BoB net down 23% but stock up 10%

High staff expenses, depreciation in investments dent bottom line, though less than expected

Government-owned Bank of Baroda's net profit for the quarter ended June dipped 22.7 per cent to Rs 1,052 crore, on a rise in staff expenses and more provision for depreciation in investment. The net profit in April-June 2014 was Rs 1,362 crore.

Even so, the figure was above market estimates and the stock price closed 10 per cent higher on Thursday at the BSE, at Rs 168. Analysts said the market was estimating profit after tax at Rs 900 crore. The provisions for bad loans were also less than analyst estimates.

Nitin Kumar, banking analyst with broking firm Prabhudas Lilladher, said asset quality slippage was nearing the bottom.

Net interest income rose four per cent to Rs 3,459 crore. 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 in the quarter, said managing director Ranjan Dhawan.

Provisions and contingencies rose 13.8 per cent to Rs 599 crore from Rs 526 crore. Wage revision pushed staff expenses up 21.7 per cent to Rs 1,345 crore. However, the provisioning for non-performing assets (NPAs) and bad loans declined by 26.4 per cent to Rs 567 crore. The provision coverage ratio was a healthy 64.9 per cent.

Dhawan said stress was not out of the system and tackling of NPAs was a challenge. Gross NPAs were Rs 17,273 crore (4.1 per cent of the total) at end-June. Standard restructured advances were Rs 25,541 crore.

Deposits rose 7.5 per cent to Rs 593,087 crore. The share of low-cost deposits (savings and current account) in domestic deposits was 31.9 per cent.

Advances rose seven per cent in 12 months to Rs 408,388 crore. Credit growth is expected to be in line with the banking sector estimate of 13 per cent for 2015-16.

The capital adequacy was 11.98 per cent, with tier-I capital at 9.73 per cent. The bank has made a presentation to the government for injecting more capital.

It also intends to raise capital worth Rs 4,000-5,000 crore through tier-I and tier-II bonds this year.