Bank of Baroda Q2 net up 14.4% on robust loan growth

State-owned Bank of Baroda ’s (BoB)second quarter (July-September) net profit rose more than 14% year-on-year to Rs 1,166 crore, supported by a robust loan book expansion. This was better-than-expected growth at the net level. A CNBC-poll estimate expected the growth in net profit at 7.3%.

Net interest income, the difference between interest earned and expended, jumped 26% Y-o-Y to Rs 2,567 crore. Total loans (domestic + global) grew at nearly 24% Y-o-Y to Rs 2.39 lakh crore while total deposits climbed more than 22% to Rs 3.29 lakh crore.

“We have seen credit demand coming from rural, retail and retail segments,” said M D Mallya, chairman and managing director, Bank of Baroda, addressing a press conference here in Mumbai.

“There is no fresh credit demand from corporate sector, especially for their green field projects. However, disbursement is taking place for all sanctioned loans. So far, we have not seen sign of stress on our asset quality. We will maintain our NIMs in the range of 3.25-3.75% for the full fiscal year.”

Its September quarter domestic net interest margin (NIM) stood at 3.67% compared with 3.39%. In the three month period, BoB’s cost of deposits have gone up from 5.27% to 6.84% Y-o-Y. At the same time, the lender has managed to increase its yield on advances from 10.71% to 12.14%. Yield on advances is the interest income.

“This alone shows, our overall fund management is strong. The rise in yields helped off-set the impact of higher deposit costs,” added Mallya.

On asset quality, gross non-performing asset (NPA) ratio improved marginally from 1.46% to 1.41% quarter-on-quarter. However, net NPA ratio inched up from 0.44% to 0.47% Q-o-Q.

During the quarter, the bank has restructured assets of Rs 663 core, of which asset worth Rs 458 crore has come from corporate customers. In the troubled power sector, the bank has an exposure of Rs 13,296 crore of which state electricity boards account for around Rs 7,000 crore. All those assets are performing so far, the bank claims.

Provisions (other than for tax) for bad loans have gone up from Rs 185 crore in Q2, FY11 to Rs 483 crore Q2, FY12. The bank enjoys a healthy provisioning cover ratio of 82% as against RBI stipulated 70% of gross NPAs.

To ensure greater asset quality, according to Mallya, such provisioning was required. The bank acts promptly in terms of provisioning.


Provision coverage ratio is the percentage of loans that a bank needs to set aside as provision to meet any contingency wherein a majority of those loans suddenly turns bad.

Source: www.moneycontrol.com

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Gaurav Agarwal
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DENIP Consultants Pvt Ltd