Q1 Results: Bank Of Baroda Back In Profit After Merger With Dena, Vijaya Bank

Bank of Baroda’s posted a profit after its merger with Vijaya Bank and Dena Bank in the June quarter but failed to meet estimates.

Net profit in the April-June period stood at Rs 710 crore compared to a net loss of Rs 49 crore in the year-ago period, according to an exchange filing. The lender missed the Rs 858-crore profit estimate of analysts tracked by Bloomberg.

Net interest income, or core income of the bank, rose 2.6 percent to Rs 6,496 crore in Q1, in line with the Rs 6,393-crore estimate. The bank’s operating income was up 4.3 percent over the year at Rs 8,413 crore.

Net interest margin, however, declined to 2.73 percent in the quarter from 2.78 percent in the year-ago period. “The NIM should improve as the bank has reduced deposit rates by 25 basis points in the second quarter,” the bank said at its post-earnings press conference.

Profitability will improve as business strategies of all three banks harmonise, Bank of Baroda said.

The bank’s gross non-performing assets stood at Rs 69,174 crore in the June quarter. Gross NPA ratio was at 10.28 percent compared to 10.02 percent in the March quarter. Net NPA ratio rose 30 basis points sequentially to 3.95 percent in Q1.

The bank sees loan recoveries improving from the second quarter of this fiscal, Chief Executive Officer and Managing Director PS Jayakumar said at the media conference after Bank of Baroda results. “Recovery has been a tad lower. Some of the recoveries happened in July, but those could not be included in the first quarter results.”

The bank’s watchlist—or source of potential stressed assets— was worth Rs 16,500 crore, which includes 10,760 crore from Bank of Baroda on a standalone basis, Rs 2,884 crore from Dena Bank, and Rs 2,856 crore from Vijaya Bank.

The bank reported fresh slippages worth Rs 5,583 crore in Q1 and made provisions worth Rs 3,168 crore. It said that an IL&FS road project worth Rs 430 crore slipped in the quarter.

“We should see growth by better account planning in corporate banking,” Jayakumar said, adding that the lender wants to get in more micro, small and medium enterprise loans, trade finance and supply chain financing.

Management Highlights:

• Co-lending arrangements and digitisation should improve the growth rate in retail lending business, the bank said.
• The lender looks at a 15 percent credit growth rate at the end of this year, with focus on improving fee income.
• MUDRA loan portfolio worth Rs 8,022 crore had a delinquency rate of 10 percent.
• The bank took an exposure worth Rs 4,200 crore on stressed NBFCs like DHFL and Anil Ambani’s Reliance Group entities.

Other Highlights:

• Domestic advances rose to Rs 5.33 lakh crore in Q1 from Rs 5.06 lakh crore in the year-ago period.
• Domestic deposits rose 8.87 percent on a yearly basis to Rs 7.85 lakh crore.
• Capital adequacy ratio is at 11.5 percent.
• Slippages ratio at 3.29 percent from 1.23 percent on a sequential basis.
• Slippages ratio for Bank of Baroda was at 2.54 percent, Vijaya Bank at 4.36 percent, and Dena Bank at 7.81 percent.

Bank of Baroda, which merged with Vijaya Bank and Dena Bank in April, has become the second-largest public sector bank after State Bank of India, with over 9,500 branches, 13,400 ATMs and 85,000 employees, serving 12 crore customers.

On Thursday, Bank of Baroda shares fell 0.68 percent to Rs 109.55 apiece on the BSE while the benchmark Sensex shed 0.04 percent to end the day 37,830.98 points. Bank of Baroda’s Q1 results were announced after market hours.