Here's what to expect from Bank of Baroda Q4 earnings

Moneycontrol Bureau

Public sector lender – Bank of Baroda's fourth quarter (January - March) net profit is likely to drop 31 percent year-on-year to Rs 1,051 crore. Net interest income (NII) or the difference between interest earned and paid out, however may rise by 6 percent to Rs 2,968 crore, according to a poll estimate by CNBC-TV18.

"Bank of Baroda continues to have negative image in the market on asset quality concerns," said Dinesh Sukhla, a banking analyst from Sharekhan brokerage.

"Since last five quarters the bank has been reporting decline in margins. We look for management commentary on arresting such fall and coming back to growth track. Moreover, stabilisation of credit quality is the most important trigger," he said.

The lender had reported a global net interest margin (NIM) at 2.99 percent for the quarter ended December 31, 2011. The decline had started from that point of time. It was at 2.96 percent in Q4, FY12, 2.73 percent in Q1, FY13, 2.71 percent in Q2, FY13, and 2.65 percent in October – December quarter in FY13.

During thrid quarter, FY13; gross non-performing asset (NPA) ratio increased sharply to 2.41 percent compared with 1.48 percent a year back. Net NPA ratio too worsened to 1.12 percent as against 0.51 percent during the same period, suggesting credit quality stress.

The bank is expected to expand its domestic loan book by 15 percent Y-o-Y. Total loans rose nearly 15% Y-o-Y to Rs 2.99 lakh crore by end-December, 2012.

Since last one year BoB shares rose nearly 10 percent as against a spike of 36 percent in the Bank Nifty – the broader index for banking stocks. On an average brokerages put BoB under close watch for revision of ratings.

"BoB needs to ramp up its growth trajectory. If that does not happen, it would be a 'sell' call for those shares. At the current level investors are not advised to buy," said a trader.

The bank had a management change in January when S Mundra joined as chairman and managing director. Three new executive directors including Ranjan Dhawan, S K Jain and P Srinivas too joined that time around. Prior to this M D Mallya - ex CMD and R K Bakshi - ex ED had retired from the bank.

"The change of gurads led to some market apprehension on BoB's future performance. However, that has wanned to a large extent," said Sharekhan's Sukhla.

saikat.das@network18online.com