Bank of Baroda Q3 net profit doubles to Rs 2,197 cr on lower provisions

Asset quality of the bank improved both sequentially and on a YoY basis; provisions of the lender fell over 27% to Rs 2,506 cr

Public sector lender Bank of Baroda's net profit doubled to Rs 2,197 crore in the October - December quarter (Q3FY22), aided by higher net interest income and lower provisions. The lender had posted a net profit of Rs 1,061 crore in the same quarter a year ago.

Net interest income, the difference between interest earned and interest expended, of the lender jumped 14.38 per cent to Rs 8,552 crore in the reporting quarter, aided by margins. Net interest margin, a measure of profitability, of the bank stood at 3.13 per cent, up 36 basis points from the year-ago period. 

The fee income has also grown 15 per cent YoY to Rs 1,557 crore in Q3FY22 as against Rs 1,348 crore in the same quarter a year ago.

“There have been some headwinds for all banks in terms of treasury income wherein the gains we had been seeing for the last few quarters have begun to peter out," said Sanjiv Chadha, MD&CEO, Bank of Baroda at a post-earnings media interaction.

Provisions of the lender fell over 27 per cent on a year-on-year (YoY) basis to Rs 2,506 crore in Q3FY22 as against Rs 3,449.90 crore in the year-ago period.

The bank is holding additional provision of Rs 558.93 crore over and above the provision as per IRAC norms in certain stressed standard advances on prudent basis.

Asset quality of the bank improved both sequentially and on a YoY basis, with gross non-performing assets (NPAs) at 7.25 per cent. Similarly, net NPAs improved to 2.25 per cent in Q3FY22. Slippages of the bank came in at Rs 2,830 crore as compared to Rs 5,223 crore during Q2FY22 and Rs 3,986 crore in Q3FY21. The bank has been guiding that the slippages should be in the range of 2 per cent.

“This improvement is likely to continue particularly because the challenges that came from Covid are largely behind us. Therefore, the secular improvement that we are seeing in the credit cycle should manifest itself more decisively in terms of gross NPAs and net NPAs, going forward," Chadha said.

Domestic advances rose 3.36 per cent on a YoY basis and nearly 5 per cent sequentially to Rs 6.54 trillion. The retail book of the lender rose 11.13 per cent YoY during the period to Rs 1.28 trillion. The bank's corporate loan book was flat from a year ago to Rs 2.91 trillion.

“The corporate book has been a bit of a challenge in terms of growth and margin. So, the fact that we saw a muted growth is also because we were very sensitive about the margin at which we do business. Going ahead, it should be possible to grow our book and protect our margins as well," Chadha further said.

“We believe that next year we should be looking at double digit credit growth and as of now our prognosis is, the market should grow by 10 – 12 per cent and our stance is we want to grow at the market rate or better than it, without compromising on margins. This year, the growth will come from retail. I believe there is a secular trend in terms of retail growing faster than corporate. But, nevertheless, next year should be a much better year in terms of corporate growth," Chadha said. 

Deposits, on the other hand, increased 5 per cent YoY to Rs 8.76 trillion, with domestic low-cost deposits up by 12.86 per cent YoY.