After reporting an uptick in slippages in the second quarter of current financial year, Bank of Baroda, India's second largest lender, expects asset quality to improve by the March-end.
The state-owned lender expects net non-performing assets (NPAs) to ease below 3.5 percent by March 2020 and slippages to be lower than levels witnessed in the second quarter.
As on September 30, 2019, the bank's net NPA ratio was at 3.91 percent, lower as compared to 3.95 percent in the previous quarter and 4.86 percent in the same period last year. The bank's gross NPA ratio also eased to 10.25 percent from 10.28 percent in the previous quarter and 11.78 percent in the same period last year.
However, the bank's slippages rose to Rs 6,001 crore in the July-September period, from Rs 5,583 crore in the first quarter and Rs 5,656 crore in the same period last year.
The lender said that most of the slippages came from four accounts, of which two were non-banking finance companies (NBFCs), adding up to Rs 2,000 crore. Other fresh additions to bad loans were from agriculture and MSME sectors.
The bank's net interest margins (NIMs) were at 2.81 percent in the second quarter, from 2.62 percent in the same period last year.
Bank of Baroda expects NIMs to be between 2.9-3 percent for the current financial year on likely easing in cost of deposits. The bank hopes to reap benefits of the merger by garnering higher Current Account Savings Account (CASA) deposits due to increased presence across the country.
On 1 April, 2019, Bank of Baroda merged with two other state-owned banks, Dena Bank and Vijaya Bank. The lender is in the process of relocating branches and ATMs from areas where all three banks had presence earlier. It relocated 300 such branches and merged 30 zonal offices in the July-September quarter.
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