Total income moderated marginally to Rs 20,022.42 crore from Rs 20,312.44 crore in the same quarter a year ago, BoB said in a regulatory filing.
State-run Bank of Baroda on Saturday reported a standalone profit after tax of Rs 1,209 crore in the quarter ended in June 2021 on higher growth in net interest income (NII) and lower provisioning for bad loans.
The lender had reported a net loss of Rs 864 crore on a standalone basis in the corresponding quarter of the previous fiscal.
The bank’s managing director and CEO Sanjiv Chadha said the lender has ensured some core profitability by keeping a discipline on liability and asset sides.
On the liability side, the bank has ensured that deposit growth does not run too far ahead of the loan growth and it is composed majorly of low-cost Casa deposits.
On the asset side, it has tried to ensure that the liquidity which had impacted corporate yield does not impact its margins, and therefore, the focus for growth was on the retail side, he said.
“This tight discipline, both on the liability and asset sides, has meant that the bank has been able to report a significant improvement in its margins. Our net interest margin (global) is now more than 3 per cent and for the domestic side it is at 3.12 per cent,” he said, adding that this lays the foundation for strong operating performance.
“Consequently, the operating profit has shown a very sharp uptick with a growth of 41 per cent, and with the provisioning also contained, the net profit has moved up to more than Rs 1,200 crore,” he added.
Global net interest margin (NIM) increased to 3.04 per cent from 2.52 per cent in Q1 FY21 led by domestic margins which improved to 3.12 per cent from 2.59 per cent.
“There would be a significant upside (in NIM in FY22) as compared to last year. Last year, it was in the 2.7 per cent range and we would expect 15-20 basis points increase y-o-y in this year,” he said.
NII rose 15.8 per cent to Rs 7,892 crore compared to Rs 6,816 crore.
Gross non-performing assets (GNPA) ratio declined to 8.86 per cent from 9.39 per cent. Net NPA increased to 3.03 per cent from 2.83 per cent as of June 30, 2020.
Fresh slippages during the quarter stood at Rs 5,129 crore. Of that, slippages in the MSME sector consisted of Rs 2,180 crore and in retail was Rs 1,245 crore.
“We have been of the view from the past few quarters that there would be stress in MSME and retail segments. It transpired little more than what we had anticipated because of the second wave, but this would be offset by corporate credit cycle improving,” Chadha said.
He expects the retail and MSME slippages to come down from the second quarter onwards.
Recovery and upgrades increased to Rs 4,435 crore from Rs 818 crore in Q1FY22. The lender recovered dues worth Rs 530 crore related to Kingfisher Airlines during the quarter. The bank has set a recovery target of Rs 14,000 crore for FY22.
Under the Reserve Bank of India’s Resolution Framework 2.0, the lender has restructured Rs 550 crore of loans in the MSME sector and Rs 1,000 crore in the retail segment.
It has an MSME restructuring pipeline of Rs 325 crore in the current quarter.
Provision and contingencies declined 23.14 per cent to Rs 4,112 crore from Rs 5,350 crore. Provision for NPAs dipped 26.06 per cent to Rs 2,557 crore from Rs 3,458 crore.
Domestic advances fell by 2.3 per cent y-o-y to Rs 6,00,971 crore due to run-off of low yielding corporate loans.
“As far as the corporate loan book is concerned, we had a fair bit of the book which was at very low rate because of the liquidity position that persisted last year. There should be an opportunity for us now to get that book reprice at a higher rate, which is why we have allowed that book to run off,” Chadha said, adding that he expects a growth of 5-7 per cent on the corporate book.
The bank is looking at a credit growth of 7-10 per cent in the current fiscal. Capital adequacy (CRAR) on standalone basis stood at 15.40 per cent.
Speaking about the international operations, Chadha said the bank may exit from its joint venture – India International Bank (Malaysia) Berhad, where it holds 40 per cent stake. Other partners in the JV are Indian Overseas Bank and Andhra Bank, now Union Bank of India.