State-run Bank of Baroda has reported a 79.3 percent rise in first quarter net profit year-on-year, aided by a sharp drop in loan-loss provisions and strong topline. Brokerage Prabhudas Lilladher had expected the bank to report a net profit of Rs 1,251.8 crore, up 3.6 percent year-on-year.
Here are the top five takeaway from the lender's Q1FY23 earnings:
Strong net profit:
Bank of Baroda’s profit after tax jumped to Rs 2,168 crore in the April-June quarter, up from Rs 1,209 crore in the same quarter of the previous financial year.
Net interest income, or the difference between interest earned and interest expended, rose 12 percent year-on-year to Rs 8,838 crore, up from Rs 7,892 crore in the same quarter of the previous financial year. Global Net Interest margins (NIM) was stable at 3.03 percent in the reporting quarter from 3.08 percent in March and 3.04 percent in June last year.
Sharp fall in provisions:
The lender’s provisions, excluding provision for tax, declined by nearly 58 percent year-on-year to Rs 1,685 crore in the April-June quarter, down from Rs 4,006 crore last year. Like most other lenders, Bank of Baroda had chosen to keep excess provisions on its balance sheet in the prior quarters against potential bad assets.
The bank is holding additional provision of Rs 465.66 crore as of June 30 over and above the stipulated norms in certain stressed standard advances on prudent basis. As on June 30, the provision coverage ratio was 75.94 percent.
Improvement in asset quality:
The bank has shown an improvement in asset quality and a decline in bad loans on a sequential and yearly basis.
Net NPA ratio declined to 1.58 percent on June 30, from 1.72 percent in March 31. Gross NPA ratio fell to 6.26 percent in June, down from 6.61 percent in March and 8.86 percent in the same quarter of the previous financial year.
The bank said it is taking proactive measures continuously to maintain and improve asset quality and therefore, believes that there may not be any significant impact on its future financial results.
Decline in other income:
The lender’s other income more than halved to Rs 1,592.37 crore from Rs 3,212.20 crore last year.
Other income of the bank includes recoveries made in written off accounts, commission/fee income on non-fund based banking activities, earnings from foreign exchange transactions, profit and loss on revaluation of investments, profit and loss on sale of investments and dividends from subsidiaries.
Some banks have reported a drop in other income owing to a sharp rise in government bond yields. Bond yields jumped more than 60 basis points in the June quarter on the back of a 90-basis-point hike in repo rate by the Reserve Bank of India to tame multi-year high retail inflation measured by the Consumer Price Index. Bond prices move in the opposite direction to their yield.
Robust loan and deposit growth:
Advances or loans registered a strong YoY growth of 18 percent in the reporting quarter. Organic retail advances grew by 23.2 percent, led by growth in high focus areas such as home loan, personal loan, auto loan and education loan. Domestic current account savings account (CASA) ratio improved by 97 basis points YoY to 44.18 percent.Meanwhile, domestic current account deposits stood at Rs 63,440 crore in June, registering a growth of 10 percent on a YoY basis. Domestic savings bank deposits grew by 11.1 percent to Rs 3.38 lakh crore.