BoB Q2 result: Net profit up 28.4% to Rs 4,253 cr, led by loan growth

To slash personal loan growth pending portfolio review; CDO terminated in 'bob World' fiasco

Bank of Baroda (BoB) net profit rose by 28.4 per cent on a year-on-year (y-o-y) basis to Rs 4,253 crore in the second quarter ended September (Q2 FY24).

Its net interest income (NII) expanded by 6.5 per cent to Rs 10,831 crore in Q2 from Rs 10,174 crore in the same quarter a year ago.

The bank’s net interest margin (NIM) moderated to 3.07 per cent in Q2 FY24, compared with 3.33 per cent in Q2 FY23. Bank revised its guidance for NIMs for FY24 to 3.15 per cent (plus or minus five basis points) from earlier 3.3 per cent. The revision in NIM guidance is due to a change in cost metrics (rise in cost of funds), said Debadatta Chand, managing director and chief executive officer in a media call post Q2 FY24 results.

Non-interest income — comprising fees, commissions, treasury income, and recoveries — rose to Rs 4,171 crore in Q2 FY24 from Rs 1,826 crore a year ago.

The lender’s provisions for non-performing assets (NPAs) and bad debt rose to Rs 2,285 crore in Q2, from Rs 1,654 crore in the year-ago period.

Advances grew 17.3 per cent y-o-y to Rs 10.24 trillion in Q2 FY24. Its retail loans expanded by 22.2 per cent to Rs 1.93 trillion. Its personal loan portfolio, a component of the retail book, expanded by 67.2 per cent y-o-y to Rs 25,618 crore.

Chand said while a lot of concern has been expressed in the system about the growth in unsecured loans, BoB’s portfolio (personal loan) is sound and stress is very less. Yet, as a prudent step, the bank will carry out a portfolio review and scale down the pace of loan growth in the personal loans segment to around 30 per cent.

Total deposits increased by 14.6 per cent y-o-y to Rs 12.49 trillion. The share of low-cost deposits — current account and savings account (Casa) — was 38.28 per cent at the end of September, down from 39.57 per cent a year ago.

The asset quality profile improved, with gross NPAs declining to 3.32 per cent in September from 5.31 per cent a year ago. It declared one airline exposure (Go First) as a non-performing asset (NPA) and made a 100 per cent provision. It was already a stressed account and turned NPA in Q2.

Net NPAs declined from 1.16 per cent in September 2022 to 0.76 per cent in September 2023. The provision coverage ratio improved to 93.16 per cent in September from 91.73 per cent a year ago.

Its capital adequacy ratio (CAR) stood at 15.3 per cent at the end of September.

On the corrective steps after the curb on-boarding new customers on the mobile banking application “bob World”, Chand said the contract of Akhil Handa, erstwhile chief digital lending officer, was terminated by the bank.

"The bank induced the termination of the contract for the matter and this is a larger action that we initiated both at the branch and corporate office level," he said. Handa was closely associated with building 'bob World'.

Last month, the Reserve Bank of India (RBI) had put curbs on-boarding new customers on 'bob World' due to supervisory concerns over the manner of onboarding customers.

The bank is taking corrective steps to meet the regulatory concerns, he said but did not elaborate on the timeframe to complete work and present itself for an audit by RBI.

On having a new chief digital officer, Chand said the bank has internal capacity to manage digital banking operations and would look for a new CDO only if such a need arises.