BOC 4Q net down; FY14 net up 18% to Rs.14.4 bn

30 March 2015 03:38 am - 0     - {{hitsCtrl.values.hits}}

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The state banking giant with over Rs. 1.3 trillion asset base saw its net profits for the quarter ended December 31, 2014 down 43 percent year-on-year (yoy) to Rs. 3.1 billion,  but the group ended the financial year with a net profit of Rs. 14.4 billion, up 18 percent. 

The earnings per share for the December quarter was Rs.621 as against Rs.1,093 over the corresponding 2013quarter.

The fourth quarter net profits were hurt mainly due to the hefty loan loss provisions which were Rs.4 billion higher than what was provided for a year ago. 

It appears that the bank has taken a more cautious approach for possible losses in its loan portfolio, providing more in the last quarter as the banking group’s performance for the entire financial year was better even amid larger provisions. 

Both Net Interest Incomes (NIIs) and the non-fund based incomes fared well during the quarter as well as for the financial year. 

For the quarter, the NII has risen by 21 percent yoy to Rs. 14 billion while the net fee and commission income grew by 23 percent yoy to Rs. 2.5 billion. 
Therefore, the total operating income grew 19 percent yoy to Rs. 18.4 billion. 

However the net interest margin slipped to 3.05 percent from 3.31 percent, below the industry average. 

A return on equity, which has now become a key financial performance measure in the banking sector, narrowed to 20.49 percent from 22.25 percent, but it is significantly above the industry average of around 16 percent. 

The banking group recorded these top line achievement despite lackluster credit demand which was as low as 2.9 percent. BOC on a standalone basis has a loan book of Rs. 777.5 billion. 

The bank during the year improved the quality of its loan book as gross non-performing advances ratio declined to 3.78 percent from 4.32 percent a year ago. 

Excess liquidity has significantly increased as the bank’s statutory liquid asset ratio of the domestic banking unit has risen to 30.78 percent (27.67 percent in 2013), but the regulatory minimum is 20 percent. 

The banking industry’s regulatory liquid asset ratio was 39.5 percent as of December 31, 2014, one of the highest in the past five years.

Both regulatory Tier I and Tier II capital adequacy ratios increased to 9.45 percent and 13.55 percent respectively, above their required minimums of 5 percent and 10 percent. 

In 2012, BOC’s capital adequacy came under stress due to rapid expansion of its loan book, and since 2013, the bank has been seeking fresh capital infusion from the national treasury, its sole shareholder, but now it does not seem to be an immediate requirement. 

However with the now rebound credit demand and the impending BASEL III enhanced capital requirements, the need for more capital remains to be seen. 
Nevertheless the bank could always make use of its hefty excess liquidity to grow its lending book by selling some of its investments. 

Meanwhile, the deposits grew 11 percent to Rs.944 million during the year. 

For the financial year ended the NII grew by 3.6 percent to Rs. 41 billion and the fee and commission income grew by 40 percent to Rs. 8.3 billion. 
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