood at Rs 783.34 crore as against Rs 651.35 crore in FY 05.

Announcing the bank's financial results here today, its chairman and managing director T S Narayanasami highlighted the fact that due to ''impeccable asset-liability management'' the bank was able to maintain an impressive net interest margin at above four per cent, which is above the industry-level average.

He, however, admitted that it may not be possible to maintain the same figure this fiscal on account of the rising interest rate scenario, cost of resources as also the fierce competition in the marketplace which impacts yield on advances. ''However, our net inerest margins (NIM) will still be on the higher side at around 3.6-to-3.7 per cent,'' he emphasised.

The bank's PAT as a percentage of net worth as at end-FY 06 stood at 28.55 per cent and has consistently been in that vicinity in the last few years. ''IOB has been identified as one of the 25 banks worldwide which have consistently given a higher return on net worth as per Forbes ratings,'' Mr Narayanasami pointed out.

The bank will be focusing strongly on retail and wholesale trade this fiscal and will seek to up its non-interest income while striving to reduce its NPAs. ''The focus will be on low-cost deposit mobilisation and we are targeting an incremental Rs 3,000 crore of this type of deposit this year,'' Mr Narayanasami revealed.

The bank's deposits witnessed a growth of 14.21 per cent in FY 06 at Rs 50,529.32 crore as against Rs 44,241.24 crore in FY 05.

IOB will also be cutting down its sub-PLR (prime lending rate) lendings, Mr Narayanasami said, adding that the bank, as a part of its strategy, was shifting away from the housing loans business and instead focusing more on providing finance to traders.

''From the asset-liability management point of view, our comfort-levels are not high vis-a-vis the housing loans business in terms of both the returns and risk factors involved. Focusing on traders not only provides us with a non-interest revenue stream but the loans are also better secured,'' he pointed out.

The bank plans to scale up its retail portfolio from the present 15 per cent presently to 25 per cent this fiscal while targeting Rs 2,000 crore as finance to traders.

A strong emphasis on reducing its NPAs also helped the bank shore up its bottomline with its net NPA in absolute terms declining from Rs 319.20 crore in FY 05 to Rs 224.32 crore in FY 06 while the net NPA ratio slipped from 1.27 per cent to 0.65 per cent.

IOB will be raising Rs 500 crore as Tier II capital this fiscal, Mr Narayanasami said, adding that in addition, the bank was contemplating tapping the overseas market for up to USD 250 million in the form of five-year FCCBs. ''This will be a borrowing and we are looking for a Moody's rating to help us in this fund-raising initiative overseas,'' he said.

On the bank's international business, he said that presently it contributed around Rs 3,000 crore to the bank's kitty. IOB is also planning to open a representative office in Vietnam and a branch in New Zealand, he said.

UNI