Dubai: Bank of India (BoI), the third largest public sector bank in India is expecting a big turnaround in its profitability and asset quality as the Indian economy begins a strong recovery starting this year, Vijayalakshmi R Iyer, chairperson and managing director of BoI told Gulf News in an interview.
India’s economic growth this year and the next are projected to be better than previously assumed, overtaking China in 2015 to become the world’s fastest growing major economy and widening the gap further in 2016, the International Monetary Fund (IMF) and the World Bank have said in separate forecasts last week.
Both the IMF and the World Bank see India’s growth rising to 7.5 per cent in 2015. “Clearly the macro economic environment in the country is improving. Although with the time lag of a few quarters it will get reflected in the corporate performance and ultimately the asset quality and profitability of banks,” said Iyer.
She said the overall non performing loans (NPLs) growth has taken a pause and going forward, improvement in corporate balance sheets should see a decline in NPLs while recoveries and wire-backs would boost profitability of the bank.
“At macro-level the signs are encouraging. We expect some positive impact on both top-line and bottom-line performance from September — October months,” said Iyer.
BoI recently raised Rs6.42 billion in capital by issuing shares on preferential basis to Life Insurance Corporation (LIC) and New India Assurance. Iyer said with the latest round of capital raising, the bank is comfortable on both overall capital adequacy and Tier 1 requirements. “We are within the regulatory requirements and are on track for the Basel III road map,” she said.
Strategic stakes
The bank is poised to augment its capital and funding base through sale of some assets it owns both in India and abroad. “We are looking at sale of strategic stakes in some of our asset management businesses in countries such as Indonesia, New Zealand and Zambia. Additionally have also plans to monetise real estate assets,” said Iyer.
As part of unlocking some of these real assets both in India and overseas, the bank said it is in the process of setting up a special purpose vehicle (SPV).
Due to the subdued economic situation last year and the overall stress in the corporate sector, BoI had consciously reduced its corporate exposures while making efforts to expand its book size in small and medium enterprises. “While infrastructure exposures have been on the decline, we have been expanding in vendor financing and SME funding,” she said.
The bank’s overall loan growth during the last year has been muted with about 7 per cent growth for the first nine months of the year.
BOI has restructured Rs39.8 billion (Dh2.3 billion) worth of loans during the first nine months of the year with some more restructuring in the pipeline mostly from infrastructure exposures. But Iyer said the pace of slippages are on decline and the gross non performing assets will be within the guidance of about 4 per cent.
Iyer said the bank will continue to pursue its overseas expansion opportunities. Currently, one third of its business comes from international operations while global businesses contribute about one-fifth of its profits.
UAE foray
BoI recently opened its Dubai International Financial Centre (DIFC) branch with a category 1 banking licence. The bank intends to extend its reach to Middle East and Africa customers through its DIFC branch. BoI has presence in 24 countries including the DIFC branch.
The bank expects to expand both assets and liabilities side of the book of its Dubai operations initially from the large Indian business community based in the UAE and Middle East region and eventually expand to international business community in the region.
“We have a large customer base from global Indian business community. Dubai being a global business hub, our existing business customers from both India and across the world is excited about our presence here. The regulatory environment and tax friendly business rules in the UAE are expected to attract a lot of our clients to do business through the UAE,” said Iyer.
