Bank of Baroda on Friday posted a net loss of Rs 3,230 crore for the quarter ended March 2016 due to higher than expected provisions which surprised market experts negatively. However, the management feels the worst seems to be coming to end.
Reacting on the corporate earnings, shares of Bank of Baroda plunged over 8 per cent in the early trade on Monday. The bank had posted a net profit of Rs 598.35 crore in the corresponding quarter a year ago.
Total Provisions and Contingencies of Bank of Baroda jumped 277.31 per cent to Rs 6857.66 crore for the quarter under review. The figures include Rs 1,615 crore relating to one time provisions towards employee pensions. Despite this the provisions towards non-performing assets (NPAs) remained high at Rs 4,880 crore, much higher than streets’ expectations.
Total provisions and contingencies of the bank stood at Rs 1817.50 crore for the quarter ended March 2015. The bank has guided for improved outlook on asset quality front and it expects recoveries to the tune of Rs 10,000 crore for FY2017.
Nirmal Bang Institutional Equities in a research note said, “We have doubts on its loan recovery guidance for FY17, which is five times that of FY16. As per our RoE estimate, the bank will witness sub-optimal growth of around 10 per cent for the next couple of years. Although BoB’s new management looks forward to regain its lost glory, we remain cautious on the stock’s performance post run-up. Therefore, we have downgraded our rating on the stock to Sell (from Accumulate) with a target price of Rs130.”
The asset quality of banks worsened further with gross non-performing assets (NPAs) or bad loans rising to 9.99 per cent of gross advances as of March 2016, from 3.72 per cent a year ago.
However Sharekhan is bullish on Bank of Baroda shares. It said, “We expect slippages to be lower hereon and focus on reduction in NPAs should improve the overall asset quality while better growth in advances would lead to improved profitability. The bank is relatively well capitalised to tap the opportunity in case of an economic revival also it provides comfort on equity dilution risk. We have maintained our ‘Buy’ rating on the stock with an unchanged price target of Rs 180.”
Later, shares of Bank of Baroda settled 8.23 per cent down at Rs 142.20 on BSE. On NSE, the scrip slid 8.12 per cent to Rs 142.50 and remained among top losers in the Nifty 50 pack.