Bank of India pioneered the introduction of the Health Code System in 1982, for evaluating/ rating its credit portfolio. This year however, the bank has been hit badly by bad debts. The bank’s profitability was impacted on the back of total provisions shooting up to Rs 883 crores (Rs 452 crores). Of the total provisions, provision for NPAs alone surged by Rs 431 crores to Rs 470 crores (Rs 80 crores).
Bank of India was founded on 7th September, 1906 by a group of eminent businessmen from Mumbai. The Bank was under private ownership and control till July 1969 when it was nationalised along with 13 other banks.
In business volume, Bank of India occupies a premier position among the nationalised banks. The Bank has 3101 branches in India spread over all states/ union territories including 141 specialised branches. These branches are controlled through 48 Zonal Offices.
Business Abroad
Bank of India was the first Indian Bank to open a branch outside the country, at London, in 1946, and also the first to open a branch in Mainland Europe, Paris in 1974. The Bank has sizable presence abroad, with a network of 29 branches (including five representative offices) at key banking and financial centers viz. London, New York, Paris, Tokyo, Hong-Kong and Singapore. The international business accounts for around 17.82% of Bank’s total business.
Stock Market Listing
The Bank came out with its maiden public issue in 1997 and follow on Qualified Institutions Placement in February 2008. The bank is listed on the NSE and BSE.
Financial Year 2009 for BOI
The sharp drop in profits made in the half year ending September 2009 stands in contrast to the consistent performance of the bank in previous years. Higher provisioning for bad loans dragged Bank of India’s net profit down by 58 per cent to Rs.323 crores in the second quarter ending September 30, 2009 as against Rs.763 crores in the corresponding period last year.
In the reporting half year, the bank’s net profit was down 31 per cent to Rs.908 crores compared with Rs.1,325 crores in the corresponding period last year.
Income and Expenses
Income for the bank has seen a healthy increase. However expenses also have increase considerably. In the quarter ending September 2009, Bank of India’s total income, comprising interest earned and other income, increased by 12 per cent to Rs 5,165 crores (Rs 4,612 crores in September 2008).
Total expenditure, comprising interest expended and operating expenses, rose by 17 per cent to Rs 3,959 crores (Rs 3,398 crores). Thus BoI’s operating profit in till September 2009 was almost flat at Rs 1,206 crores (Rs 1,215 crores).
Loans Scene at BoI
Bank of India pioneered the introduction of the Health Code System in 1982, for evaluating/ rating its credit portfolio. This year however, the bank has been hit badly by bad debts. The bank’s profitability was impacted on the back of total provisions shooting up to Rs 883 crores (Rs 452 crores). Of the total provisions, provision for NPAs alone surged by Rs 431 crores to Rs 470 crores (Rs 80 crores).
The increase in loans disbursed is small in percentage terms 3.8%. However this is on a large base of Rs.1,29,314 crores in 2008. The total loans disbursed in the year 2009 is Rs.1,50,238 crores.
The bank expects the growth in loans portfolio to come from Agriculture, Retail and SME/Mid Corporate Segments.
Trading Losses
In contrast to the leading banks in India, Bank of India has made losses in the treasury and trading operations. In the quarter ending September 2009, trading losses (slippages) amounted to Rs 1,400 crores. Half of the slippages in the reporting quarter were on account of slippages in the restructured advances, said Mr B.A. Prabhakar, Executive Director.
Subsidiaries of BOI
Securities Trading Corporation of India Ltd. (STCI)
Securities Trading Corporation of India Ltd. (STCI) is one of the leading Primary Dealers in the country enjoying the highest credit rating of P1+ by CRISIL and A1+ by ICRA for short-term debt instruments. The Bank is the single largest stakeholder of STCI with 29.95% stake in its equity.
Star Union Dai-Ichi Life Insurance Co. Ltd.
Bank of India and Union Bank of India, and The Dai-Ichi Mutual Life Insurance Company, a leading Japanese Company in the Life Insurance market, have floated a Joint Venture Company, “Star Union Dai-ichi Life Insurance Co. Ltd.” for undertaking Life Insurance Business in India. The capital is contributed as follows: 51% by BOI, 26% by Dai-ichi Life and 23% by Union Bank. The Joint Venture company has an initial paid-up capital of Rs. 250.00 Crores.
Credit Rating
Bank of India has go the BWR AAA + (Triple A Plus) rating from Brickwork Rating India Pvt Ltd. which stands for issuers to offer the best creditworthiness.
The statutory Capital Adequacy Ratio of the bank is not at the required levels. For this BoI has sought Rs 2,000 crores from the government in order to augment its core Tier-I capital.
The Year Ahead for Bank of India
Bank of India has been historically been at the forefront of introducing various innovative services and systems. The Bank requires reinventing its innovativeness in 2010 for it to make up for the losses it has made in certain banking operations. The much required capital infusion from the Government will also help. The bank needs to keep a close eye on quality of credit, focus on NPA management, increase the proportion of low-cost CASA deposits, in the year 2010.
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