BackBank of Baroda Q1 profit up 16.6% to Rs1,362
Net interest income rose 15.2% to `3,328 crore
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Mumbai: Public-sector lender Bank of Baroda (BoB) said on Monday that fiscal first quarter profit rose 16.6% as it earned more interest on loans even as asset quality remained under stress.
Net profit rose to ₹ 1,362 crore in the three months ended 30 June from ₹ 1,168 crore a year ago, the lender said. Net interest income (NII), the difference between what a bank earns from lending and what it pays on deposits, rose 15.2% to ₹ 3,328 crore.
Non-interest income, or income from fees, commissions and trading, dropped to ₹ 1,024.5 crore from ₹ 1,230.55 crore a year ago, as bond yields rose in the period by 1.3 percentage points. As yields rise, the prices of bonds fall. Non-interest income would have fallen even more but for the bank earning a profit on its equity portfolio.
Revenue grew by 9% to ₹ 11,682.5 crore from ₹ 10,717.5 crore in the year earlier.
The bank’s global net interest margin (NIM), or the difference between yields on advances and cost of deposits, fell to 2.35% from 2.41% in the year-ago quarter. Domestic NIM improved to 2.94% from 2.84% a year ago.
Chairman S.S. Mundra forecast 3% NIM for the full fiscal year and said the bank will not be aggressive in pursuing growth. “There is no point in growing aggressively if it is not profitable. We decided to grow with the environment around us and we ensured that our NII remains strong," said Mundra, who is set to retire this month.
Mundra is considered to be a top contender for the job of deputy governor of the Reserve Bank of India (RBI), which became vacant after K.C. Chakrabarty resigned on 20 March.
In the first quarter, BoB wrote back ₹ 319 crore of provision on investments, but the bank did not use it to boost profit. Instead, the amount was added back to provisions to improve the provision coverage ratio.
The bank’s gross non-performing assets (NPA), as a percentage of its advances, rose to 3.11% in the June quarter, from 2.99% in the year-ago quarter and 2.94% in the quarter ended March.
Fresh slippages, or good loans turning bad, in the quarter amounted to ₹ 1,880.83 crore in the June quarter, lower than its year-ago quarter level of ₹ 1,960 crore. In the quarter ended March, fresh slippages were to the tune of ₹ 1,677 crore.
Loans restructured fell to ₹ 986 crore in the first quarter, from ₹ 1,157 crore in March quarter and ₹ 2,157 crore in the June quarter a year ago.
The bank management guided for a restructuring pipeline of about ₹ 1,000 crore in the second quarter.
As per RBI guidelines, banks are allowed to restructure loans only up to March 2015. Any loan restructured after that period will be considered a bad debt and banks will have to set aside money to cover the risk of default.
Total provisions in the quarter fell 11.9% to ₹ 1,117.72 crore, out of which provisions for bad debts was ₹ 771.80 crore, 14.6% higher than its year-ago quarter’s level of ₹ 673.49 crore.
Net NPA ratio stood at 1.58% in the three months ended June compared with 1.52% in the January-March quarter.
“Gross slippage at 1.9% is lower than its peers who have declared their results and hence it is positive for the stock. BoB remains one of the preferred stock in the PSU (public sector undertaking) banking space," said Saday Sinha, banking analyst, Kotak Securities Ltd.
Sinha called the bank’s asset quality “healthy", as gross NPA and net NPA remained stable quarter on quarter in absolute terms while in percentage terms, they had inched up marginally.
BoB’s stock rose 0.53% to ₹ 866.10 a piece on the BSE on a day the benchmark Sensex fell 0.52% to 25,991.23 points.
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