Bank of Baroda's third-quarter net profit dropped 68% on a one-time tax-related charge and higher provisions...
Bank of Baroda’s third-quarter net profit dropped 68% on a one-time tax-related charge and higher provisions for non-performing assets (NPAs).
The bank reported a net profit of Rs 334 crore for the quarter ended December 31. Net interest income rose 7.5% year-on-year (y-o-y) to Rs 3,286 crore.
Bank’s executive director Ranjan Dhawan said there was a tax demand amounting to Rs 410 crore from the Dubai authorities, which the company decided to account in full in the past quarter with part payment to be made in April.
Dhawan, however, expressed concern on the NPA front, saying that it has worsened over the last few quarters.
“Normally, our NPAs for the quarter are at an average of Rs 2,000 crore. This time the NPA is nearly at Rs 3,100 crore which has resulted in an excess provision. This has affected our net interest margins (NIMs), our return on assets.”
He said that a huge number of the bank’s borrowers are facing stress, adding that he expects the stress to continue both on asset restructuring and NPA.
“We have seen in the last six to eight months that even our current borrowers are not giving us enhancement proposals,” Dhawan said. “There is no new fresh capacity coming up. Profitability is under squeeze, some of them had rating downgrades and this is the result of a general economic downturn.”
He added that an economic upturn is expected as seen in the market sentiment, with foreign investment waiting to enter India.
“If there is an economic upturn, a lot of the marginal borrowers should come out of NPA. This will not happen immediately, I doubt if it will happen in the next two to three months,” he said.
Provisions and contingencies for the quarter rose 65.7% to Rs 1,262.25 crore. Domestic NIM stood at 2.92%. Slippages stood at Rs 3,042 crore, a rise of 96% y-o-y. NPA provision rose 40% to Rs 1,150 crore
Net NPA ratio stood at 2.11% compared with 0.68% posted in the second quarter while gross NPA was 3.85% compared with 3.32% in the previous quarter.