OBC will concentrate on increasing corporate activity and target higher fees through distribution of third-party products. It also targets to lift its net interest margins to 3%.
Expects fee-based income will rise 40% this year
MUMBAI: Oriental Bank of Commerce (OBC) will concentrate on increasing corporate activity and target higher fees through distribution of third-party products. It also targets to lift its net interest margins (NIMs) to 3%.
“We are concentrating on improving our fee-based income. We are targeting a growth of 40% in fee-based income this year from the current 30-35%,” said Allan Pereira, executive director, Oriental Bank of Commerce.
Recently, OBC tied up with Canara Bank and HSBC Insurance (Asia-Pacific) to launch a life insurance company in which OBC will hold a 23% stake. The bank also has a tie-up with Life Insurance Corporation of India (LIC). “Our bancassurance business is reaping us Rs 10-15 crore earnings on a yearly basis,” Pereira added.
OBC has a tie-up with Franklin Templeton to sell mutual fund products. It also has a deal with Western Union for money transfer services. Online trading facility will be opened up at 80-100 branches of the bank this year.
Raising NIMs is the other area of focus. “We are targeting NIMs of 3% by the end of March 2008 (as against 2.70% a year back). We raised our prime lending rates by 75 basis points in April this year and have also reduced our deposits rates to attain greater profitability,” Pereira added.
An SSKI report on OBC says the bank’s non-interest income (NII) may grow 8% in the second quarter of the year.
“This is due to the lag effect of the PLR hike in April, which could provide fillip to yield on advances. Going forward, the bank, with a higher proportion of bulk deposits, is likely to be a key beneficiary in a reducing interest rate environment,” the report says.
NII is likely to get a further boost due to higher treasury profits and recoveries from the write-off account of Global Trust Bank. Trading profits on the investment portfolio is estimated to be Rs 65-70 crore in the first half of the year.
About non-performing assets (NPA), Pereira said OBC is determined to bring down its net NPAs from the 0.65% to 0.40-0.50%. “We have put in place a strong and speedy recovery system to tackle delinquencies,” Pereira added.
“Advances to small-scale industries, agriculture and SMEs will be the main focus of our bank. We are projecting our credit growth at 21-22% for the year,” Pereira said.
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