Bank of Baroda is slated to report its September quarter (Q2FY20) earnings on Friday, November 8 amid expectations of muted loan growth and marginally higher net interest income (NII) on a sequential basis.
The bank, which got merged with Vijaya Bank and Dena Bank, posted a standalone profit of Rs 425.4 crore in the corresponding quarter of the previous fiscal (Q2FY19), and a PAT of Rs 709.87 crore in the previous quarter of the current fiscal (Q1FY20). The NII was Rs 4,492.5 crore and Rs 6,498.1 crore in Q2FY19 and Q1FY20, respectively. Recently, the government decided to infuse capital worth Rs 7,000 crore by way of preferential allotment of equity shares during FY20.
Numbers for this quarter will remain incomparable on a yearly basis as the three-way merger came into effect in the last quarter (Q1FY20).
At the bourses, the stock declined 23.6 per cent in the quarter under review, relative to the benchmark S&P BSE Sensex, which fell by nearly 2 per cent during the same period.
Here is what to expect from the results:
The brokerage expects the net profit to decline 52.2 per cent QoQ to Rs 339.3 crore in Q2FY20, while pegs the pre-provision operating profit (PPOP) at Rs 4,436.9 crore, a rise 3.8 of per cent sequentially.
“Advances growth for the domestic book are likely to moderate on account of integration challenges… Mark-down of Deferred Tax Assets (DTA) could lead to lower earnings,” the brokerage wrote in its results preview note.
Emkay Global Financial Services
Analysts at Emkay Global remain watchful of deterioration in the asset quality due to large accounts turning into non-performing assets (NPAs).
“Categorisation of Reliance Commercial will be watched as we expect the key large account to turn NPA at Rs 17 billion. We also remain cautious of Cox & Kings,” they noted.
The brokerage estimates a 4 per cent rise in NII at Rs 6,755 crore, while the net interest margin (NIM) is pegged at 2.75 per cent. They expect the net profit at Rs 560 crore.
“Even though we expect the DTA mark-down to be spread over the three quarters, we expect it to impact profitability in Q2… Centre has put in the capital in last day of quarter which should help improve Tier-I capital, while improved operating performance should take care of the provisioning. Margins may slightly improve but loan growth could remain slow,” they said.
Analysts peg the loan growth at Rs 6.2 lakh crore, while expect the provisions at Rs 3,006.7 crore. The gross NPA (GNPA) ratio is likely to see a sequential improvement of 6 bps at 10.22 per cent.
The brokerage would eye exposure to stressed asset and its consequent impact on slippages. However, recoveries from Bhushan Power, and GMR Chhattisgarh could aid in reducing the asset quality ratios, it said.
“While PAT is seen at Rs 933 crore, we do not see any positive impact of higher recoveries. Reason being, higher recoveries from National Company Law Tribunal (NCLT) resolution are expected to be utilised for building higher provisions for other stressed account,” it noted.
Besides, an update on succession of incumbent MD & CEO, PS Jayakumar would also be keenly watched by analysts.
Analysts at the brokerage expect the bank to report a revenue of Rs 8,322 crore, a drop of 1.1 per cent QoQ from Rs 8,413.7 crore. The same was Rs 5,844.2 crore in the year-ago period.