The Hindu Business Line : Indian Bank Q1 net rises 21 pc at Rs 165 cr

Money & Banking - Financial Performance
Corporate Results - Public Sector Banks
Web Extras - Performance
Indian Bank Q1 net rises 21 pc at Rs 165 cr

Our Bureau

Loan growth, NPA recovery aid profit growth

Chennai , July 28

Indian Bank has reported a 21-per cent growth in net profit at Rs 165 crore for the first quarter ended June 30. Net interest income was up 20 per cent at Rs 409 crore. Loan growth was at 27 per cent during the first quarter. Dr K.C. Chakrabarty, Chairman and Managing Director of the bank, said that he was confident of maintaining net profit growth at 20 per cent and loan growth at between 20 per cent and 25 per cent during the rest of the year.

The growth in profits was aided by loan growth and a recovery of Rs 75 crore of bad loans. Although lower than the target of Rs 100 crore, Dr Chakrabarty said that higher property prices, a more congenial legal environment (thanks to SARFAESI Act), and sustained follow-up helped the bank recover what it had. Gross non-performing assets declined to Rs 648 crore as on June 30, 2006, while net NPA declined to Rs 141 crore or 0.57 per cent of loans as on June 30, 2006.

Treasury income was, however, affected by the fall in bond prices during the quarter. The bank's profit from trading in securities fell to a little over Rs 6 crore compared with Rs 27 crore in the corresponding year-ago period.

Dr Chakrabarty said, "About Rs 25 crore had to be provided for depreciation. But we were able to neutralise the rate hike because we had transferred a large amount of securities to the Held-to-Maturity (HTM) category last year."

High interest rate impact

Dr Chakrabarty, while answering a question on the impact of higher interest rates on the cost of funds, said, "Our cost of funds is at 4.9 per cent now. That is partly because deposit costs are a bit sticky. And savings account rates are still at 3.5 per cent. But bulk deposit rates have risen from around 5.5 per cent to 8 per cent. And in the coming days, the cost rise will be steeper."

Answering a question on whether the bank would increase interest rates, he said, "The interest on deposits will definitely be increased. The increase in interest on advances will also follow. Our Asset-Liability Management Committee will meet to decide on the issue. However, unless major players increase rates, we can't. But I can say that loans to real estate sector, housing and consumer loans will definitely become costly."

More Stories on : Financial Performance | Public Sector Banks | Performance

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page