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NT Bureau
Chennai, Apr 24:

        In spite of robust credit growth and rising cost of funds, Indian Overseas Bank was able to maintain the capital adequacy ratio (CAR) at 13 per cent at the end of last financial year.

'We will be rebalancing our lending portfolio which may slow down credit growth this fiscal. Now regional managers would okay consumer and housing loans after following due diligence as there are number of cases detected with fake documents and salary certificates,' said         T R Narayanasami, chairman and managing director, IOB. Addressing a press meet here yesterday after presiding over a board meeting, he said the net interest margin (the bank's spread) stood at 4.16 per cent at the end of the fourth quarter (Q4) as against 3.89 per cent for the same quarter of the last fiscal. 'The NIM is our strong area and we are able to maintain a lead over other banks despite rising cost of funds. We are able to maintain the interest rate despite tough competition for resources due to our ability to raise capital at opportune time and mobilisation of low-cost deposits,' he said.         He emphasised the need to step up CASA (current and saving accounts) deposits by 46 per cent to bring down the cost of funds. IOB has targeted 30 per cent and 20 per cent growth in deposits and advances in the current year to achieve a 26 per cent jump in net profit.

Indian Overseas Bank CMD T Narayanasami at a press meet in Chennai yesterday.

        Net profit for the year (2006-07) stood at Rs 1,008 crore, a growth of 29 per cent from Rs 783 crore netted in the previous year. Total income of the bank rose by 26 per cent to touch Rs 6,219 crore from Rs 4,947 crore for the year ended 31 March 2006. Net interest income, the core strength of IOB, stood at Rs 2,560.80 crore, a growth of 38 per cent in two years, while non-interest income comprising treasury operations, core banking income and fee-based earnings (cross-selling of products) rose by 50 per cent.

        Gross deposits climbed to Rs 68,746 crore, a 36 per cent rise from Rs 50,529 crore, while advances grew by 34 per cent to Rs 47,923 crore at the end of March 2007. The credit-deposit ratio was 69.71 per cent. As many as 713 out of its 1,840 branches (post merger with Bharat Overseas Bank) have come under Core Banking Solution which captured more than 70 per cent of overall business. In the fourth quarter, the cost of deposits rose from 4.65 per cent to 5.24 per cent, even as non-interest income, net of treasury gains, rose by 25 per cent. But due to new accounting of amortisation cost and revaluation loss on investments as introduced by RBI, the non-interest income, excluding gains in treasury, went up marginally by 6.24 per cent from Rs 130 crore in Q4 of the previous year to Rs 138 crore at the end of March 2007.

        Total income for Q4 grew by 45 per cent to reach Rs 1936 crore from Rs 1,337 crore at the end of Q4 of the previous year. Net profit of the last quarter of the fiscal 2007 grew by 42 per cent to reach Rs 290 crore aided mostly by a mix of core income as well as treasury operations.

        Net NPA at IOB stood at 0.55 per cent as against 0.65 per cent in March 2006.

        To a query, Narayasami clarified that IOB with a healthy CAR and growing non-interest income has adequate resources to comply with Basel-II norms that would come into force for all Indian banks from January 2009.