BoB net falls 21.5%; rise in provisions hit bottomline

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SummaryBank of Baroda’s net profit in the three months to December 2012, fell 21.5% year-on-year (y-o-y) to R1,011.62 crore.

Bank of Baroda’s (BoB) net profit in the three months to December 2012, fell 21.5% year-on-year (y-o-y) to R1,011.62 crore. The bottomline was hurt by a 23% y-o-y increase in provisions to R1,029.31 crore. BoB’s share fell 7% to close at R802.10 on Monday on the Bombay Stock Exchange.

The third largest public sector bank’s net interest margin (NIM) for the October-December sequentially fell 6 bps to 2.65%. The bank expects domestic NIM, which were at 3.08 % in the latest reported quarter, to remain above 3% in FY2012-13.

“We have been brining down our high cost deposit and Casa has also slightly improved. These along with repricing some loans could help us protect our margins,” said SS Mundra, who was appointed chairman and managing director of BoB on January 22 nearly two months after MD Mallya retired from the post in November 2012. Mundra was an executive director at Union Bank of India prior to the new appointment.

The net interest income (NII) for BoB rose 7% y-o-y to R2,840.90 crore, while total income rose 10% y-o-y to R9,685.5 crore. The bank said NII growth was muted as interest expenses increased 20% y-o-y to R6,004.02 crore. Other income fell 27% y-o-y to R840.6 crore as income from the treasury business fell.

The asset quality of BoB deteriorated with the gross non-performing assets (NPAs) sequentially rising 43 basis points to 2.41% and net NPAs rising to 1.12%, from 0.82%. Slippages during the quarter were to the tune of R1,604 crore, Mundra said. Mundra said the increase in bad assets came from the wholesale banking, agriculture and manufacturing sectors.

“Next 2-3 quarters would be challenging. There would be issues like NPAs, restructuring assets in banking system and BoB is no exception. We would align ourselves with the industry for next 2-3 quarters in terms of growth and focus on tackling asset quality issues,” Mundra said.

The advances for the bank grew 15% y-o-y to R2,99,318 crore as on December 31. The deposits for the quarter grew by 18.8% y-o-y to R4,14,733 crore. Mundra expects the Mumbai-based bank’s deposits to grow at 15-16% in FY2012-13, while he sees advances growing at 16-17%.

The capital adequacy ratio for the bank at the end of Q3 stood at 12.66% compared with 13.45% the corresponding quarter last year.

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