Mumbai: India’s fourth largest lender Bank of Baroda on Wednesday announced a 20.4% growth in net profit to Rs906.28 crore for the fourth quarter ending March but net profit at Bangalore-based Canara Bank, the sixth largest, dropped 30% to Rs503.10 crore
Bank of Baroda’s stock hit its lifetime high of Rs689 in intraday trade before closing at Rs686.75, 1.55% higher than its Tuesday close. Canara Bank’s shares fell 2.39% to close at Rs408.80.
Looking up: MD Mallya, CMD, Bank of Baroda. Abhijit Bhatlekar/Mint
The Sensex, the Bombay Stock Exchange’s bellwether equity index, fell 1.76%, or 310.54 points, to close at 17,380.08.
An analyst with a local brokerage termed Bank of Baroda’s performance as “muted” and Canara Bank’s results as “bad” as the second bank’s quarterly net income dipped sharply owing to lower trading profit and higher provisions to increase coverage of bad assets.
Under Reserve Bank of India norms, banks are required to set aside money to cover 70% of bad assets on their books. Canara Bank had covered only 37% of its bad assets, one of the lowest provision coverage ratios in the industry, while Bank of Baroda’s cover is at least 75%.
During 2009-10, Canara Bank made a total provision of Rs2,039 crore, including Rs927 crore for the fourth quarter, higher than the Rs554 crore for the same quarter in the previous fiscal. This includes Rs1,408 crore provision for bad assets, bank chairman and managing director A.C. Mahajan said.
“Income from sale of investments during the quarter was Rs114 crore against Rs349 crore during the same quarter a year ago,” he said.
Bank of Baroda’s trading profits fell to Rs300.85 crore in the March quarter from Rs206.81 crore a year ago and the bank’s provisions for the quarter, including that for tax, increased 30.94% to Rs722.50 crore.
For the fourth quarter, Bank of Baroda’s total income rose 2.57% to Rs5,120.73 crore, while Canara Bank’s total income remained almost flat at Rs5,506.72 crore.
For the full year, Bank of Baroda’s net profit was up 37.3% to Rs3,058.33 crore while Canara Bank’s profit rose 45.8% to 3,021.43 crore.
Bank of Baroda’s net interest margin, or NIM, a key parameter to gauge a bank’s efficiency, improved to 3.50% from 3.38% a year ago in domestic operations but dropped to 2.97% from 3.17% in its global business. The bank’s chief economist, Rupa Rege Nitsure, attributed this to the falling interest rate scenario overseas. The overseas activity contributes about 24% of the bank’s total business and around 20% of profit.
Given the share of the overseas business, it will be a key focus area for the bank going forward, said the Bank’s chairman and managing director M.D. Mallya.
“Despite the meltdown, there is no perceptible deceleration in our global asset quality,” said Mallya. The bank will ensure that NIM—both global and domestic—is protected, he added.
The bank’s net bad debts as a percentage of advances marginally rose to 0.34% from 0.31% a year ago.
According to Nitsure, the bank’s approach going forward will be “sustainable and qualitative growth in profit and high return on assets” against the earlier practice of “high profit and low return on assets”.
The share of low cost current and savings accounts (Casa) in Bank of Baroda’s total deposits were 35.63% in fiscal 2010, marginally higher than 34.87% in fiscal 2009.
The bank expects its credit and deposits to grow at 24% in the current fiscal and Mallya said he can sustain this growth rate for the next two years before the bank approaches the government for capital.
The government holding in Bank of Baroda is 53.81%, close to the mandatory minimum of 51% but the bank does not have immediate capital raising plans.
PTI contributed to the story.