BOB Q4 net down 48% to Rs 598 crore

Bank cites weak interest income and much higher NPA provisions; hopes to address these and improve share of low-cost deposits this year

Government-owned Bank of Baroda (BoB)’s net profit in the March quarter almost halved (fell 48.2 per cent) to Rs 598 crore, on higher provisions for bad loans and flat net interest income. The comparative figure in January-March 2014 was Rs 1,157 crore.

However, despite the bank performing below analyst estimates, its stock moved up sharply to close at Rs 169 a share, 17 per cent higher over the previous close on the BSE. Analysts said the stock had been hammered in the past few sessions and had corrected on Monday due to positive market sentiment and affirmation for maintaining comfortable provisioning on bad loans.

Net interest income for the quarter was 1.5 per cent more at Rs 3,171 crore, down from Rs 3,124 crore in the same quarter of FY14. The net interest margin (NIM) was down to 2.29 per cent from 2.17 per cent in 2013-14.  BoB said the margin in business abroad came under pressure due to a glut in liquidity.

Other income including commissions, fees and sale of investments, shrunk by 2.3 per cent to Rs 1,295 crore from Rs 1,326 crore.

R Dhawan, managing director and chief executive officer (MD & CEO), said the net profit declined due to weak interest income and higher provisions for non-performing assets (NPAs).

Net profit for the entire financial year was down 25 per cent to Rs 3,398 crore, from Rs 4,541 crore in FY14. Total income grew 9.1 per cent to Rs 47,365 crore. The board of directors has recommended a dividend of Rs 3.2 per share (of face value Rs 2 each).

Total deposits grew 8.6 per cent to Rs 6,17,500 crore. The share of low-cost deposits (current and savings accounts) to the domestic total rose to 33 per cent in March from 31.8 per cent a year before.

Reflecting the economic slump, its loan book grew 7.8 per cent in FY15 (to Rs 428,065 crore) as against 21 per cent in FY14.  

On the outlook for the financial sector, Dhawan said system growth might not exceed 25 per cent. The only sector showing significant demand was real estate but they were cautious on loaning to this segment. There is no pick-up in demand from other sectors, he said.

Asset quality remained under pressure through the year due to rising defaults, especially in the corporate segment. Gross NPAs were up at 3.72 per cent (Rs 16,261 crore) from 2.92 per cent (Rs 11,875 crore) in March 2014.

The provision for non-performing loans in the quarter was Rs 1,817 crore, up from Rs 1,153 crore in the year-before period. The bank had to make higher provisions for old NPAs. Bad loans which move from the substandard to the doubtful bucket need 50 per cent provisioning and those moving from doubtful to the loss category require full provisioning.

The MD & CEO said steel, suffering from dumping by Chinese producers, and infrastructure, especially the power sector, continue to face challenges. There is unlikely to be much improvement.

Loans worth Rs 4,084 crore were restructured in the quarter. Standard restructured loans (SRL) were Rs 25,905 crore, about 6.15 of total standard advances.  Thus, the portfolio of stressed assets (gross NPAs plus SRL) was 9.87 per cent.

On plans for 2015-16, he said the bank would concentrate on improving its domestic NIM to three per cent. It also wishes to take the return on assets close to one per cent from the 0.49 per cent in FY15, by further improving share of low-cost deposits and improving the yield on advances.

The capital adequacy ratio under Basel-III rules was 12.6 per cent, with tier-I capital at 9.87 per cent at end-March.