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Bank of Baroda expects most provisions to have been done by H2FY19

The bank reported after the market's close on Friday that third-quarter net profit more than halved because the funds it set aside for soured loans nearly doubled from a year earlier

Reuters  |  Mumbai 

Bank of Baroda
Bank of Baroda | Photo: PTI

of Baroda, India's third-biggest state-run lender, expects a recovery in its financial performance to quicken from the second half of the next fiscal year as soured-loan provisions gradually decline, a executive told Reuters on Monday.

The reported after the market's close on Friday that third-quarter net profit more than halved because the funds it set aside for soured loans nearly doubled from a year earlier.

Its shares, however, jumped as much as 10.7 percent on Monday as investors took comfort from the bank's stronger operating performance and bet that bad loans were peaking.

Indian lenders are staring at least one more quarter of heavy provisioning as the central has ordered them to achieve by March an at least 50 percent provision cover on all loans to undergoing bankruptcy proceedings.

of Baroda needs to make about 8.6 billion rupees ($134 million) more of provisions for the 26 of its borrowers that are undergoing bankruptcy proceedings after a central order, Papia Sengupta, an at the bank, said in an interview.

Still, overall provisions for the current quarter should remain at similar levels as the 31.55 billion rupees made in the third quarter, she said.

Asked when the lender, whose profits have been under pressure for the past more than two years, will see faster improvement in its performance, Sengupta said: "I think we'll have to wait for the second half of the next (fiscal) year." The bank's fiscal year starts on April 1.

"We would have been done with most of the provisioning by then. (Also), I think some of the recoveries will start coming in, at least the NCLT cases," she said, referring to the borrowers undergoing bankruptcy proceedings at (NCLT).

of Baroda will continue to set aside funds to further boost its provision coverage ratio, which at 68 percent is already one of the highest among Indian Sengupta also said the aimed to prevent its net non-performing loans, which stood at 198.52 billion rupees at end-December, from crossing 200 billion rupees.

The bank's renewed focus on with based on credit scores was paying off, Sengupta said. A "war room" set up to chase the top 200 stressed borrowers should also boost recoveries, she said.

Top lender State of India, which reported a surprise third-quarter loss last Friday on higher bad-loan provisions, has guided for an improvement in its performance in the new financial year that begins on April 1.

Its shares were trading 2.5 percent lower by 0926 GMT in a market that was 0.8 percent up.

First Published: Mon, February 12 2018. 19:48 IST
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