MUMBAI: Bank of Baroda on Saturday reported a robust set of numbers with an 87.7 per cent on-year jump in net profit at Rs 4,070 crore in the June quarter, driven by higher interest income from an above-industry level loan growth and better margins.
The bottom line was also helped by lower provisions for bad loans as the asset quality improved vastly. Loan growth was led by the global book, something none of the other domestic lenders could book.
The management of the second largest state-run lender said the profitability growth was supported by healthy operating income that grew 42.9 per cent to Rs 14,319 crore, of which the key net interest income (NII) grew 24 per cent to Rs 10,997 crore and other income led by treasury income jumped 2.8 times to Rs 1,152 crore.
Debadatta Chand, BoB's managing director & chief executive, said the bank's global NIM stood at 3.27 per cent, an increase of 25 basis points (bps) and domestic NIM at 3.41 per cent, an increase of 34 bps and guided towards a 3.3 per cent level for the remaining quarters as they see some repricing of deposits which will eat into the spread.
Accordingly, the yield on advances increased to 8.40 per cent from 6.58 per cent in Q1FY23 and the cost of deposits rose to 4.68 per cent from 3.46 per cent yet its cost to income came down to 45.36 per cent from 54.81 per cent, said BoB chief financial officer Ian de Souza.
The asset quality continued to improve with the gross NPA ratio falling by 33.8 per cent to Rs 34,832 crore or 3.51 per cent of the total book down from 6.26 per cent in Q1FY23.
The net NPA fell to a record low of 0.78 per cent in the reporting quarter from 1.58 per cent in Q1FY23. This had the provision coverage ratio improving to 93.23 from 78.52 in Q1FY24.
Total provisions (other than tax) and contingencies rose 15.5 per cent to Rs 1,946 crore, of which, provisions for NPAs stood at Rs 420 crore and for wage hikes stood at Rs 730 crore of which Rs 500 crore was made this quarter, and for written-off accounts at Rs 1,693 crore.
The bank made a cash recovery of Rs 986 crore, Ajay Khurana, one of the executive directors, said adding and recovering Rs 1937 crore from NPAs accounts and another Rs 636 crore from written accounts.
The bank has a recovery target of Rs 12,000 crore for the year. Similarly, the slippage ratio declined to 1.05 from 1.71 in Q1FY23 and the band does not expect any negative surprises going forward. This also had the credit cost falling by 5 bps to 0.70 per cent and Chand expects this to fall further to under 0.5 per cent by March.
Excluding prudential provisions credit cost would have been 44 bps, he said.
On the asset side, unlike other peers especially the market leader SBI, its global advances grew at a robust 18 per cent on-year to Rs 9,90,988 crore, as against SBI's 7.7 per cent and Chand expects this to moderate to 14.16 per cent As against this domestic advances grew at a lower 16.8 per cent to Rs 8,12,626 crore, taking the total business to Rs 21,90,896 crore, which was 17 per cent more than the year-ago period.
Established in July 1908, the Bank of Baroda has a significant international presence with a network of 93 overseas offices spanning 17 countries. Chand said the bank's international business mostly comes from the US, England, the UAE and Singapore.
Domestic loan growth was led by the retail segment (24.8 per cent), driven by auto loans (22.1 per cent), home loans (18.4 per cent), personal loans (82.9 per cent), mortgage loans (15.8 per cent), and education loans which grew 20.8 per cent.
Agri loan grew 18 per cent to Rs 1,27,583 crore, the gold loan portfolio rose 32 per cent to Rs 40,652 crore and the MSME portfolio grew 12.7 per cent to Rs 1,09,220 crore.
Global deposits increased 16.2 per cent to Rs 11,99,908 crore and domestic deposits rose 15.5 per cent to Rs 10,50,306 crore. Domestic Cass deposits grew 5.5 per cent to Rs 4,23,600 crore.
Chand said the sale of Bob Financial Solutions is on course and has already completed the financial due diligence but did not sound confident of completing the process this year citing the long list of approvals needed and also market conditions and valuation.
Similarly, the bank is also keen to sell its stake in Nainital Bank which will also depend on the market conditions and regulatory nods.