Public-sector bank Bank of India is setting an ambitious target of Rs 10,000 crore net profit in the next five years.
The bank had posted a Rs 1,741 crore net profit in 2009-10. The bank has set the target after getting a growth strategy from management consulting firm Mckinesy.
“We have set a target of Rs 10,000 crore of net profit by 2015,” said BA Prabhakar, executive director, Bank of India. The bank, which has a market capitalisation of Rs 23,300 crore, had hired Mckinsey last year to prepare a strategy for future growth.
Based on the recommendation, the bank has decided to focus on mid-corporate and small and medium scale enterprises (SMEs). “Mid corporate businesses and SMEs will be in focus in our growth strategy,” said Prabhakar.
Increasing fee-based income will be the other important area of focus for the bank.
“Our fee based income is currently 15% of the total income, it needs to be increased at least to 25% in next five years,” he said.“To increase fee based income we will look for new product and services.”
The bank’s strategy to increase fee-based income includes selling treasury products, increasing loan syndication activity and offering cash management service to the customers. Loan syndication is a process of involving several lenders in providing various portions of a loan. “The strategy is already in the place and we are in the process of implementing the recommendations,” said Prabhakar. According to him the recommendation will help the bank to reap the benefits of growing Indian economy.
The bank had Rs 17,878 crore revenue in 2009-10. Its net profit for 2009-10 declined by 42% to Rs 1,741 crore, from Rs 3,007 crore in the previous year. The dent in the profit of the bank was mainly due to higher provisioning for the bad loans.