Bank of Baroda’s Q3 FY22 net profit zooms 107%

Bank of Baroda’s standalone net profit shot up 107 per cent year-on-year (y-o-y) to ₹2,197 crore in the quarter ended December 31, 2021, against ₹1,061 crore in the corresponding quarter of the previous fiscal due to healthy growth in net interest income (NII) and a decline in total provisions.

The public sector bank’s net interest income (difference between interest earned and interest expended) rose about 14 per cent y-o-y to ₹8,552 crore from ₹7,477 crore last year.

Non-interest income — comprising recoveries made in written-off accounts, fee income on non-fund based banking activities, earnings from foreign exchange transactions, profit and loss on revaluation of investments, profit and loss on sale of investments and dividends from subsidiaries etc. — shrank about 13 per cent y-o-y to ₹2,519 crore (from ₹2,911 crore).

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Global net interest margin (net interest income/average interest earning assets) rose to 3.13 per cent in the reporting quarter against 2.87 per cent a year ago.

Total provisions of Bank of Baroda declined about 27 per cent y-o-y to ₹2,506 crore (₹3,450 crore).

Under the aforementioned accounting head, loan loss provisions jumped 106 per cent to ₹4,283 crore (₹2,080 crore). The bank made investment depreciation provisions of ₹447 crore (against write-back of ₹103 crore).

NPAs improve

Bank of Baroda received provision write-backs of ₹1,936 crore from standard advances (against provision of ₹1,418 crore) and ₹288 crore from other provisions (against provisions of ₹55 crore).

Fresh slippages during the reporting quarter were lower at ₹2,830 crore (from ₹3,986 crore). About 36 per cent of fresh slippages came from the MSME segment, followed by agriculture (22 per cent), corporate (21 per cent), and retail (18 per cent).

Reduction in non-performing assets (NPAs) via recovery, upgrdation and write-offs was at ₹6,998 crore (₹7,076 crore).

Bank of Baroda’s gross NPA position improved to 7.25 per cent of gross advances as at December-end 2021 against 8.11 per cent in the preceding quarter. Net NPAs position too improved to 2.25 per cent of net advances against 2.83 per cent in the preceding quarter.

Profitability should continue to be robust

Sanjiv Chadha, MD & CEO, Bank of Baroda, emphasised that almost throughout the pandemic, especially in the last few quarters, there was an improvement in both GNPA and NNPA ratios.

“While there have been challenges, the fact that the bank’s profitability has improved means that we have enough room to make adequate provisions.

“I believe that is a trend which should accelerate going forward...our profitability should continue to be robust enough to take care of our capital requirements,” he said.

As at December-end 2021, gross domestic advances of the Bank of Baroda increased by 3.36 per cent y-o-y to ₹6,54,315 crore. The advances growth mainly came from retail (about 11 per cent growth) and agriculture (about 10 per cent) segments. MSME loans edged up about 2 per cent. Corporate loan growth was muted.

Gross overseas advances were up about 5 per cent to ₹1,17,679 crore.

Corporate loans a challenge

Chadha observed that the corporate loan book has been a bit of a challenge in terms growth and margins. The muted growth in the corporate book is because the Bank of Baroda is very sensitive about the margins at which it does business, he said.

“As interest rates normalise, we believe the share of banks in terms of credit requirements of borrowers would reassert itself.

“Having said that, banks would possibly have to operate in both markets — as investors in the bond market and also the loan market — particularly when it comes to better rated corporates,” he said.

As at December-end 2021, domestic deposits with Bank of Baroda rose by 5 per cent y-o-y to ₹8,76,555 crore. Overseas deposits, however, declined about 15 per cent to ₹1,01,479 crore.

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