Provisions for NPAs identified by RBI’s asset quality review in Q3FY16, instead of spreading it over two quarters, has ensured that Bank of Baroda's quarterly profits turn into a massive loss in Q3FY16.
Provisions for NPAs identified by RBI’s asset quality review in Q3FY16, instead of spreading it over two quarters, has ensured that Bank of Baroda’s quarterly profits turn into a massive loss in Q3FY16. Results declared by India’s second-largest public sector bank by market capitalisation on Saturday reveal a 388.4% (y-o-y) jump in provisions (225.9% q-o-q) to Rs 6,164.55 crore, leading it to incur a net loss of Rs 3,342.04 crore in the quarter ended December 31, as compared to a profit of Rs 333.98 crore in the same quarter last year. This, on the back of a Rs 15,223.78 crore (q-o-q) rise in slippages. Incidentally, this net loss of Rs 3,342.04 crore — highest by any bank in Q3FY16 — is despite a tax write-back of Rs 1,118.37 crore.
MD & CEO PS Jayakumar, said, “Whether you take the hit in one quarter or in two quarters, the outcome at the end of the year is the same. If we had taken the hit in two quarters, we would have been asked what we were going to take in the next quarter. We have put all this uncertainty behind us. If something has to be done, it might as well be done now, instead of being spread over a period of time.”
The bank also reported a 17.7% (Y-o-Y) drop in net interest income—the difference between interest earned and interest expended—to Rs 2,705.34 crore, as its domestic yield on advances fell by 144 bps (Y-o-Y) to 9.57% and domestic yield on investments fell by 62 bps (Y-o-Y) to 7.51%, while cost of deposits fell by just 35 bps. This meant that the bank’s domestic net interest margin (NIM) shrunk by 81 bps (Y-o-Y) to 2.11% and operating profit dropped by 27.14% (Y-o-Y) to Rs 1,704.14 crore. Despite such a performance, the bank’s management expressed optimism about Q4 and categorically said that “no further issuance of equity capital is required in the foreseeable future” and that it “has advised the Government of India that no further support by way of infusion of equity capital is required”.