Indian Overseas Bank published an ad with a header “Performing Consistently, Growing Exponentially” while releasing its December quarter results. Only growth the Bank has shown in past five quarters is in bad loans
The slowdown observed in the manufacturing and service sectors has affected the entire economy very badly. This has given very worst impact to the banking sector, especially public sector banks. Most of the public sector banks have delivered bad results quarter after quarter during this year. They are saddled with surging bad loans and huge provisions to meet the bad loans. This trend may continue till we witness visible recovery on the overall economy.
On 31 January 2014, I saw December quarter results of Indian Overseas Bank, published in the Hindu Business Line with the following header…
“Performing Consistently, Growing Exponentially”
I was really surprised to see such headline from the Bank as their financial results for the past five quarters were not encouraging at all. The ultimate performance of any entity or bank is measured by the profit generated by that entity. Among all indicators, increasing profitability depends upon the following parameters…
I furnish below the essential indicators of Indian Overseas Bank for the past five quarters.
Rupees in crore
| Dec 2012 | Mar 2013 | June 2013 | Sept 2013 | Dec 2013 |
Net Profit | 116.5 | 58.87 | 125.8 | 132.55 | 75.07 |
Gross NPA | 6515 | 6608 | 7431 | 8201 | 9168 |
Net NPA | 3591 | 4027 | 4580 | 4874 | 5481 |
% of Net NPA | 2.33 | 2.5 | 2.81 | 2.83 | 3.24 |
Provisions made | 811 | 1187 | 843 | 620 | 811 |
The gross non-performing assets (G-NPAs) and net non-performing assets (N-NPAs) of the Bank are growing rapidly. Net profit of the Bank is declining. The huge provisions made towards bad loans are eating away the profit of the Bank. Bank should take strenuous efforts to arrest the above trend.
Oriental Bank of Commerce (OBC), one among the public sector banks, has got total business of Rs3.16 lakh crore (total deposits of Rs1.82 lakh crore and total advances of Rs1.33 lakh crore from 2,089 branches). The business level of Indian overseas Bank is higher than Oriental Bank of Commerce with total business of Rs3.87 lakh crore, total deposits of Rs2.13 lakh crore and total advances of Rs1.74 lakh crore from 3,117 branches. It is pertinent to note that Oriental Bank of Commerce has generated net profit of Rs224.30 crores for the quarter ended 31 December 2013.
On the other hand, City Union Bank, one of the scheduled commercial bank based at Kumbakonam, with 400 Branches and a total business of Rs36,941 crores, total deposits of Rs21,116 crore and total advances of Rs15,825 crore, has earned a net profit of Rs89 crores for the same quarter.
It is to be noted that opening of more number of branches alone does not serve any purpose. There should be close follow-up action by the executives at the helm to build up business and make the branches earning sizeable income. Apart from rural branches, all other branches should break even in a couple of years.
Had the increase in deposits and advances of Indian Overseas Bank earned substantial profit, the headline in the ad on the top of their results for the quarter ended December 2013 would become meaningful. The IOB team should create excellent results and not the ad.
Inside story of the National Stock Exchange’s amazing success, leading to hubris, regulatory capture and algo scam
Fiercely independent and pro-consumer information on personal finance.
1-year online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
30-day online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
Complete access to Moneylife archives since inception ( till the date of your subscription )
