Non-recurring items such as profit on sale of investments and gains on treasury investment helped Bank of Baroda’s net profit grow 11.6 per cent. Thanks to a rise in government bond prices, there was Rs 246 crore in the form of write-back and sale of treasuries compared to a Rs 135-crore loss last year.

Excluding these items, the profit before tax declined 17 per cent year-on-year, instead of reported growth of 5 per cent. While the bank’s margin picture has been reasonable, asset quality slippages haven’t tapered off.

Higher NPA provisioning (which rose fourfold year-on-year) led to lower earnings. While the margins were expected to decline further from the June quarter due to cut in base rate, the margins held up quite well for the bank. This was despite a lower credit-deposit ratio.

The reason could be, one, the bank had lower reversal in income than the previous quarter.

Two, the bank has increased lending to SME segment during this period which improved the yield on advances sequentially. Third, the yield on the held-to-maturity investments also rose during the three months ended September 2012. Fourth, cut in reserve ratio helped the bank’s margins — in line with other banks.

While decline in margins is not a concern, as the bank may improve margins when it lends more, deteriorating asset quality continues to be a concern.

Bank of Baroda, which has one of the lowest non-performing assets (NPA) in the public sector bank space, saw its gross NPA rise 10.5 per cent sequentially and 72 per cent year-on-year.

The gross NPA ratio was 1.98 per cent in September 2012, up from 1.84 per cent sequentially.

The restructured loan proportion, on the other hand, rose 40 basis points to 6.7 per cent of the total loans. Even as the troubled segments such as small-scale industries and agriculture loans continued to deteriorate, the retail book of the bank also witnessed higher slippages.

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