Bank of Baroda net nosedives 68.1% on higher provisions for taxes, NPAs

State-run lender Bank of Baroda on Friday reported a whopping 68.1 percent fall in net profit at Rs 334 crore in the December quarter on account of higher provisioning for non-performing assets and taxes.

Mumbai: State-run lender Bank of Baroda on Friday reported a whopping 68.1 percent fall in net profit at Rs 334 crore in the December quarter on account of higher provisioning for non-performing assets and taxes.

The city-based bank's profit after tax stood at Rs 1,048 crore in the same period last year.

"The decline in net profit was mainly contributed by increased provisions for NPAs at Rs 331 crore and higher tax provision of Rs 375 crore during the quarter," bank executive director, Ranjan Dhawan, told reporters here today.

The bank had to make higher provisioning on taxes as the Dubai government levied retrospective tax on its UAE branch, he added.

"There was an opening of the tax assessments from 2007 onwards and the Dubai tax authorities have decided to levy tax retrospectively on us. So, we have made this one-off provision this year," Dhawan explained.

Net interest margin fell to 2.92 percent from 2.95 percent.

Reacting to the poor set of numbers, shares of BoB tanked over 11 percent to Rs 193.35 on the BSE whose main gauge Sensex shed 499 points on profit booking and negative global cues.

The bank also saw its asset quality worsening in the period due to the stresses in the economic environment and the ongoing structural issues.

Gross non-performing assets (NPAs) stood at 3.85 percent as against 3.32 percent while net NPAs was at 2.11 percent as against 1.88 percent.

Fresh slippages in the quarter stood at Rs 3,042 crore. There was no sale of bad loans to asset reconstruction companies in the third quarter.

Provision coverage ratio improved to 62.37 percent from 62.22 percent in the year-ago period.

Globally, bank restructured Rs 1,598 crore of loans and domestic restructuring stood at Rs 1,529 crore.

During the quarter, recovery stood at Rs 238 crore and the bank upgraded Rs 183 crore of loans and wrote off Rs 328 crore.

Dhawan expects stress on asset quality to remain for next one or two quarters as the economy has not revived.

"We don't expect the NPA pressure to come down substantially in next one or two quarters. There are 2-3 very lumpy accounts which we are hopeful that they would be upgraded in this quarter. If it happens then we will not have a very high NPA levels.

"We hope the gross NPA will be contained at 3.1 percent this fiscal, but it does not look to me that we will achieve it," he added.

Bank's total deposits rose 12.1 percent to Rs 5,64,600 crore and advances grew 11.7 percent to Rs 3,93,631 crore as of end-December.

Dhawan said bank's loan growth is likely to be at 11-12 percent, in line with the industry, during this year.

On lending rate cut, he said the bank may look at next month. Its capital adequacy ratio was 12.42 under Basel III.

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