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Bank of India net income up by just 7% despite massive fall in bad loan ratios

Net profit for the full year jumped 57% to Rs 6,318 crore as against Rs 4,023 crore in FY23.

Screenshot 2024 05 11 104039MUMBAI: State-run banks continue to get weighed down by the wage and pension related provisions with yet another lender Bank of India Friday reporting a muted 7 percent on-year growth in net income at Rs 1,439 crore for the three months ending March.

On Thursday, the largest peer State Bank of India said it had to make an additional provision to the tune of Rs 7,100 crore towards pension settlements even though the bank still managed to report the highest ever earnings of Rs 20,698 crore, which was up 24 percent over the same period previous year.

Similarly, the second largest state-run lender Bank of Baroda earlier in the day reported a very muted 2.3 percent net income growth, again weighed down by an Rs 800 crore additional provisions towards pension liabilities.

Gross NPAs declined by 23% from Rs 37,686 crore to Rs 29,183 crore and net NPAs declined by 15% from Rs 8,054 crore to Rs 6,845 crore. In percentage terms, gross NPAs improved by 233 bps from 7.31 to 4.98 and the net NPAs improved by 44 bps from 1.66 to 1.22. The provision coverage ratio stood at 90.59.

The bank led by chief executive Rajneesh Karnatak did not share the additional provisions made towards the pensions and wages but given all other numbers barring the margins are healthy, these wage/pension related provisions can only be the reason for the muted net income.

Net profit for the full year jumped 57% to Rs 6,318 crore as against Rs 4,023 crore in FY23.

Net interest income increased 7% to Rs 5,937 crore for the quarter as against Rs 5,523 crore but non-interest more than halved to Rs 1,751 crore from Rs 3,099 crore. The NII for the full year rose 14% to Rs 23,053 crore while non-interest income for the full year to declined to Rs 6,095 crore from Rs 7,100 crore in FY’23.

The key profitability metric net interest margin declined to 3.30% in from 3.59% as its cost of funds has gone up. Accordingly, the cost to income ratio increased to 53.73 from 51.48.

Yield on advances improved 52 bps to 8.47% as against 7.95% and cost of deposits rose to 4.71% from 3.91%.

Overall business rose 11.65% from Rs 11,85,438 crore to Rs 13,23,515 crore of which deposits increased 10.21% from Rs 6,69,586 crore to Rs 7,37,920 crore and advances rose 13.52% from Rs 5,15,852 crore to Rs 5,85,595 crore.

Of the loans, the RAM book increased 15.55% to Rs 2,74,477 crore, constituting to 55.74% of total advances and within this retail grew 18.12% to Rs 1,11,484 crore and agriculture grew 16.69% to Rs 84,460 crore and MSME credit grew 10.96% to Rs 78,533 crore.

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