State-run Bank of Baroda today reported a whopping Rs 3,230-crore net loss for the three months to March as it continued to bleed heavily under a huge pile of bad loans.
The record loss in two consecutive quarters comes after the bank management had publicly stated, while announcing the December quarter numbers, that all was hunky-dory on the asset quality front as they had front-loaded the provisions for the two quarters at a go.
In the December quarter, the nation's second largest lender in terms of assets had reported a whopping Rs 3,342 crore in net loss -- the highest in the country's banking history and had expressed confidence that NPA pain was behind it which was cheered by investors.
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Provisions zoomed nearly six-fold to Rs 6,857 crore in the March quarter from Rs 1,817 crore on the back of the gross NPA ratio moving up to 9.99 per cent from 3.72 per cent.
The PSU lender reported a loss of Rs 5,067 crore for the full year as against a profit of Rs 3,911.73 crore a year ago. Had it not been for a write-back of Rs 1,055 crore, the losses would have much more higher.
While the December quarter loss was on account of impact of the asset quality review, managing director and chief executive P S Jayakumar today was at pains to explain the bleeding balance-sheet.
He blamed the excess provision of Rs 2,900 crore towards shoring up the provision coverage ratio to the industry average of 60 per cent and setting aside Rs 1,564 crore for pension liabilities that hurt its bottomline for the reporting quarter.
Even though recovery and upgrades will be a focus area where the bank is targeting for an uptick of Rs 10,000 crore, Jayakumar said the bank expects up to Rs 15,000 crore of fresh slippages in the new fiscal and is particularly watching assets of Rs 14,000 crore currently classified as restructured and as special mention assets 2 (SMA2) accounts.
Overall, Rs 3,000-5,000 crore will be the net slippages
and BoB will end FY17 with gross NPAs of Rs 45,000 crore as against Rs 40,521 crore in FY16, he said.
In the reporting quarter, its gross slippages rose to Rs 5,030 crore, while there were reductions of Rs 4,345 crore coming in from Rs 1,434 crore of recovery, Rs 1,768 crore of upgrades and Rs 1,142 crore of write-offs.
It ended the quarter with a gross NPA ratio of 9.99 per cent, which moved up primarily on the back of an 11.52 per cent de-growth in the loan book on a terminal basis.
Stressing that the accumulation of fresh bad assets is going down and NPAs have peaked, Jayakumar said much of the pain in the March quarter has come from three accounts from the AQR process which were not included in the Q3 results due to requests from the companies which were approaching for strategic sales.
Disclosing that the bank is targeting to raise up to Rs 1,500 crore through sale of non-core assets during the fiscal, Jayakumar said any extraordinary income will help strengthen the balance sheet. He identified private sector lender Bank of Nainital, in which it holds a substantial majority stake, as a probable divestment targets.
He, however, asserted that the bank is working with the multiple scenarios in mind including the worse case ones, and there will not be a need to dilute the government's 59 per cent holding in the bank for maintaining the capital buffers.
Courtesy the push it received from RBI's review of capital calculation guidelines and the drawback in advances, the bank closed FY16 with an overall capital adequacy of 13.17 per cent with the CET at over 10 per cent.
As against the de-growth in advances in FY16, when it concentrated on consolidation, the bank is targeting to grow its loan book by 10 per cent domestically by picking quality corporates, executive director BB Joshi said.
At present, corporates account for 50 per cent of the book, followed by SMEs (20 per cent), retail (18 per cent) and agriculture (12 per cent).
It is also targeting to expand its domestic net interest margins to 3 per cent from the 2.70 per cent as of the March quarter, primarily by reducing the dependence on high-cost bulk deposits which have seen a shedding of Rs 27,000 crore in FY16.
The bank, which has a presence in 24 countries and is the second largest domestic lender, is also working on re-evaluating its foreign operations, Jayakumar said, adding there is a case for both repatriation and infusing more capital as per countries.
The bank management identified a few geographies like London, the UAE, Singapore and the US as growth markets, while others like Malaysia and Fiji are also important from the perspective of presence of the huge diaspora and absence of domestic peers.
The bank scrip closed 1.74 per cent down at Rs 154.95 on the BSE, as against a 1.2 per cent correction in the benchmark Sensex. The results were announced after the market hours.
