Bank of Baroda posted a 36 percent drop in net profit at Rs 355 crore, its asset quality improved in quarter ended September 2017.
Seldom do post-earnings press conferences have CEOs drawing parallels between songs and their company's plans. Especially when the company in question belongs to the banking sector — an industry riddled with the problem of non-performing assets (NPAs).
Bank of Baroda CEO PS Jayakumar did just that on Tuesday when he took the dais and sang "Jo waada kiya woh nibhaana padega" to a question. The Mohammad Rafi and Lata Mangeshkar classic he sang alluded to the promise of action on NPAs. The bank hopes to control the asset quality from here on though the NPAs continue to remain a challenge, he said.
The premise of the promise, made in the previous quarters, stands because even as Bank of Baroda posted a 36 percent drop in net profit at Rs 355 crore, its asset quality improved in quarter ended September 2017. Gross NPAs as a percentage of gross advances lower at 11.16 percent (against 11.40 percent in Q1FY18) and net NPAs also declined to 5.05 percent (5.17 percent).
"I feel positive about our ability to grow the balance sheet. As far as NPA is concerned, we are working very hard we feel that the NPA ratios will improve here onwards. We have to look at containment of NPA and improving our provision coverage ratio," Jayakumar said.
He pointed out that a lot depends upon how the NCLT cases pan out but as we close the quarter we feel things will look better.
The public sector bank has a total exposure of nearly Rs 12,000 crore to both the RBI lists of NPA accounts to be referred to the insolvency courts.
Fresh slippages into NPAs for the quarter stood at Rs 2,586 crore, flat from the previous quarter and almost half from a year ago which was at Rs 4,384 crore.
On the 40 NCLT cases including the dirty dozen listed by the Reserve Bank of India, Jayakumar said that they have marginal exposure with roughly 2 percent loan share in most of the accounts under insolvency and they are trying to sort out issues of interim financing while the resolution takes place.
"We believe that we can lend more to lose less and not about lending more to prevent losses," he said.
Further, when asked abou this views on existing promoters bidding to buy the assets undergoing the insolvency proceedings, Jayakumar said, "It's a choice between moral issue and taking a very pragmatic position." Such deals will have to be done with utmost scrutiny and the promoters have to come up with a credible plan and they must have upfront cash to buy those assets, he said.
On the divergences of classification of NPAs, the audit has not come to an end and the discussions with central bank is yet to take place.
Banks including HDFC Bank, Axis Bank and Yes Bank had reported divergences in NPAs from the regulator's assessment.
Bank of Baroda also posted a 9.4 percent growth in advances with domestic growth at 14 percent driven by retail loan growth of 25.5 percent aided by 34 percent home loan growth and 12 percent rise in personal loans.
We are also relaunching our credit cards in Q4, so we will see higher growth in unsecured book, he said.
Jayakumar expects to keep the growth momentum with a rise of 15 percent credit growth for the full year.
Overall, the BOB chief said that the bank would require growth capital and though NPAs remain a challenge, by matching provisions with the level of NPAs.He is just about hopeful to fulfill the Rafi-style promise to improve the balance sheet although "the path is not absolutely certain and there is fair amount of volatility".