Bank of Baroda Q1 net dives 60% to Rs 423.62 crore as bad loans surge
Public sector Bank of Baroda on Thursday reported a massive 60 percent plunge in its standalone net profit at Rs 423.62 crore for the first quarter ended June 2016, hit by higher provisions for bad loans and contingencies.
Mumbai: Hit hard by nearly three-fold jump in bad loans, state-run Bank of Baroda Thursday posted 60 percent plunge in its first quarter net profit at Rs 424 crore, even as it returned to profitability after two straight quarters of huge losses.
Total income declined to Rs 11,877.91 crore in the quarter ended June 30, from Rs 12,243.720 crore a year ago.
The massive decline in profit on year-on-year basis was due to higher provisions for bad loans and contingencies.
There was a massive spike in bad loans, as the gross NPA ratio rose to 11.15 percent from 4.13 percent a year ago and from 9.99 percent in the March quarter. Net NPAs more than doubled to 5.73 percent from 2.07 percent.
The bank had reported net profit of Rs 1,052 crore in the year-ago quarter. In the March quarter, it had reported net loss of Rs 3,230 crore as asset quality worsened following the RBI mandated review of large accounts.
"The bank has become profitable due to very sound liability management," the lender's Managing Director and Chief Executive P S Jayakumar said.
Chief Financial Officer V S Narang said the conscious run-down of higher-cost deposits to improve the deposit mix has led to significant strengthening of operating profit in the quarter at Rs 2,669 crore, highest in the last five quarters.
Domestic net interest margin improved to 2.80 percent sequentially from 2.70 percent and international NIM improved from 0.92 percent to 0.98 percent.
Jayakumar said the bank is looking at NIM of 3 percent by the end of this year.
Gross non-performing assets stood at Rs 42,991 crore compared to Rs 40,521 crore in the March quarter.
The gross NPA ratio stood at 11.15 percent or Rs 42,991.68 crore compared to 4.13 percent or Rs 17,273.95 crore a year ago.
"We had said gross NPAs will be in the range of Rs 45,000-50,000 crore. We don't see that guidance getting worse. So we will be somewhere between Rs 45,000-50,000 crore but closer to Rs 45,000 crore," Jayakumar said.
Net NPAs more than doubled to 5.73 percent from 2.07 percent or Rs 20,783.77 crore from Rs 8,470.02 crore respectively.
Fresh slippages stood at Rs 5,527 crore. Reductions during the quarter was at Rs 3,625 crore as against Rs 895 crore a year-ago. Upgraded loans were worth Rs 1,401 crore while the write-offs stood at Rs 1,142 crore.
Thus, provisions for bad loans and contingencies rose to Rs 2,004.07 crore for the reporting quarter against Rs 599.74 crore a year. Provisions against NPAs and write-offs alone stood at Rs 1,986 crore.
The provision coverage ratio was 60.17 percent and tax provisions Rs 242 crore.
The bank restructured two accounts worth Rs 788 crore under the strategic debt restructuring in the quarter.
Despite a massive spike in bad loans, the bank did not sell any such account to asset reconstruction companies in the quarter.
Its total business stood at Rs 9,24,940 crore, down from Rs 10,01,475 crore a year ago and Rs 9,57,808 crore in March 2016 on account of planned and structured rundown of low yielding assets and high cost liabilities.
Total deposits was at Rs 5,62,174 crore and advances were at Rs 3,62,766 crore. The bank is looking at a deposit growth of 12-13 percent and loan growth of 8-10 percent this financial year.
Bank of Baroda shares plunged 9 percent to Rs 145.95 on the BSE against a 0.31 percent gain on the benchmark Sensex.