BoB reports drop in net profit after 30 quarters
Net down 21.6 % at Rs 1,012 cr, dip in treasury income, high NPA provisions makes dent
Bank of Baroda today posted a drop in net profit for the first time after 30 quarters on lower treasury gains, higher provisions for bad loans, and rise in interest expenses.
Net profit for Q3 ended December 2012 declined by 21.6% to Rs 1,012 crore from Rs 1,289 crore Q3 of 2011-12.
The last time the public sector bank had reported drop in quarterly net profit was for Q1 (June 2005) of 2005-06. It had posted a 46.44% drop in net profit at Rs 156.9 crore, according to Capitalline data compiled by BS Research Bureau.
Reflecting market’s disappointment with performance, its stock closed 7.5% lower at Rs 802.1 on the Bombay Stock Exchange today.
The total income rose by 9.8% to Rs 9,865 crore. Its net interest income – difference between earnings and expenses – grew by just 7% to Rs 2,840.9 crore in Q3 over Rs 2,655.5 crore a year.
Despite continued macro headwinds and subdued credit demand, the Bank could protect its Net Interest Margin (NIM) in domestic operations at around 3.08% during Q3.
| Drop in performance no reflection on change of guards: Mundra |
| Newly appointed chairman and managing director today rejected contention that change of guard is behind sudden drop in performance |
| There have been many instances in past especially in the public sector banking space where new CMDs, report a bad performance (low profits, high slippages etc) as a first step to “clean up” balance sheets |
| Asked about sudden drop in performance profile of bank was due to change of guard (new CMD), S S Mundra said there is no link between them |
| “I have taken over on January 22, 2013 (that after end of quarter) and this itself should satisfy the query. Bank has tradition of following a prudent policy” he said |
| M D Mallya hanged the boots at end of November 2012 at end of his term. He came on board in May 2008 |
| He pointed out to strong attachment he has for mother bank. “I am not an outsider. I have come back (he started career and worked upto general manager level with BOB). I have large emotional stake in the organisation |
The other income comprising of fees, commissions and treasury gains declined to Rs 840.59 crore from Rs 1,149.33 crore in Q3 FY12.
S S Mundra, chairman and managing director said the net profit in Q3 declined on the back of faster rise in interest expenses over earnings and lower trading gains.
Total deposits rose by 18.8% (year on year) to Rs 4, 14,733 crore. The share of low cost deposit (current and savings deposits) base in the domestic business was 32.2%. Its advances grew by 14.8% to Rs 2, 99,318 crore. Its expects to bring down bulk deposits to Rs 32,000 crore level by March 2012 from Rs 49,000 crore in early February.
Deposits are expected to grow by 15% and advances by 16% in 2012-13, Mundra said.
The provisions, excluding those for tax, in Q3 rose by 23% to Rs 1,029.31 crore. These provisions for Non-performing assets (NPAs) and other regulatory norms also made dent in net profits.
Mundra said provision Coverage Ratio (PCR) has been maintained at the healthy level of 70.9% as at of December 2012. It is in line with prudent policies adopted by bank. This will act as a cushion against the stricter regulatory norms in the future.
The gross NPAs rose sharply to Rs 7,321 crore (2.41% of advances) in December from Rs 5,879 crore in September (1.98%) due to continued weakness in both agriculture and manufacturing sectors.
Mundra said this is still lowest level of NPAs amongst peers. The pressure on asset quality will prevail for atleast next 2-3 quarters.
Bank restructured loans worth Rs 1,567 crore in Q3. The trend in next 2-3 quarters is expected to be on the lines of reported numbers for Q3, he said.
The Capital Adequacy Ratio (Basel II) was 12.66% (Tier 1 at 9.33%) at end of December 2012.