Treasury trouble: BoB sees 15% fall in profit

Bank of Baroda (BoB) is likely to report a 15 per cent drop in operating profit for the current fiscal. Meanwhile the public sector bank will consider acquiring a public sector bank to expand its presence in the east and north.

"In view of the fall in sale of investments, the operating profit is likely to decline by around 15 per cent in FY05 compared with the previous fiscal... This year, loan growth is likely to be 15-18 per cent, yet income from this segment will not fully compensate the dip in income from treasury operations," said P S Shenoy, chairman and managing director at the sidelines of a press conference held by its subsidiary BobCards here yesterday.

In 2003-04, the bank had recorded an operating profit of around Rs 2,500 crore while treasury income was close to Rs 950 crore, he added. The bank has witnessed year-on-year growth of 14 per cent in loans till end of August.

Asked on inorganic growth Shenoy said the bank was internally working on formulating various permutations and combinations for assessing fit and viable banks. In the overseas market BoB is looking at only inorganic growth.

However, BoB would only look at public sector banks for acquisition, especially those which would help to strengthen its presence in the east, north and south, he added.

BOBCARDS capital: Meanwhile, the bank will increase the paid-up capital of its wholly owned subsidiary BOBCARDS Ltd five-fold to Rs 100 crore to fund its growth strategy in the competitive card market.

"BOB board is expected to approve the proposal and we hope to increase the capital from Rs 20 crore to Rs 100 crore over next couple of months", said P S Shenoy, chairman and managing director, Bank of Baroda here today.

The capital infusion would help in increasing the confidence of customers and also help the subsidiary to give more revolving credit, he added. On plans to bring in a strategic partner for BOBCARDS and BOB Mutual Fund, the CMD said "the time was still not right".

BOBCARDS, which completed 10 years, has slashed its service charge to 1.99 per cent from 2.25 per cent effective October one, 2004, which would be further reduced to 1.49 per cent for quality card holders from April next year. Shenoy said in a bid to increase the card base, BOBCARDs would issue free credit cards to fixed deposit holders of Rs 25,000 and above of BoB.

BOBCARDS, managing director, S P Garg said "the current active card base is 1.5 lakh, which we aim to double by March 2006."

The card company was also planning to launch an international dollar card by March 2005 either in association with MasterCard or Visa, he added.

On the default rate for BOBCARDS, he said it was between 8-10 per cent.