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SURGING CREDIT GROWTH DRIVES UP IOB NET PROFIT BY 27%

• Indian Overseas Bank has been on a fast growth track since 2000, guided by the principles of qualitative asset expansion and efficiency of operations.

• During the year ended March 2005, the Bank recorded highest ever credit growth of Rs 4,981 crore. This, coupled with efficient asset liability management, enabled the Bank to post perceptible improvement in profitability and other key areas of operations.

• How it began
• Pre-Nationalisation (1947-69)
• At the time of Nationalisation (1969)
• Post - Nationalisation (1969 - 1992)
• Post Reform Period (1992 & after)
• Surging credit growth Drives up IOB net profit by 27%

•  IOB reported Net Profit of Rs.651.36 crore for the year ended 31.3.2005 as against Rs.512.76 crore in the previous year – growth by 27 percent. It is worth mentioning that Net Profit has risen from a level of Rs 40.34 crore in March 2000 to Rs 651.36 crore in March 2005, a phenomenal growth of over 16 times in 5 years.

•  Operating Profit during the year was Rs.1336.80 crore as against Rs.1325.20 crore in the previous year. Operating Profit has moved up from Rs 188.23 crore in March 2000 – an increase of over 600% in 5 years.

•  It is significant that growth in Operating Profit during the year was achieved despite lower treasury earnings, revaluation of securities transferred from AFS to HTM category, scaling up of deposit rates, pressure on lending rates and provision for wage arrears.

•  An analysis of Operating Profit and Net Profit growth recorded during the year will reveal the following :

o Net Profit on Sale of Investments declined by Rs.108 crore during the year.

o Total revaluation of investments, including on account of transfer of SLR securities from AFS to HTM category adversely impacted treasury earnings by Rs.80.45 crore during the year. The core Operating Profit excluding the impact of the above factors improved by Rs 200 crore during the year.

o The Bank has provided Rs 29 crore towards leave encashment benefits on retirement of employees and Rs 105.50 crore towards wage arrears.

o Supported by healthy asset expansion, the Bank’s Net Interest Income rose by Rs.257 crore.

o The Bank could contain its domestic cost of deposits at 4.82 percent in March 2005 as against 5.57 percent in the previous year, in spite of rise in the volume of deposits and rise in interest rates on deposits.

o Overseas Branches generated Operating Profit of Rs.59.24 crore during the year.

o Fee Based income of the Bank showed an impressive rise by Rs. 87.78 crore during the year.

o The Bank made unallocated provisions of Rs.277.27 crore over and above the requirement as per prudential norms.

•  The Bank has proposed a final dividend of 10%, taking the total dividend to 24% for the financial year 2004-2005.

The key indicators for 2004-2005 viewed in the backdrop of previous year are as under:

•  Capital adequacy has improved to 14.21 percent from 12.49 percent. The rise is significant considering the steep credit growth and enhanced risk weights assigned to consumer loans and housing loans during the year.

•  Net Interest Margin increased from 3.62 percent to 3.75 percent.

•  Return on assets improved to 1.28 percent from 1.08 percent

•  Credit Deposit Ratio peaked to 58.96 percent as against 49.82 percent - rise by nearly by 1000 basis points during the year.

•  Gross Advances increased to Rs.26274 crore from Rs.21293 crore in the previous year.

•  Gross Deposits increased to Rs.44241 crore from Rs.41482 crore.

•  In terms of business volume, the Bank crossed Rs.70,500 crore mark, a jump of over 12 percent in the previous year. Business growth has nearly doubled during the last five years.

•  Cash recovery towards NPA during the year surpassed Rs.300 crore against the target of Rs.250 crore. This is over and above recovery towards undebited interest and written-off accounts.

•  Gross NPA declined to 5.28 percent from 7.40 percent.

•  Net NPA declined to 1.27 percent from 2.85 percent.

•  The prudent policy of creating unallocated provisions from profits has gradually stepped up provision coverage of NPAs to 71.89 percent from 60.11 percent.

• As part of strategic Asset-Liability Management policy, the Bank funded its credit expansion largely by offloading surplus SLR securities at the opportune times and increasing its share of low cost / no cost deposits. Low cost deposits comprised 39.50 percent of the total deposits as against 34.90 percent in the previous year.

•  IOB’s deployment under Priority Sector Lending constituted 43.47 percent of Net Bank Credit, well above the national norm of 40 percent. Agri lending to Net Bank Credit was 18.06 percent as of March 2005. Increase in agri lending during the year was Rs.894 crore at 30.43 percent growth. 209229 Kisan Credit Cards were issued during the year, taking the total number of cards issued to 825532 at the end of the year. 32402 Self-Help Groups were credit-linked during the year with a credit outlay of Rs 143 crore during this year.

•  The Bank’s Regional Offices at Coimbatore and Bangalore have been accredited with ISO 9001:2000 certification for planning, directing and ensuring growth of branches in the Region. Apart from achieving 100 percent computerisation, the Bank has successfully launched Core Banking Solution with in-house developed software in 27 branches in the first phase.

•  The bank is planning for yet another Equity issue of seven crore shares through the GDR route.

•  IOB has been adjudged the "BEST IPO – PSUs" for 2004 by OUTLOOK MONEY.

•  For the second consecutive year, IOB is listed in the coveted 2000 Top Corporates in the World as per Forbes 2000 ranking. IOB is one among the 30 Indian firms to be ranked in the list.