Low provisions, stable NII: Here's what may drive Bank of Baroda's Q1 PAT

Healthy operating profit, steady interest income, and some recoveries from stressed accounts, along with fewer provisions, may help Bank of Baroda report profit in the June quarter of FY22 (Q1FY22). However, the bottom line growth may be capped by higher slippages, say analysts.

The state-owned lender, which had reported net loss of Rs 864 crore in Q1FY21 and Rs 1,046.5 crore in Q4FY21, is expected to report up to Rs 1,633.3 crore-net profit on Saturday, August 7, for the quarter under review.

Here’s what brokerages expect:

Nomura

The brokerage pegs PAT at Rs 1,175.5 crore for the period under study on the back of around 10 per cent year-on-year (YoY) rise in operating profit (at Rs 4,739.8 crore) and 13.5 per cent YoY gain in net interest income (at Rs 7,736.9 crore). Besides, it expects loan book to remain stable sequentially and grow 2.5 per cent YoY at Rs 7.04 trillion while net interest margin (NIM) may expand to 2.84 per cent in Q1FY22. Loan book was at Rs 6.86 trillion in the year ago period and at Rs 7.06 trillion in Q4FY21. NIM, meanwhile, was 2.52 per cent and 2.72 per cent, respectively.

ICICI Securities

The brokerage believes BoB could post a below industry average loan growth at 2 per cent YoY levels as Q1, usually, is modest in terms of business growth while lockdowns due to second wave also keep growth subdued. Deposits, on the other hand, are expected to grow 6.6 per cent YoY while CASA should be steady sequentially.

Effectively, it expects NII to grow 8 per cent YoY and 3.5 per cent QoQ, at Rs 7,352.5 crore, despite modest credit growth on account of sequential expansion of NIMs by 7 bps. NII was Rs 6,816 crore in the previous year period and Rs 7,106.6 crore in the March quarter of FY21.

“Credit cost is expected to remain at an elevated 45 bps. On the asset quality front, some weakness in MSME book (15 per cent of domestic loans) is expected due to the impact of pandemic,” the brokerage said in its result preview report. Overall, net profit is projected at Rs 759 crore.

Prabhudas Lilladher

According to this brokerage, BoB’s earnings should look better on lower provisioning and move to a new tax regime from Q4FY21 onwards. Further, operating profit should look good on the back of lower other income last year and higher wage provisions. In absolute terms, operating profit is pegged at Rs 5,138.1 crore, up 19 per cent on year from Rs 4,320.2 crore, but down 18 per cent quarter-on-quarter from Rs 6,265.6 crore. The net profit, meanwhile, is seen at Rs 1,633.3 crore

On the asset quality front, the brokerage bakes-in provisions at Rs 2,930.9 crore for the quarter under study. This would be a massive 48 per cent yearly decline from Rs 5,627.7 crore set aside in Q1FY21, and an 18.3 per cent sequential decline from Rs 3,586 crore earmarked in Q4FY21.  The gross NPA ratio is seen at 8.86 per cent, unchanged sequentially, and down from 9.39 per cent reported in Q1FY21.

Emkay Global

The bank will continue to report healthy growth in retail, but corporate loans may remain sluggish. Contained credit cost could lead to reasonable net profit of Rs 857.8 crore. That said, slippages in SME/Retail and mid-corporate book could remain high.

Kotak Institutional Equities

The brokerage expects operating profits to grow 17 per cent YoY (at Rs 5,071.3 crore) on the back of 16 per cent YoY NII growth (at Rs 7,903.9 crore), and 22 per cent YoY growth in non-interest income. It also expects an unchanged loan growth primarily led by a decline in international loan portfolio.

“We expect slippages at 2.5 per cent (Rs 4,300 crore) but the high impact of slippages would be offset by a few recoveries in the corporate NPL portfolio. Further, focus would be on the performance of the bank's SME and retail loan portfolio which would have seen the highest impact from Covid,” it noted in its report. Overall, net profit is seen at Rs 1,372.4 crore.