The Net NPA numbers of the merged bank should be about Rs 23,000 crore which is equal to just one & half years operating profit of the merged bank, a very positive number.
We believe Bank of Baroda has transformed itself into a new age bank under the guidance and leadership of its MD & CEO PS Jayakumar and whole rejuvenated team of the bank.
Bank of Baroda accomplished several standards which were set earlier when current MD and CEO had taken over the charge of its banking operations. The Bank's transformation journey involving initiatives across Business Units and Support Functions like IT, HR, Operations & Services continue to reap dividends.
Domestic YoY credit growth remained in double digits for eight quarters led by 24.18 percent increase in home and auto loans at 22.15 percent and 49.43 percent.
Net Interest Income (NIl) increased to Rs 4,863 crore. Adjusting for IT refund of Rs 204 crore in March 2019, NIl increased by 25.73 percent on a YoY basis. Domestic core fee income increased by 10.41 percent on YoY basis to Rs 995 crore.
Consolidated and standalone operating profit stood at Rs 15,519 crore and Rs 13,487 crore respectively for FY 2019 an increase of 12.34 percent and 14.43 percent respectively. Treasury trading gains were lower at Rs 989 crore from Rs 1,878 crore in FY 2018. Standalone operating profit for Q4 FY' 19 stood at Rs 3,861 crore registering an increase of 44.88 percent.
Net interest margin (NIM) improved to 2.9 percent in Q4 FY 19 from 2.69 percent last quarter. For the year, NIM increased to 2.72 percent from 2.43 percent in the previous year. Domestic NIM increased to 2.98 percent in Q4 FY 19 (adj. for IT refund) from 2.8 percent last quarter.
The Government of India on March 28, 2019 infused an amount of Rs 5,042 crore towards preferential allotment of equity shares. Pending allotment of the shares, the amount has been disclosed under share application money pending allotment as on March 31, 2019. The Bank has considered such amount received from Government of India as a part of Common Equity Tier-I (CET 1) capital as on March 31, 2019.
Capital Adequacy Ratio of the Bank stood at 13.42 percent and CET -1 at 10.38 percent against 11.67 percent and 8.65 percent in December 31,2018. Consolidated CET-1 and Capital Adequacy Ratios improved in March 2019 at 11.6 percent (9.74 percent in December 2018).
Domestic CASA deposits registered a growth of 8.36 percent on YoY basis. CASA deposits to Total Domestic Deposits at 40.23 percent against 41.18 percent as on March 31, 2018.
Domestic Deposits stood at Rs 5,17,966 crore as on March 31,2019 up 11.91 percent from Rs 4,66,974 crore as on March 31, 2018.
Domestic advances grew by 14.17 percent to Rs 3,70,185 crore as on March 31, 2019 from Rs 3,24,239 crore as on March 31,2018. The increase was led by retail loans which grew by 24.18 percent.
Contribution of Bank's International Business at the end of March 31, 2019 was 19.81 percent compared with 19.87 percent as of December 31, 2018 due to effect of rationalisation of overseas operations setting in.
Cost to Income ratio was very impressive at 45.14 percent in Q4FY19. For FY19, cost to income stood at 45.56 percent, which is one of the best amongst the PSU banks.
Gross NPA ratio improvement is best in 12 quarters. Gross NPA reduced to 9.61 percent as on March 31, 2019 against 11.01 percent last quarter. Net NPA fell to 3.33 percent from 4.26 percent last quarter. Absolute amount of Net NPA also declined by Rs 3,521 crore to Rs 15,609 crore, lowest in eight quarters. Fresh slippage during Q4FY19 stood at Rs 2,662 crore out of which Rs 530 crore was from IL&FS.
With regards to much talked accounts, the Bank has zero exposure to Jet Airways. DHFL account till date is doing well and the bank does not expect any surprises. According to Mr Jaykumar, even the exposure to Religare is also taken care of.
The liquidity crisis in NBFC sector may affect BoB and it may be reflected in coming quarters but believe the Bank is strongly placed to tackle such risks.
Exposure in accounts under NCL T 1 list was Rs 3,908 crore and NCL T 2 list was Rs 3,831 crore as on March 31,2019. Provision coverage under NCL T 1 and NCL T 2 list was 95.63 percent and 84.11 percent respectively, again one of the highest.
AUCA stood at Rs 18,000 crore of which the bank expects a recovery of Rs 600-800 crore per annum.
The Bank front-ended NPL provisions of Rs 5,550 crore which includes provisions of ~Rs 1,000 crore owing to accounting standards/entries due to delay in resolution of certain key accounts in IBC, provisions of Rs 1,875 crore or thereabouts for Reliance Communications, Essel group and Videocon, fraud related one time provision of about Rs 250 crore.
The Bank has considered exposure to six borrowers in Infrastructure Financial Services group as "Non performing" and made provision of Rs 400. 70 crore for the year ended March 31, 2019, which is 23.7 percent of the outstanding amounts. PCR including Total Written Off accounts (TWO) increased to 78.68 percent and PCR excluding TWO increased to 67.64 percent as on March 31, 2019 from 73.47 percent and 64.03 percent respectively as on December 31,2018.
Bank of Baroda recorded loss on a standalone basis of Rs 991 crore for Q4 FY 19 due to acceleration in provisions. For the whole year, standalone and consolidated profit stood at Rs 433 crore and Rs 1,100 crore respectively. We are not worried about Bank reporting loss since as a precautionary measure the Bank has done front end provisioning to avoid any future stress.
After the merger with Vijaya Bank and Dena Bank, BOB is the second largest public sector lender after State Bank of India and has now over 9,500 branches, 13,400 ATMs and 85,000 employees to serve 12 crore customers. The consolidated entity has now business mix of over Rs 16 lakh crore on the balance. The consolidated entity would report their first financial result in Q1FY20.
According to us, the Net NPA numbers of the merged bank should be about Rs 23,000 crore which is equal to just one & half years operating profit of the merged bank, a very positive number.
Although the integration process may take two years, but we believe there would be synergies and it would be a force to reckon with in the near future.
In Ajcon’s view, BoB is one of the best PSU bank to invest and hold at the current price.
The author is Vice-President - Research at Ajcon Global ServicesDisclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.