Strong growth in advances, coupled with a robust jump in net interest income, buoyed Bank of Baroda's net profit in the fourth quarter ended March 31, 2011.
Net profit for the quarter increased 43 per cent to Rs 1,294 crore, against Rs 906 crore in the corresponding quarter last year.
“Though the bank made higher provisions, profits increased due to strong growth in advances and core operations,” said Mr M.D. Mallya, Chairman and Managing Director.
For the full year 2010-11, the bank posted a net profit of Rs 4,242 crore, up 39 per cent from Rs 3,058 crore in the previous fiscal.
The bank's board has proposed a dividend of Rs 16.50 per share having face value of Rs 10 per share for the just ended fiscal.
A Challenging year
Mr Mallya said that 2010-11 was a challenging year as there was an upward bias in interest rates throughout the year. Due to the steep increase in term deposit rates, the share of low-cost current and savings account in total deposits shrunk marginally.
Non-interest income was flat due to lower trading profits of Rs 120 crore (Rs 206 crore).
Gross non-performing assets increased to Rs 3,152 crore (Rs 2,401 crore). However, this was not a cause for concern, as the bank has seen good recoveries, said Mr Mallya. During 2010-11, the income from recoveries was Rs 720 crore (Rs 685 crore).
The bank also substantially increased its provisions in FY2011 by 91 per cent to Rs 1,331 crore (Rs 697 crore). The provision coverage ratio as on end-March was 75 per cent.
The bank has absorbed the full impact of pension liability and has made a total provision of Rs 920 crore towards employee benefits in 2010-11, Mr Mallya said. This includes Rs 554 crore, which is the entire pension provision for former employees and Rs 366 crore, which is one fifth of the pension provision of Rs 1,830 crore for existing employees. Banks have been permitted to amortize the pension provision for existing employees over a period of five years.
Target
For the current fiscal BoB is looking at a deposit growth of 20-22 per cent, credit growth of 23-24 per cent and profit growth of around 25 per cent. It is also looking to hire 4,000 personnel and open 500 more branches.
It is planning to add about 15 offices and branches overseas in locations like Malaysia, Uganda, Botswana, Gulf and Australia, said Mr Mallya.
Shares of BoB closed at Rs 940.45, down 5.02 per cent, from the previous close of Rs 990.15, on the BSE, on Thursday.