BANK OF INDIA Q2 NET SURGES 91% ON INTEREST INCOME

In a bid to streamline functioning of existing lines of business, Bank of India plans to kick-off a comprehensive organisational restructuring exercise whereby various departments will come under the administrative control of either the National Banking Group vertical or the Wholesale and International Banking vertical.

The public sector bank is undertaking the restructuring exercise based on the advice of consulting firm McKinsey. The firm has completed the survey and the preliminary report is ready, said Mr Alok Misra, Chairman and Managing Director, BoI.

According to the consulting firm's recommendation, various components of the bank's business will fall under one of the two verticals — Wholesale and International Banking and National Banking. Wholesale banking group will include large corporate, mid-corporate, and international segment. National banking group will look after retail, rural, and small and medium enterprises.

One of the main aims of this restructuring exercise is to gear up for the loss of human capital the bank is likely to face.

This year alone the bank will lose about 1,500 staff through retirement. Concurrently, the recruitment process for 5,200 staff members has already begun.

The bank has 31 branches that will focus solely on the mid-corporate segment. It has also set up six large corporate branches and put in place a syndication desk.

The 24 retail hubs are being revamped in order to step up retail lending, which currently account only for 11 per cent of total advances.

Q2 profit surges

For the quarter ended September 30, 2010, BoI's net profit surged 90 per cent to Rs 617 crore, from Rs 323 crore in the same period last year. The huge growth in profits was on account of improvement in net interest income and decline in provisions, said Mr Misra. Provisions were lower at Rs 527 crore (Rs 604 crore). The provision coverage ratio improved to 70 per cent (68 per cent).

This fiscal, the bank is looking at credit growth of 19-20 per cent and around 19 per cent deposit growth.

Non-interest income fell due to lower profit from sale of investments at Rs 36 crore (Rs 151 crore).

Cost of deposits decreased to 4.89 per cent (5.59 per cent). Given that interest rates could move by an additional 25 basis points by March, there could be a hike in cost of deposits. But that would be matched by a corresponding rise in yield on advances, said Mr B. Prabhakar, Executive Director, BoI.

SOURCE: http://www.thehindubusinessline.com/2010/10/23/stories/2010102351450600.htm