State-owned Oriental Bank of Commerce is working on a strategy to focus on re-pricing its high-cost deposits in order to improve its profit margins. Though it is also in the process of improving its current account and savings account deposits (CASA), the immediate focus is on high-cost deposits.
The bank has already started repricing the high-cost deposits from about 12% now to about 6%. “This exercise will give us a cost savings of about 600 basis points and would help in bringing down the cost of deposits to below 7%. This would have a positive impact on the profit margins,” Rathnakar Hegde, ED, said.
The bank’s net interest margin (NIM) is currently at about 2% and repricing and focus on CASA deposits would take the margins to about 2.2% in the current fiscal.
The bank has also witnessed a significant drop in its CASA deposits from about 32.6% in 2005-06 to about 23.7% in 2008-09. However, Hegde said, the deposits have increased in absolute terms though there is a dip in percentage terms. While the bank is working on a target of taking deposits to about 25% in FY10, it would achieve about 30 per cent by March 2012.
Interestingly, Hegde said that the bank is yet to come out of the drag due to takeover of the ailing Global Trust Bank (GTB). “We would return to pre-GTB margins in the next couple of years,” he said. The bank had a balance sheet size of Rs 1,84,425 crore as on September 30, which grew 24.2% year on year. It is aiming to expand its balance sheet above the Rs 2 lakh-crore mark by fiscal-end.
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