Bank of Baroda’s PAT rises 28% on strong operating metrics, better loan quality

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Bank of Baroda’s net profit in Q2FY24 rose 28.4 per cent year-on-year to ₹4,253 crore, as operating income rose 25 per cent to ₹15,002 crore and non-interest income doubled to ₹4,171 crore.

In a post-earnings call, executive director Ajay Khurana said recovery of ₹1,231 crore from written off accounts was from some large corporate accounts. There are more such accounts in the queue and the recovery rate for H2FY24 should be similar to the ₹1,894 crore seen in H1. However, net interest income (NII) rose 6.5 per cent year-on-year to ₹10,831 crore. Global NIM for the quarter fell 26 bps year-on-year to 3.07 percent. Yields on advances rose by 121 bps as against 133 bps rise in cost of deposits.

Deposit amount increases

Global deposits grew 14.6 per cent to ₹12.5 lakh crore, of which domestic deposits grew 12 per cent to ₹10.7 lakh crore.

MD and CEO Debdutt Chand said deposit growth has lagged behind credit growth to the industry, due to which the bank expects incremental deposit growth to be below 12-13 per cent.

Wholesale deposits grew by 59 per cent while CASA deposits grew by 4.4 per cent and retail term deposits by 3.9 per cent. “We are trying to optimize on the wholesale deposits front, control that growth so that we can maintain margins and grow strategically,” Chand said. The ongoing festive season is expected to help strengthen the CASA base as the bank continues to moderate bulk deposit growth. The bank aims to increase the CASA ratio from the current 39.6 per cent to 41 per cent in the “near future”.

Global advances grew 17.3 per cent year-on-year to ₹10.2 lakh crore. Domestic credit stood at ₹8.3 lakh crore, up 16.5 per cent. Retail loans grew by 22.2 per cent, with high focus areas like automobile, home, mortgage and education loans growing by 13-21 per cent and personal loans by 67 per cent.

Chand said 95-96 per cent of personal loan takers are existing bank customers and new customers are only those who start a salaried account with the bank, due to which the quality of the portfolio remains strong.

However, considering the industry situation the bank has decided to go slow on personal loans, which will see growth of about 35 per cent in FY2014. Moreover, the bank now has data of the last 2-3 years which it will analyze to review and recalculate the strategy going forward.

Slippage for the quarter was ₹4,331 crore, higher than a quarter and a year ago, due to a large international account of ₹500 crore and an aviation account of ₹1,773 crore being classified as bad loans. Recoveries and upgrades for the quarter were ₹2,207 crore.

The bank’s management said the outlook on the aviation account remains positive, referring to Go Air. He said the CoC (committee of creditors) for the airline, which is undergoing insolvency proceedings, has seen interested bidders and it is difficult to comment on the possibility of liquidation at this point.

The bank’s gross NPA ratio improved to 3.32 percent from 5.31 percent a year ago and 3.51 percent a quarter ago. The net NPA ratio at 0.76 per cent was also better than 1.16 per cent last year and 0.78 per cent in the previous quarter.

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