Bank of Baroda Q3 net beats forecast, asset quality weakens

Public sector lender Bank of Baroda beat street expectations with the third quarter (October-December) net profit rising 3.6 percent to Rs 1,047.84 crore compared to same quarter last year due to lower provisions and higher other income, but that was squeezed by deferred tax liability. However, pressure continued on its asset quality.

According to CNBC-TV18 poll, analysts had expected profit after tax at Rs 967 crore (down 4 percent) and net interest income at Rs 3,004.6 crore (6 percent growth) for the quarter.

Net interest income too came in higher-than-expected at Rs 3,057 crore, a growth of 7.6 percent compared to corresponding quarter of previous year.

The bank created deferred tax liability of Rs 272.09 crore during the quarter ended December 2013 on account of special reserve for the nine months of current financial year, which was charged to profit & loss account. Tax expenses during the period jumped to Rs 372.2 crore from Rs 202.6 crore year-on-year.

Gross non-performing assets (NPA) expanded 91 basis points (17 bps sequentially) to 3.32 percent and net NPAs rose 76 bps (4 bps) to 1.88 percent compared to a year-ago period.

In absolute term, gross NPAs jumped 63 percent year-on-year (9.5 percent quarter-on-quarter) to Rs 11,925.76 crore and net NPAs doubled (up 5 percent on sequential basis) to Rs 6,623.60 crore in the quarter gone by.

Slippages declined sequentially to Rs 1,553 crore from Rs 1,863 crore while the restructured assets stood at Rs 1,213 crore as against Rs 1,637 crore in September quarter.

While addressing press conference, SS Mundra, CMD said the debt restructuring pipeline for the January-March quarter is at Rs 1,500-2,000 crore. He expects Q4 domestic net interest margin at 3 percent as against 2.95 percent in Q3.

Provisions and contingencies slipped 26 percent Y-o-Y and 11 percent Q-o-Q to Rs 761.87 crore during October-December quarter.

Non-performing loan provisioning coverage ratio increased to 62.22 percent as on December 31 as against 61.68 percent in September 2013.

Domestic net interest margin climbed to 2.95 percent from 2.85 percent and global net interest margin rose to 2.37 percent versus 2.32 percent quarter-on-quarter.

Other income or non-interest income of the bank shot up 11 percent on yearly basis to Rs 932 crore during December quarter.

Meanwhile, Bank of Baroda raised USD 750 million via overseas market in January 2014 apart from Rs 550 crore received from government through preferential issue.

At 11:54 hours IST, the stock was up 1.4 percent to Rs 550 on the BSE.