Bank of Baroda PAT up 28% on strong operating metrics, better loan quality

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Bank of Baroda’s net profit for Q2 FY24 rose 28.4 per cent y-o-y to ₹4,253 crore, led by 25 per cent growth in operating income to ₹15,002 crore and two-fold increase in non-interest income to ₹4,171 crore.

In the post earnings call, Executive Director Ajay Khurana said that recoveries from written-off accounts of ₹1,231 crore were from certain large corporate accounts. More such accounts are lined up and the recovery rate for H2 FY24 should be similar to the ₹1,894 crore seen in the first half. However, net interest income (NII) was up a muted 6.5 per cent y-o-y to ₹10,831 crore. Global NIM for the quarter fell 26 bps y-o-y to 3.07 per cent. Yield on advances were up 121 bps against a 133 bps increase in cost of deposits.

Deposits grow

Global deposits increased 14.6 per cent to ₹12.5 lakh crore, of which domestic deposits rose 12 per cent to ₹10.7 lakh crore.

MD and CEO Debadatta Chand said deposit growth has been lagging credit growth for the industry, owing to which the bank expects incremental deposit growth to be lower at 12-13 per cent.

Bulk deposits were up 59 per cent whereas CASA deposits up 4.4 per cent and retail term deposits 3.9 per cent. “We’re trying to optimalise on the bulk deposit front, moderate that growth so that we can maintain margins and grow strategically going forward,” Chand said adding that in addition to loan offers, the bank has also provided liability-side offers during the ongoing festival season which is expected to help bolster the CASA base as the bank moderates bulk deposit growth. The bank aims to improve the CASA ratio to 41 per cent in the “near future” from 39.6 per cent at present.

Global advances were up 17.3 per cent y-o-y at ₹10.2 lakh crore. Domestic loans were ₹8.3 lakh crore, 16.5 per cent higher. Retail loans grew 22.2 per cent, led by 13-21 per cent growth in high focus areas such as automobile, home, mortgage and education loans and 67 per cent in personal loans.

Chand said that 95-96 per cent of the personal loan borrowers are existing bank customers and the new customers are only those that start a salaried account with the bank, due to which the portfolio quality remains strong.

However, given the industry situation the bank has decided to go slower on personal loans, guiding for FY24 growth of around 35 per cent. Further, the bank now has data for the last 2-3 years which it will analyse to review and recalibrate its strategy going forward.

Slippages for the quarter were ₹4,331 crore, higher than both a quarter and a year ago, due to one large international account of ₹500 crore and one aviation account worth ₹1,773 crore being classified as bad loans. Recoveries and upgrades for the quarter were ₹2,207 crore.

The bank’s management said that the outlook on the aviation account, referring to Go Air, remains positive. The CoC (committee of creditors) for the airline undergoing insolvency proceedings, has seen interested bidders and it is difficult to comment on the possibility of liquidation at this point, they said.

Gross NPA ratio of the bank improved to 3.32 per cent from 5.31 per cent a year ago and 3.51 per cent a quarter ago. Net NPA ratio at 0.76 per cent too was better than 1.16 per cent in the previous year and 0.78 per cent in the previous quarter.