BackBank of Baroda Q1 net profit drops 23% on higher provisioning
Profit for the quarter ended June was at Rs1,052.15 crore, compared with Rs1,361.88 crore in the year-ago quarter
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State-owned banks continued to report sharp drops in profits even as asset quality deteriorated, indicating that the worse may not be over for the lenders.
India’s second largest public sector lender Bank of Baroda on Thursday reported a 22.7% drop in its first quarter net profit, dragged down by higher employee costs and lower treasury gains.
Profit for the quarter ended June was at ₹ 1,052.15 crore compared with ₹ 1,361.88 crore in the year-ago quarter.
Analysts polled by Bloomberg were expecting the bank to post a profit of ₹ 900 crore for the quarter.
Net interest income, or the difference between interest earned on loans and that paid on deposits, rose 3.95% to ₹ 3,459.62 crore, while other income dropped 5.59% to ₹ 967.23 crore from ₹ 1,024.54 crore in the year-ago quarter.
Net interest margin, a key profitability parameter, was at 2.26%, narrowed from the year-ago quarter’s 2.35%, but widened from the fourth quarter’s 2.17%.
Gross non-performing assets (NPAs) as a percentage of total loans rose to 4.13% from 3.11% a year ago. Fresh slippages, or good loans turned bad in the quarter, was at ₹ 1,685.01 crore, down from the year ago quarter’s ₹ 1,881 crore, but up from the fourth quarter’s ₹ 1,359 crore.
“Even as macroeconomic indicators look promising, not much of growth has occurred in this country," said the bank’s managing director and CEO Ranjan Dhawan at the bank’s results meet with media.
“Not all our clients are out of the woods. In sector such as steel, infrastructure, textiles and real estate there is still some stress visible, but some of our clients have better cash flows now. I am tempted to say the worst is over, but on the back of weak corporate results and uncertain monsoon, I cannot give a firm outlook (on bad debt)," Dhawan said.
Provisions for bad and doubtful debt fell 26.4% to ₹ 567.82 crore in the quarter. Total provisions, excluding for tax, rose 13.9%, to ₹ 599.74 crore from ₹ 526.71 crore in the year-ago quarter.
Post provisioning, the net NPA ratio of the bank stood at 2.07% against 1.58% in the year-ago period.
Bank of Baroda’s stressed assets, which is restructured book plus net NPA, stood at 8.2%.
This is “lower than its peers and positive in our view," said Saday Sinha, an analyst at Kotak Securities Ltd.
In the first quarter, the bank’s expenses rose 21.7% to ₹ 1,345 crore. This is to account a 15% hike in wages of employees arising out of the recently concluded bipartite agreement between banks and the unions.
Bank of Baroda said it has asked the Reserve Bank of India to allow it to float a subsidiary to handle 9 million no-frills accounts opened under Pradhan Mantri Jan Dhan Yojana. The amount mobilised with those accounts haven’t crossed ₹ 15 crore yet.
“We are under some strain servicing those accounts, but these will hopefully turn out to be good long-term assets. Besides, opening the accounts were our social obligation," Dhawan said.
Meanwhile, Delhi-based Oriental Bank of Commerce reported a 29.3% drop in its first-quarter net profit on lower net interest income.
Profit for the first quarter ended June was at ₹ 257.84 crore, compared with ₹ 364.54 crore in the year-ago quarter.
Ten analysts polled by Bloomberg expected the bank to post profit of ₹ 226.4 crore for the quarter.
Net interest income, or the difference between interest earned on loans and that paid on deposits, rose 6.9% to ₹ 1,328.51 crore from ₹ 1,242.75 crore in the same quarter last year, the bank said in its filing with the exchanges.
Other income dropped 22.83% to ₹ 453.93 crore from ₹ 588.20 crore in the year-ago quarter.
Gross non-performing assets (NPAs), as a percentage of total loans, rose to 5.85% from 4.33% a year ago.
Provisions rose 6.66%, to ₹ 577.65 crore from ₹ 541.58 crore in the year-ago quarter.
Post provisioning, the net NPA ratio of the bank stood at 3.76% against 3.11% in the year-ago period.
Another Mumbai-based lender Dena Bank’s net profit dropped 81.4% to ₹ 15.16 crore in the first quarter on a sharp rise in bad loans.
Dena Bank’s first quarter net profit was at ₹ 81.52 crore, while bad assets as a percentage of total loans shot to 6.2% against 4.21% a year ago. The net NPA ratio rose to 4.24% from 2.94% a year ago.
Shares of Bank of Baroda rose 10% to ₹ 168.40, Oriental Bank of Commerce gained 4.42% to ₹ 164.30, and Dena Bank advanced 3.88% to ₹ 44.15 on BSE. The exchange’s benchmark Sensex gained 0.51%, or 141.92 points to 27,705.35 points.
PTI contributed to this story.
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