Bank of Baroda Q2 net down 5.5% at Rs 1,104 crore

Raises gross NPA estimate for FY15 to 3.2% from 3%

Public sector lender Bank of Baroda's (BoB) net profit for second quarter ended September 2014 fell by 5.5% to Rs 1,104 crore on five-fold growth in tax provisions.

It had posted net profit of Rs 1,168 crore in the July-September 2013.

BoB stock closed slight up at Rs 960 on Bombay Stock Exchange (BSE).

Its Net Interest Income (NII) rose by 17.5% to Rs 3,401.11 crore on the back of efficient management of deposit franchise and loan-book. The Other Income, however, rose marginally by 1.8% to Rs 991.65 crore on changed dynamics of financial markets and weaker fee-based income on account of lacklustre credit growth.

Bank's tax provisions rose by over five times in Q2 to Rs 410.67 crore, as it had to create a Differed Tax Liability (DTL) on Special Reserves. The usual deduction of Bad Debt Written Off was not available due to the recent legislative changes, said its executive director P Srinivas.

Total Deposits increased by 16.9% (y-o-y) to Rs 5,66,926 crore at end of September 2014. The share of domestic low cost - Current account and Savings Account Deposits was 31.89%.

The total Advances increased by 13.5% (y-o-y) to Rs 3,85,766 crore. Bank expects to grow loan book at rate two% more than industry average by March 2015.

Srinivas said the industrial growth was subdued and credit off-take anaemic for the Indian banking sector. Bank was expecting improvement in business environment by end of second quarter (September 2014) and but things have not evolved on expected lines. There is still stress in the system and may remain for two more quarters, he added.

The bank raised guidance for Gross non-performing assets (GNPA) level to be 3.2% by March 2015 as against previous estimate of 3%. It scaled down estimate for Return On Assets (ROA) from one% to 0.9% by March 2015. Gross NPA stood at 3.32% at end of September 2014. Its provision coverage ratio for bad loans stood 65% and plans to gradually increase it to 70%.

Its provisions and contingencies (excluding tax provisions) rose by 3.2% to Rs 888.04 crore in Q2 FY15 versus Rs 860.83 crore in Q2, FY14. An increase in provisions was mainly on account of higher provisions for investment depreciation on equity portfolio during Q2, FY15. The index returns became negative in September, 2014 after almost eight months.

The capital adequacy ratio was 12.69% with tier I of 9.47% at end of September 2014. The bank plans to raise tier I capital through Basel III compliant bonds. It is, however, yet to finalise amount and timing.