BoB to trim bank's wholesale book to below 40%

The bank has been having low margins partly because of its large wholesale book apart from its considerable international operations

Public-sector Bank of Baroda is keen to bring down the share of wholesale advances to 40% from the present 45%, to achieve a better portfolio balance, the bank's newly-appointed Chairman and Managing Director S S Mundhra has said.

"It's better not to have all your eggs in one basket. It is easier if the risk is spread across," Mundhra told PTI in an interaction here over the weekend.

The bank has been having low margins among the large state-run peers partly because of its large wholesale book apart from its considerable international operations, which constitute a little more than 30% of its income and profit.

Mundhra said the wholesale category constitutes 45% of the loan book now, which he would like to get down to 40%. He, however, did not offer a timeline.

Such a move will also help the bank firm the Net Interest Margin, which has seen a sequential dip in the last two quarters. It will also help the bank forge larger number of individual relationships that will help in long-term, he said.

The state-run bank had reported higher level of bad loans from advances to large units in the third quarter, which also impacted its bottomline.

In the post-results commentary, Mundhra had blamed the "composition of the book" for the considerable fall in profit.

"It will be one of my endeavours to broad base the asset book and have a better balance in the portfolio," said Mundhra, who returned to the city-headquartered bank, after a short stint at Union Bank of India.

He also said a focus will be given to retail, SME, mid- corporate and rural advances as it trims the wholesale book.

Mundhra, however, clarified that this does not mean that the bank will stay away from advances to large corporates. "It is just that the growth in retail and SME will be higher than the one in large corporates, going forward."

The focus on non-corporate lending is partly driven by the lower spread from this book, which in turn affects its margins, as corporates make hard bargains with lenders.

Indian banks have one of the highest NIM, a key gauge of profitability, while in the West it is the lowest, hovering at 1-1.5%.

Even then, BoB kept its international NIM at 2.6-2.7%, and the overall margin at 3.08% in Q3.