Angel analyses Bank of Baroda's Q2 performance

In an interview to CNBC-TV18 Vaibhav Agarwal, Angel Broking reviewed second quarter financial performance of public sector lender Bank of Baroda (BoB)

Also read: Here's how Angel Broking is reading BoI's Q2 earnings Below is the verbatim transcript of his interview on CNBC-TV18 Q: What is your call looking at the Bank of Baroda numbers, would you say it is a bit of a relief or would you say that this is almost in line with your estimate numbers? A: The numbers are better than our estimates as well and clearly much above the market but even above ours. On the asset quality, on the net NPA front we were expecting about a 15-20 bps increase in the environment and that is what they have more or less done. Therefore, on asset quality as well it isn’t anything alarming as such on the base of it. So these numbers look to be better than what we have seen the trend so far in PSU. Q: What about the fact that we just pointed out that the tax outflow is much lower this quarter on a year on year basis and the fact that the other income is much higher which has boosted the profitability. On an adjusted basis then would you be a little disappointed with the profitability? A: We have to really look at the line item wise analysis whether there were these one time items. On the tax front - PSU banks again and again have been able to take advantage of write-offs to actually reduce their tax liability. So, we really have to see what the other income breakup was, and was it because of recoveries or forex, what are the trends there. A more detailed analysis is required but at least on the asset quality it seems they have been able to keep it within check. Q: So the relief for the market is clearly because of the gross NPAs 3.15 versus 2.99 so that is only a 16 bps jump. Would that be a bit of a relief for the market that may be the worst is getting over? A: Looking at BoB numbers alone we would not extrapolate for the whole PSU space because clearly looking at all the other results so far and the environment itself, clearly there does not look to be any abasement on the asset quality front. Even for BoB we really have to see whether this would be sustainable for them because a single quarter is not enough to really convince one to really assume things are bottoming out.