Indian Overseas Bank Q3 Results: Loss Widens As Provisions Spike 

Indian Overseas Bank’s loss widened in the quarter ended December as provisions rose.

Net loss stood at Rs 6,075 crore in the October-December period compared with a loss of Rs 346 crore a year ago, according to its exchange filing.

That’s because of a more than threefold jump in provisions. The bank’s provisions and contingencies rose to Rs 6,663 crore in the third quarter from Rs 2,075 crore in the year-ago period.

Still, its asset quality improved during the quarter. Gross non-performing assets ratio dropped to 17.12 percent from 20 percent in the three months ended September. Net NPA, too, fell to 5.81 percent from 9.84 percent in the preceding three months.

The bank, however, reported a Rs 358-crore divergence in gross NPAs for the financial year ended March 2019. The Reserve Bank of India assessed the level of gross NPA at Rs 33,756 crore, while Indian Overseas Bank reported bad loans at Rs 33,398 crore as of March 2019.

As per the RBI’s rules, banks are required to disclose any divergence of more than 15 percent. The market regulator, on the other hand, mandates disclosure if the divergence in bad loans is more than 10 percent of operating profit.

“The year 2019-20 is declared as year of resurgence,” the lender said in a statement. “The bank plans to come out of the prompt corrective action by focusing on recovery, low-cost deposits and less capital consuming advances.”

Indian Overseas Bank was placed under the RBI’s prompt corrective action framework—that restricts a bank’s ability to grow its loan book by limiting the accumulation of higher risk assets—in 2015.

The lender’s net interest income, or core income, also fell to Rs 1,278 crore from Rs 1,383 crore last year.

Other Highlights

• The bank’s common equity tier-1 ratio—a key measure of financial strength—fell to 3.53 percent in December 2019. That compares with the regulatory requirement of 5.5 percent.
• Total capital adequacy ratio fell to 5.53 percent in the third quarter compared with the central bank’s requirement of 9 percent. But the Government of India sanctioned a capital infusion of Rs 4,360 crore in December, which was received by the bank in January 2020. Accounting that, the bank’s capital adequacy ratio stands at 10.43 percent.

(Corrects an earlier version that misstated the bank’s gross NPA numbers at the end of March 2019.)