The net profit leaps because of lower provisioning, reduced cost of deposits and healthy interest income
The lender’s net interest income increased 7% YoY and 10% sequentially to Rs 7,538 crore.
Bank of Baroda, the country’s third-largest public sector lender, on Thursday reported a 128% year-on-year (y-o-y) increase in its net profit for the September quarter to Rs 1,679 crore due to lower provisioning, reduced cost of deposits and healthy interest income.
The lender’s net interest income increased 7% YoY and 10% sequentially to Rs 7,538 crore. The cost of deposits came down 99 basis points (bps) YoY to 4.42%. Provisions reduced 28.7% YoY to Rs 3,002 crore. Sequentially, provisions came down 46.6%, compared with Rs 5,628 crore in the June quarter.
Sanjiv Chadha, MD and CEO, said, “Improvement in the bank’s performance seems to be sustainable. This is on two pillars – cost of deposits, which is powered by a very significant improvement in CASA deposits, and advances growth in the retail book.”
Advances grew 5.32% YoY to Rs 7.18 lakh crore during the quarter under review. The retail loan portfolio grew 17% YoY to Rs 1.11 lakh crore. Deposits grew 6.73% YoY to Rs 9.54 lakh crore, compared to Rs 8.94 lakh crore. Domestic current account savings account (CASA) ratio increased 190 bps to 39.78% from 37.88% in the comparable quarter last year.
Domestic net interest margin (NIM) remained flat at 2.96%, compared to 2.95% in the September quarter last year. Net interest margins, however, improved 33 bps on a quarter-on-quarter basis, compared to 2.63% in the June quarter.
The asset quality showed an improvement in the latest quarter. Gross non-performing assets (NPA) ratio improved 26 bps to 9.14%, compared to 9.4% in the previous quarter. Similarly, net NPA ratio came down 62 bps to 2.51% from 3.13% in the June quarter.
The bank has not declared any new NPA since August 31, 2020, due to the interim order of Supreme Court. The apex court had earlier directed banks not to recognise fresh NPAs, till further orders in the interest-on-interest case. A public interest litigation (PIL) was earlier filed in the Supreme Court to waive off interest on interest for borrowers during the moratorium period between March and August, 2020. “If the bank would have classified the said borrower accounts as NPA, the gross and net NPA ratio would have been 9.33% and 2.67%, respectively,” Chadha said.
The provision coverage ratio improved 747 bps in the September quarter to 85.35%, compared to 77.88% in the year-ago period. The capital adequacy ratio as on September 30, 2020 was 13.26%.