Fresh bad loans shot up 73% sequentially to Rs 10,387 crore and and provisions surged 156% y-o-y to Rs 7,155 crore
Bank of Baroda (BoB) on Friday reported a shocking Rs 1,407-crore loss for the quarter ended December at a time when most bankers have been claiming the NPA (non-performing assets) cycle has peaked and that the worst is over. BoB’s fresh bad loans shot up a whopping 73% sequentially to Rs 10,387 crore and and provisions surged 156% year-on-year (y-o-y) to Rs 7,155 crore.
The state-owned lender’s management attributed the jump in slippages to divergences between the bank’s assessment of asset quality and the Reserve Bank of India’ (RBI) for the year ended March 2019, with over Rs 4,000 crore of fresh bad loans resulting from the central bank’s review.
“We have had a rough quarter due to divergences. There are some short-term challenges due to amalgamation. In the long term we are going to create fair value of assets,” Sanjiv Chadha, MD and CEO, BoB, observed.
The divergence in both gross and net non-performing assets (NPA) stood at a very large Rs 5,250 crore, while that for provisioning was as much as Rs 4,090 crore. After recognising the additional bad loans identified by the RBI, BoB restated its net loss for FY19 at Rs 10,998 crore, as against Rs 8,339 crore earlier.
The gross NPA ratio at the end of December stood at 10.43%, up 18 basis points (bps) sequentially. Net NPAs were at 4.05%, 14 bps higher than 3.91% at the end of the September quarter. The provision coverage ratio (PCR) of BoB improved to 77.77% from 70.72% a year ago. A major part of the stress came from three accounts in the NBFC sector, a few accounts in power and one account in the chemicals sector.
Net interest income (NII) – the difference between interest earned and interest expended – stood at Rs 7,129 crore, up 50% y-o-y. The bank’s net interest margin (NIM) fell marginally to 2.81% from 2.8% at the end of September. The bank will maintain a target of 2.9-3% for NIM in the coming quarters, even as pressure from NPAs persists.
Domestic advances grew 0.67% y-o-y to Rs 5.45 lakh crore at the end of December 2019. The lender’s current and savings account (CASA) ratio improved to 38.8% in Q3FY20 from 36.2% in the same quarter last year. Its domestic deposits rose 1.3% y-o-y to Rs 7.82 lakh crore at the end of the December quarter.