Bank of Baroda clocks Rs 1K-cr profit, warns of stress in retail, SME loans

Despite interest income declining by almost 7 per cent, the lender's NII rose 8.65 per cent to Rs 7,749 crore

Public sector lender Bank of Baroda reported a net profit of Rs 1,061 crore in the October-December quarter (Q3) of FY21, compared to a loss of Rs 1,407 crore in the year-ago period.
 
Despite interest income declining by almost 7 per cent, net interest income rose 8.65 per cent to Rs 7,749 crore in Q3 compared to Rs 7,132 crore as interest expenses fell sharply. On the other hand, non-interest income rose 6 per cent to Rs 2,896 crore.
 
Domestic net interest margin (NIM) improved by 11 basis points (bps) to 3.07 per cent in Q3FY21 compared to 2.96 per cent in the preceding quarter, while global NIMs improved by 1 bp to 2.87 per cent.
 
“While the bank has been largely corporate-oriented, we want retail, specially secured retail, to be a bigger part of our business. We have tightened our underwriting standards and whatever growth we are seeing is despite that,” said Sanjiv Chadha, MD & CEO, Bank of Baroda.
 
“Going ahead some stress will play out in the MSME and retail book but we believe that the credit cost which might accrue on the accounts will be offset by lower credit cost from the corporate book. We believe we have a fair handle on the corporate book and are confident about the asset quality going ahead,” he added.
 
While provisions and contingencies dropped significantly year-on-year (YoY), sequentially it went up more than 30 per cent to Rs 3,957 crore, of which Rs 2,080 crore was for non-performing assets (NPAs) and Rs 1,690 crore for standard advances.
 
In Q2, the bank’s provisions were to the tune of Rs 3,002 crore, of which Rs 2,277 crore were for NPAs. The bank also holds Covid-19 provisions of Rs 1,709.35 crore as of December.
 
The lender’s asset quality improved as gross NPAs were at 8.48 per cent compared to 10.43 per cent in Q3FY20. In Q2, gross NPAs were at 9.14 per cent. Net NPAs, on the other hand, declined by 12 bps sequentially to 2.39 per cent. NPA provision coverage ratio of the bank stood at 85.46 per cent at the end of the December quarter.

 
Had the bank classified accounts which were 90 days’ past overdue as NPA, if not for the SC’s interim order, its gross NPAs would have been 9.63 per cent and net NPAs 3.36 per cent. But, the bank is holding contingent provisions of Rs 1,521.56 crore.
 
Furthermore, interest income aggregating to Rs 369.93 crore has been reckoned in operating profit and as a prudent measure an equal amount has been provided for.
 
The Covid-19 restructuring book is to the tune of Rs 9,500 crore, or 1.38 per cent of the advances. Of the Rs 9,500 crore, one-third is a part of proforma slippage. And, corporate segment accounts for 82 per cent of the total restructuring.
 
Domestic advances increased 8.31 per cent to Rs 6.33 trillion, led by organic retail and agriculture loans, which grew at 13.78 per cent and 14.08 per cent, respectively.
 
Domestic deposits grew 6.74 per cent to Rs 8.34 trillion, with domestic CASA deposits growing by 13.21 per cent to Rs 3.43 trillion. On a standalone basis, the capital adequacy was at 12.93 per cent, with CET I was at 8.98 per cent. The bank is looking to hit the market in the current quarter for a qualified institution placement which might in the range of Rs 2,000-4,000 crore.
 
Shares of the bank closed marginally higher at Rs 73.85 apiece on the BSE.
 
“The merger with Dena Bank and Vijaya Bank is complete in every possible way and it has gone fairly well both in terms of execution and the impact that we are seeing,” Chadha added.