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Bank of Baroda-Vijaya Bank-Dena Bank merger: Here’s how the three lenders performed in Q1FY19

The merger will take at least 3-4 quarters to complete and the three banks will function independently until the process is concluded. Take a look at the banks' results from the June quarter

September 18, 2018 / 12:39 PM IST

The Centre on Monday announced the proposal to merge three public sector banks—Bank of Baroda (BoB), Dena Bank and Vijaya Bank. The merged entity, comprising two relatively stronger banks and a weak one, will be the third-largest lender in India after State Bank of India and HDFC Bank Ltd, with a total business of more than Rs 14.82 lakh crore.

This move is a  measure to tackle the growing non-performing assets (NPAs) in the banking sector. The total NPAs in the banking sector at the end of March 2018 was close to Rs 10 lakh crore. The merger will take at least 3-4 quarters to complete and the three banks will function independently until the process is concluded. The merger is expected to reduce the amount of capital the government needs to pump into these lenders and help clean their balance sheets.

Let us take a look at how the three entities fared in the June quarter of FY19.

Bank of Baroda

In the first quarter of FY19, BoB’s profit more than doubled to Rs 528 crore as compared to the corresponding quarter last year, exceeding expectations as bad loans fell. The lender’s net interest income rose by 28.7 percent year-on-year at Rs 4,381 crore.

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Provisions for bad loans fell by over 75 percent quarter-on-quarter to Rs 1,759.7 crore and 18 percent on a yearly basis to Rs 2,156.7 crore.

During this quarter, the gross non-performing assets of BoB was 12.46 percent, slightly better than 12.26 percent in the last quarter. Net bad loans were at 5.4 percent, as against 5.49 percent in the previous quarter.

Vijaya Bank

In the three months to March 31, 2018, the Bengaluru-based public sector lender’s profits fell 43 percent year-on-year to Rs 144.3 crore. Vijaya Bank’s net interest income registered a 27.9 percent growth year-on-year at Rs 1,207 crore.

The bank reported a better asset quality in Q1FY19. Provisions for bad loans for the quarter touched Rs 6,59.4 crore, 18.5 percent higher than the previous quarter and 55.8 percent higher on a yearly basis.

Gross NPAs as a percentage of gross advances were lower at 6.19 percent against 6.34 percent in the previous quarter. Net NPAs also decreased to 4.10 percent from 4.32 percent in the previous quarter.

Dena Bank

In Q1FY19, net loss for Dena Bank widened to Rs 721.71 crore from Rs 132.65 crore in the corresponding quarter last year, though it went down from Rs 1,225.42 crore loss reported in the previous quarter. Net interest income of the bank rose 9.9 percent from the same quarter last year, to Rs 742 crore.

Bad loans provisions made by the lender doubled to Rs 1,118.80 crore from Rs 522.50 crore in Q1FY18.

Gross NPAs increased to 22.69 percent in the June quarter from 22.04 percent in March quarter, while net NPAs were at 11.04 percent, lower than March quarter’s 11.95 percent.

According to government’s estimates, the net NPA of the merged entity will be at 5.71 percent, which is much better than the public sector banks average of 12.13 percent.
Moneycontrol News
first published: Sep 18, 2018 12:39 pm
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