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Q4 Results: Bank Of Baroda Posts Surprise Loss As Provisions Rise

Bank of Baroda’s loss narrows to Rs 991 crore in Q4.

Pedestrians walk past a Bank of Baroda bank branch in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)
Pedestrians walk past a Bank of Baroda bank branch in Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Bank of Baroda posted a surprise loss as it front-ended provisions in the March quarter.

Net loss stood at Rs 991 crore in the quarter ended March compared with Rs 3,102 crore a year earlier, the bank said in its exchange filing. Analysts tracked by Bloomberg had forecast a profit of Rs 860 crore.

Its gross non-performing assets narrowed to 9.61 percent from 11.01 percent as of December. Net NPAs also contracted 93 basis points sequentially to 3.33 percent.

Provisions of the state-run lender rose despite a reduction in bad loans. The bank’s provisions nearly doubled over the previous quarter to Rs 5,500 crore. Its provisioning coverage ratio increased 521 basis points sequentially to 78.68 percent. The bank said provisions worth about Rs 950 crore were added during the quarter due to its exposure in Bhushan Power & Steel Ltd. and Alok Industries Ltd., which have seen a delay in their resolution process under the Insolvency and Bankruptcy Code.

Bank of Baroda also disclosed an exposure of Rs 4,680 crore to the debt-laden Infrastructure Leasing & Financial Service group. It classified loans to six IL&FS group firms as non-performing assets and set aside Rs 400 crore as provisions.

PS Jayakumar, managing director and chief executive officer of Bank of Baroda, expects the bank’s standalone slippages in the ongoing financial year to come around Rs 15,000 crore, and its recoveries to be higher than Rs 15,000 crore. This means the bank would not see any movement in NPA ratios over the year.

  • Net interest income for the fourth quarter rose 26.6 percent year-on-year to Rs 5,067 crore compared with an estimate of Rs 4,939 crore.
  • The bank’s other income rose 16.2 percent year-on-year to Rs 1,970 crore.

Bank of Baroda has merged with state-run peers Dena Bank and Vijaya Bank. The lender had received Rs 5,042-crore infusion from the government ahead of the merger that became effective from April 1.

It will now start merging the balance sheets of all three lenders, which will help Bank of Baroda to better understand the nature of stress in Dena Bank and Vijaya Bank. Jayakumar said the net NPA ratio for the merged entity would have been around 3.65 percent for the January-March period.

The bank is also in the process of rationalising its international presence. Bank of Baroda, according to Jayakumar, has shut its businesses in the Bahamas and Bahrain. It is also pruning its business in China and is likely to completely exit the country in September. The bank is also in the process of closing businesses in Oman and South Africa.

In 2019-20, the bank plans to raise funds through several routes, including the employee share purchase scheme. Its board has approved a total fundraising cap of Rs 19,400 crore for the year, of which Rs 11,900 crore would come from common equity capital.