Bank of Baroda, the country's second largest state-owned bank, reported a 60 per cent year-on-year drop in net profit to Rs 424 crore for the quarter which ended on June 30. Total income fell 3 per cent to Rs 11,878 crore, even as the lender clocked an operating profit of Rs 2,669 crore, its highest in the last five quarters. BoB had reported losses in the last two quarters, largely due to the provisioning it had to make against bad assets.
The markets, however, did not take kindly to this small victory and chose to focus on the bank’s worsened asset quality. Bank of Baroda’s shares fell at opening after it released its numbers and ended the day more than 9 per cent lower than the previous day’s close on the National Stock Exchange. The bank's gross non performing asset (NPA) ratio stood at 11.15 per cent, against 4.13 per cent a year ago and 9.99 per cent at the end of March. The corresponding figures for the net NPA ratio were 5.73 per cent, 2.07 per cent, and 5.06 per cent. The gross NPA figure as on June 30 stood at Rs 42,991 crore, as against Rs 40,521 crore as on March 31.
The bank's total business stood at Rs 9,24,940 crore, down from Rs 10,01,475 crore as on June 2015 and the bank attributed the fall to “planned and structured rundown of assets and liabilities.”
The net interest income was Rs 11,878 crore and the net interest margin for domestic operations stood at 2.8 per cent. Credit growth remained flat at around 1.5 per cent. The bank has a full-time credit growth target of eight to 10 per cent. In a post-earnings press conference, MD and CEO P.S. Jayakumar said the bank will target an NIM of 3 per cent by the end of the financial year 2016-2017.
Jayakumar also said that the bank retains its expected NPA figures for the full year, which he had said would be in the range of Rs 45,000 crore to Rs 50,000 crore in the previous quarter. The bank may “see trouble” with accounts in the power sector where commercial operation dates were delayed or power purchase agreements were not in place.
“We expect to see growth in fertilisers. We are getting a few transactions in the oil and natural gas segment, terminals for shipment of LNG and natural gas,” Jayakumar said. “Then, also, renewable energy is growing and also pharma. But what we really want to do is, as we diversify the portfolio, we don't have adequate share in automobiles. Where we want to focus on is segments where we are not present—auto ancillaries, cement, consumer goods, service industries—we would like to see growth there, in addition to retail and stuff. I think there's a pipeline there and the pipeline looks good.”