Strong interest income lifts Bank of Baroda's net by 43%

State-run lender Bank of Baroda on Thursday said its net profit rose 43 per cent to Rs 1,294 crore for the quarter ended March, compared with Rs 906 crore in the corresponding period a year ago. The rise in net profit was aided by higher interest income from advances.

Net interest income, or the difference between interest income and interest expenditure, surged by nearly 50 per cent to Rs 2,613 crore. Net interest margin for the bank’s domestic business stood at 4.16 per cent during the three-month period, up 34 basis points sequentially. Yields on advances rose 31 basis points to 10.65 per cent, while the cost of deposits rose 36 basis points to 5.63 per cent during the quarter.

“We will wait for the announcement of the annual monetary policy by the Reserve Bank of India (RBI) on May 3 before taking a call on the revision of base rate,” said Chairman and Managing Director, MD Mallya. The bank’s base rate, or the minimum lending rate, currently stands at 9.5 per cent.

In financial year 2010-11, Bank of Baroda’s advances rose 30.7 per cent, while deposits rose 26.6 per cent. The share of low-cost current account savings account (CASA) deposits in total deposits shrunk to 34.4 per cent from 35.6 per cent a year ago. The lender said decline in CASA ratio was primarily because of higher term deposit rates, which resulted in many depositors shifting their funds to fixed deposit accounts.

Mallya said the bank expected a growth of 20-22 per cent in deposits and a 23-24 per cent rise in advances in the current financial year.

In January-March period, the bank provided Rs 554 crore for pensions of retired employees, while Rs 1,830 crore was kept aside for existing employees, to be provided over a period of five years. The bank also kept aside Rs 366 crore in the last quarter as provision for pensions.

The bank’s gross non-performing assets stood at 1.36 per cent, while net bad loan ratio was 0.35 per cent as on March 31.

The bank plans to open 15 overseas branches and 500 domestic branches in the current financial year. It also plans to open branches in Malaysia, Uganda, Botswana, West Asia and Australia.