Bank of Baroda reported a net profit of Rs 3,313.42 crore for the quarter ended September, an increase of 58.7 percent from a year earlier on the back of improved asset quality and healthy core income growth.
The public sector lender's net interest income (NII) rose 34.5 percent to Rs 10,714 crore for the reported quarter. NII growth was on the back of a robust 19 percent loan growth. A 28 percent surge in retail loans underpinned this credit growth for the September quarter. Within retail, the growth was broad based though unsecured personal loans more than doubled from a year ago period. Corporate loans reported a growth of 10 percent for the quarter.
Another reason for NII growth was stable net interest margins. Bank of Baroda reported a net interest margin of 3.41 percent, sharply higher than 3.07 percent in the previous quarter and 2.9 percent in the year-ago period. The improvement in margins was mainly due to hikes in loan rates by the bank that lifted the yield of advances book. To be sure, the bank’s low cost deposits as a percentage of total deposits dropped to 42.77 percent.
Asset quality improves
Bank of Baroda reported a sharp reduction in its bad loan portfolio and slippages were contained as well for the September quarter.
Gross non-performing assets were at 5.31 percent of the total loan book, down from 8.11 percent from a year ago. On a net basis, bad loans were 1.16 percent of the loan book, compared with 2.83 percent a year go.
Fresh slippages were Rs 3,479 crore, down from Rs 5,802 crore a year ago. Recoveries and upgrades improved from year ago period although write-offs remained elevated. The resulting reduction in bad loans brought down the provisioning requirement of the bank. Bank of Baroda provided Rs 1,628 crore towards bad loans, 41 percent lower than the year-ago period. The bank has roughly Rs 15,000 crore worth of loans that were restructured under pandemic-related forbearance.
Operating performance
Despite strong NII growth and credit offtake, Bank of Baroda's operating profit grew by a mere 6.4 percent year-on-year. One reason was the 49 percent year-on-year fall in non-interest income. The hit was mainly from treasury operations that included mark-to-market losses on the bond portfolio. A 9 percent rise in operating expenses also dragged on profit. The bank's cost to income ratio has remained elevated near 50 percent for many quarters now.
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