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Oriental Bank sees 05/06 profits up

"Definitely profit will be higher than last year's. The third quarter has given me a lot of confidence," says KN Prithviraj.

india Updated: Jan 24, 2006 15:49 IST
Reuters
Reuters
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India's state-run Oriental Bank of Commerce expects profit in the year to March to exceed last year's level, lifted by a growing loan portfolio and increased recovery of bad loans, its chairman said on Tuesday.

"Definitely profit will be higher than last year's. The third quarter has given me a lot of confidence," KN Prithviraj said in an interview. "In this quarter we are going the whole hog for recovering of NPAs (non-performing assets)."

Oriental, India's seventh-largest bank by market capitalisation, posted a net profit of Rs 7.61 billion ($172 million) in the year to March 2005.

The bank has a target of reducing gross NPAs by March to about 6 per cent of the total, or Rs 20 billion, from 7.1 per cent, or 23.4 billion, at the end of the third quarter.

The bank's shares rose as much as 1 per cent in early Mumbai trade, and were 0.35 percent higher at Rs 258.85 by 0530 GMT, while the benchmark BSE index was up 1 per cent at 9,555 points.

Oriental, which plans to issue Rs 5 billion in bonds by next month, expects credit disbursals to rise to Rs 350 billion in the next three months from about 330 billion now, and total business to touch Rs 900 billion by next year, he said.

Prithviraj forecast robust loan demand from the fast-growing infrastructure, cement and retail sectors in Asia's third-largest economy, which is set to expand by more than 7 per cent this year.

He expected liquidity in the banking system to harden in the shorter term as competition among banks for cheaper borrowing and quality assets increases.

DIGESTING GLOBAL TRUST

Oriental Bank, which bought fallen Global Trust Bank in 2004, said profits would improve once the impact of that purchase wears off in about two years.

Prithviraj said his bank, with 1,130 branches, had sought the Reserve Bank of India's approval for opening 50 more branches.

"By next year I hope to have 30 to 40 branches ready."

India's crowded banking sector has nearly 100 public, private and foreign banks, besides some 200 regional rural banks.

There are about 30 privately managed banks, while the government owns a majority in 19 of the public sector ones, including the largest, State Bank of India (SBI), and its seven associate banks.

The Reserve Bank of India owns almost 60 per cent of SBI, which handles a fifth of all bank deposits and loans. Together, SBI and public sector banks account for nearly 75 per cent.

With more than 800,000 people on the payrolls, banks are the second-largest employer in the formal economy after Indian Railways.

First Published: Jan 24, 2006 12:44 IST