Bank Of Baroda Swings To Loss In Q3 As Provisions Against Stressed Assets Rise
Public sector lender Bank of Baroda posted a loss in the quarter ended December as its provisions against stressed assets increased.
India’s second-largest state-run lender by market value reported a loss of Rs 1,407 crore in the three-month period, according to its exchange filing. That’s because provisions against bad loans rose nearly 47 percent year-on-year to Rs 6,621 crore. The bank had posted a profit of Rs 436 crore in the year-ago period. The numbers aren’t comparable as it’s in the middle of a three-way merger with itself, Vijaya Bank and Dena Bank.
Net interest income, or the bank’s core income, increased 9 percent year-on-year to Rs 7,128 crore in Q3 FY20. The bank’s net interest margin stood at 2.8 percent, up 18 bps from the same period last year.
Asset Quality Performance
Bank of Baroda added Rs 10,387-crore in fresh bad loans to its balance sheet in the third quarter. Its non-performing assets stood at Rs 73,140 crore compared with Rs 69,969 crore in the previous quarter. Net NPAs rose nearly 6.5 percent sequentially to Rs 26,504 crore.
Its gross NPA ratio rose 18 basis points over the previous quarter to 10.43 percent.
Last month, the bank disclosed a divergence worth nearly Rs 5,250 crore in its gross NPA disclosures for the year ended March 2019—adding to its quarterly slippages. That, according to SL Jain, executive director of the bank, is a one-time event largely on the back of a deterioration in the value of security they hold against certain corporate accounts.
The slippages during the quarter included Rs 2,900 crore from a housing financier, Rs 1,000 crore from two power accounts and Rs 2,700 crore from a chemical company. Standard accounts in the bank’s watchlist came down to Rs 10,500 crore from Rs 12,500 crore in September. That apart, the lender said it has managed to recover Rs 584 crore from two corporate accounts in the three-month period.
The bank said that it isn’t taking up any fresh exposures to stressed non-bank lenders. In the December quarter, NBFCs repaid loans worth Rs 2,400 crore, the bank said. Nearly 45 percent of Bank of Baroda’s total exposure to NBFCs—worth Rs 1.03 lakh crore—is toward companies rated AAA.
The bank has also fully provided against exposure to telecom companies worth Rs 4,100 crore. It said that it has a small exposure to the stress-hit Vodafone Idea Ltd., which is currently standard.
Weak Advances Growth
Total advances during the quarter rose less than 1 percent year-on-year to Rs 6.54 lakh crore, well below credit growth in the banking system of about 7 percent.
“We’re focused on retail loans like home loans, auto loans and personal loans that can stand the test of time during stressful periods,” Chadha told reporters after announcing the bank’s results.
The bank expects a credit growth of 4-5 percent in the ongoing fiscal as it emerges from the merger.
Deposits rose marginally to Rs 8.96 lakh crore. Domestic current account savings account (CASA) ratio as on Dec. 31 was 38.84 percent, compared with 37.88 percent in the September quarter.
The CASA ratio is expected to rise to 40 percent in the next few quarters, said Sanjiv Chadha, the bank’s managing director and chief executive officer.