Bank of Baroda shares fall 4% on weak loan, deposit growth in Q1FY25

Bank of Baroda shares fall: The fall in the share price of the PSB came after the lender reported a weak loan growth in the April-June quarter (Q1) of FY25 on a sequential basis

Bank of Baroda Q1 business update: Shares of public sector bank (PSB), Bank of Baroda, fell 4.3 per cent in the intraday trade on the BSE on Monday. By comparison, the benchmark BSE Sensex was down 0.16 per cent at 1:40 PM.

The fall in the share price of the PSB came after the lender reported a weak loan growth in the April-June quarter (Q1) of the current financial year 2024-25 (FY25) on a sequential basis.

Bank of Baroda's global deposits fell to Rs 13.05 trillion at the end of the June quarter from Rs 13.26 trillion at the end of the March quarter of FY24 (Q4FY24). Over the previous June quarter (Q1FY24), however, the lender recorded a growth of 8.8 per cent from Rs 11.99 trillion.  

 

Global advances, meanwhile, fell to Rs 8.81 trillion in Q1FY25 as against Rs 8.98 trillion in Q4FY24. Global advances were up 8.5 per cent year-on-year.

"The bank's overall loan growth in the quarter was soft at 8.1 per cent Y-o-Y. Moreover, the loan book declined Q-o-Q by 1.6 per cent. Bank of Baroda does not have any clear seasonal trend in loan book in Q1FY25, though the past three-year average Q-o-Q loan growth in Q1 is zero," noted analysts at Nomura.

On the domestic front, Bank of Baroda's deposits fell to Rs 11.05 trillion vs Rs 11.28 trillion Q-o-Q. The Q-o-Q decline in deposits was largely in-line with seasonal trends (average Q-o-Q decline in deposits in the past three years was 1.8 per cent). This was led by domestic deposits (up 5.3 per cent Y-o-Y / down 2 per cent Q-o-Q). Overseas deposits growth was relatively better at 33.9 per cent Y-o-Y and 1 per cent Q-o-Q.

Bank of Baroda's domestic loans were at Rs 8.81 trillion in Q1FY25 vs Rs 8.98 trillion in Q4FY24. Domestic retail advances, however, were up at Rs 2.22 trillion in Q1FY25 from Rs 2.14 trillion in Q4FY24. On a yearly basis, this was a growth of 20.86 per cent from Rs 1.84 trillion at the end of Q1FY24.

Domestic loan-to-deposit ratio (based on gross loans) was largely stable sequentially at 80 per cent.

"Loan growth at 8 per cent Y-o-Y is tracking well below management's guided range of 12-14 per cent, and our FY25 estimate of 13 per cent Y-o-Y. Deposits, too, (up 9 per cent Y-o-Y) are well below the management's guidance of 11-12 per cent. We await further clarity from the results. Based on the pre-Q1 update, we expect NIMs to be largely stable sequentially (aided by higher Q-o-Q retail loan growth, stable LDR). Delivery on asset quality will also be a key monitorable," Nomura added.

Separately, Bank of Baroda's board has approved plans to raise additional capital of up to Rs 7,500 crore through debt capital instruments. The bank plans to raise capital in suitable tranches until March 31, 2025, or beyond if necessary, depending on market conditions.