Bank of India tumbles on loss

The net loss of Bank of India for Q2FY19 is simply staggering. As against most expectations of losses around Rs.450-500 crore, the PSU bank posted a loss of Rs.1156 crore.

The Bank is under the RBI’s ‘critical care’ unit – it is one among the 11 banks under the Prompt Corrective Action (PCA) framework and that has helped it show a better Net NPA at 7.64% v/s 8.45% (QoQ) and its provision coverage ratio has been ramped up from 66.7% to 69.12% (QoQ) with slippages also showing a dramatic reduction. This is what the PCA was supposed to do – remove toxic assets and keep away from risky assets.

Provisions for bad loans jumped 51.5%(YoY) to Rs. 2,828 crore, while total provisions surged 71% to Rs. 3,343 crore – this is what led to the loss but hiking the provisions was inevitable.

Its bad loans are over Rs.60,000 crore and its exposure to the power sector remains elevated at over 10% of its loan book.

The Bank has set a target of bringing its Net NPA below 6% as this is what will help it come out of the PCA framework. Under the PCA now, the Bank can lend only to better rated companies with most routine banking activities under restriction – this alone helped bring down the Net and Gross NPA, not operational efficiency.

The Bank said that it’s focus is on recovery efforts and has put up over Rs.10,000 crore worth of assets for auction and Rs.1000 crore of assets have been resolved in current Q3. It has rationalized 35 domestic branches, five overseas branches or offices and 483 automated teller machines.

The market remains troubled over this performance of Bank of India, shaken by its loss. The stock is presently the top loser on the BSE, going down over 7.5% to Rs.80.55.