Bank of Baroda Q3 result: Net profit jumps 75% to Rs 3,853 crore

Bank of Baroda: Bank of Baroda hikes MCLR by up to 35 bps. The public sector lender has hiked marginal cost of funds based lending rate (MCLR) by up to 35 bps across tenors. The rate hike will be effective from January 12.

Bank of Baroda on February 3 reported a net profit of Rs 3,852.74 crore for the December quarter, a 75 percent year-on-year increase that was helped by strong net interest income growth.

The public sector lender's interest income rose to Rs 2,3540.14 crore from Rs 17,963 crore a year ago.

The net interest income rose 26.5 percent to Rs 10,818 crore for the three months ended December. This comes on the back of a robust loan growth of 19.7 percent and an improvement in net interest margins as well.

Provisions declined 4 percent to Rs 2,403.93 crore for the quarter ended December 31, 2022. In the same period of the previous year, the bank's provisions totaled Rs 2507 crore.

Together with healthy NII growth and modest provisions, the bank's operating profit surged 50 percent year-on-year to Rs 8,232.19 crore from Rs 5,483.33 crore a year ago.

Margins get a boost

Like its peers, Bank of Baroda, too, reported an improvement in net interest margin (NIM) despite multiple deposit rate hikes.

NIM is the difference between the interest a bank pays on its deposits and the yield it earns through lending.

Bank of Baroda's NIM improved to 3.37 percent for the December quarter,  a 24 basis points higher than that in the corresponding quarter of the previous year. One basis point is one-hundredth of a percentage point.

The public sector lender's cost of deposit increased sharply to 4.01 percent from 3.50 percent a year ago. This was mainly driven by its international deposits. Growth in domestic deposits came in at 14.5 percent, while overall deposits grew by 17.5 percent. Low-cost current and savings account deposits grew by 7.6 percent.

The yield on advances also rose to 7.78 percent from 6.92 percent from the year-ago period, as the bank hiked its loan rates during the quarter.

The bank's loan mix continued to be tilted towards corporate and small businesses, though retail loans grew at the fastest pace of 29.4 percent for the quarter. Corporate loans grew by 13.3 percent and loans to micro, small and medium enterprises grew 11.1 percent year-on-year.

Asset quality shines

Bank of Baroda's asset quality metrics showed significant improvement, with the share of bad loans in the overall loan book falling.

The gross bad loan ratio dropped to 4.53 percent in the December quarter, from 7.25 percent a year ago. Outstanding gross bad loans shrank by 25 percent to Rs 41,857.50 crore.

The annualised slippage ratio declined to 1.05 percent for the December quarter, an indication that fresh stress has also reduced for the lender.

Fresh slippages were lower at Rs 2172 crore for the December quarter compared with Rs 3479 crore the previous quarter and Rs 2830 crore in the December quarter of FY22. Small businesses and farm loans contributed the bulk of the stress.

However, the bank's write-offs remained elevated at Rs 4725 crore and upgrades saw a sharp drop to Rs 925 crore from 1272 crore a year ago.

That said, the bank chose to make provisions to keep its coverage ratio elevated. The provision coverage ratio was 92.34 percent as of December.

The bank's shares were up more than 5 percent on the National Stock Exchange after the release of the quarterly result.