Bank of Baroda reported a 48.3 percent fall in net profit, but gross NPA improved to 3.7 percent. Jignesh Shial, research analyst at IDBI Capital Markets said the numbers seem okay. He said the bank’s profit took a hit on higher provisioning and perhaps even interest reversal.
At an operational level, the performance seems stable, he told CNBC-TV18.
Hatim Broachwala, research analyst- institutional equities at Nirmal Bang is positively surprised with the bank’s performance on the asset quality front. He has an accumulate rating on the stock at the moment and said he will wait for further details to take a call on re-rating.
Below is the verbatim transcript of Jignesh Shial & Hatim Broachwala's interview with Nigel D'Souza, Reema Tendulkar & Ekta Batra on CNBC-TV18.
Nigel: You have had a look at the numbers, asset quality improvement is something that stands out. Could you take us through your first take on these numbers?
Shial: The numbers seems okay, rather than improvement I would rather say it has not much deteriorated, so it seems pretty okay set of numbers. Obviously the profit had been down because of the higher provisions and even operational line has not been that great, interest reversals could be the reason. Overall it is okay set of numbers, not that great but not bad at all.
Ekta : I wanted your thoughts on the fact that the stock is up seven percent so was just the asset quality the key point to watch out for for Bank of Baroda (BOB) because if you look at the net profit, it is down for the second consecutive quarter in terms of a steep percentage decline on a year-on-year (YoY) basis. That doesn’t seem to worry the street, neither do the provisions at Rs 1,800 crore which is a multi-quarter high for the bank?
Shial: It had been Rs 145-146 around the last closing if I am not wrong. So the street had been pretty negative on the numbers rather than on the asset quality front. For the rest, it is all the all peers are facing issues of growth - that is not the case here or the concerns won’t be specific for BOB, you won’t penalise them for that. What you will penalise them for would be for their asset quality, whether it is further deteriorating or it is remaining stable like in case of Punjab National Bank (PNB) the numbers have been pretty bad, they actually reported losses at this time. So if BOB is not-obviously these are different topics but at least loss is something very negatively surprising, so at least in that case people would be comfortable a bit with BOB in that case.
Ekta: What have you analyzed BOB’s number as?
Broachwala: Yes, numbers on the asset quality front look stable, this has surprised us positively because we were expecting a slight amount of deterioration in line with what management was guiding, but asset quality numbers are far better than what we were expecting. Of course we need to see into the details as to what are the breakup of gross non performing assets (GNPAs) but on the income front clearly lower net interest income (NII) and higher provisions, operating expenses are also lower, there will be some reversal of wage hike provision which they were making earlier but profit numbers are lower but asset quality is better than expectations.
Reema: On the back of this performance by BOB, does it reverse its under-performance?
Broachwala: Yes, after the bad results from PNB, this is a bit of a relief and BOB has remained one of the favorites within PSU banks, so after this relatively better results, it can again gain back its favorite position.
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