Bank of India has reported a strong second quarter of FY27, with earnings lifted by healthy core income, a surge in recoveries from written-off loans and further gains in asset quality. Management expects the RBI’s October rate hike to add to margins this quarter and is targeting a global net interest margin close to 3 per cent.
Earnings rise on core income and recoveries
According to the bank’s results for the July-September quarter, standalone net profit grew 25.34 per cent year-on-year to ₹3,202 crore, compared with ₹2,555 crore in the same period last year. Profit was also up 4.37 per cent sequentially from ₹3,068 crore in Q1. For the first half of FY27, the bank has earned ₹6,270 crore, an increase of 30.44 per cent. Consolidated net profit came in at ₹3,308.82 crore, up 28.4 per cent.
Net interest income increased 18.52 per cent to ₹7,007 crore. Non-interest income grew faster, rising 24.78 per cent to ₹2,770 crore. The main drivers were recoveries from written-off accounts, up 190 per cent to ₹978 crore, and forex earnings, up 157 per cent to ₹411 crore. These more than offset a 36 per cent fall in treasury income to ₹201 crore.
Operating profit rose about 33 per cent to ₹5,089 crore, and the cost-to-income ratio improved by 507 basis points to 47.95 per cent. The bank did set aside more for bad loans. NPA provisions more than doubled, up 114 per cent to ₹1,010 crore.
Global NIM rose to 2.47 per cent from 2.41 per cent a year earlier. Domestic NIM was around 2.75 per cent.
Asset quality and balance sheet
The bank’s investor presentation shows a steady improvement in asset quality. Gross NPAs fell to 1.60 per cent of advances, down from 2.54 per cent a year earlier and 1.81 per cent at the end of June. Net NPAs eased to 0.42 per cent from 0.65 per cent. The provision coverage ratio stood at 94.45 per cent. The slippage ratio was 0.15 per cent and credit cost was 0.12 per cent for the quarter.
The balance sheet also grew at a fast pace. Global deposits rose 21.59 per cent to ₹10,37,530 crore, and global advances grew 20.58 per cent to ₹8,55,071 crore. Retail, agriculture and MSME (RAM) loans increased 18.68 per cent to ₹4,12,670 crore and now make up 58.63 per cent of the domestic loan book. The CASA ratio was 34.16 per cent.
Karnatak sees margin lift from the repo hike
In a media interview after the results, MD & CEO Rajneesh Karnatak said the RBI’s 25-basis-point repo rate increase on 7 October is not yet reflected in the bank’s numbers. He expects it to raise domestic NIM by roughly 10-12 basis points, or about 11.5 basis points, in the October-December quarter. Around 63 per cent of the loan book is linked to the repo rate and reprices quickly, while about 30 per cent is tied to MCLR. Higher deposit costs will absorb part of the benefit, he noted, so the full 25 basis points will not pass through to margins.
Over the next two to three years, Karnatak wants to take global NIM closer to 3 per cent by growing higher-yielding loans and bringing down funding costs. For FY27, the bank expects deposit growth of 16-17 per cent and credit growth of 15-16 per cent. The guidance factors in FCNR deposits raised this year and possible further rate hikes.
Karnatak said the recent level of recoveries from written-off accounts included a few lumpy cases and may not repeat every quarter. He added that recoveries should keep growing because the bank has strengthened its internal recovery process. He expects the impact of the IRDAI’s draft rules on insurance commissions to be limited to around ₹50 crore of non-interest income. He also expects SMA levels to stay stable and does not see a sharp increase in slippages in the third quarter.
Why it matters
The results show public sector banks increasingly combining double-digit balance sheet growth with cleaner loan books. The next test for the lender is whether rising lending yields can keep pace with deposit repricing as rates go up, and whether it can maintain its recent recovery performance once the one-off gains fade.
