Although the state State-owned Bank of India on Friday reported an increase of 10 per cent in its net profit at Rs 716 crore for the quarter ended Dec 31 against Rs 653 crore during the like period of the previous financial year, it has increased a lot of exposure to corporate loans. Corporate loans account for nearly half of its total assets now. The pace of growth of its corporate credit slowed in the quarter, rising 9.6 percent compared with retail loans that grew about 15 percent.
Bank of India’s total restructured loan book stands at 114.8 billion rupees ($2.3 billion), of which about 22 billion rupees were restructured in the December quarter, Chief Financial Officer Ravi Kumar said.
National carrier Air India, rival Kingfisher Airlines, and shipbuilder Bharati Shipyard Ltd have been among the prominent companies that have restructured, or are looking to restructure, huge borrowings. Bank of India considers its account with Kingfisher as non-performing after the loss-making airline failed to service its debt for more than three months. Share of restructured loans for Indian banks is expected to rise to 7-8 percent of total assets in 2011 and 2012 from 4.4 percent seen after the 2008 crisis, Fitch Ratings said in a note this week.
It expects credit losses to be contained but state-run banks’ profits may take a 15-20 percent hit due to higher loan loss provisions.
At least in the medium term, the road to higher profits looks tougher for Bank Of India.
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