BoB net down 22.7% but stock zooms 10%

High staff expenses, depreciation in investments dent bottom line

Public sector lender Bank of Baroda (BoB)’s net profit for the first quarter that ended in June 2015 dipped 22.74 per cent to Rs 1,052 crore on rise in staff expenses and provision for depreciation in investments. But, the bank’s stock zoomed 10 per cent to Rs 168 as the numbers were above the Street’s expectations. The bank had posted a net profit of Rs 1,362 crore in April-June 2014 (Q1 of 2014-15).

According to analysts, the market estimated the profit after tax or PAT (net profit) at about Rs 900 crore, but the actual performance was better. The provisions for bad loans were also less than analyst estimates.

Nitin Kumar, banking analyst with broking firm Prabhudas Leeladhar Ltd, said the asset quality was nearing the bottom and if performance stayed on course, its PAT growth in the coming quarters could be at the first quarter’s levels.

The provision for non-performing assets (NPAs) and bad loans declined 26.4 per cent to Rs 567 crore. The provision coverage ratio was 64.94 per cent.

Ranjan Dhawan, managing director and chief executive (additional charge), said stress is still not out of the system. There might be pressure on the books for one to two more quarters.

Gross NPAs stood at Rs 17,273 crore (4.13 per cent) in June-end. Standard restructured advances were about Rs 25,541 crore.

Reserve Bank of India Deputy Governor S S Mundra has said there was some improvement in the banks’ NPAs, given the first quarter numbers.

BoB’s net interest income rose mere four per cent to Rs 3,459 crore in the reporting quarter as against Rs 3,328 crore in April-June 2014.  

The other income declined 5.6 per cent to Rs 967 crore due to reduced trading gains on the government bond portfolio. The yields on bonds hardened during the quarter, Dhawan said.

The provisions and contingencies rose 13.8 per cent to Rs 599 crore from Rs 526 crore. The wage revision pushed staff expenses up 21.67 per cent to Rs 1,345 crore in June 2015.

The deposits rose 7.51 per cent to Rs 5,93,087 crore. The share of low-cost deposits — savings deposits and current accounts — in domestic deposits was 31.89 per cent.

The advances rose by seven per cent in 12 months to Rs 4,08,388 crore. The credit growth is expected to be in line with the banking industry estimate of 13 per cent for 2015-16.

The capital adequacy ratio was 11.98 per cent with tier-I of 9.73 per cent. The bank has made a presentation to the government for infusing capital.

BoB seeks to raise Rs 4,000-5,000 crore through tier-I and tier-II bonds in the current year.